A brief history of India’s Interim Budgets

Finance Minister Nirmala Sitharaman’s sixth Union Budget and the Prime Minister Narendra Modi-led NDA government’s 12th (10 full budgets and two interim) will be, like its 2019-20 predecessor, an interim budget—a vote on account. Budget 2024 will not have the legislative force to usher in major changes, given that general elections will be announced soon after and a new government will be in charge by May 2024. That will be the task of a full budget, in July 2024.

FM Sitharaman’s Interim Budget will talk about the government’s achievements since 2014 and will look ahead at Amrit Kaal of 2047. Having tracked FM Sitharaman’s work closely, we speculate with some authority that, as PM Modi’s last pre-elections major policy document, Budget 2024 will celebrate the past, charge the present, and communicate the future. Predictably, Budget 2024 will be labelled an ‘election budget’. This is nothing new; electoral reminders being part of Interim Budgets have been the new normal since Finance Minister Manmohan Singh’s 1996 speech.

Having tracked FM Sitharaman’s work closely, we speculate with some authority that, as PM Modi’s last pre-elections major policy document, Budget 2024 will celebrate the past, charge the present, and communicate the future.

Globally, Budget 2024 is situated at time when India has become the world’s fifth-largest economy and is in sniffing distance of being the third largest in less than a year, a US$ 5 trillion economy in two years, and a US$ 7 trillion economy before this decade ends. Strategically, it stands at the cusp of a changing regional order and is a signatory to the eastward shifting of the economic world order. India has evolved to become a major actor in the Indo-Pacific region, and an important voice in international affairs.

Irrespective of global narratives, Union Budgets are domestic entities—they derive their power and their authority from forces within borders, not outside. Howsoever compelling the numbers, FM Sitharaman’s Interim Budget will be criticised on the welfare versus growth front—jobless growth, K-shaped recovery, millionaires gearing up to leave India, too many millionaires in the country, and so on. Most of these are political spins on economic issues.

FM Sitharaman’s Interim Budget will be criticised on the welfare versus growth front—jobless growth, K-shaped recovery, millionaires gearing up to leave India, too many millionaires in the country, and so on.

Budget 2024 will need to address several opposing issues simultaneously. These will include poverty and prosperity, jobs and prices, and financialisation and markets. Inequality will be a major theme. This, even as India stands atop a comfortable Gini Coefficient, a measure that informs us about the extent to which the distribution of income or consumption among households deviates from equal distribution. A Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality. At 34.2, India’s Gini Coefficient is better than 39.8 for the US and 37.1 for China, but worse than Germany’s 31.7 and Japan’s 32.9; it was 35.7 in 2011 (the data for 2012, 2013 and 2014 is missing).

Further, the income share of the highest 10 percent of Indians stands at 27.8 percent, compared to 30.1 percent for the US, 29.4 percent for China, 26.4 percent for Japan and 25.2 percent for Germany. Amongst economic peers, therefore, India is comfortably perched on the inequality front. FM Sitharaman’s recent challenge of those who, in a politically charged and “vitiated” atmosphere, believe India’s growth is a K-shaped recovery needs to be seen in this context.

Such is the power of narratives to derail facts, that the economy as the driving force of a nation has had to bend before politics. When the Modi government celebrated its nine years of governance with a data-driven book, it began with welfare, followed through with foreign policy, and only then did the economy find a place, in chapters 8 through 12. FM Sitharaman will place several of these data points, from digital payments and GST collections to unicorns and ease of doing business, in Budget 2024.

When the Modi government celebrated its nine years of governance with a data-driven book, it began with welfare, followed through with foreign policy, and only then did the economy find a place, in chapters 8 through 12.

In 2013, Morgan Stanley had classified India amongst the “Fragile Five” economies. A decade later, India is the world’s fastest-growing economy. In 2014, on a GDP of US$ 2 trillion, India was the world’s 10th-largest economy; in 2024, at US$ 4 trillion, it is the world’s fifth largest. Underlying this change are the policies and reforms of the Modi government.

These include, but are not restricted to, the Jan Dhan Yojana, which is the world’s largest financialisation scheme; the Goods and Services Tax that reformed India’s indirect taxes; the Insolvency and Banking Code that reformed bankruptcy processes; the Jan Vishwas Act that has made a beginning to decriminalise irrelevant business laws and clauses; and the establishment of Labour Codes. Last-mile efficiencies on direct benefit transfers have removed the friction of administration and corruption for the last woman standing.

Like earlier Interim Budgets, FM Sitharaman will offer an economic policy vision for the next five years—or more. In his 1 February 2019 speech, then Finance Minister Piyush Goyal had laid out a trimurti of troikas that climaxed into “10 dimensions” for a US$ 5 trillion GDP going on US$ 10 trillion. “This is not merely an Interim Budget, but a medium of the country’s development journey,” he had said in his 98-paragraph, 8,119-word speech—the second largest Interim Budget speech ever (See table).

INTERIM BUDGETS: WHO SAID HOW MUCH
Year	Finance Minister	Paragraphs	Words
November 1947	R.K. Shanmukham Chetty	39	9,998
February 1952	C.D. Deshmukh	13	1,883
March 1957	T.T. Krishnamachari	18	2,116
March 1962	Morarji R. Desai	35	4,162
March 1967	Morarji R. Desai	40	4,769
March 1971	Y.B. Chavan	35	5,021
March 1977	H.M. Patel	9	798
March 1980	R. Venkataraman	40	3,431
March 1991	Yashwant Sinha	23	2,451
February 1996	Manmohan Singh	43	6,002
March 1998	Yashwant Sinha	16	1,367
February 2004	Jaswant Singh	51	5,044
February 2014	P. Chidambaram	85	6,597
February 2019	Piyush Goyal	98	8,119
SOURCE: Union Budget documents, Ministry of Finance, Government of India

Of course, the largest interim budget speech was made by Finance Minister R.K. Shanmukham Chetty, who, in November 1947, almost touched the 10,000-word level in 39 paragraphs (See table). This was not merely an Interim Budget speech; it was a celebration of independence and the acknowledgement of self-governance. “For the first time in two centuries, we have a Government of our own answerable to the people for its actions,” he had said. That it was an ‘interim’ budget was revealed only in his next February 1948 budget.

The third-longest Interim Budget speech was by Finance Minister P. Chidambaram in February 2014. He argued and defended the past 10 years of the two UPA governments, which “gently nudged India and Indians into accepting that growth is an imperative.” From food production to installed power capacity, he offered statistics to counter the allegation of inertia: “I reject the argument of policy paralysis.” He reminded us about the legislations brought—the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act; the National Food Security Act; and the new Companies Act. He mentioned the National Pension System as an important reform, on which the Congress has now made a U-turn in Himachal Pradesh, Chhattisgarh, Jharkhand and Rajasthan.

The shortest Interim Budget was by Finance Minister H.M. Patel in his 798-word speech in March 1977, following the worst assault on India through the Emergency, which led to the Congress losing elections. He acknowledged the looming political change and noted that “there is an urgent need to redirect our economic policies and priorities.”

The shortest Interim Budget was by Finance Minister H.M. Patel in his 798-word speech in March 1977, following the worst assault on India through the Emergency, which led to the Congress losing elections.

Finance Minister Yashwant Sinha’s 1,367-word March 1998 speech followed next. He spoke about the deepening, broadening and acceleration of economic reforms. Finance Minister C.D. Deshmukh’s February 1952 speech was the third shortest. This was a time of food shortages, and Deshmukh was cognisant of the fact—seven out of his 13 paragraphs talked about food and agriculture.

From 1996 onwards, driven by Finance Minister Manmohan Singh, Interim Budgets have become platforms that record past performances and infuse future political intent. Manmohan Singh reminded us of his landmark July 1991 speech that liberalised the Indian economy and promised to “build a new India” in his February 1996 Interim Budget. Fourteen years later, in his February 2004 interim budget, Finance Minister Jaswant Singh spoke of several achievements, from managing the post-Pokhran economic sanctions and surviving the East Asian crisis, to two border stand-offs and the Gulf War.

Manmohan Singh reminded us of his landmark July 1991 speech that liberalised the Indian economy and promised to “build a new India” in his February 1996 Interim Budget.

This trend has continued through to P. Chidambaram and Piyush Goyal. There is no doubt that FM Sitharaman will follow the same pattern. The only question is around size—will 1 February 2024 see her deliver India’s longest Interim Budget speech? Keeping in mind the achievements of the NDA government over the past decade, a very important election looming, a strong policy intent of continuity and outcomes, and trend-reading her predecessors, the answer is very likely.

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Gautam Chikermane is Vice President at the Observer Research Foundation.

• Indian Economy
• India
• achievements
• Budget 2024
• economic change
• election
• GDP
• India’s growth
• Inequality
• Interim Budget trends
• Interim Budgets
• Modi reforms
• NDA
• Sitharaman
• Union Budgets
• welfare

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