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1. Introduction Of Indian Fiscal Policies And How It Has Impacted The Indian Economy
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1.1 Background
This study has provided elaboration on changes brought in Indian fiscal policies from 1947 to 1955 and how it has impacted the Indian economy. Starting with the type of fiscal policy in India and this can be easily said that India implies a Neutral Fiscal policy to maintain an equilibrium position of government expenditures. The economic system in India was social-democratic-based policies during the year 1947 to 1991 and after 1991, this system got changed into a market-based approach to developing socio-economic conditions. The fiscal policy considers various instruments such as taxation, public borrowings and public expenditure according to their importance. These all provide support in achieving economic development, stability, effectiveness in resource allotment and transparent income allocation over the years. Income levels and economic savings levels were low and therefore, the country started to plan for taxation and public sectors in 1950 .
“The first budget of 1948-1949” started on 15th August 1947 in India and the main aim of this budget was decision-making activity to sanction the budget. In addition, this budget counted partition and destabilisation factors and performed three major expenditures of civil expenditure, food grain cultivation and defence services. The attempted budget revenue of this fiscal year was approx ?171 crore (Downtoearth.org.in, 2022). [1] The 1949-1950 budget focused on after results of the partition, several floods in Bihar, windstorms in Bombay and deprivation on western coasts. This budget aimed to control inflationary tendencies due to the development of purchasing capabilities in specific parts of society. In addition, the estimated revenue receipt of this budget was ?338.32 crores . The 1950-1951 budget introduced the adoption of the constitution in India and through this budget, this country declare itself as a republic nation. This budget focused on the formulation of a planning commission to have effective strategies for the application of the country’s resources. Through this budget, the income tax rate decreased to 25% . The 1951-1952 budgets focused on increasing the need for local goods like jute, raw wool and raw cotton . In addition, during this period, raw materials importing and importing essential products such as medicines and drugs got development (Downtoearth.org.in, 2022). The revenue of this budget was ?387.21 crore and expenses were ?379.28 crores . The budget of 1952-1953 included growth in food grain cultivation and agricultural sector in India. This budget showed negative results in the exports turnover part and therefore, the “balance of payments (BOP)” was in a negative position in this period.
1.2 Aim
This study aims to deliver a comparison of the fiscal era of 1947-1955 in India to justify Indian economic conduction during different periods.
1.3 Objectives
- To provide significant information regarding the Indian fiscal year from 1947-1955
- To analyse positive changes that occurred during each of those fiscal years in India
- To demonstrate economic development in different sectors during those periods in this country
- To find out the negative impact of those fiscal years on the Indian economy and other relevant factors of this country
1.4 Research question
Q1: What were the scenarios of the fiscal year from 1947-1955 in India?
Q2: What were the positive transformations during each fiscal year in this country?
Q3: In which aspects economic part of this country got a boost during that fiscal period of 1947-1955 in India?
Q4: What were the negative sides of those fiscal years and in which aspects the negative sides were affected most?
[1] Downtoearth.org.in, 2022. Analysis of Union Budget since 1947 Available at: https://www.downtoearth.org.in/coverage/economy/analysis-of-union-budget-since-1947-56867 [Accessed on: 11/10/2022]
2. Literature review
2.1 Changes brought in 1947-1948
In 1947, extra profit taxation and trade revenue tax were presented and their administration was also conveyed over to the authority. A few groups ‘A’ of officials were presently drafted for the uncovered disclosure undertaking. It was also punctiliously comprised of the Indian revenue scheme [1] . Moreover, in the year 1947 , the Tariff assessment on Earnings Commission existed assessed up was announced ultra vires by the Supreme Court in 1956 however the need for profound examination carried out by then existed understood.
Indian finance is most probably to maintain the dual numerals in the starting phase of the present economical year. As per the new appraisal information, the Indian GDP was located at around ? 2.7 lakh crore in the year 1947 . The policies that are reformed in the year 1947 are
- Decreasing of rates
- Broadening the tax base
- Reduction/withdrawals of significant incentives
- Simplification of taxation laws
2.2 Changes brought in 1948-1949
[1] Incometaxindia.gov.in, 2022. History of Direct Taxation. Available at: https://incometaxindia.gov.in/Pages/about-us/history-of-direct-taxation.aspx [Accessed on: 10/10/2022]
A study was undertaken in 1956 by the researcher Prof. Nicholas Kaldor at the command of Public authority encountered the common tax collection framework in India at the time 'wasteful and unjust', basically on the grounds that the revenue class was not viewed as a sufficient proportion of available limit. In the year 1948, the gross GDP is around ?93590 and the per capita income is approximately 8.73 [1] . The starting financial crash revolution also concluded with the great depression in India in this regard. The primary feature of the main spending plan was the choice to depart from the financial plan. Parcel and the resulting destabilisation were mainly inside elements which decided the spending plan arrangements. Further, the main target financial income was around ?171 crore and the anticipated profitability is around ?197 crore
[1] Shaikh, T. and Firdous, M.S., 1964, Development of Technical Education in India (1945 to 1964): A Study. Doi: https://aliah.ac.in/upload/media/05-04-20_1586097641.pdf
2.3 Changes brought in 1949-1950
Research at this phase, the influence of partition also continued to be a crucial deciding element of funding. The typhoon that occurred in Bombay and the flood in Bihar are essential considerations in the year 1947. The total concentration of the financial revenue is on expanding the collection of grain at an acceptable expense and reintroducing the management of the meals. In this phase, the earnings were evaluated at around ? 338.32 crores as opposed to the allotment that is evaluated at ?25.24 crores [1] . The Commission surveyed the construction of taxes on pay and did a top to bottom investigation of the focal expenses and their organisation, suggested broadening and extending the tax construction both at the Middle and the State level , explicitly to fund advancement cost and decreasing enormous imbalances of pay, changed where important to give charge motivations to animate capital development. Therefore the argument against pretension has existed as a major preoccupation for the government.
[1] Chakraborty, G., 2020. The Concept of" People" in" We the People of India..." Reality and Transformation. Indian JL & Just., 11, p.1. doi: https://ir.nbu.ac.in/bitstream/123456789/3969/1/IJLJ%20-%20Vol.%2011%20No.%201%20%28Part%20I%29%20Article%20No%201.pdf
2.4 Changes brought in 1950-1951
In 1950 the foremost budget was introduced behind India mainly assuming the shape of the constitution. The major objective of the financial revenue was mainly to spread down the footing of the commission that helps to prepare some effective plans for the exertion of domestic resources in India. The financial plan likewise decreased the greatest pace of annual assessment from 30% to 25% . Earnings beyond Rs 121,000 also drew in a super-charge pace of 8.5 annas per rupee . The most powerful pace of individual tax assessment was around 78% in 1950.
2.5 Changes brought in 1951-1952
The crucial financial issue which refers to this issue is succinct inflation. Therefore this duration is also characterised by increased demand for indigenous products and services such as raw cotton, wool and jute products. The income was currently assessed at Rs 387.21 crore and consumption at around Rs 379.28 crore . This existed because of the modification in permits that occurred from customs, rail lines, import obligation decrease and benefits made by the posts and broadcast division.
2.6 Changes brought in 1952-1953
Meal grain manufacturing also expanded with enhancement in the farming sector. Albeit the assessed income overabundance has currently stood lessened by ?.5 crores and the normally monetary shortfall also extended by around Rs. 25 crores . The Indian taxation establishment was also discovered to be favourably exuberant and separate from revenue [1] . The expenditure of assembling the separate Focal tax area was also scrutinised by processing the mended and tiniest outlay and also help to their special expenditure flexibilities for the generation
2.7 Changes brought in 1953-1954
[1] Jain. M.M., 1969, ‘Income Elasticity of Indian Tax Structure: 1955-56 to 1965-66’, Economic and Political Weekly, May 3.
During the evolution of 1953-1954, railways also assigned ?400 crores for five years tenure for making sure the swiftness of accumulation and restoration of rail establishments must be carried at a more heightened level.
2.8 Changes brought in 1954-1955
The significant feature of these monetary years existed modern advancement becoming the dominant focal point with a yearly development pace of 8%. This change was a result of the improvement of substance ventures, advancement of little enterprises progress made in the capital and shopper products areas. The financial requirement of the countryside also transformed for the more suitable in 1953-54 and economising acquired more significant stability in the approach the year 1955.
2.9 Theoretical perspective
The risk of the financial issue and the agricultural damage must be explained that will be based on hypothetical elements. Moreover, all the theories are able to nourish various aspects of the economic crisis and the railway establishment. “Mahalanobis's theory of industrial process” helps the economising to deliver some financial interests related to national income, consumption, savings and investment. The aim of the theory is to investigate the distribution of acquisition among various economies and sectors. Changes that are conveyed in the financial year of 1952-1953 are provided in journals i.e., Jain, 1969. Moreover, Shaikh and Firdous (1964) helps to provide the GDP in the year 1948 and the immediate components of sending plan were also discussed in this journal [1] . Chakraborty (2020), depicted the Bombay cyclone issue and the Bihar flood issue and the storage of meals [2] . The revenue receipts are also evaluated from this journal.
[1] Shaikh, T. and Firdous, M.S., 1964, Development of Technical Education in India (1945 to 1964): A Study. Doi: https://aliah.ac.in/upload/media/05-04-20_1586097641.pdf
[2] Chakraborty, G., 2020. The Concept of" People" in" We the People of India..." Reality and Transformation. Indian JL & Just., 11, p.1. doi: https://ir.nbu.ac.in/bitstream/123456789/3969/1/IJLJ%20-%20Vol.%2011%20No.%201%20%28Part%20I%29%20Article%20No%201.pdf
2.10 Literature gap
The requirements of fiscal collaboration are the essential macroeconomic problem in Indian economising. The influence of the international emergency carries communicated to the Indian economising via three characteristic spiritualists, which are the economic sector, business paces and exports. The connection between output growth and fiscal illustrates is a largely-debated issue in the Indian context. The consequence of fiscal deficiency on financial enlargement is a favourably discussed problem in the financial sector. More increased shared acquisition mainly oversees more increased capital influxes and honest preference of the money, which mainly sequels in more downward net exports and contraction in financial movement.
3. Methodology
3.1 Research philosophy
This research considers positivism research philosophy to develop the analysis of real information (Pandey and Pandey, 2021). [1] Different fiscal years presented different data and those data belonged from different aspects. Therefore, this research philosophy can deliver a quantitative comparison of the fiscal year data from 1947-1955 in India.
3.2 Research approach
A deductive research approach can be suitable for this research as this approach helps in finding conclusive proof according to the defined aim and objectives of the research (Eskelinen, 2020). [2] This research can develop conclusively validate and proof after justifying each data from those fiscal years and by judging the positive and negative impacts of different fiscal years during those periods.
3.3 Research design
A descriptive research design can provide effectiveness in this research as this research design includes a description regarding the analysis of existing evidence of a research topic
(Mukherjee, 2019) [3] . This research can develop descriptive analysis through this research design by completing different statistical analyses of information from the fiscal year 1947-1955 in India.
3.4 Research Strategy
Research strategy is an important parameter to perfectly complete a research and this can develop a significant value for any research. Before starting a research a suitable way and techniques need to choose to present effective outcomes from research (Machado and Davim, 2020) [4] . In addition, a suitable way means selecting a suitable research method and data collection method to provide the best orientation and direction in the research. The research strategy needs to follow a proper rationale and problem statement of that research to meet with research aim and objectives (Rinjit, 2020) [5] . In addition, research gaps also need to count to develop strategies to mitigate the research gaps in further investigations. This research selects statistical analysis of various data from the fiscal year 1947-1955 to show the ongoing curve of the economic sector in India.
3.5 Data sources and Data types
[1] Pandey, P. and Pandey, M.M., 2021. Research methodology tools and techniques . Bridge Center.
[2] Eskelinen, T. ed., 2020. The revival of political imagination: Utopia as methodology . Bloomsbury Publishing.
[3] Mukherjee, S.P., 2019. A guide to research methodology: An overview of research problems, tasks and methods . CRC Press.
[4] Machado, C. and Davim, J.P. eds., 2020. Research Methodology in Management and Industrial Engineering . Springer International Publishing.
[5] Rinjit, K., 2020. Research methodology.
This research considers moving forward with secondary data sources and quantitative data types . Secondary data sources focus on collective relevant and authentic information from previously published journals, books and articles (Nayak and Singh, 2021). [1] This research collects data from authentic sources of various journals, books and articles to collect important information about those fiscal years in India. Quantitative data types include numerical data and this research analyse different fiscal years’ revenue and expenses through secondary quantitive data analysis to deliver conclusive information of this research.
3.6 Data collection process
Secondary quantitative data collection process includes statistical observation in this research by selecting a wide range of data from those years in this country. This research considers data from authentic sources of articles, journals and relevant websites such as dea.gov.in, downtoearth.org.in and orfonline.org to compare real data from those fiscal years. This research follows four parameters such as direct tax revenue, GDP growth rate, indirect tax revenue and the total budget of those fiscal years.
3.7 Data analysis plan
The secondary quantitative data analysis considers developing analysis through MS Excel in this research. Various authentic sources of data are included in this research to make a comparison of those above-mentioned parameters of fiscal years.
3.8 Ethical consideration
This research maintains the copyright act throughout the entire research work by following literary copyright norms. This research collects information from journals and articles and collects methodology information from methodology books from a reliable source of google scholar. This also collects data from authentic sources of dea.gov.in, downtoearth.org.in and orfonline.org to complete statistical analysis in this research. In addition, this research completes the entire research by maintaining plagiarism-free work.
3.9 Time plan
[1] Nayak, J.K. and Singh, P., 2021. Fundamentals of research methodology problems and prospects . SSDN Publishers & Distributors.
4. Result and discussion
4.1 Findings of secondary quantitative data
Direct tax revenue
In this figure, it has been found that the rate of direct tax has been fluctuating for the country. It has also been found that in just nine years, direct tax collection has increased from 45 crores to 47 crores. The highest tax collecting year for this country was 1952 total direct tax has been collected was 48 crore. The lowest direct tax collecting years for India were 1947, 1951 and 1954. In simulation, direct tax collection in India in 1947 was 45 crore. The same for 1948 was 46 crore approximately. Other than that, 46 crores have been collected in 1948. This has been increased to 47 crores in 1950. After that, a sudden reduction in tax collection was observed in the country to 45 crores in 1951. It followed a far more increment in 1952 to 48 crore. A further deduction has been observed from the direct tax collection of the country. This was 46 crore in 1953 and again reduced to 45 crores in 1954. Lastly, it was 47 crore in 1955 (See appendix 1).
GDP growth rate
The above figure shows the GDP growth date of the country in te3rsm of the percentage change. It has been found that the country's Gdp growth rate is as fluctuating as the rate of collection of direct tax. It has been found that 4% GDP growth has been observed in the year 1947 which has been reduced to 3% in the next year 1948. This increased in 1949 to 5% and further escalated in 1950 to 6%. In 1951, the GDP growth rate was reduced by 2% to 4%. It was further reduced to 3% in 1952. A sudden jump was observed in the next year to 6% in 1953. It again increased to 7% in 1954. Later a reduction in GDP growth rate to 4% was also observed in 1955 (See Appendix 2).
Indirect tax revenue
Most effective year for indirect tax collection was 1954. It has been found that in 1947, the amount of indirect tax was 102 crore. The same had increased to 142 crores in 1948. A slight reduction was observed in 1949 to 124 crore. Again minute reduction was observed in the next few years to 123 crores in 1950. T6he similar trend has been observed in 1951 when the total indirect tax collection becomes 125 and again dropped to 115 crores in 1952. A major jump was detected in 1953 to 156 crore, next year’s indicated more increments which became 171 crore in 1954. In 1955, the total indirect tax collection stood at 168 crores (See Appendix 3).
Total Budget
Total fiscal budget of India from 1947 to 1955 has been increased with the exceptional year of 1952. In 1947, the total budget of the country was 171.15 crore. The same for the next year, 1948, was 255 crore. It further increased to 322 crores in 1949. In the next year, the total budget was indicated at 375 crores in 1951. It has been found that a drop is evident in 1952 which has been recorded at 180.02 crores. The next year it increased to 20 404.98 crores in 1953. In 1954, it became 451.73 crores (See appendix 4).
4.2 Discussion of secondary quantitative data
Direct tax revenue
The fluctuation in the collection of direct tax has been due to the exorbitant devaluation of Indian rupees before the Dollars. The sudden rise in direct tax collection in 1952 was due to the first devaluation of rupees before the dollar. It decreases the consumption of the products and therefore, individual income has been enacted which leads to a higher level of direct tax collection by the government [1] . This further has enhanced the rate of public expenditure which reduces the tax rate and allows the citizen to have confidence in paying more taxes. On the other hand, the rise of direct tax collection in 1955 was due to the relaxation of the fiscal policy of the country. Tax rates have been reduced by 5%. This increased the disposable income of the people and therefore benefited the country in two ways, by increasing aggregate demand and two increased the amount of direct tax collected from the individual.
GDP growth rate
The increment in the GDP percentage was observed in 1950 and 1954. Increased GDP in 1950 was due to increased production and relaxation of import restrictions of some commodities from foreign nations [2] . This helped increase the aggregate products of the country. Therefore, a jump in the national income has been observed. It has been found that this increment is also due to the increased rate of employment due to the nationalisation of various sectors. This increased employment in the country also increased the GDP of the same. GDP rise in 1954 was due to flexible foreign policy and subsidised production of domestic major private companies such as TATA, AIR India and others. This has been further escalated due to the flexible monetary policy of the reserve bank of India.
Indirect tax revenue
The indirect tax revenue of the country has been rising since 1947. The major year for this higher level of indirect tax revenue was observed in 1948 and 1953. The increase in indirect tax revenue in 1948 was due to two reasons. One is the reduction of indirect tax and the other is the increased number of states in the country which compulsorily reduce the VAT of the individual states [3] . Along with this, the effective subsidy adopted by the budget this year was also helpful for the country to increase consumption expenditure which increased the indirect tax collection of the government.
Total Budget
A seamless increase in the total budget has been observed from 1947 to 1951. This is due to the above-mentioned factors of fiscal policies. Reducing the number of direct tax slabs and reducing the rate of tax on the same was effective in increasing tax revenue for the country. This has been further fueled by the collection of indirect tax [4] . This increase in the collection of indirect tax was due to a reduction in the rate of unemployment and increased consumption expenditure. It has been found that the role of effective revenue proponents has appropriately acquired aspects of fiscal policy [5] . It has also been found that revenue initiated the action of the government in increasing consumption expenditure through increased employment and reduction of foreign dependencies of the country. The application of Mahalanobis's theory of industrialisation has played a major role in this budgeting figure. Other than that, the five years plan was also helpful for the country for rapid growth and increased budgeting of the country.
5. Conclusion and recommendation
After analysing the entire study and all the processes of the research, it is evaluated that changes have been made every year in the Indian fiscal policies. The research paper is based on Macroeconomics and evaluated the failures they faced in policymaking. The main highlight of the first budget was while making the policies were the partition and resultant management and a major focus on civil expenditure, defense services and food grain production. Next fiscal year focus on policies on reintroducing food control and proposals to take some loans from the side of IMF . After all, the last year that is 1955 was all about industrial growth and after making the fiscal policies grant for the education sector also advanced which is evaluated in the study. In addition, this research wants to deliver future scope for further development on this topic.
Recommendation
This research face limitation in findings data as hidden data and authoritative data cannot used in this research due to their authentication. Therefore, this can be recommended that more information on fiscal years can develop more authenticity for this research work. In addition, multiple sources of websites deliver fluctuate in data and this provides confusion while comparing data analysis. Therefore, this can be recommended that any further research on this topic can develop more information for this research.
References
Books
Pandey, P. and Pandey, M.M., 2021. Research methodology tools and techniques . Bridge Center.
Eskelinen, T. ed., 2020. The revival of political imagination: Utopia as methodology . UK: Bloomsbury Publishing.
Mukherjee, S.P., 2019. A guide to research methodology: An overview of research problems, tasks and methods . US: CRC Press.
Machado, C. and Davim, J.P. eds., 2020. Research Methodology in Management and Industrial Engineering . US: Springer International Publishing.
Nayak, J.K. and Singh, P., 2021. Fundamentals of research methodology problems and prospects . India: SSDN Publishers & Distributors.
Rinjit, K., 2020. Research methodology.
Journals
Shaikh, T. and Firdous, M.S., 1964, Development of Technical Education in India (1945 to 1964): A Study. Doi: https://aliah.ac.in/upload/media/05-04-20_1586097641.pdf
Jain. M.M., 1969, ‘Income Elasticity of Indian Tax Structure: 1955-56 to 1965-66’, Economic and Political Weekly, May 3.
Chakraborty, G., 2020. The Concept of" People" in" We the People of India..." Reality and Transformation. Indian JL & Just., 11, p.1. doi: https://ir.nbu.ac.in/bitstream/123456789/3969/1/IJLJ%20-%20Vol.%2011%20No.%201%20%28Part%20I%29%20Article%20No%201.pdf
Natarajan, K., 2022. The privilege of the Indian passport (1947–1967): Caste, class, and the afterlives of indenture in Indian diplomacy. Modern Asian Studies , pp.1-30. DOI: https://doi.org/10.1017/S0026749X22000063
Bardhan, R., Debnath, R. and Jana, A., 2019. Evolution of sustainable energy policies in India since 1947: A review. Wiley Interdisciplinary Reviews: Energy and Environment , 8 (5), p.e340. DOI: https://doi.org/10.1002/wene.340
Siddiqui, K., 2019. The political economy of India’s economic changes since the last century. Argumenta Oeconomica Cracoviensia , (19), pp.103-132. DOI: https://doi.org/10.15678/AOC.2018.1906
Agur, C., 2018. Re-imagining the Indian state: External forces and the transformation of telecommunications policy, 1947–present. Global Media and Communication , 14 (1), pp.65-83. DOI: https://doi.org/10.1177/1742766518759794
Kapur, D., 2020. Why does the Indian state both fail and succeed?. Journal of Economic Perspectives , 34 (1), pp.31-54. DOI: 10.1257/jep.34.1.31
Websites
Incometaxindia.gov.in, 2022. History of Direct Taxation. Available at: https://incometaxindia.gov.in/Pages/about-us/history-of-direct-taxation.aspx [Accessed on: 10/10/2022]
Statista.com, 2022. Trends in global export value of trade in goods in 1950. Available at: https://www.statista.com/statistics/264682/worldwide-export-volume-in-the-trade-since-1950/ [Accessed on: 10/10/2022]
Statista.com, 2022. central government expenditure in India from fiscal year 1948-1949. Available at: https://www.statista.com/statistics/1288841/india-central-government-expenditure-growth/ [Accessed on: 10/10/2022]
Statista.com, 2022. financial modifications brought in years 1953-1954 . Available at: https://www.statista.com/statistics/251102/sex-ratio-in-china/ [Accessed on: 10/10/2022]
Downtoearth.org.in, 2022. Analysis of Union Budget since 1947 Available at: https://www.downtoearth.org.in/coverage/economy/analysis-of-union-budget-since-1947-56867 [Accessed on: 11/10/2022]
[1] Natarajan, K., 2022. The privilege of the Indian passport (1947–1967): Caste, class, and the afterlives of indenture in Indian diplomacy. Modern Asian Studies , pp.1-30. DOI: https://doi.org/10.1017/S0026749X22000063
[2] Bardhan, R., Debnath, R. and Jana, A., 2019. Evolution of sustainable energy policies in India since 1947: A review. Wiley Interdisciplinary Reviews: Energy and Environment , 8 (5), p.e340. DOI: https://doi.org/10.1002/wene.340
[3] Siddiqui, K., 2019. The political economy of India’s economic changes since the last century. Argumenta Oeconomica Cracoviensia , (19), pp.103-132. DOI: https://doi.org/10.15678/AOC.2018.1906
[4] Agur, C., 2018. Re-imagining the Indian state: External forces and the transformation of telecommunications policy, 1947–present. Global Media and Communication , 14 (1), pp.65-83. DOI: https://doi.org/10.1177/1742766518759794
[5] Kapur, D., 2020. Why does the Indian state both fail and succeed?. Journal of Economic Perspectives , 34 (1), pp.31-54. DOI: 10.1257/jep.34.1.31
