A populist Budget typically spends on schemes that are just handouts to please people and don’t have any enduring positive impact on the economy.
Examples of such spending are waiving off farm loans, giving higher procurement prices for different crops to farmers and cutting income tax above the low slabs.
Such spending can push up inflation and weighs down on the government’s balance sheets, making it difficult to meet the fiscal deficit target.
It’s plain to everyone that if one lives beyond one’s means, splurges more money than one earns, it can ruin one’s financial condition.
Same is true for a country too.
When a country remains within the means, more or less, it is called fiscal discipline.
There is a school of thought that says public spending is more important than meeting the fiscal deficit target.
More spending creates demand and boosts business which are good for the economy when the GDP has gone down due to demonetisation and the GST.
Subvention literally means grant of money by the government.
In the context of the Budget, it is interest subvention, the government paying part of the interest on a loan.
The government offers subvention mostly on home, crop and education loans.
Difference between a Full Budget and a Vote on Account
A Full Budget is not just the presentation of annual finances of the government but an occasion to change existing tax slabs, announce new schemes and sops for different sectors of the economy.
A Full Budget includes the passage of a finance bill to get Parliament’s approval for any tax related changes.
In the absence of presentation of a Full Budget, the outgoing government seeks a vote on account from the Parliament for proposed expenditure to be incurred in the next few months till the new government takes over.
There are no major announcements related to any new schemes or sops during a vote on account as the new government’s stance could differ from that of the outgoing government.
Liaquat Ali Khan: 1946-1947 (interim government)
Nawabzada Liaquat Ali Khan (1896 – 1951) was an Indian Muslim politician and a leading member of the All India Muslim League (AIML). He played an influential role in the partition of India and the creation of Pakistan. He was closely involved in the negotiations over the form of independence to be granted to India after World War II.
When the Indian political leadership asked the Muslim League to send its nominees for representation in the interim government, Liaquat Ali was asked to lead the League group in the Union Cabinet. He was assigned the finance portfolio by the first Indian Prime Minister Pandit Jawahar Lal Nehru.
Acknowledged as Jinnah’s “right hand” and as such Liaquat was the obvious choice to become prime minister of independent Pakistan in 1947. He went on to become the country’s senior most leader after Jinnah’s death in 1948.
RK Shanmukham Chetty: 1947-1948
Independent India’s first Budget was presented by the country’s first finance minister, RK Shanmukham Chetty, on November 26, 1947. And, that was an interim Budget.
It was a review of the economy and no new taxes were proposed as the budget day for 1948-49 was just 95 days away.
He resigned shortly. It is believed that he was asked to resign by Jawaharlal Nehru, the Prime Minister of India due to a minor dereliction of duty by a subordinate official, so as to ensure probity.
KC Neogy: 1948
Kshitish Chandra Neogy then took charge. He was the second Finance Minister of free India. He held office for just 35 days and didn’t get an opportunity to present a Budget.
John Mathai: 1948-1950
John Mathai was an economist who served as India’s first Railway Minister and subsequently as Finance Minister, taking office shortly after the presentation of India’s first Budget, in 1948.
He presented two budgets for 1949-50 and 1950-51. He resigned after presenting the 1950 Budget following protests against vesting large powers with the Planning Commission and P C Mahalanobis.
CD Deshmukh: 1950-1956
CD Deshmukh was also the first Indian Governor of the Reserve Bank of India. He presented an interim budget for 1951-52. The first general elections in post-independence era were held between December – February 1952. Deshmukh was given the Finance portfolio after the new ministry assumed office. He felt honoured to present the first budget to the first-time elected members of Lok Sabha.
Hindi crept into the budget documents beginning 1955-56. His stewardship of the country’s finances was marked by prudence and humane perspective. He provided the much desired vision to deal with the changing financial needs of a young, independent and under-developed country like India.
He made significant contributions to the formulation and implementation of the country’s First and Second Five Year Plans that provided strong base for the years ahead. He was responsible for ensuring social control of the financial structure such as the enactment of a new Companies Act, and nationalisation of the Imperial Bank of India and life insurance companies. He resigned from the Union Cabinet after protesting separation of Mumbai from Maharastra.
Morarji Desai: 1959-1964
Morarji Desai became the next Finance Minister and he presented the maximum number of budgets so far- ten. They included five annual and one interim budget during his first stint.
In his second tenure, he presented three full budgets and one interim as Finance Minister and Deputy Prime Minister. His annual budgets were for the years from 1959-60 to 1963-64 and the interim budget for 1962-63.
Indira Gandhi: 1969-71
After Morarji Desai’s resignation, Indira Gandhi, the then Prime Minister assumed the Finance portfolio. So far, she has been the only woman Finance Minister.
Chaudhary Charan Singh: 1979-1980
The budget for 1979-80 was presented by Chaudhary Charan Singh who was also Deputy Prime Minister.
Rajiv Gandhi: 1987-1988
Rajiv Gandhi presented the budget for 1987-88. He was the third Prime Minister to present a budget after his mother, and grand father. The exercise in zero-based budget began in 1987-88. The zero-based budgeting is a process of review, analysis and evolution for each budget request in order to justify its inclusion or exclusion from the integrated whole budget before it is finally approved.
In India, the zero-based budgeting was implemented in three phases – one third in the first year, two thirds in the second year and fully from the third year. It is a continuous process.