Superb pointer to the article on Union Budget 1970-71 by Nani Palkhivala. Things have changed dramatically since 1970s when there were just unimaginable tax rates and all kinds of restrictions.
However, this bit by Palkiwala over budget hype remains true and only getting shriller:
Ancient India made a signal contribution to the growth of human civilization–it gave a new direction to philosophy and gave imperishable expression to “thoughts that wander through eternity “. Emerson regarded the Upanishads as the feast of reason and the flow of soul par excellence. Modern India has made three contributions to civilization–the Bandh, the Gherao, and the pre-Budget technique. The first is political oppression, the second is industrial oppression, and the third is well calculated to condition the public mind for fiscal oppression.
The pre-Budget technique consists in making it widely known throughout the month of February that such levels of taxation would be inflicted on the people as to make them hate the very sight of money and hardly leave a shirt on their backs, so that when actually the Budget is introduced with 93.5 per cent income tax and 12 per cent wealth tax as the maximum marginal rates, the Budget evokes a favourable, and in fact a cheerful response.
The Union Budget for 1970-71 has been called an “imaginative” Budget. It is only so in the sense that it imagines certain consequences to ensue from the Budget which are contrary to all known motivations of human nature and all rules of sound economics.
It was Justice Holmes who once remarked that most men judge things dramatically and not quantitatively. This explains the dramatically favourable general response to the Budget, without quantitative analysis of the burdens it imposes and the effects it can be expected to produce on the national economy. If one were to sum up the effect of the Budget in one sentence, one would say that it is politically clever and economically unsound.
Bandhs and gheraos are not as problematic anymore but Pre-budget technique is just getting worse. One could add pre-monetary policy technique also but it is not Modern India’s contribution.
These are such useful glimpses from Indian economic history. Full speech is here..