History of Union Budgets in India: From 1947 Crisis to Viksit Bharat – Key Milestones

India’s annual Union Budget document, presented by the Federal (Central) government before the start of the financial year is basically a provisional financial report card (preliminary estimates) for the government for the current FY and a projection (budget estimate) for the next FY. The Union Budget is also a policy/vision document for the government for both the short to mid-term or even longer-term. The Union Budget may be officially defined as the constitutionally mandated Annual Financial Statement (unaudited) under Article 112. It also summarizes the Government of India comprehensive financial plan for the forthcoming FY with any key policy change in taxation (direct/indirect) and regulation. The budget summarises total revenue/receipts and expenditures, budget & fiscal deficit, any requirements of borrowings and also strategic reform. India’s Dalal Street is usually heavily influenced by the budget in anticipation and actual outcome, overall policy directions, sectoral allocations and fiscal health.

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India’s Finance Minister (FM) Nirmala Sitharaman is set to present the much-awaited 80th Union Budget for FY27 on a rare Sunday, February 1, 2026, at 11:00 AM in the Lok Sabha (LS). This will be her 9th consecutive budget presentation amid India’s resilient economic growth, stable macros and ongoing policy priorities for the bigger picture of ‘Viksit Bharat-2047’ (developed India by 2047, on 100 years of independence). But the focus will also be on global challenges being posed by the US trade/tariffs & other policies headwinds under President Trump. India’s stock exchanges (NSE/BSE) will also run a special, but regular trading session on the eventful Sunday, February 1, 2026, so that investors/traders can take the volatility as an opportunity.

The Modern Budget Era Begins (Post-1947)

India's First Independent Budget: FY1947-48/49

After getting independence from 200 years of British colonial rule on August 15, 1947, India’s first Finance Minister R.K. Shanmukham Chetty, under the 1st PM Jawaharlal Nehru (INC), presented an interim budget on November 26, 1947, for FY1947-48 (April-March). The budget was presented amid India-Pakistan partition turmoil and subsequent political & policy uncertainty. The overall revenue was at ₹171 crore, expenditure was at ₹197 crore. India’s first budget post-independence and partition/security issues –prioritised defence/military/internal security spending- allocated almost 50% of the proposed expenditure. The era was marked by partition riots, refugee crisis, and the emerging 1st India-Pakistan war over Kashmir, which happened barely less than 3-months after the independence of both countries in mid-August 1947. Overall, the budget plan stressed economic stabilisation, refugee (immigrants) rehabilitation and security in a fractured country. The first full budget for FY1948-49 was subsequently presented in February 1948.

Foundations of Planned Economy: FY1950-51 / 1951-52-Formation of 5Y Planning Commission

Post 1947 independence era, the full Republic of India budget was presented by the then FM John Mathai in February 1950 for FY1951. The primary significance was the official formation of India’s Planning Commission (5Y) to focus on appropriate policy planning led by SOE (State Owned Enterprise) & socialistic policies. It emphasized on state led (PSU/PSE) industrialisation and development. The Planning Commission was chaired by the then PM (Prime Minister) Pandit Jawaharlal Nehru. All these initial budgets were defence/security spending-heavy due to the war with Pakistan over Kashmir and overall rehabilitation of refugees as a result of partition, leaving very little for development (both traditional & social infra).

1962-71: Budgetary Constraints amid India-China/Pak War and High Taxation on Super Riches

During 1962-71, the decade of war, India’s budget was heavy on defense & internal security spending. Under PM Nehru (Congress), followed by Lal Bahadur Shastri (Congress), the 1963-64/1964-65 budgets hiked defence expenditures sharply; income tax peaked at 72.5%, with super profit/expenditure taxes for revenue amid a war ridden economy.

• 1965 2nd Indo-Pak War: Under PM Lal Bahadur Shastri and then Indira Gandhi (Congress)-budgets were marked by huge rupee devaluation (₹4.76 to ₹7.50/USD); austerity and import substitution focus to preserve scarce FX (USD) & austerity in an effort to manage balance of payment (BOP) crisis.
• 1968: People's Budget and Excise Reforms- The then FM Morarji Desai (record holder with 10 budgets) simplified excise duties, introduced self-assessment for manufacturers, and abolished factory-gate stamping—easing compliance for industry in a major deregulation move to curb excess bureaucracy and underlying rampant corruption.
• 1971-73- Indo-Pak War & Bangladesh Liberation: The budgets were heavily screwed in covering war & refugee costs, leading to subsequent hyperinflation. There were also supply issues amid rampant hoarding & black-marketing.

1975-1977: The Era of National Emergency

The budgets were marked by political & policy turmoil amid 21-months of National Emergency under PM Indira Gandhi (INC)-recorded negative inflation (deflation) -7.3% amid surgical strike on black marketing/hoardings of essential goods & commodities post 1892-71 war era, and also good monsoon. India’s real GDP growth zoomed around 9% due to low base, strict discipline, wage/price control, anti-corruption/black money drives and tax cuts (income & wealth). There were also 20-point reform programs covering economic discipline, poverty alleviation and economic growth. It also includes land redistribution, debt relief for farmers, slum improvements, irrigation expansions and proper public distribution of essential food grains & commodities (PDS-Ration).

The era was also marked by a forced sterilisation campaign to control the increasing population, especially for government employees and targeting social security incentives/disincentives (in line with Chinese policy). There was also a control on wage & price, and bans on any types of strikes. The overall direction was austerity in public spending (education, health, social welfare) and higher indirect taxes to offset revenue losses.

However, all these economic gains were short-lived as these policies were coercive in nature rather than structural reforms and widespread public backlash over emergency & forced sterilisations, leading to the end of the emergency and a stunning electoral victory by the United Opposition under Janta Party (JP) and PM Morarji Desai in March 1977.

1977 Electoral Defeat & Janata Party Government

The 1977-78 interim budget under FM Hirubhai M. Patel was the shortest (~800 words) in India’s history- emphasising democratic restoration, rural development, and Emergency measures rollback amid instability. Overall, the JP era was marked by a lack of decisive political leadership, infighting among various ruling parties/leaders, political & policy uncertainty, resulting in an economic recession (-5.2% GDP growth in 1979-80) and hyper-inflation (almost 18%). This again led to the return of Indira Gandhi as PM in the 1980 election & policy restoration.

Indira Gandhi’s 1980 Return and Its Impact on Budgets & Economic Policies (1980-84)-Path towards Modern India

Indira Gandhi inherited a crisis-hit economy after her stupendous return as PM in 1980 under Cong (I). Her subsequent term of 1880-84 was marked by the end of prior policy paralysis and a pragmatic shift from 1970s populism towards growth-oriented reform policies. Gandhi launched India’s 6th Five-Year plan, targeting +5.2% real GDP growth (achieved 5.7%) with a priority for industrial modernisation, private sector efficiencies, tech innovations, and also retaining some selective social welfare schemes (under 20-Point Programme). Some of the key policy steps were easing of license Raj, encouraging private investment, tax incentives for industry and middle class, and anti-inflation measures; inflation fell to 6.5-5.0% from prior 18%. The period delivered economic stabilisation and industrial momentum, demonstrating how political resurgence enabled pragmatic, pro-growth fiscal and policy adjustments amid inherited challenges.

1984-1989: Rajiv Gandhi Era

Post Indira Gandhi assassination in the aftermath of Operation Blue Star- Rajiv Gandhi (Cong-I) was elected, and his policies focused on India’s modernisation, computers/internet, techs and also Minimum Alternate Tax (MAT) in 1987-88. Overall, Rajiv Gandhi inherited the laid groundwork of Indira Gandhi’s reforms –leading to bolder & decisive reforms during the 1984-89 era-gradual pro-business tilt, reduced license raj and other economic reforms.

1990s political & policy uncertainty (local crisis) and global issues (oil shocks, Asian currency crisis)-led to India’s BOP crisis in 1991

But the subsequent Bofors scandal led to the electoral defeat of Rajiv Gandhi in the 1989 election, resulting in subsequent political & policy uncertainties of multiple unstable coalition governments under V.P. Singh, Chandra Sekhar, etc., and the eventual assassination of Rajiv Gandhi in May 1001 during an election campaign-all leads to a period of India’s political & policy paralysis. These events, coupled with the 1990s Asian Currency/financial crisis, oil shocks, USSR trade collapse-all leads to the infamous Indian BOP crisis –forcing emergency measures like the lien of sovereign Gold to take FX credit,

1991-92: Epochal Liberalisation Budget of Modern India

India’s modern era reform was led by the then FM Dr Manmohan Singh (MMS) under the PM Narasimha Rao, amid the severe BOP and other economic crises after two years of political & policy uncertainties. MMS/Rao dismantled License Raj, liberalised FDIs, slashed tariffs (import duties from 300% peaks, devalued the local currency unit (LCU-INR) and initiated the famous LPG reforms (Liberalisation, Privatisation and Globalisation)-widely seen as the most transformative budget, saving India from an imminent default. The MMS 1.0 era also marked India’s journey as the IT service export hub and other significant economic reforms.

1997-98: Dream Budget despite Coalition Politics Compulsions

The budget was delivered by FM P. Chidambaram under PM H.D. Deve Gowda/I.K. Gujral (United Front coalition, Congress-I support): Tax cuts (personal to 30%, corporate to 35%) spurred consumption.

1999–2004 (NDA Government under PM Atal Bihari Vajpayee)

The NDA/BJP era (1999–2004) emphasised infrastructure-led growth, fiscal discipline, and private sector revival amid post-Pokhran US (NUKE) sanctions and Kargil War recovery. Key budget policies include:

• Golden Quadrilateral highway project
• Telecom reforms
• Privatisation initiatives (disinvestment in PSUs)
• The FRBM Act groundwork began in 1999 to target fiscal deficit reduction
• FM Yashwant Sinha's budgets (e.g., 2003–04) focused on low interest rates, tax rationalisation, and rural/agricultural support to boost consumption and investment.
• GDP growth averaged ~6% (rising from recessionary lows)
• Inflation remained moderate ~5%
• Fiscal deficit improved from 5.5–6% to 4.3% of GDP by 2003–04
• Major events: Kargil War (1999), IT boom acceleration, and stable macro environment despite some global headwinds/slowdowns after 9/11attack on the US and subsequent wars
• This period laid the foundations for sustained growth through infrastructure push and fiscal responsibility, earning praise for unleashing private sector potential and setting India on a high-growth trajectory.

2004–2014 (UPA Government under PM Manmohan Singh)

The UPA/Cong decade (2004–2014) prioritised inclusive growth via welfare schemes amid the global financial crisis (2008–09) and domestic scams. Key budget policies include:

• MGNREGA (rural employment), Right to Education, Food Security Act, RTI, etc. (policy & process reforms)
• Fiscal Stimulus post-2007-08 GFC (tax cuts, higher spending).
• P. Chidambaram/Pranab Mukherjee’s budgets featured fiscal expansion (deficit widened to 6–6.5% in 2009–10)
• Indirect tax reforms paving the GST groundwork.
• GDP growth averaged 7–7.5% (peaking ~9% pre-crisis), but slowed to 5–6% later amid ‘policy paralysis’ during late UPA 2.0, amid allegations of various high-profile scams (telecom/2G, Commonwealth games, mining allocations, etc.)-eroding confidence and causing INR depreciation.
• High inflation (8–10% peaks), and twin deficits (fiscal 4.5–6%, CAD worsening); India was viewed as ‘fragile five’-after stalled reforms amid political & policy uncertainty.

2014–2025 (NDA Government under PM Narendra Modi)

The Modi-led NDA (2014–2025) focused on structural reforms, digitalisation, and infrastructure for Viksit Bharat 2047 targets. Landmark policies include:

• Demonetisations (2016)-out of budget
• GST (2017)
• IBC (2016)
• Make in India
• PLI schemes
• Digital India
• Atmanirbhar Bharat (post-COVID packages)
• Jan Dhan/UPI for inclusion.
• Income Tax cuts/recalibrations/simplifications/new regime
• Corporate Tax cut
• New Labour codes (out of budget)
• GST reform-rate cuts/recalibrations (out of budget during September’25)
• Fiscal consolidation (deficit from 4–6% to 4.4% target in 2025–26)
• Scaling up of social welfare schemes like PM-KISAN/MGNREGA
• GDP growth averaged 6–7% (resilient post-COVID, 6.5% in 2024–25)
• Inflation moderated (~4–6%, dipping to 1.5–2.8% lows in 2025)
• The era transformed India into the fastest-growing major economy, with strong infrastructure, digital payments, and a manufacturing push, though early disruptions (demonetisation, GST rollout) occurred.
• It built resilience through reforms and inclusive policies.

Conclusion

India's Union Budget has evolved from post-independence stabilisation under Nehru/Congress, through geopolitical shocks (wars, Emergency under Indira Gandhi), coalition experiments, 1991 reforms under Rao/Manmohan Singh, to NDA-era resilience and inclusive growth under Modi. These milestones - shaped by crises, political shifts, and visionary reforms - have built a robust $4 trillion economy. From 1947 to 2025, almost all budgets were marked by incremental reforms as per the underlying & evolving local & global geopolitical economy. There were also instances of monumental reforms unleashed in budget documents from time to time. The market is now waiting for one of such monumental reforms, like the abolition of LTCGT in the forthcoming February 1, 2026 budget.