The Union Budget, 1973-74

By N. A. Palkhivala

Summary

In his Forum of Free Enterprise booklet on the Union Budget for 1973-74, N. A. Palkhivala opens with a satirical verse on the proliferation of laudable but empty objectives (‘Committees in Geneva’), arguing that no disparity is ‘so glaring and costly as that between the prized ends solemnly pronounced in the Budget Speech every year and the provisions of the annual Finance Bill which are so admirably calculated to frustrate those objectives’. The Budget’s five avowed goals — counter inflation, promote savings, enlarge employment, ensure basic amenities, boost exports — are dismissed as ‘pious aspirations’. He documents a yawning gap between estimated and actual deficits (an overall deficit of Rs 550 crores against an estimate of Rs 251 crores, an actual deficit nearer Rs 1,449 crores), rising wholesale prices (up 13.2%), and heavier excises and customs that will fuel further inflation.

The core of the address is the familiar Palkhivala indictment: personal and corporate tax rates remain ‘by and large, the highest in the world’, so habitual that press and public have stopped noticing; the only substantial savers are ‘smugglers, black marketeers and tax-evaders’; the Wanchoo Committee’s recommendation of a 75% top rate is ignored; the agricultural lobby keeps farm income effectively untaxed; and incentives for industry are withdrawn one by one, the last casualty being the development rebate due to lapse on 31 May 1974. He contrasts India’s withdrawal of incentives with the generous tax holidays and subsidies (30-45% of capital cost) offered by Argentina, Brazil, Canada, the U.K., Iran and others, and notes the public sector’s 84 undertakings carrying aggregate losses while the Budget Speech maintains a ‘see no evil’ silence.

Palkhivala stresses the Government’s record of breaking statutory promises of tax exemption (on annuity policies, electricity duty, octroi), warns that unchecked inflation makes ‘everybody a loser’ — contrasting the U.K. and Canadian tax-cutting budgets (‘Everybody gains, and nobody loses’) with India’s — and closes by endorsing Sir Richard Clarke’s call for an end to Budget secrecy and open debate of long-term tax policy. He concludes that the Budget’s ‘most striking feature is its complete irrelevance to the gigantic tasks facing the country’. The rendered pages cover the full address (the PDF repeats a few interior scans) and the closing FFE colophon dated 20 April 1973.

Key points

• The Budget’s five avowed goals (counter inflation, promote savings, enlarge employment, basic amenities, boost exports) are dismissed as ‘pious aspirations’.

• Estimated versus actual deficits diverge sharply (overall deficit Rs 550 crores vs estimate Rs 251 crores; actual nearer Rs 1,449 crores); wholesale prices up 13.2%.

• Personal and corporate tax rates remain among the highest in the world; the only substantial savers are smugglers, black marketeers and tax-evaders.

• The Wanchoo Committee’s recommended 75% top marginal rate is ignored, and the agricultural lobby keeps farm income effectively untaxed.

• Industrial incentives are withdrawn one by one — the development rebate is to lapse on 31 May 1974, and initial depreciation is no substitute.

• India’s meagre backward-area incentives are contrasted with 30-45% capital subsidies and long tax holidays abroad (Argentina, Brazil, Canada, U.K., Iran, etc.).

• The Government’s record of breaking statutory exemption promises (annuity policies, electricity duty, octroi) undermines investor confidence.

• Closes by endorsing Sir Richard Clarke’s call to end Budget secrecy, concluding the Budget is ‘complete[ly] irrelevan[t] to the gigantic tasks facing the country’.

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