1955: Laying the foundation for India’s industrialisation Premium

Budget updates: India's Union Budget 1955-56 under Finance Minister C.D. Deshmukh laid the foundation for industrialization and economic growth.

Stepping out of the post-war transition, India’s Finance Minister Mr. C.D. Deshmukh’s Union Budget 1955-56 laid the foundation for the country’s industrialisation. Closing out the First Five-Year Plan, the Budget reflected an increasing tempo of Government expenditure, reported The Hindu on February 28, 1955. Delivering his seventh budget speech, Mr. Deshmukh presented the document in Hindi as well as English – a first since Independence.

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In 1954, both agriculture and industrial production had increased. Production of some commodities exceeded the Five-Year Plan’s targets, reported The Hindu. Restrictions on movement and distribution of foodgrains had been lifted, industrial development had gained pace and cost of living had declined by 7% by December 1954. Inspite of a surplus in the first two quarters, the country’s balance of payments exhibited a deficit of ₹15 crores in the third quarter. Increase in import of raw materials and sugar, decline in indigenous sugar production contributed to a sizeable deficit in the second half of the year. However, the finance minister expressed satisfaction about the country’s external payments position but warned about continued relative shortage of foreign exchange in the long-term.

Saving of ₹11.01 crores in expenditure due to decrease in share of Union Excise Duties payable to States and less defence procurement, led to the revised estimates exhibiting a reduction in revenue deficit to ₹5 crores form the ₹ 15.36 crores as envisaged in the original Budget. 

“From now on, unless very marked deterioration took place in the international situation or a natural calamity like the failure or maldistribution of the monsoon occurred in a big way, the determining factor in economic situation, would be the rate pf planned economic development in the country,” he was quoted as saying.

Taxation and duties

Income tax structure was readjusted. With a focus on families, married persons earning upto ₹2000 were exempt from taxes, while unmarried persons earning above ₹1000 were taxed.