Union budget: 1970
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A change in the tone of the budget
Chakshu Roy, January 29, 2023: The Indian Express
Saturday, February 28, 1970, was a special Budget day in Parliament. Prime Minister Indira Gandhi, who also held the finance portfolio, became the first woman to present the country’s Budget.
The convention was for the Finance Minister (FM) to present the Budget at 5 pm on the last day of February. But in Parliament, things were not going to plan. After the PM finished her budgetary remarks, she started introducing the Finance Bill. This law contains the legal changes to implement the tax proposals mentioned in the Budget speech.
But before the PM could introduce the Bill, in a moment of confusion, Speaker G S Dhillon adjourned the House to meet on Monday at its usual time at 11 am. This procedural misstep had implications for tax collection. The provisions related to income tax would come into effect from April 1, but a few tax increases, like on petrol, cigarettes, air conditioners were supposed to kick in from midnight. If the finance minister introduced the Bill on Monday, the government would lose tax revenue from across the country for more than a day.
The 1970 Budget is not remembered for the procedural slip-up but for the change in its tone. Until then, Budget speeches were a dry recitation of facts as FMs had yet to start using poetry and couplets. Some FMs tried adding a little colour to their speeches. For example, Morarji Desai, in his last budget in 1969, bucketed his tax proposals into appetisers and main course. A year earlier, he had equated his measures for resource mobilisation to conducting surgery. He stated, “I propose to engage myself essentially in a minor operation in the nature of plastic surgery — taking out a little flesh here and adding a little bit there in order to make the tax-system more efficient and attractive.”
But the 1970 speech was different. Experts argue that it was the first time the Budget speech went from a financial statement to a political one. The change came during a tumultuous time in our national politics. A crisis was brewing in the Congress party. There were sharp differences between the PM and her senior party colleagues. Political and policy disagreements (like on bank nationalisation) led to Morarji Desai being relieved of the finance ministry and the PM taking over.
It was the second time that a PM had taken over the finance portfolio and went on to present the Budget. The first was in 1957 when PM Jawaharlal Nehru took that responsibility from finance minister T T Krishnamachari who had to resign for allegedly misleading Parliament.
The split in the Congress party became more public in the 1969 presidential elections. The breakaway faction of the party led by PM Gandhi supported the independent candidate V V Giri. He narrowly defeated the Congress party’s official candidate Neelam Sanjeev Reddy. The widening differences meant that when the PM piloted the Budget in 1970, her government had a tentative majority in Parliament.
The PM started her speech by stating, “…growth and increase in wealth cannot be sustained without due regard to the welfare of the weaker sections of the community. Therefore, it is necessary to devise policies which reconcile the imperatives of growth with concern for the well-being of the needy and the poor … Any severance of the vital link between the needs of growth and of distributive justice will produce stagnation or instability.”
The Budget speech mentioned providing drinking water in rural areas, fortified food for children, and a minimum pension for government employees. It increased the income tax to the maximum rate of 93.5% in the slab over Rs 2 lakh, and kept corporate taxes high.
There was a mixed reaction to the budget: the stock market jumped, but experts like Nani Palkiwala described it as “politically clever and economically unsound”. A year later, the Reserve Bank of India’s annual report described the budget as providing “further measures for moving nearer to the social objectives of reducing regional disparities and bringing about an egalitarian society”.
But Lok Sabha Speaker G S Dhillon was less concerned by the details of the Budget and more worried about the procedural gaffe that had led to the non-introduction of the Finance Bill. Shortly after he had adjourned the session at 6.15 pm, Lok Sabha MPs had left the Parliament complex. If the PM did not introduce the Bill on the same day, the government exchequer would suffer. The Speaker had no choice but to reconvene the Lok Sabha.
Fortunately, the secretariat had made a big push to install telephone lines at the residences of parliamentarians. To get MPs back to Parliament required furious dialling of these rotary phones, accompanied with messengers rushing with the Speakers’ message to the dinner hangouts of MPs.
Finally, the Lok Sabha met at 10 pm and the PM introduced the Finance Bill. And with that, the budget of 1970, marked the first step towards PM Gandhi’s 1971 general election slogan of “Garibi Hatao”.
