SPEECH OF SHRI C D
DESHMKH
MINISTER OF FINANCE
INTRODUCING THE BUDGET FOR THE YEAR 1952-1953 (INTERIM)
Dated: February 29, 1952
I rise to present
the budget of the Central Government for the year 1952-53.
This is only an interim budget although it has been prepared as usual for
a full year. Its main purpose is to place before Parliament an account of
the finances of the Central Government for the current year and the prospects
for the coming year on the existing basis of revenue and expenditure so that
the House may know the general background against which it has to deal with
the demands which will be placed before it for a vote on account to meet the
expenses of the administration till the new Parliament considers and passes
the budget for the whole year. The budget which I am now presenting will be
presented again in due course to the New Parliament with such changes as the
new Government may consider it necessary. Meanwhile, Government propose to
ask the House only for a vote on account to meet the anticipated expenditure
during the first four months of the next year and to approve of the continuance
of the existing measures of taxation.
A White Paper giving an account of the economic conditions in the country
during 1951 and the main features of the revised estimates for the current
year and the budget estimates for the next year is being circulated with the
budget papers. I do not therefore propose to make any detailed speech introducing
the budget but I shall content myself with giving the House a brief account
of salient features of the budget.
Before I deal with the estimates I should like to mention briefly the main
developments in the economic conditions in the country during the year which
is now drawing to a close. As Hon'ble Members are aware the vagaries
of the monsoon have again left the country to face a substantial deficit in
foodgrains during the coming year. In the other respects the years results
are, however, more encouraging. For some months the steady rise in prices,
which has been one of the disconcerting features in the country's economy
since the commencement of the Korean war, has been halted and from July 1951
onwards there has been a steady downward movement in the price level. This
welcome development can be traced as much to the world-wide falling of trend
commodity prices as to the general disinflationary effect of the very large
revenue surplus realised during the year and the withdrawal of a substantial
volume of purchasing power from the public by the sale of imported wheat purchased
from the American loan. The level of production in the principal industries
of the country has also been higher than in the previous year and the larger
supplies thus made available for internal consumption have had a steadying
effect on prices. Agricultural production also showed some improvement although
in the case of foodgrains the increased production secured by the Grow More
Food campaign was more than wiped out by the shortages created by adverse
seasonal conditions.
The balance of payments position during 1951, was not as favourable as in
the preceding year. This was due partly to a fall in the demand for the principal
export of this country after the first phase of stock piling by the United
States and other countries was over and partly to our having had to pay more
for our imports, owing to rise in world prices and increase in freight rates.
I do not expect that these conditions will change materially in the coming
year. We shall still have to import substantial quantities of foodgrains,
and essential raw materials and capital and consumer goods, while no appreciable
expansion of our principal exports is likely to take place, although Government
will continue to take all possible steps to maintain and develop the country's
export markets. Among such steps I would mention the recent lowering of the
export duty on hessian. I see little prospect of any reduction in the volume
of our imports and in dealing with the problem of the adverse balance of payments
position of the sterling area as a whole I made it abundantly clear that while
we would assist in every way In stimulating the country's exports there was
no scope for this country cutting down its imports to any significant extent
in its present stage of development and with its chronic shortage of food.
The House will remember that in the current year's budget I had provided for
a revenue surplus of Rs. 26.1crores and an overall budget deficit, taking
the revenue and capital budgets together, of Rs. 51.88 crores. I now estimate
the revenue surplus for the year at Rs. 92.61 crores and the overall budget
deficit at Rs. 3.7 crores. The improvement in the revenue position is mainly
due to the extraordinary buoyancy of receipts from Customs which are now estimated
to show an improvement of Rs. 76 crores over the budget. Union Excise duties
and Income-tax are also expected to show larger yields. Revenue as a whole
is now placed at Rs. 498 crores against the budget estimate of Rs. 402 crores.
Of this improvement of Rs. 96 crores, Rs. 30 crores will be absorbed by additional
expenditure, mainly on the payment of food subsidies and expenditure on displaced
persons, leaving Rs. 66 crores more than the original estimate for assisting
the capital budget.
The capital budget was also assisted during the year by the net receipts from
the sale proceeds of the wheat purchased from the American loan of 190 million
dollars and wheat obtained from certain Commonwealth countries under the Colombo
Plan. These together are estimated at Rs. 76 crores and taken With the increased
revenue surplus of Rs. 66 crores more than balanced the shortfall of Rs. 50
crores in public borrowing and the contraction of Rs. 30 crores in the floating
debt during the year, resulting from the liquidation of their investments
by some of the States and other authorities. This also made it possible to
make increased allocations for some of the capital schemes such as the River
Valley projects during the year.
At the existing level of taxation and expenditure, I estimate the revenue
for next year at Rs. 425 crores and the expenditure at Rs. 4061/4 crores,
leaving a revenue surplus of Rs. 183/4 crores. The actual surplus may be Rs.
15 crores more than the figure I have just mentioned and which Hon'ble Members
will also find mentioned in the budget papers. The reason for this increase
is that of the provision of Rs. 25 crores taken in the estimates for food
subsidies, Rs. 15 crores is not likely to be required as a result of the decision
announced last week by my Hon'ble colleague the Minister for Food and
Agriculture about the abolition of the food subsidies except to a very limited
extent. The drop of Rs. 73 crores in revenue in the coming year as compared
with the current year is mainly due to a reduction of Rs. 42 crores under
Customs and Rs. 23 crores under income-tax. The fall in Customs revenue is
accounted for by the reduction in the export duty on hessian recently announced
and also by an estimated fall in the receipts from import duties which have
been unusually high this year. The reduction in income-tax reflects the result
of the action taken in the current year for the clearance of arrears and also
the gradual disappearance of arrear collections of taxes no longer in force.
I have also taken into account the disappearance from the Central budget of
the revenue and expenditure of the five Part C States which will have their
own separate budgets from next year.
The total expenditure next year is estimated at Rs. 4061 crores, of which
Rs. 197.95 crores will be on Defence Services and the balance under Civil
heads. As a result of the abolition of the food subsidies a saving of Rs.
15 crores is likely on these estimates. Defence expenditure will be Rs. 17
crores more than this year, mainly owing to the carry over of certain liabilities
for stores on order from the current year. The other variations as compared
with the original budget and the revised estimates are explained in the detailed
memorandum circulated with the budget papers and I do not propose to weary
the House by repeating them here.
Substantial provision has been included in the budget for the coming year
for capital and development expenditure and for loans to State Governments
to assist them in financing their development schemes. The provision for capital
and development expenditure broadly follows the pattern laid down by the Planning
Commission in the draft Five-Year Plan. The House may remember that the Plan
envisaged the Centre producing a revenue surplus of the order of Rs. 26 crores
in each of the 5 years covered by it. Although the estimated surplus this
year is about Rs. 67 crores larger than the sum envisaged in the Plan, this
improvement is only fortuitous and cannot be carried forward to subsequent
years. It only helped partially to fill the gap in borrowing during the year
and there was no net addition to our resources on this account-indeed we had
to run down to some extent the unforeseen accretion to our balances from the
previous year.
Next year's budget taken as a whole provides for an overall deficit of Rs.
56 crores, which the increase in the revenue surplus resulting from the abolition
of food subsidies will reduce to Rs. 41 crores. This will be well within the
estimated balance of payments deficit for the year and will not therefore
add in any way to the inflationary position. At the end of the year I expect
that our cash balances would be of the order of Rs. 116 crores. Included in
this figure will be an unspent balance of Rs. 40 crores received by way of
foreign assistance.
I do not propose to embark at any length on a review of the fiscal and financial
policy of Government on this occasion of presenting what is virtually a caretaker
budget. But looking back on the year just drawing to a close I feel that there
is justification for sober satisfaction. Although the country's food problem
still remains acute, there has been a notable improvement in other directions.
The rise in prices has been halted and there has been a progressive decrease
in the price level in recent months. In spite of the difficulties in obtaining
some of the essential raw materials there has been an all round increase in
production. The emergence of a realistic and coordinated plan of development,
as a result of the labours of the Planning Commission, has, I think, convinced
people both in this country and outside that we mean, and have. set about
In right earnest, to tackle the problem of the proper development of the country's
resources. I venture to think that the cumulative effect of the fiscal and
financial policy in recent months has definitely been to enhance the creditworthiness
of this country. It will I hope, pave the way for a larger flow of international
assistance and foreign investment to this country, to help us in our planned
campaign for developing the latent resources of this country for the raising
of the standards of life of our people.