India gained independence on August 15, 1947. There were widespread riots due to partition and people’s movement from India to Pakistan and vice versa. Amidst all this, the then finance minister Hon’ble Dr. R. K. Shanmugham Chettiar, presented Independent India’s first budget in the Parliament on November 26, 1947. The budget was for a period of seven and a half months from August 15, 1947 to March 31, 1948. The total estimate for the budget was Rs. 171.15 crore, and the estimated fiscal deficit was Rs. 24.59 crore.

Dr. R.K. Shanmugham Chetty, on November 26, 1947, also made it clear in the parliamentary meeting that the two dominions- India and Pakistan until September 1948 would be run using the same currency and from the next 1st of April after that, Pakistan would have its own currency printed in its own country. The partition had cut across the country’s cultural and economic unity.

Let us take a look at the how the budget was presented and what was its highlights-

The three key expenses of the budget were on civil services, defence services and food grain production. Food production those days was low, therefore food grains were given the highest priority. Since it was only for a period of seven and a half months, this budget was mainly influenced by the partition and the expenses related to the same, it did not include railways. Railways was looked after in the budget that was presented in April in the following year.

The Economic Situation of the Country

There had been a notable weakening in the financial circumstance in the nation since March last. The circumstance had been affected by the enormous scale unsettling disturbances which burst out all of a sudden, more particularly in the Punjab and the North West Frontier Province. A huge number of blameless lives had been lost in the two dominions and migration on a remarkable scale in history had occurred. The total number of individuals associated with this movement had achieved huge figures on either side concerning ascend to issues of extraordinary greatness influencing the economy of the nation.

The food position had kept on causing grave nervousness both to the State Governments and the Central Government. The aftereffects of the “Develop More Nourishment Campaign” had been in general frustrating. During the three years 1944- 45, 1945-46 and 1946-47 the country needed to import from abroad 43.80 lakhs of tons of foodgrains at an expense of more than 127 crores of rupees. If the economy had to be kept in a healthy condition, it was very necessary for the government to increase internal production. Therefore the government had to become dependent and make use of its own resources, it announced a scheme under the budget which would enhance the production of cotton textiles and would simultaneously increase labour and it was estimated that the production of an additional 1,000 million yards would be achieved.

Revenue and Expenditure

At that point of time, no one could have accurately measured the effect of the partition on the country’s revenue and expenditure. The estimated figures were only tentative but the fact that economists did not fail in taking measures to uplift the country’s economy is not to be ignored.
Income from the Posts and Telegraphs Department was relied upon to sum to Rs. 15.9 crores and the working costs and interest to 13.9 crores leaving a net surplus of Rs. 2 crores.
The total consumption for the year was evaluated at Rs. 197.39 crores, of which Rs. 92.74 crores was by virtue of the Defense Services, the parity speaking to expenditure of civil affairs.

Defence Services

At that time, the approximate strength of the army stood roughly at 410,000 troops. The budget had a provision for reconstitution of the army after which the army was supposed to have roughly 260,000 troops, creating more jobs and building a strong defence base for the country. An organisation under a Supreme Commander, acting under the direction of the Joint Defence Council, was set up. India had never an adequate Navy or Air Force and the effect of the partition had been to reduce them still further, so far as the dominion of India was concerned. The estimate of net expenditure on the defence sector was estimated at Rs. 92.74 crores. This estimated budget was made keeping in mind the following tasks-
The govt’s decision to stop demobilisation and to withdraw troops from overseas.
The execution of the post-war Pay Committee’s recommendations with respect to Defence Services personnel.
The movement of troops and stores in connection with the reconstitution of the Armed Forces.

The General Financial Position

The Indian subcontinent with its remaining states after partition would still cover the larger part of the country, with immense resources in men, material and industrial potential. The country’s debt position was also intrinsically sound and for a country of its size, India carried only a relatively small burden of unproductive debt. India’s external debt was negligible and the nation had considerable external resources in the accumulated sterling balances. It was of the utmost importance that the country was industrialised rapidly so as to secure increased production and a widening range of employment for the people.

Ways and Means

The spending limit for that period accommodated an acquiring of Rs. 150 crores however this target was not achieved. Owing to the communal disturbances in the country, vulnerabilities of the political circumstances, the securities market was very unsettled.

Civil Estimates

There were two aspects to this sector viz., the short term one was of giving immediate relief to the refugees pouring into the country from Pakistan, practically destitute, and the long term one was of resettling them in India. All the resources at the cost of the Government of India had been mobilised in arranging the evacuation and relief of those refugees and the railways and the Armed Forces had been utilised to the maximum extent possible on this subject.

Of the total account of Rs. 104.5 crores, Rs. 44.5 crores were reserved for the expenditure on migrants and refugees and the sponsoring of imported foodgrains, leaving Rs. 60 crores for ordinary consumption. This incorporated Rs. 5 crores for tax accumulation, mandatory consumption of Rs. 221 crores on installment of interest and benefits and arrangements for debt redemption, Rs. 2 crores on planning and resettlement and Rs. 12 crores for use on nation building exercises, for example, medical, public health, education, research institutes and so on in which the Centre generally supplements the work of the Provincial Governments by giving profitable help by method of specialised services and research, leaving a balance of Rs. 18.5 crores for the conventional consumption on administration, common works and so forth. This consumption just comprised of 18 percent of the total civil use incorporated into the budget. Notwithstanding the consumption of Rs. 12 crores on nation building exercises referenced above, arrangement had been made in the Capital Budget for a grant of Rs. 20.39 crores to Provincial Governments for improvement and Rs. 15 crores for advance.

Dr. R. K. Shanmugham Chetty was the first finance minister of Independent India. He considered it a privilege and his duty to look after India’s economy which was in its baby stages. It was very vulnerable. After presenting this budget, he resigned and was taken over by Dr. John Mathai. The budget as presented by Dr. R. K. Shanmugham Chettiar, was although, from today’s perspective, lacked several minute details, but today, we owe what we are to those people. After partition, the citizens of India were in a very delicate position. Due to riots and disturbances, there was scarcity of food, lack of provisions for them, widespread loss of dear ones. They needed homes to reside, jobs to earn money for themselves and their children. Through this budget, the Government created a number of jobs, built schools for their development, built hospitals for their treatment, created jobs in almost every sector and laid the foundation pillars on which today’s India stands.