The first budget was presented for a period of seven and half months from August 15, 1947 to March 31 1948. This budget was presented on November 26, 1947.
Chetty himself remarked that the budget speech was not “spectacular” and should “hold no surprises” however it remains a proud moment for every Indian, that this is the country’s first budget as an independent nation.
Chetty refers to multiple factors that had cut into the Indian economy during 1947. The issue of partition is prominent among them. Independent India’s first Finance Minister refers to the partition as a major setback, one that affected the common man in Pakistan as well as India. He also referred to the economic advantages and disadvantages for both the countries. The sudden disturbances in Punjab, and North-West Frontier Province find special mention in his speech.
The Finance minister also details the grave economic situation of India back then. There is the aspect of international wars, communal disorders, industrial unrest and a heavy reliance on import of food-grains that are mentioned as major concerns. Elaborating upon how much India imported those days, he says, “During the three years 1944- 45, 1945-46 and 1946-47 we had to import from abroad 43.80 lakhs of tons of foodgrains at a cost of over 127 crores of rupees.”
Furthermore, the Finance minister also elaborates on the growing inflation. Wholesale prices rose by 7 points while the cost of living index in Bombay (back then it was not referred as Mumbai) advanced by 14 points the FM said while referring to the Economic Adviser’s index number of wholesale prices.
In those days, the Railway budgets were presented separately. For the financial year 1947-48, the railway budget was presented just a week ago on 20th November 1947. Chetty, in his budget speech that year says that finance ministry was not expecting any revenue contribution for the financial year of 1947 from the Railways. The railways budget in that year mentions similar depressing challenges- communal tensions post the partition.
The Finance Minister also touches upon India’s capacity of foreign reserves, mainly Sterling balances.
“The peak figure which the sterling balances reached was Rs. 1,733 crores on the 5th April 1946. Thereafter, they have declined very rapidly. At the end of March 1947 they stood at Rs. 1,612 crores showing a reduction of Rs. 121 crores in twelve months. In the middle of July 1947, from when our new agreement became effective, they stood at about Rs. 1, 547 crores. We had thus drawn as much as Rs. 65 crores in a little over six months. These large decreases were due largely to heavy imports mainly of food grains and of consumer goods, of which the country had been starved during the period of the war. They also reflected some movement of capital from India, largely British.”
The Finance Minister back then did speak upon restriction of goods with an intention to reduce slippage of foreign exchange reserves. He said it was this purpose that the government followed a broad classification to restrict imports.
The restriction policy comprised of dividing imports into three categories -free, restricted and prohibited.
The FM attributed this as a Deficit Budget. The deficit between revenue and spending was that of Rs 26.24 crores. The total revenue was projected at Rs 171.15 crores, while the expenditure was kept at Rs 197.39 crores. The FM however promised to reduce deficit if a proposal to increase export duties on cotton cloth and yarn were to be accepted. This reduction was pegged at Rs 24.59 crores.
The biggest headers on the expenditure list were Defense, refugees and payment of subsidies for food-grains - Rs 92.74 crores, Rs 22 crores (provisional) and Rs 2.52 crores respectively.
Although this was a deficit budget, Chetty contended that there major issues affecting several economies.
“This is the eighth consecutive deficit budget and the House may well ask itself if our revenue position is sound. I have myself no hesitation in answering that question with an emphatic ‘yes’. The years covered by these budgets have been overshadowed by the greatest war in history and no country, whether neutral or belligerent, has been able to escape its economic effects or its aftermath. The deficits in the war years were wholly due to the high level of Defence expenditure and were met as far as possible by raising additional taxation,” he said in his budget.
To conclude Chetty the Finance Minister sought for support for co-operation.
"If India, just risen from bondage, is to realise her destiny as the leader of Asia and take her place in the front rank of free nations, she would require all the disciplined effort her sons can put forth in the years immediately ahead. The willing help and co-operation of all sections of the community is required in maintaining peace and order, in increasing production and in avoiding internecine quarrels whether between communities or between capital and labour. I am sure my appeal for this help and co-operation will not go in vain."
Although the first budget did not reportedly carry much opposition, a few reports from then said mention eyebrows being raised upon a quote remarked by Chetty on how India obtained its much-needed Freedom.
This is what Chetty had said, “While we have secured freedom from foreign yoke, mainly through the operation of world events and partly through a unique act of enlightened self-abnegation on behalf of the erstwhile rulers. If the country, we have yet to consolidate into one unified whole the many discordant elements in our national life. This can be achieved only by the rigorous establishment of the rule of law which is the only durable foundation on which the fabric of any democratic State can be raised.”