Let Budget 2021-22 May Not be a Document of the Economic Disaster of Free India

Today, the 1st February, 2021 is expected to be yet another historic day for India and very challenging for Nirmala Sitharaman, our Finance Minister, to present Budget 2021-22 after the country went through severe Covid impact. While our PM Modi said that there were many mini budgets announced in tranches last year after annual budget 2020-21 to devise economic relief to the people in pandemic, Nirmala Sitharaman has said that the budget 2021-22 is going to be very different to the extent of never happened before. We can understand that her task is going to be very tough to deal with the battered economy due to Covid onslaught. 

India did witness the situations affecting the economy in the past but the vision of the leaders from Nehru to Narasimha Rao and practical and bold decisions of FMs from Morarji Desai to Dr Manmohan Singh drove the nation towards economic recovery.

During 1953-56 India faced famine and acute food shortage thereafter. PM Nehru also took charge of the Finance and in 1958 budget for the first time wealth and gift taxes were Introduced to raise income.

After the 1962 Chinese attack, in the 1963 budget the then FM Morarji Desai allocated a major portion of 38% of the budget on defence expenditures. As a result we could give a fitting reply to Pakistani attack in 1965, again Chinese attack in 1967 in Nathula and in 1971 we ripped Pakistan into two parts in 14 days to help create Bangladesh. A remarkable sense of priority displayed by Morarji to modernize defence for national safety and dignity. He realized border disturbances will hamper our efforts for economic growth.

But after the 1971 war Indian economy was in shambles. The cost of war, arrival of refugees from across the border, food shortage due to drought, bad monsoon, price escalation of petroleum and recession in the international market hit our economy. Inflation was getting uncontrolled that led to economic slowdown in India in the 70s. Economic recovery seemed far and unachievable. 

In the budget 1974-75, our then FM YB Chavan announced nationalisation of coal mines, general insurance companies and Indian Copper Corporation. Later coal mines went into losses.

But Chavan did take a bold decision to reduce the rate of income tax at the time of the economic crisis so as to encourage more and more  taxpayers to pay tax and thus to discourage tax evasion. Though no substantial results were achieved, Chavan's 1974-75 budget opened the gateways for direct tax reforms for the future FMs who kept on reducing the rate of IT and as a result there was a continuous increase in the number of taxpayers and decrease in tax evaders.

In 1991 the nation witnessed an acute crisis-time budget. The nation had a foreign reserve for only 15 days. The PM of the nation was Narasimha Rao and FM an economist Dr Manmohan Singh. Manmohan Singh came up with a groundbreaking historic budget that encouraged economic liberalization. He made drastic changes in reducing the government expenditure. Indian market was opened for international investors and business houses. Similar encouragements were given to Indian exporters and importers to gain from the liberalization. Custom duties were reduced and "licence raj" was discouraged by removing the necessity of licences except a few 18 of them. Economic reforms were introduced by reducing direct taxes. He took some brave decisions to introduce reforms in the banking sector like reducing control over banks by RBI; SEBI was authorized to deal with all matters related to the capital market; industry requirements, business production and price determination were left to the open market. It was in this budget of 1991-92 Manmohan Singh allowed the PUCs for disinvestment to raise funds to improve their economic health, go for diversification, unbundling for administrative ease for better control and performance. As a result the sick economy of India came out of the ICU to run on the fast track for growth and economic recovery. There was steady growth in GDP -- 1.06% in 1991, 5.84% in 1992, 7.57% in 1995, 8.85% in 1999. It was due to the liberal economic policies of Manmohan Singh new national and international companies and manufacturing plants started coming up in India with stormy speed. This economic boom created direct and indirect job opportunities for millions.

Now it is the turn of our present FM Nirmala Sitharaman to show the nation the way to course through Corona affected devastated economic condition. She could be another FM to be always remembered in the history of political economy if she draws examples set by previous FMs to propose the budget today.

Keeping in view of the abstract of past experience of economic crisis Nirmala Sitharaman has four options -- namely 1959 budget of Nehru to burden the rich with additional taxes or; 1963 budget of Morarji Desai to increase the expenditure on crisis ridden areas for economic recovery or; 1974 budget of YB Chavan to reduce IT rate so that there could a sizable increase in tax base or; 1991 budget of Dr Manmohan Singh to bring in practical and workable ideas of liberalization that may stand out to further infuse oxygen into our sluggish economy. 

It has to be seen today as to which option Nirmala Sitharaman will choose. Or she may be having some other better ideas!!!!