We have come a long way since Independence

'The Finance Minister devoted a lot of time to explaining the difficult balance of payments position and rapid depletion of foreign exchange reserves', says the author

As we step into the seventy fifth year after our independence, it is worthwhile taking a look at where we started.

The first Union Budget presented on November 26, 1947 by the Finance Minister RK Shanmugam Chetty of the Justice Party, envisaged total expenditure of Rs 197.39 crore and revenue of Rs 171.15 crore. The net deficit was Rs 16.24 crore but the Finance Minister said the deficit could be higher because the actual amount required for meeting the expenditure in connection with the relief and rehabilitation of refugees was still very uncertain.

The defence expenditure at Rs 92.74 crore took away about 47 per cent of the total expenditure as the demobilization of the armed forces after the Second World War had not taken place fully.  After providing for subsidies for food imports, payments for interest, pensions and administrative expenses, relief and rehabilitation of the refugees from Pakistan etc., the amo­unt left for expenditure on nation building activities such as education, public health, infrastructure, electricity, com­munication, transport, dams, irrigation canals, rese­arch laboratories, public institutions etc. was only Rs 12 crore.

On the revenue side, the 1947 Budget estimated customs receipts at Rs 50.50 crore and income tax receipt at Rs 29.5 crore and other collections of Rs 91.15 crore. The Finance Minister explained the difficulties in raising loans, increasing revenues and inflationary pressures. He flagged rising pent up demand that was suppressed during the war and limitations in increasing the supplies for want of enough production capacity and low productivity as key issues.
 

The Finance Minister devoted a lot of time to explaining the difficult balance of payments position and rapid depletion of foreign exchange reserves. So, the government has decided to adopt a more restrictive import policy, he said. Accordingly, imports of food, capital goods, the raw materials of industry and certain essential consumer goods were freely importable and no exchange restrictions were placed upon their imports. Consumer goods which were not absolutely essential were to be licensed on a quota basis, while others which were regarded as totally unessential and luxury imports were altogether prohibited. Certain restrictions on remittances abroad, in particular on the transfer of Indian capital, were also imposed. The Imports and Exports Control Act, 1947 and Foreign Exchange Regulation Act, 1947 were enacted that year. Later they were amended several times and repealed.

The Finance Minister said that the only real answer to inflation is to increase our internal production and thereby close the gap between the available supplies and the purchasing power in the hands of the community which in present circumstances imports cannot bridge. He also said that large scale Imports of food grains seriously affect our foreign exchange position and threaten to consume the bulk of the available resources which are badly required for the industrialization and development of the country.

In the concluding part of his speech, the Finance Minister said, “while we have secured freedom from foreign yoke, mainly through the operation of world vent and partly through a unique act of enlightened self abnegation on behalf of the erstwhile rulers of the country, we have yet to consolidate into one unified whole the many discordant elements in our national life”.

From those difficult gloo­my days, we have travelled a long distance through a democratic process. Hopef­ully, we will move forward at a faster pace in the coming days. 

email:tncrajagopalan@gmail.com