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India the Budget Speech1948-1949

India the Budget Speech1948-1949

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Published by mullookkaaran
India Budget Speech1948-1949
India Budget Speech1948-1949

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Published by: mullookkaaran on Mar 07, 2010
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07/16/2010

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1
SPEECH OF SHRI R.K. SHANMUKHAM CHETTY, MINISTER OFFINANCE INTRODUCING THE BUDGET FOR THE YEAR 1948-49
When I presented my Interim Budget for Free India’s first Parliament a few months back, our nation had been shaken to its very foundations by the great Punjab tragedy.Thousands of our people had been brutally butchered, and millions of innocent men,women and children driven out of their ancestral homes and forced to make a dusty,deadly trek in search of a new home. Our crying concern then was to dress the woundsof uprooted humanity, and to mobilise all our financial resources to set aright an unhingedeconomy. Our new found freedom, however, weathered the storm, and as the eve of myfirst annual Budget approached, I could see a silver lining around the cloud. Then,suddenly, like a thunderbolt that rends the sky and spins the globe, calamity struck usonce more and orphaned our infant State and enveloped the. country with a darknesseven more complete. The hand that nailed Jesus to the Cross reached out of the evilrecesses of history once again and slew the latest in the line of Prophets. Along withBernard Shaw one wonders “Must then a Christ Perish in torment in every age to savethose that have no Imagination” In Mahatma Gandhi the world has lost an upliftingstandard, our nation its Founding Father, - and each one of his friend, philosopher andguide. Many ran up to him in times of stress, national or personal, and came back withrenewed confidence. Our fledgling freedom felt warm and secure under the protectivewing of Gandhiji. The way ill fortune has dogged our heels makes one doubt whether our people had made a tryst with disaster rather than with destiny. But that is a most un-Gandhian mood; for he remained cheerful and buoyant and hopeful even in the darkesthour. Indeed I rise today under a shadow but I know it is the shadow of his Cross, and soI feel confident that our nation will be prepared to meet the great challenge of thesituation. In the faith that looks through death we shall shape the destiny of our nationon the pattern which he cherished and lead it from the dark abyss of hatred and despair to the sunlit pastures of eternal life.
REVIEW OF ECONOMIC CONDITIONS
2.The third year after war finds the world still in the meshes of those economicmaladjustments which are the inevitable aftermath of total war - the nemesis thatinexorably pursues the victor and the vanquished alike. Western Europe is still in a sad plight and intolerable economic conditions prevail in many of the devastated areas. Theefforts at rehabilitation by the United Nations Organisation and the United StatesGovernment have so far borne little fruit. All hope is now centred round the MarshallPlan. But its gestation is unduly delayed, and it has worsened the already strained relations between the Big Three. The United Kingdom is making a heroic effort to rehabilitateher war torn economy and shattered trade. There has been serious economic dislocationin many Asian countries owing to violent internal struggles or fight for freedom from
 
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2foreign domination. Thus, over a large part of the world, economic conditions are stillworse than in wartime, production has fallen, even below pre-war levels in some cases,and prices have been soaring to new heights. The world food situation is still a cause for serious anxiety, while the world’s population has increased by about 200 millions since1939, the total food production has fallen by 7 per cent. At the same time, there has been a tremendous increase in the money in circulation. The many high poweredinternational bodies lately set up for rectifying the world’s currency and food troubleshave so far made little headway. In the result, inflation is still holding the world in itsfirm grip and the standards of living of the great majority of the world’s populationremain at depressingly low levels. Especially in Asian countries, the economic situationhas greatly deteriorated owing to violent internal struggles and the consequent dislocationof normal economic activity.3.There has been no material change in the general economic conditions inour own country since I reviewed them last when presenting the budget for the currentyear last November. The dislocation caused by the mass migration of people betweenWestern Pakistan and India still remains to be surmounted and only the fringe of the problem of rehabilitating the millions of people who have crossed over to India has sofar been touched. While active steps are being taken to provide the necessary financialassistance to the refugees to enable them to start on. useful careers in their newsurroundings, the process of rehabilitation is necessarily bound to take some time. The budget for next year provides a substantial amount for relief and rehabilitation and theHouse may rest assured that everything possible will be done to place these refugees inuseful occupations as early as possible. It is not merely a matter of humanitarian relief  but one of economic investment, for the sooner these people, many of whom are skilledworkers and agriculturists with experience, are placed in occupations in which their  productive capacity would add to the wealth of the community the better for the country.In this task of rehabilitation the Government of India are working in close co-operationwith the neighbouring States and Provinces and the plans for their relief and rehabilitationare being drawn up In co-ordination with them.4.The food position still continues to cause anxiety and conditions havedefinitely become worse in large parts of the Madras Presidency following the failureof the monsoon. Steps are being taken to make additional supplies available but the position is bound to be difficult
 
until the new harvest comes on the market. It is notnecessary for me to explain in detail the reasons which led to the policy of gradualdecontrol of food which was approved by this House. The effects of this policy on theinternal sources of supply still remain to be seen but if the expectation behind this policy that it would bring more supplies to the market and, to that extent, reduce our dependence on foreign imports is realised, it would be completely justified.5.In my speech last November I mentioned the rising trend of prices as themost unwholesome feature in our economic situation. This, as I explained then, was theresult-of a number of factors some of which like the accumulation of surplus purchasing
 
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3 power in the hands of the community, have been in operation for some time while thean round fall in production, both industrial and agricultural, was of more recent origin.I stressed then the need for increasing production in every possible way and I gavedetails of the steps taken to promote the Increase of textile production as an example of what the Government are striving to do. But the House must realise that any substantialincrease in production is impossible until the shortage of materials, the bottleneck intransport and other impediments are removed. If the increase in production requires theImport of equipment from overseas, this again takes time to obtain and is also limited by considerations of foreign exchange on which the more urgent requirements of foodhave necessarily the first claim. These difficulties are inherent in the situation but itdoes not necessarily follow that Government are doing nothing in the matter. One serioushindrance in the way of production, even with the available resources, has been thefrequent disputes between capital and labour, resulting in strikes and other interruptionsof work. If the recent truce agreed upon between capital and labour for a period of threeyears in the recent Industries Conference can be implemented in letter and spirit, theway would be clear for a considerable increase in production.6.A view that has in recent years become almost unanimous among economistsand financiers is that each year a Government’s financial policy should be so plannedas to rectify the economic maladjustments of the time, and to serve as a compensatorydevice to offset fluctuations in the private sector of economy. In a time of inflation, budgets should not only be balanced but there should he a comfortable surplus for mopping up the excess purchasing power and encourage economy in private spending.On the other hand, when a depression is on, Government should launch bold schemesof public expenditure and should boldly budget for a deficit if necessary.7.An inflationary pressure resulting from too much money chasing too fewgoods has been the keynote of our present economy, and there is no indication that areversal of this trend is in sight. At such a juncture, we should exert every nerve to budget for a surplus, if possible, by increasing revenue and curtailing expenditure. Themethods by which these aims are achieved are important, because as the present phaseof inflation is due to an abundance of spending power without the goods to spend on,we must see that a surplus is achieved in such a way as to curtail spending and createsuitable incentives for increasing production. In other words, the tax-burdens laid must be met by cutting down expenditure on consumption and not by saying less. Similarly,the borrowing made must be from genuine savings and not from inflated bank credit.The practical application of these principles is indeed difficult, but we must bear themin mind in shaping our financial policy.
BALANCE OF PAYMENTS
8.I should like to draw the attention of the House to a matter which has been causingsome concern to Government, namely, the emergence, in recent times, of a substantialadverse balance in India’s external payments. India’s balance of trade has in the pastalways been substantially in her favour, the surplus of exports over imports being used

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