Why Union Budget Of 1973 Is Called India's 'Black Budget'

The Union Budget often reflects India's economic mood. Some show reform, others record stress and struggle. One such was the Union Budget of 1973-74, remembered in the country's economic history as the “Black Budget.”

The Budget was presented during the prime ministership of Indira Gandhi by then Finance Minister Yashwantrao B Chavan. It earned its label mainly because of an unusually high fiscal deficit, which exposed the severe economic pressure India was facing at the time.

What Made The Budget “Black”?

The reason was the fiscal deficit of Rs 550 crore. For that period, this figure was unprecedented. A fiscal deficit is the gap between what the government earns and what it spends. When this gap widens, it signals stress in public finances. In 1973-74, the deficit raised serious concerns about economic stability and the government's ability to manage rising costs.

This large shortfall did not emerge overnight. It was the result of several crises that hit India in quick succession.

Economic Conditions Before The Black Budget

India entered the 1973-74 financial year under heavy strain. The 1971 war with Pakistan had stretched government finances, especially defence spending. After the war, India also had to rehabilitate over 10 million refugees, which added to public expenditure.

At the same time, the country faced a severe drought in 1972, one of the worst in decades. Agricultural output fell sharply, leading to food shortages and higher prices. Rural incomes dropped, while cities faced power shortages and rising unemployment.

Global events made matters worse. The 1973 oil crisis, triggered by the West Asian conflict and the OPEC oil embargo, led to a sharp rise in crude oil prices. As an oil-importing nation, India saw its import bill soar. This pushed up inflation and strained foreign exchange reserves, deepening the balance of payments problem.

Together, war costs, drought, rising oil prices, and inflation created a perfect storm for the economy.

The 1973 Black Budget

The 1973 Budget introduced several major policy decisions. The government allocated funds for the nationalisation of coal mines, insurance companies, and the Indian Copper Corporation. The aim was to bring key sectors under state control to ensure supply and reduce dependence on private monopolies.

Large sums were set aside for relief and recovery. The government earmarked funds for drought relief to support millions affected by crop failure. It also spent heavily on importing foodgrains to tackle shortages and stabilise prices.

The Budget increased investment in agriculture, irrigation, fertiliser plants, and power projects to strengthen domestic production. It also raised taxes on wealthier sections, including affluent Hindu Undivided Families, as part of its redistribution efforts.

The policy choices made during this period shaped India's approach to state control, welfare spending, and economic management in the years that followed.