This Article is From Jul 09, 2014

Opinion: Expecting a Landmark Budget from Arun Jaitley

Opinion: Expecting a Landmark Budget from Arun Jaitley

Each year, India's Union Budget is announced on the last working day of February, unless the year happens to be an election year. In an election year an Interim Budget is presented in March and then Union Budget is passed in early July after the new government is formed.

The Union Budget is a pretty important day of the year; in fact it is the most important day of the year from an economic perspective. Even when we look at non-election years, Union Budgets have had the power to sway the markets considerably. The Sensex has been known to sway 5 per cent just by a few sentences mentioned by the Finance Minister that would have a financial impact on the country. The budget is powerful as it provides the government opportunity to make sweeping changes in tax laws and introduce innovative reforms. On election years, there are increased expectations from the Union Budget.

Let's take a look back at 4 of the most memorable (and important) Union Budgets from the past.

1947: "The First Budget"- R K Shanmukham Chetty

India's first Finance Minister, R K Shanmukham Chetty undoubtedly had little to work with, as India had just won its independence. Unlike future Union Budgets, this one was presented in November (since India only became independent in August). In this vague budget, Mr Chetty's general message was to lead the economy in a direction of self-dependence. Hence, the budget was aimed at promoting agriculture and textiles; economic pillars of the country that he knew the country could sustain itself on over the next decade.

1970: "Garibi Hatao" - Indira Gandhi

In 1971, Indira Gandhi had started her budget speech with these two powerful words. She was the Prime Minister on India at that time but also held the finance ministry portfolio.

She followed up with her famous 20 point programme aimed at drastically reducing poverty in the country. In fact, it could be argued that her election-win was due to this powerful message and the actions that backed up the words. She was able to setup massive anti-poverty programs across the country and promoted socialist economic policies. However, her extreme pro-welfare economic views turned the economy into a high spending one that flipped a budget characterised with a surplus into one with a deficit.

1991: "Rise of New India" - Manmohan Singh

Arguably this could be called the most important budget in the history of India. Manmohan Singh was a reformist who liberalised and finally opened up India to the rest of the world. He was able to break away from India's socialist economic policies that it had for decades.

Some of the major breakthroughs of the budget included the opening of doors for foreign investments into the country, initiating privatisation, and massive reforms to cut down inflation that was plaguing the economy.

Eventually, this opened up the doors for FDI investments and a slow shift from socialist economic policies to a capitalistic economy. The effects were felt immediately over the next 4 years. Foreign investments into India grew from just $132 million in 1991 to $5.3 billion in 1995.

1997: "The Dream Budget" - P Chidambaram

After seeing how Manmohan Singh was able to turnaround the economy through the introduction of reforms aimed at liberalisation, P. Chidambaram focused the budget on India's tax laws. He had cut the maximum tax on individuals from 40 per cent to 30 per cent, increased the income tax to be paid by companies from 30 per cent to 40 per cent and reduced customs duty taxes in this budget. By taking these steps Chidambaram was able to implement a balancing act, which allowed major tax overhauls to be implemented while remaining within budgetary constraints.

Perhaps most importantly, it was the first budget that aggressively targeted black money. Through the passage of the voluntary disclosure of income scheme, tax filing laws were heightened across all sectors of society.

2014: Arun Jaitley?

It now remains to be seen whether Finance Minister Arun Jaitley's Union Budget will be able to crack the list. If he does, we can be assured that the Narendra Modi's administration will surely be a memorable one.

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