The Union Budget 1983-84

By N. A. Palkhivala

Summary

N. A. Palkhivala’s tract, based on his public talk in Bombay on 4 March 1983, is a forensic dismantling of the Union Budget for 1983-84 presented by Finance Minister Pranab Mukherjee. Opening with George Orwell’s lament that ‘we have sunk to a depth at which restatement of the obvious is the first duty of intelligent men’, Palkhivala restates the obvious arithmetic: the real deficit on revenue account, at Rs. 1,794 crores, is the highest ever; fresh levies and pre-budget levies together raise the burden by some Rs. 2,600 crores; the Centre starves the States by routing increases through a surcharge they cannot share; and unemployment is rising at six million a year while only half a million organised-sector jobs were added in 1980-81.

The heart of the pamphlet is its diagnosis of what he calls ‘a rudderless Budget’ — a document of ‘pronouncements but no philosophy’, whose modest sweeteners (a lower bottom-slab income-tax rate, higher gratuity exemption, full first-year depreciation on energy-saving plant) are swamped by a higher surcharge and harsher corporate provisions. Palkhivala then names ‘four elemental forces’ loose in the North Block — instability, complexity, injustice and pettiness — and itemises each: 62 amendments to the Income-tax Act in a single Finance Bill; the constitutional indecency of withdrawing exemptions for charities, capital-investment bondholders and foreign-technology royalty recipients on whose faith contracts had been signed; the politicisation of rural development through a Prime Minister’s Fund; the flat 20% disallowance of travel and advertising spend; and Section 80VVA’s cap on incentives for the 50–65 most dynamic companies in India.

The last sections widen the lens. Palkhivala marshals data on India’s collapsing share of world exports (from 2.2% in 1950 to 0.4% in 1981, with the country’s rank dropping from 16th to 46th), contrasts R&D spending across nations to show India at 0.6% of GDP, and notes that 4 million Indian taxpayers generate 6,000 High Court references a year against 30 in the United Kingdom on 29 million taxpayers. The Budget, he concludes, will ‘underwrite stagnation’ and leave the Misery Index untouched; the repeated boast about abolishing excise on pressure cookers only confirms that ‘the common man’s goose has been properly cooked.’ Echoing Cecil Rhodes’s deathbed line — ‘So little done; so much to do’ — Palkhivala closes with a verdict more in sorrow than in anger that an able Finance Minister has been swallowed by the system he serves.

Key points

• Real revenue deficit of Rs. 1,794 crores is the highest on record, with the nation ‘reduced to living partly on its capital borrowings’.

• Combined burden of new and pre-budget levies adds around Rs. 2,600 crores; the increases route through a surcharge that the States, contrary to revenue-sharing norms, cannot share.

• Palkhivala diagnoses ‘four elemental forces’ driving the Budget — instability, complexity, injustice and pettiness — and reads the Finance Bill as institutionalising each.

• Sixty-two amendments to the Income-tax Act, plus the avalanche of 53,000 rules/orders issued 1971–81, are contrasted with the United Kingdom’s deliberate reduction of statutes in force.

• Specific provisions targeted: Section 80VVA’s 70% cap on incentives for the most dynamic companies, the politicisation of rural development via the Prime Minister’s Rural Development Fund, the rewriting of charity-trust exemptions, and the flat 20% disallowance of travel and advertising.

• Data on India’s collapsing share of world exports (2.2% in 1950 to 0.4% in 1981; rank from 16th to 46th) and R&D spending of only 0.6% of GDP illustrate the cost of economic introversion.

• Unemployment is rising at six million a year; only half a million organised-sector jobs were created in 1980-81 against a Sixth-Plan need for 35 million.

• The ‘Misery Index’ — inflation, poverty, unemployment — will be untouched; closing imagery quotes Cecil Rhodes’s ‘So little done; so much to do.’

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