The government budget is a roadmap that outlines the Indian government's economic priorities, policies, and plans for the upcoming fiscal year. Presented annually by the Finance Minister, its history traces back to the colonial era.
To learn about the history of the Government Budget in India, check out this blog post.
The first ever budget in Indian history was presented on 7th April 1860 by James Wilson, a Scotsman and colonial India Finance Minister, as well as the Founder of The Economist. The 1860 budget introduced the income tax, which has remained a major source of government revenue to this day.
According to Sabyasachi Bhattacharya's book, The Financial Foundation of the British Raj, the authorities were 'toying' with the idea of direct taxation when Wilson arrived in India. There were plans to present a license tax bill, but it wasn't in the "right shape."
After arriving, Wilson scrapped the said bill and in place of it, he introduced two new bills, one for the income tax and the other for the license. He declared in his financial statement that anyone earning less than Rs 200 per year would not be required to file taxes.
An appropriation audit based on the English model determined the status of monthly expenditure accounts. As India's first Finance Officer, Wilson was responsible for addressing the subcontinent's post-mutiny financial issues, but he passed away from dysentery in Kolkata in August of the same year he presented the country's first budget.
After India gained independence, industrialist RK Shanmukhan Chetty became the first Finance Minister. He was the erstwhile Diwan of Cochin state and Constitutional Adviser to the Chamber of Princes.
He belonged to the pro-British Justice Party. On November 26, 1947, against the backdrop of rioting and partition, Mr. Chetty presented the first budget of Independent India. The budget prioritized rebuilding the nation, stabilizing the economy, and setting the foundation for future growth of independent India.
The government separated the Railway Budget from the Union Budget nearly a century ago, in 1924, following the recommendations of the Acworth Committee, chaired by Sir William Acworth. This practice continued until 2016, with the Railway Budget being presented a few days before the Union Budget.
However, in 2016, a committee of NITI Aayog led by Bibek Debroy and a separate paper titled "Dispensing with the Railway Budget" by Bibek Debroy along with Kishore Desai suggested doing away with the practice of separate budgets.
The Financial Minister at that time, Arun Jaitley, delivered the historic combined budget in February 2017 after the Railway Budget and the Union Budget were integrated based on the recommendations. This practice is still in place today.
February 1 has become popular for being the ‘Budget Day’. However, historically, it wasn’t the budget date during the British Raj. Back then, the Union Budget was presented on the last working of February, typically during the month’s last week.
This practice had been in place since colonial times in India. But in 2017, history was made by the Finance Minister Arun Jaitley when he declared that the budget would now be presented on February 1 instead of the month’s end.
There were two major reasons for changing the budget’s date. Presentation of budget on February 1 was a colonial-era practice. It became necessary to end this practice so India could continue to build its own identity.
However, the more important reason behind Jaitley’s decision was to allow the government more time for financial adjustments before the fiscal year.
Now that the government presents the budget on 1st February, it gets more time to adjust to the shift in financial practices and implement all necessary changes before the next financial year begins.
The government historically presented the budget at 5 p.m. However, in 1999, it changed the timing to 11 a.m. to break away from the colonial-era practice of announcing the budget in the evening.
Since Indian Standard Time (IST) is 4.5 hours ahead of British Summer Time (BST) and 5.5 hours ahead of Greenwich Mean Time (GMT), presenting the budget at 5 p.m. in India ensured it took place during the daytime in England at either 12:30 p.m. BST or 11:30 a.m. GMT solely for the convenience of the Brits.
However, the Finance Minister Yashwant Sinha in 1999, under the Atal Bihari Vajpayee-led government, changed the tradition forever by presenting the Union Budget at 11 a.m.
The history of the government budget in India dates back to 1860, when the colonial era Finance Minister James Wilson introduced the first ever budget. After India gained independence from the British Raj, RK Shanmukhan Chetty - the first Finance Minister of independent India, presented the first ever budget. The Railway budget used to be a part of the General budget until the government separated them in 1924. Up until 2016, this practice continued.
However, a committee of NITI Aayog headed by Bibek Debroy recommended doing away with the practice of separate budgets. Since then, the railway budget and the union budget remain united.
Q1. Who introduced the first budget in colonial India?
A. James Wilson introduced the first ever budget in India during British Raj.
Q2. Who introduced the first budget of independent India?
A. Shanmukham Chetty, the first Finance Minister of India, introduced the first budget of independent India.
Union Budget 2024: Key Highlights and Announcements
Want to know More ?