Every year, the Union Budget not only determines the direction of the Indian economy for the upcoming fiscal year, but also has a significant impact on individual household budgets. Over the years, some budgets have also served as significant turning points in India’s progress.
The most well-known Budget since independence is this one. The economic liberalisation trend in India got underway with this budget. The Budget, which was made in honour of late Prime Minister Rajiv Gandhi—who had just been assassinated—came against the backdrop of a Balance of Payments crisis that put India in danger of becoming bankrupt. The Budget lowered import licencing, changed import-export policies, and encouraged exports. The budget paved the way for Indian businesses to compete on a global scale and encouraged foreign investment in Indian industry. ‘In a progressive approach, it will expose our manufacturing sector to competition from outside,’ said Dr. Manmohan Singh, the finance minister at the time.
The VP Singh-presented Union Budget is regarded as the catalyst for indirect tax reforms in India. He created the MODVAT (Modified Value Added Tax) plan, which allowed manufacturers to immediately and fully recover the excise duty they had already spent on the parts and raw materials. The new tax also aims to assist manufacturers in avoiding unnecessary tax burdens and double taxing. ‘The introduction of the MODVAT scheme is an important measure of cost reduction,’ he had stated. The MODVAT scheme offers transparency by disclosing the full taxation on the product.
The maiden Budget of the then-Finance Minister P Chidambaram, known in the Indian media as the ‘Dream Budget,’ was praised for its audacious measures in the midst of the political unrest surrounding the United Front government. Major tax reforms were released by the Budget. The highest marginal income tax rate was lowered from 40% to 30%. Taxes on domestic and foreign businesses are now 35 and 48 percent, respectively, instead of 40 and 55 percent. Additionally, the business tax surcharge was eliminated.
TT Krishnamachari delivered this budget, which is renowned for implementing a number of levies, most notably the wealth tax, which was in effect until 2016. The wealth tax was implemented in an effort to reduce the likelihood of evasion. “The system of income taxation must be complemented by a wealth-based tax system. This is a more equitable wealth tax, “added Krishnamachari. In an effort to improve the nation’s balance of payments, the Budget also placed restrictions on imports through an import licencing system.
The then-prime minister, Indira Gandhi, who was the first woman to hold the finance portfolio, delivered the Union Budget. Despite the fact that she shattered the glass ceiling, the 1970 Budget is now infamous for raising taxes. On all incomes above 2 lakh, the marginal tax rate was raised by 11 percentage points to 93.5 percent in that year’s Budget. She offered to revoke some of the benefits to prevent individuals from tax evasion in her address and emphasised the need for a broader tax base to maintain the ‘requirements of economic and social welfare.’