History of Union Budgets in India: From Planning Commission to Viksit Bharat

India has come a long way since independence, from being a young, growing country to an emerging global economic powerhouse. At the heart of this transformation lies the Union Budget, the government’s yearly financial roadmap that steers policy directions, fiscal measures, and reform paths.

Though all budgets have their importance, some are game-changers that have redefined India’s economic landscape. Below, we trace the major milestones in the history of Union Budgets, noting landmark reforms and analyzing their wider implications, through recent times under the “Amrit Kal” and on the path to a “Viksit Bharat.”

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Early Foundations: 1951–1958

1951–1952: Creation of the Planning Commission

• First Budget of Independent India: Presented in November 1951 by Finance Minister John Mathai, this was the Republic’s inaugural Union Budget.
• Key Announcement: The formation of the Planning Commission—tasked with formulating Five-Year Plans to steer the economy—was unveiled. Prime Minister Jawaharlal Nehru assumed the role of Planning Commission Chairperson.
• Legacy: For over six decades, the Planning Commission served as the epicenter of India’s planned economic strategy. In 2015, it was replaced by the NITI Aayog, shifting from a command approach to a cooperative, federal–state governance model, with the Prime Minister at its helm.

1957–1958: Introduction of Wealth Tax

• Budget by T.T. Krishnamachari: In the 1957–58 Union Budget, Finance Minister T.T. Krishnamachari introduced a direct wealth tax—levied on personal assets, including real estate, jewelry, and other holdings.
• Tax Structure: Initially applied to individuals owning net assets above ₹30 lakh, the peak rate reached 1%. Unlike income tax, which targets earnings, wealth tax targeted accumulated assets, drawing criticism from high‐net‐worth individuals who argued that it penalized non‐income‐earning wealth.
• Abolition and Aftermath: Due to limited revenue generation and perceived dampening of investor sentiment, Finance Minister Arun Jaitley abolished the wealth tax in the 2016 Budget. In its place, a 2% surcharge was levied on net incomes above ₹1 crore. Additionally, incomes between ₹2 crore and ₹5 crore faced a 25% surcharge, while incomes above ₹5 crore were subjected to a 37% surcharge.

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Expanding Fiscal Reforms: 1968–1987

1968: Excise Reforms by Morarji Desai

• “People’s Budget”: Finance Minister Morarji Desai’s 1968 Budget earned the moniker of “People’s Budget” due to sweeping excise reforms intended to support domestic manufacturing.
• Key Reforms:
  1. Abolition of Stamping and Factory‐Gate Assessment: Simplified the assessment process for excise duty by eliminating multiple layers of inspection at factory gates.
  2. Implementation of Self‐Assessment: Manufacturers were permitted to assess their own excise liability, promoting transparency and reducing bureaucratic hurdles.
• Impact: These measures catalyzed industrial growth, streamlined compliance for producers, and laid groundwork for future indirect‐tax modernization.

1987: Introduction of Minimum Alternate Tax (MAT)

• Budget Under Prime Minister Rajiv Gandhi: Serving concurrently as Finance Minister, Rajiv Gandhi introduced the Minimum Alternate Tax (MAT) in 1987.
• Rationale: Certain profitable companies were paying zero tax due to exemptions and deductions allowed under the Income Tax Act. MAT mandated that such companies pay a minimum tax—calculated as a percentage of their “book‐profit”—ensuring broad‐based corporate contributions to the exchequer.
• Evolution: Over time, MAT became a steady source of revenue. As of 2021, the MAT rate is set at 15% of book profits for most companies, underscoring its enduring relevance.

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The Liberalisation Epoch: 1991 and Beyond

1991: The Epochal Budget—Liberalisation, Privatisation, Globalisation

• Presented on July 24, 1991 (instead of the customary February 1): Finance Minister Dr. Manmohan Singh, under Prime Minister P.V. Narasimha Rao’s leadership, unveiled a package of bold reforms to rescue India from a severe balance‐of‐payments crisis.
• Hallmarks of the 1991 Budget:
  1. Deregulation of Industrial Licensing (“Licence Raj” Ends): Removed the requirement for industrial permits in most sectors, unleashing entrepreneurial energy.
  2. Tariff Reduction: Customs duties on imported capital goods were slashed, enabling domestic firms to access modern machinery at competitive prices.
  3. Financial Sector Reforms: Initiated steps toward liberalising interest rates and privatizing select public‐sector banks.
  4. Foreign Investment: Ease in foreign direct investment (FDI) norms attracted global capital, marking India’s entry onto the world economic stage.
• Legacy: The 1991 reforms are widely regarded as the watershed that transformed India into a market‐oriented economy, unlocking decades of robust growth and global integration.

1993–1994: Establishment of the National Stock Exchange (NSE)

• Budget Announcement: The 1993–94 Union Budget paved the way for India’s first demutualized, electronic trading stock exchange—the National Stock Exchange (NSE).
• Objectives:
  1. Transparency and Efficiency: Replace the fragmented, open‐outcry system of regional bourses with a nationwide, screen‐based platform.
  2. Professionalisation: Institute uniform settlement cycles, robust risk management, and real‐time price dissemination.
• Outcome: Since launching in November 1994, the NSE has become India’s dominant exchange (by trading volume), boosting investor confidence, enabling fair price discovery, and driving capital‐market modernization.

1994–1995: Introduction of Service Tax

• Budget Initiative by Manmohan Singh: Recognizing the services sector’s growing share—already around 40% of GDP—Finance Minister Manmohan Singh introduced service tax in the 1994–95 Budget.
• Initial Scope: Began with a modest list of taxable services (e.g., telephone, accountant’s fees, and security services) at 5%.
• Evolution: Over the years, service tax‐cover expanded to include dozens of additional services (advertising, insurance, consultancy, etc.), ramping up government revenue.
• Transition to GST: In July 2017, service tax was subsumed into the Goods and Services Tax (GST) framework, unifying indirect taxation and eliminating cascading levies.

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Tax Rationalisation and “Dream” Budgets: 1997–2006

1997: The “Dream Budget” of P. Chidambaram

• Tax‐Friendly Reforms: As Finance Minister under Prime Minister I.K. Gujral, P. Chidambaram introduced sweeping rate cuts to revive growth.
• Key Measures:
  1. Personal Income Tax: Maximum rate for individuals slashed from 40% to 30%.
  2. Corporate Tax: Domestic companies’ top rate cut from 40% to 35%.
  3. Voluntary Disclosure of Income Scheme (VDIS): Encouraged individuals to declare hidden income by offering immunity from penalties—though undisclosed funds were taxed at the highest rate.
• Aftermath: Lowered rates widened the tax base, eventually boosting collections. The “Dream Budget” moniker stemmed from its popular appeal among salaried earners and businesses alike.

2006–2007: Laying the Foundation for Tax Reform

• Indirect Tax Simplification: The 2006–07 Union Budget introduced a four‐pronged strategy to rationalize and simplify India’s complex indirect‐tax regime:
  1. Reduction of Central Excise Rates: Mopped up overlapping excise slabs.
  2. Harmonization of Customs Tariffs: Streamlined import duties to align with World Trade Organization (WTO) commitments.
  3. Service Tax Expansion: Carved out a roadmap to bring more services under unified taxation, anticipating the future GST.
  4. Roadmap for GST: Set clear milestones for implementing a nationwide Goods and Services Tax, targeting 2010–11 for rollout.
• Significance: These reforms paved the way for one of India’s most transformational indirect‐tax overhauls—GST in 2017.

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Consolidation and Crisis Response: 2017–2021

2017: Merging the Railway Budget with the General Budget

• “Union Rail Budget” Ends a 92‐Year Tradition: Former Finance Minister Arun Jaitley’s 2017 Budget integrated the standalone Railway Budget—presented separately since 1924—into the Union Budget.
• Rationale:
  1. Holistic Fiscal Planning: Enabled the government to allocate resources more flexibly across sectors (roads, railways, ports, and aviation) under one fiscal document.
  2. Multi‐modal Transport Vision: Aligned rail planning with broader infrastructure initiatives (e.g., Smart Cities, Dedicated Freight Corridors).
• Outcome: The merger has streamlined budgetary processes, allowing for coordinated infrastructure investment and policy coherence across transport modes.

2021: The Pandemic Budget

• First COVID‐Era Budget: Amid the ongoing COVID‐19 crisis, Finance Minister Nirmala Sitharaman unveiled India’s first “pandemic Budget” in February 2021.
• Healthcare and Economic Revival:
  1. Healthcare Outlay: Allocation jumped 137%, from ₹94,452 crore in 2020–21 to ₹2,23,846 crore in 2021–22, including an additional ₹35,000 crore for COVID‐19 vaccines (with provisions for more if needed).
  2. Asset Reconstruction Company (ARC): Proposed creation of a Special Window for Stressed Assets and an ARC to clear Non‐Performing Assets (NPAs), enabling banks to resume lending.
  3. Digital Push: Announced the transition to a paperless Budget for the first time in India’s history.
• Significance: This Budget aimed to fortify India’s healthcare infrastructure, address banking sector distress, and provide stimulus for an economic rebound following nationwide lockdowns.

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The Amrit Kal and Viksit Bharat: 2022–2024

2022: Digital & Technology‐Focused “Amrit Kal” Budget

• Second Pandemic Budget: In February 2022—marking the commencement of Amrit Kal (the 25‐year journey from India’s 75th to 100th Independence anniversaries)—Finance Minister Nirmala Sitharaman introduced a forward‐looking Roadmap emphasizing digital transformation and global leadership.
• Key Highlights:
  1. 9.2% GDP Growth: India recorded the world’s highest GDP growth in 2021–22, underscoring resilience amid global uncertainties.
  2. Priority Sectors:
     • Digital Public Infrastructure: Expansion of the Open Network for Digital Commerce (ONDC), digital banking initiatives, and fintech accelerators.
     • Healthcare & Education: Continued bolstering of health infrastructure, additional outlays for medical education, and skill development.
     • Green Economy & Transportation: Funds earmarked for electric vehicle (EV) incentives, battery storage projects, and clean energy.
     • MSMEs & Startups: Extension of credit support through the Credit Guarantee Scheme and new measures to foster innovation.
  3. Tax Reform Proposals: Adjustments to direct and indirect taxes aimed at simplifying slabs and broadening the taxpayer base.
• Vision: This Budget laid the foundation for India’s ambition to be among the top three global economies by 2047, focusing on technology, innovation, and inclusive growth during the “Amrit Kal.”

2024: A Themed Budget for Skills, Employment & More

• “Viksit Bharat” Mission: The 2024 Union Budget continued building on the Amrit Kal ethos, explicitly aiming to achieve a Viksit Bharat (Developed India) by the centenary of independence in 2047 under Prime Minister Narendra Modi’s leadership.
• Nine Priorities Under Viksit Bharat:
  1. Agriculture & Rural Economy: Enhanced support for agri‐infrastructure, cold chains, and integrated value chains.
  2. Infrastructure Investments: Emphasis on transportation (roads, railways, ports), urban regeneration (smart cities), and logistics corridors.
  3. Employment & Skilling: Upskilling initiatives for youth, expanded vocational training, and special focus on “future skills” (AI, data analytics, robotics).
  4. Manufacturing & Atmanirbhar Bharat: Strengthening local supply chains, incentives for semiconductor fabs, and preferential treatment for domestic OEMs (Original Equipment Manufacturers).
  5. Urbanization & Affordable Housing: Continued push for Pradhan Mantri Awas Yojana (Urban) and new public‐private partnerships for sustainable urban infrastructure.
  6. Next‐Gen Reforms: Simplification of corporate governance, startup accelerator funds, and regulatory sandboxes for financial technologies.
  7. Digital & Financial Inclusion: Expansion of digital banking networks, micro‐ATMs, and off‐grid power solutions for rural areas.
  8. Climate & Green Growth: Additional tax breaks for renewable energy capacity additions, carbon‐capture pilots, and green bonds for urban infrastructure.
  9. Middle Class-Enabling Measures: Reduced customs duties on key consumer goods—solar panels, select medicines, mobile phones, and precious metals—to make everyday essentials more affordable.
• Taxation Adjustments: The Budget proposed slight upward tweaks in direct‐tax rates on capital gains and derivatives trading while simultaneously lowering customs duties on strategic imports, reflecting a nuanced approach to balancing revenue and consumer affordability.

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Impact of Union Budget Announcements on the Indian Stock Market (2014–2024)

Union Budget days often trigger strong reactions on Dalal Street, with investors reading policy announcements for cues on corporate profits, sectoral windfalls, and fiscal discipline. Below is a decade-long snapshot of budget-day market movements:

1. 2014 (Interim & Full Budgets)
   • February 2014 (Interim Budget): BSE Sensex climbed 97.20 points to 20,464.06, while Nifty 50 rose 24.95 points to 6,073.30, reflecting optimism about a stable government ahead of elections.
   • July 2014 (First Full Budget of Modi Government): Market sentiment was cautious; the Sensex dipped 0.28%, and the Nifty 50 fell 17.25 points amid investor concerns over gradual fiscal consolidation.
2. 2015: Focus on Fiscal Discipline and Growth
   • Measures included a modest cut in corporate tax rates (for small companies) and deferral of the contentious General Anti-Avoidance Rule (GAAR).
   • Budget-Day Reaction: Sensex gained 141.38 points to 29,361.50; Nifty 50 rose 57 points to 8,901.80. However, over the next month, Nifty declined by 4.6% as global headwinds and rising crude prices tempered enthusiasm.
3. 2016: Rural & Fiscal Themes Disappoint Markets
   • Though the Budget emphasized rural and agricultural spending, it lacked substantial industry-boosting incentives. Additionally, the introduction of a higher Securities Transaction Tax (STT) on options trading disappointed traders.
   • Budget-Day Reaction: Sensex dropped 0.66%, closing just above 23,000, reflecting a muted response.
4. 2017: Merger of Railway & Union Budgets Spurs Optimism
   • Key reforms—reduction in long-term capital gains (LTCG) holding period from 36 months to 12 months and tax relief for middle-class salaried taxpayers—sparked upbeat sentiment.
   • Budget-Day Reaction: Sensex jumped 485.68 points to 28,141.64, marking the highest budget-day gain since 2010; Nifty 50 surged 155.10 points to 8,716.40.
5. 2018: Caution Over New Capital Gains and Dividend Taxes
   • The Budget introduced a 10% LTCG tax on equity investments (over ₹1 lakh of annual gains) and increased dividend distribution tax from 15% to 20%.
   • Budget-Day Reaction: Sensex slid 0.16%, registering the eighth budget-day fall in the past ten years, as equity investors reeled from higher taxes on long-term gains.
6. 2019 (Interim & Full Budgets)
   • February 2019 (Interim Budget): Tax relief for low-income earners and benefits for farmers drove Sensex up 212 points; Nifty 50 climbed 62.7 points on hopes of pre-election populist measures.
   • July 2019 (Full Budget): Initial panic—Sensex plunged 980 points intra-day due to proposals to raise tax on high-net-worth individuals and increased public shareholding requirements for companies. It recovered to close 394.67 points down, reflecting investor anxiety over potential dampeners on corporate earnings.
7. 2020: Lack of Bold Reforms Triggers Sell-Off
   • The Budget introduced minor changes—new tax slabs and modest infrastructure allocations—but failed to deliver significant stimuli for manufacturing or fiscal expansion.
   • Budget-Day Reaction: Sensex plummeted 2.43%, closing below 40,000, its worst performance since the global financial meltdown of 2009.
8. 2021: Pandemic-Era Recovery Sparkles
   • Aimed at revitalizing a COVID-ravaged economy, the Budget focused on capital expenditure (infrastructure), digital payments, and production-linked incentive (PLI) schemes for key sectors.
   • Budget-Day Reaction: Sensex soared 2,314.84 points to 48,600.61, while Nifty jumped 646.60 points to 14,281.20—the best Budget-day performance in twenty years.
9. 2022: Digital Infrastructure & 5G Support Boosts Markets
   • Measures supporting 5G rollout, digital currency exploration, and infrastructure investments lifted investor confidence, although concerns over a widening fiscal deficit led to higher bond yields.
   • Budget-Day Reaction: Sensex gained 849.40 points to 58,862.57; Nifty 50 rose 237 points to 17,576.85. PSU bank stocks lagged, weighed down by fears of higher borrowing costs.
10. 2023: Mixed Reactions on Policy Continuity
    • The Budget largely continued existing policies, with incremental tax relief for middle-class households and limited new announcements.
    • Budget-Day Reaction: The Sensex rallied over 1,100 points intraday but ultimately closed only 158.18 points higher at 59,708.08; Nifty 50 ended 45.85 points lower at 17,616.30, reflecting investor ambivalence.
11. 2024: Tax Hikes Temper Initial Optimism
    • Proposals to raise taxes on long-term capital gains and derivatives trading triggered caution, even as customs duties on solar panels, medicines, and mobile phones were lowered to benefit consumers.
    • Budget-Day Reaction: Both Sensex and Nifty fell by about 1%, with the rupee hitting an intraday all-time low against the US dollar. Analysts warned that higher LTCG tax could dampen savings and investment appetite, offsetting gains from customs-duty reductions.

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Key Budgetary Milestones: A Chronological Recap

1. 1951–52: Establishment of the Planning Commission, underpinning India’s planned‐economy framework.
2. 1957–58: Introduction of the Wealth Tax to tax accumulated assets—a levy abolished in 2016.
3. 1968: Morarji Desai’s “People’s Budget” instituted landmark excise reforms and self‐assessment for manufacturers.
4. 1987: Launch of the Minimum Alternate Tax (MAT) to ensure large, profit‐making companies pay a minimum tax.
5. 1991: Drastic liberalization under Manmohan Singh—ending the Licence Raj, reducing tariffs, and inviting foreign capital—launching India’s market‐oriented economy.
6. 1993–94: Announcement of the National Stock Exchange (NSE), revolutionizing capital markets with electronic, screen‐based trading.
7. 1994–95: Introduction of service tax to capture revenue from a rapidly growing services sector, later subsumed under GST.
8. 1997: P. Chidambaram’s “Dream Budget” slashed personal and corporate tax rates, broadened the taxpayer base, and introduced the Voluntary Disclosure of Income Scheme (VDIS).
9. 2006–07: Roadmap for unified indirect‐tax reform, laying the foundation for the GST regime that launched in 2017.
10. 2017: Merger of the Railway Budget with the Union Budget after 92 years, enabling integrated infrastructure planning.
11. 2021: The first “pandemic Budget,” with massive healthcare outlays (+137%) and establishment of an asset‐reconstruction company to tackle bad loans.
12. 2022: Emphasis on digital public infrastructure, technology adaptation, and “Amrit Kal”—a 25-year roadmap to become a top global economy.
13. 2024: Themed around Viksit Bharat (Developed India) with nine priorities—agriculture, infrastructure, skilling, manufacturing, urbanization, and green growth—aimed at realizing India’s centenary vision by 2047.

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The Union Budget’s Evolving Role

Over seven decades, the Union Budget has transitioned:

• From Planning to Market Orientation: Early budgets (1950s–1980s) focused on centralized planning, import substitution, and building public‐sector capacity.
• To Liberalization and Global Integration: The 1991 Budget ushered in an era of deregulation, privatization, and foreign‐investment push, integrating India into the global economy.
• To Fiscal Consolidation and Social Inclusion: Post-1997, budgets have balanced revenue reforms (tax rationalization, broadening the base) with social‐sector spending (education, healthcare, rural uplift).
• To Digitization and Future-Ready India: In the “Amrit Kal” phase, budgets emphasize digital infrastructure (e-governance, fintech, e-commerce), decarbonization, and skill development.
• To a Vision of Viksit Bharat: The 2024 Budget crystallized nine priorities under the “Viksit Bharat” mission, consolidating India’s strategic roadmap for inclusive, sustainable growth through 2047.

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Conclusion: Toward a Developed India by 2047

As India charts its course toward becoming a Viksit Bharat by the 100th anniversary of independence, the Union Budget continues to be the government’s bulwark policy tool—dictating fiscal prudence, sectoral focus, and structural change. From the creation of the Planning Commission in 1951 to advancing digitization and green growth during 2022–2024, Union Budgets have guided India’s shift from a command‐and‐control economy to a vibrant, services‐driven dynamo.

Looking ahead, the next 25 years will be critical. Under Prime Minister Narendra Modi’s leadership, India’s Viksit Bharat vision aspires to position the nation among the top three global economies, eradicate extreme poverty, universal access to quality education and healthcare, and achievement of net-zero carbon emissions. As every Union Budget unrolls, policymakers will have to reconcile cross-cutting imperatives—social welfare, fiscal responsibility, infrastructure growth, and global competitiveness—to reorient India’s economic story and realize the potential of a developed nation by 2047.