REGISTERED No. D, 22f
The Gazette of India
EXTRAORDINARY
PART I—Section 1
PUBLISHED BY AUTHORITY
No.
47] NEW DELHI, WEDNESDAY, FEBRUARY 28, 1973/PHAGUNA 9, 1894
Separate paging la given to this Part in order that it may be filed
as a separate compilation.
Budget 1973-74
Speech of
Minister of finance
28th February, 1973
Sir,
I rise to present the Revised Estimates for 1972-73 and the Budget Estimates
for 1973-74.
2. The budget of the Central Government is not merely an
exercise
in
balancing revenue and expenditure. Its primary role today is to be a major-
instrument for the realisation of our basic social and economic objectives.
This
Government is firmly committed to accelerated economic growth in a framework
of greater social justice and self-reliance. The budget proposals which I shall
present later in my speech are aimed at achieving these basic objectives. For
a proper appreciation of these budget proposals in the broad context of the
strategy for realising these objectives, it is necessary to bear in mind,
as
(227)
.238
THE GAZETTE OF INDIA EXTRAORDINARY
[PART I—SEC. 1]
background, the state of the economy in 1972-73 and the economic prospects
for 1973-74. The Economic Survey which was presented to Parliament a few
days ago covers this territory fairly extensively. I shall, therefore be brief in
describing the salient features of the current econpmic situation.
ECONOMIC CONDITIONS
3 With the return of refugees to their homeland and the emergence of
IBangladesh as a friendly independent sovereign country, we had hoped that
1972-73 would be a year in which we would devote our entire energy and resour-
ces to the unfinished task of economic and social reconstruction and develop-
ment. We did certainly recognise from the beginning
that 1972-73 was not
going to be an easy year for the economy. In the course of my budget speech
last year, I had pointed out that while the resilience and the strength displayed
by the economy in 1971-72 could give us confidence, there was little room for
complacency. I had at th-it time warned that the events- of 1971-72 would
continue to cast their shadow in 1972-73. The strains and stresses through which
the economy has had to pass in the current year could not, however, be wholly
foreseen at that time.
4, Once again there was a failure of the monsoon in the summer of 1972
which created severe drought and scarcity conditions in several parts of the
country. This has led to extensive loss of crops, shortage of fodder, and paucity
of drinking water, creating conditions of grave hardship and suffering in parts
of the country. The Government has been deeply concerned over the human
suffering resulting from these unprecedented adverse conditions. In order to
meet this challenge a large effort has been made to provide the maximum resour-
ces possible for the relief of those Jiving in the affected areas, and we will have
t0 continue these efforts so long as they are required. Unfortunately, this is
the second year in succession that the production of foodgrains during the khan I
season suffered a
serious set-back. This has adversely affected the procure-
ment of grain for distribution by Government. The drought has also adversely
affected the production of important commercial crops, such as oil seeds and raw
jute As a result, imbalances in certain strategic sectors of the economy produc-
ing the basic necessities of life have been magnified.
5. The abnormal increase in prices that took place In the current Y^i&
basically a reflection of these imbalances. The wholesale prices index aunng
the period April 1972 to the end of January 1973 registered an increase of 9.1
-ner rent as compared to an increase of 3.7 per cent during the corresponding
period of 1971-72 The rise in the prices of food articles was the crucial factor
•contributing to the increase in the index of wholesale prices. I am v ^ ™™f X
of the fact that movements in prices during the current year have added greatly
in fhP hardshics suffered by the weaker and more vulnerable sections of our
.society. A rSjor thrust of the policy of this Government is to reduce these
hardships.
mmmmmmm
gramme was launched to increase d ^ " i l
h i h R
1 9 0 c r o r e s w e r e made
during the rabi ^ason will register a s^gnmcant increase
u t j o n a r v m
e
Se^nmenttt
: a ^ t ^ ^ ^ T b e W i S W A l ^ S ^ d and* streamlined.
7. The events of the current year have ^ugM f o sharp J ^ g , ^
g
heavy dependence of Indian agr culture on the: rams, iwa^^a v
^
^
•of the urgent need to expand the * X l efemenTs <5an agricultural strategy
ieeKeTUU7e Z m ^ k T T U l ^ & ^ . The large scale distress
IPART I—SEC.1]
THE GAZETTE OF INDIA EXTRAORDINARY
229
in the drought affected areas has served to emphasise once again the pressing
-need for better regional balance, and evenness in the level of development.
8. Against this background the sharp acceleration in the rate of growth of
industrial production during the current year is heartening. On present indica-
tions the index of industrial production will register an increase of close to 7
per cent over the year, against an increase of 4.5 per cent in the previous year.
But for a continuing shortage of power, the outcome would have been still more
favourable, While a large number of industries have contributed to industrial
recovery, the rapid growth of textiles, after a decline in the preceding year,
was the most important favourable factor. Sustained growth in industrial
production in the coming year will require a more broad based effort than in
the past.
9. I am glad to say that the export front looks encouraging. Exports increased
by 23 per cent during the first eight months of 1972-73. This is a good perfor-
mance, particularly wlien allowance is made for the uncertainties
that
have
prevailed in exchange markets during the greater part of the current year. It
would be well to remember, however, that our exports were helped by certain
factors whose continuation cannot be taken for granted. The exports of engi-
neering goods on which we had placed high hopes have lost some of their1 earlier
momentum. Some of the principal factors, like lesser utilisation of external
assistance and large payments for imports of foodgrains and industrial inputs
like iron and steel, oil, and fertilizer, are likely to exert greater pressure on our
foreign exchange reserves. Clearly, foreign exchange is still a major constraint
on our development. If self-reliance is to become a living reality, there must
lae a massive increase in our exports, coupled with adequate expansion in
the domestic production of such vital import substitutes as iron and steel nnd
fertilizers, and increase efforts in exploring indigenous sources of supply of oil.
The behaviour of agricultural production, both of foodgrains and commercial
crops, will also be a major determinant of the state of our balance of payments,
10. Despite a rapid growth of Industrial production and of exports, the growth
of real national income in the current year is likely to be small due mainly to
lack of adequate growth in the agricultural sector. In order to retain a proper
perspective of the situation, it must not be forgotten that fluctuations in national
income are not an uncommon phenomenon in countries heavily dependent on
agriculture. Such fluctuations must not lead us to draw pessimistic conclusions
about the country's basic economic health, or its development potential and
prospects, "which are sound.
11. As the Honourable Members know, the Government, after a careful assess-
ment of all relevant factors, has fixed the growth target for the Fifth Plant
at 5.5 per cent per annum. The criticism is made that this target is too ambi-
tious considering past trends. I arri, however entirely unable to accept that the
target is unrealistic. Purposeful planning, after all, is not simply an extrapo-
lation of past trends. The political and economic development of India since
independence has belied the gloomy prophecies of many a distinguished commen-
tator
More than once it has been demonstrated that the economy and polity
of India have the resilience to bear hard shocks and emerge even stronger.
Ihe
events of 1971 are an impressive indication of what can be achieved by collective
will properly channelised, The task now before the nation is to bring a similar
sense of discipline, determination, and hard work to bear on its quest for a better
quality of life for the common man and a sfelf-reliant economy.
12. The immediate tasks for the economy may be summarised as follows:
"Firstly, inflationary pressures have to be continued through a judicious combina-
tion of demand management, increased production of basic wage goods, and the
strengthening of the public distribution system. Secondly, in order to improve
growth prospects, vigorous efforts have to be made to increase the rate of savings
awd'investment. The third most important task is to achieve greater viability
on the external front, which tian only be achieved through higher exports and
restraint on imports. Fourthly, there .ffjust be a rapid increase in employment
opportunities, both in rural and urban ar"esn?-^ta make an adequate dent on the
problem of unemployment, Determined efforts arB~Ti«cea.sary to reduce dispari-
ties in income and consumption. Finally, to secure gre&t<w: social justice,
programmes designed to provide minimum basic amenities to aft citizens must
be expanded in scope and coverage. These are the) principal tasks which I
have kept in mind in framing the budget proposals for 1973-74.
2 j ^
™E GAZETTE OF INDIA EXTRAORDINARY
[PART I_SEC. 1J.
Revised Estimates: 1972-73
h a d ^ t s ^ n o ^ h f ^ ^ ' L ^ ^ S ^ W s e c t o r d u e t 0 t h e f a i l u r e of the monsoons
the current v m T P . ? C i 0 V 5 e b " ^ e t a r v position of the Government during
to States c h i p Z f ^ f ? , ^ 0 ^ '
161 cr,ore? h&d, *? b? Provided for assistant
atrfnnihfrfli « ^ f-
development of minor irrigation under the emergency
K n ,
i i ° d f n"? programmes In addition, tie provision for short-term
lodnb for seeds fertilizers, and pesticides, was raised from Rs. 60 crores to
Tb' i™ c r o ri s' t ?el,lef operations had to be organised on a massive scale in all
the areas affected by natural calamities. The provision for assistance to States,
for relief of natural calamities had to be stepped up from Rs. 75 crores to Rs. 220'
crores. I feel it will be useful to draw up more effective plans for dealing with
drought and natural calamities which unfortunately are at present a feature of.
the Indian economic scene.
14. The Budget made a provision of Rs. 720 crores for Central assistance to
btates Plans. To accelerate the work on certain irrigation and power projects,,
and with a view to bridge the gap In Plan resources, it has been decided to step'
up this assistance by another Rs. 55 crores. In addition, special accommodation'
by way of loans continued to be provided to certain States to meet inescapable-
deficits In their non-Plan accounts and for specified projects. The additional
burden on the Central Budget on this account in the current year is likely to
be Rs. 153 crores. It was necessary to make this enhanced special accommodation
as, otherwise, the resources available to such States for implementing their Plan,
would have been reduced.
15. I had mentioned in my budget speech last year that a scheme for liquida-,
tion of overdrafts taken by the States had been evolved in consultation with
the Reserve Bank of India to ensure that overdrafts were not used by States aa
a mode of financing their expenditure. The scheme was put into operation with
effect from 1st May, 1972 and has worked effectively during the year. I wish
to say that we could not have solved the problem of States' overdrafts but for
the cooperation extended by the State Governments in this matter. However,
this was not achieved without paying a price. The overdrafts to States,
amounting to Rs. 642 crores at the end of April 1972, were declared by providing
ways and means advances and advance release of payments due to states.
A small portion of these ways and means advances has been recovered in the
course of the year and the recovery of the balance amount of Rs. 421 ctores
will be spread over the next few years. This arrangement really represents the-
taking over of the past deficits of State Governments on to the books of the
Central Government with a corresponding adjustment in the books of the State-
Governments, thus increasing, though notionally, the deficit in the Central
Budget by this same Rs. 421 crores.
16. The Defence Expenditure for the current year, now estimated at Rs. 160a
crores, shows an increase of Rs. 192 crores as compared to the original Budget
provision of Rs 1408 crores. Other commitments contributing to expenditure
higher than estimated in the budget proposals this year are—additional food
subsidy to the extent of about Rs. 17 crores, payments on account of the take
over of general insurance, coking and non-coking coal mines and the Indian
Copper Corporation to the extent of Rs. 56 crores, and, Rs. 18 crores for
rehabilitation assistance to about 8 lakhs people on the Western front affected
by December 1971 war with Pakistan.
17. Honourable Members will, however be glad to know that we have not
allowed these unforeseen and heavy commitments on account of drought relief
and emergency production programmes to come n the way o! Plan £™n<^re.
The Budget for 1972-73 had provided for a big step-up in the Plan outtey.
Taking Central and Union Territories Plans and assistance to State Haafr
together, the provision was Rs. 2624 crores, which represented an tocrea« rf
•npflriv R.i 100 crores over the 1971-12, Plan provision. I an% glad to be able to
SySrtftS wiTnofbe any material *«&.11
^*l%™f£A^Stl™n
On the other hand, the Railwavs' Plan expenditure fox the year will register an-
Increafle of R3. 34 crores over the budget, estimates.
1R Soeeial Nutrition Scheme's"started W 1970-71 for providing supDlemental;
nutrition to v u l ^ m e "sections of the population have gained momentum, and
c u r S v 32 ffi Jre-tthool children and expectant and nursing mothers in,
Sban slums, tribal areas and rural areas are deriving benefit from them.
[PART I—SEC.1]
THE GAZETTE OF INDIA EXTRAOKDINARY
231
19. Tne scheme for provision of home-sites to workers in rural areas is also
gathering momentum. Central assistance for providing over 2 lakhs house-aitea
has already been sanctioned. States axe also assured of assistance for Basti
.improvement schemes on the analogy of the Calcutta Improvement Scheme.
20. Receipts under Income and Corporation taxes are now estimated at Rs. 83
.crores more than the
Budget
Estimates. Customs
revenue may exceed the
Budget Estimates iby Rs. 9G crores. Union Excise duties may, however, show
a decline of Rs. 37 crores a5 compared to the Budget Estimates because production
may be affected on account of prevailing
drought
conditions and the power
shortage.
21. In order to meet the heavy commitments to the States and to mop up the
surplus invcstible funds of the banks and other financial institutions, we have
taken recourse to three additional floatations of market loans during the current
year. As a result, there will be an improvement in the receipts under this head
by Rs. 263 crores—the realisation being Rs. 478 crorcs, against the provision of
Rs 215 crores made in the original Budget proposals. Collections under the
various Small Saving,: Schemes are now expected to reach Rs. 300 crores, as
against Rs. 230 crorcs assumed in the Budget.
22. After taking all these changes into account, the overall budgetary deficit
will still be Rs. 55(1 crores. This figure excludes Rs. 421 crores of loans to States
for clearance 01 their overdrafts till the end of last year. A deficit of this order,
despite large scale additional resource mobilisation, was inescapable due to the
extremely difficult situation caused by the drought and the resultant shortfall in
foodgrains production involving" unexpectedly heavy spending on drought relief
and on the emergency agricultural production programmes.
Budget Estimates; 1973-74
23. Let me now turn from a narration of the past to the future. As we leave
behind 1972-73 and turn to 1973-74, our main objective is to fulfil the remaining
commitments of the Fourth Plan and to provide a firm ibase for the launching of
the Fifth live Year Plan in 1974-75,
24. In the background of the strong inflationary pressures prevailing in the
economy, it is not easy to reconcile the requirements of growth with the require-
ments of stability. However, my general approach has been that the stability
to be aimed at must be the stability of a growing economy. I believe that a
solution which seeks stability by cutting down
expenditurev which adds to the
productive capacity of the economy is in the long run
self-defeating.
In ari
economy where there is considerable unemployment such an approach would
aggravate the inequitable distribution of income between those who are fully
employed and the unemployed. For these reasons the provisions for development
expenditure hove (been stepped up in the last three years notwithstanding the
severe stresses through which the economy has had to pass in this period.
25. In 1973-74 a provision of Rs. 1924 crores for the Central Plan is being
made which will be Rs, 137 crores larger than the 1972-73 Budget provision. In'
addition to this, g provision of Rs. 810 crores- for Central assistance to State Plans
is being made which represents an increase of Rs. 35 crores over the 1972-73
provision,
With a Plan provision of Ra. 110 crorcs for Union Territories, the
original estimated requirement for Union Territories for the Fourth Plan will
also be fulfilled.
The Plan provision in the budget next year taking together
Central and Union Territories Plans as well as Central assistance to State PJans
will be Rs. 2344 crores as against Rs. 2624 crores in 1972-73.
26. AG Honourable Members are aware, a number of significant Initiatives have
been taken in the past three years to reorient our approach to the Plan so as to
combine the objective
of
promoting rapid
economic growth with the ideal of
securing greater social justice and the well being of the needy and the poor. For
thi3 purpose, in continuation of earlier measures like the nutrition programme
for children* rural water supply schemes, social security benefits for industrial
workers, and schemes for rural employment, an amount of Rs. 125 crores was
earmarked for a new package of welfare measures in 1972-73 Budget.
Important
schemes introduced during 1972-73 were special employment programmes for
both educated and uneducated unemployed—Rs. 60 crores, expansion of primary
education—Rs. 30 crores, slum improvement and rural home sites—Ra, 20 crores,
and rural water supply—Rs. 15 crores. These schemes are an essential compo-
• nent of our development strategy of growth, subserving the cause of social justice.
332
THE GAZETTE OP INDIA EXTRAORDINARY
[PART I_SEC. I"1
They have now gathered momentum and are yielding
beneficial results. Wei1
have, therefore, decided to provide in the 1973-74 Budget the same amount of'
Rs. 125 crores for continuation of these schemes in the Central Plan.
27. Xhere are a number of on-going schemes which form the core of the Plan
and provide the necessary infrastructure for our industries and commerce.
We
have to find resources for these. The Plan provision for power is being increased:
from Rs. 88 crores this year to Rs. 115 crqres next year. Provision for increasing
production capacity in the field of fertilizers and
chemicals is being fixed at
Rs. 134 crores, as against Rs. &5 crores In the 1972-73 Plan. Honourable Members,
will agree with me that an increased supply of power and of such critical inputs,
as fertilizers will have a highly favourable effect on the growth in
agriculture
and industry.
28. A word would be appropriate here about the Differential Interest Rates,
Scheme. Honourable Members will recall that on the 25th March last year I
made a policy statement in this House in regard to public sector banks starting,
a scheme of lending at a concessional rate of interest for helping certain cate-
gories of persons in the low income brackets in their productive endeavours.
The Reserve Bank issued the guidelines for the scheme in June, 1972, and there-
after banks started operating a pilot scheme, Later, when progress was reviewed
it was felt that there was need for
making some
adjustments in the scheme.
After considering all aspects I have decided to announce the following changes,
in the scheme.
29. The pilot
scheme was
confined to 163 industrially
backward districts,
excluding those which were covered by the Small Farmers Development Agency
ar.d the Marginal Farmers and Agricultural Labour Schemes. The scheme will
now be applicable to Small Farmers Development Agency/Marginal Farmers and
Agricultural Labour Schemes districts also, and, in all will be operated in 265
districts covering three-fourths of all districts in the country. Institutions for
physically handicapped persons, and orphanages and women's homes, irrespective
of their place of location, will hereafter be eligible to borrow at the concessional
rate, provided the funds thus obtained by them are used purely for productive
schemes, and not for meeting their normal expenses. In the pilot schemes, the
income limit for eligibility had been fixed at not more than Rs. 2,000 per annum,
per family in urban and semi-urban areas, and Rs. 1,200 per annum per family
in the rural areas. I am increasing this limit to Rs. 3,000 for urban and semi-
urban areas, and Rs. 2,000 for rural areas. J have also decided to make a change
in regard to the ceilings for loans under the scheme. The ceiling for working
capital loans, which was earlier Rs. 500, is now being raised to Rs. 1,500, and for
term loans from Rs. 2,500 to Rs. 5,000. With these liberalisations I hope the scheme
will be able to make a better impact,
30. Despite the progress made by the schemes already initiated for providing
employment, and the efforts made both by Central and State Governments, what
has been done so far has not been commensurate with the magnitude of the
problem. Clearly, this is a field for fresh initiatives and greater concerted effort
in the yeais to come. Government is particularly concerned about the growing
unemployment among educated persons. In order to make a further dent on-
this problem it is proposed to undertake new programmes which will generate
employment opportunities for an additional half a million educated persons ia.
various fields and will at the same time help in the creation' of durable assets,
collection and compilation of valuable data, and training of an adequate number
of persons to help in implementing the new programmes and proiect that will
be introduced in the Fifth Plan. For this purpose, a provision of Ra. 100 crores;
has been set apart in 1973-74 Budget. But for the constraint of resources, I would
have been happier to allocate a much larger sum for this purpose.
31. Another significant step which is being taken is the provision of Rs. 150
crores for 'advance action1 on the Fifth Plan. This will ensure that when' the
Plan is launched we are in a position to get the benefits of Plan programmes
within the Plan period itself. The next Plan envisages a much larger invest-
ment both iri agriculture and key and basic industries, as well as industries pro-
ducing goods for mass consumption. If
the
projected
growth rate is to be
achieved within the policy framework of self-reliance it is essential that projects-
of critical importance to the economy are completed according to schedule and
attain full capacity output within the shortest possible time. The advance action
on the Fifth Plan proposed in the 1973-74 Budget is designed to facilitate thia;
outcome.
[PART I—Sac. t]
THE GAZETTE OF INDIA EXTRAORDINAR,.
23^
32. In addition to the provisions made in the Budget, resources will also be
available from the internal resources of the public sector enterprises, and by
«£ty oi' contributions from financial institutions. Such resources are estimated,
to yield sn additional Rs. 518 crores to the Central Plan for next year, thereby
raising resources lor the total Central Plan to Rs. 2,442 crores.
33. The State Plans have made satisfactory
nrogress and for this purpose
wherever necessary the Central Government has been providing help over and
above the Central assistance for State Plans. With
the
provision of Rs. 119
crores in 1073-74 Budget, the total expenditure on special accommodation
to
States during the Fourth Plan will be in excess of Rs. 800 crores which was thfc
estimate in the original Plan. The total State and Union Territories Plan outlay
as worked out after discussions between the States, Planning Commission
and
Finance Ministry will be of the order of Rs. 1,914 crores as against Rp. 1,704 crores
during the current year.
34. Taking the Central Plan with its internal resources as well as the State
and Union Territories Plans, the total Plan outlay in 1973-74 will be Rs. 4,35S
crores as against Rs. 4,011 crores durine the current year.
35. On the non-Plan side due care has been taken to restrict the growth
of
expenditure to the minimum level. Defence expenditure is retained at the same
level as in current year, namely, Rs. 1,600 crores, Special accommodation to the
States will foe of the order of Rs. 119 crores and this should enable them to fulfil
their Plan targets. In addition to this, a sum of Rs. 79 crores will be given as
loans to States for financing certain specific projects outside the State Plans. As
a precautionary measure I am also
providing Rs. 100 crores for assistance to
States for meeting expenditure on natural calamities relief. I shall be a happy
man If it is not needed.
36. The report of the Third Pay Commission is yet to be received.
Govern-
ment share the anxiety of the Honourable Members and of Central Government
employees that the report, when received, should be considered and acted upon
oxpeditiously. In the absence of the report, it has not been possible to make any-
specific provision for meeting the expenditure arising out of recommendations yet
to be made. On receipt of the report, and subsequent to whatever decisions
may be taker on its
recommendations,
Supplementary
Grants to the extent
necessary will be taken for the additional requirements.
37. On the resources side, income-tax and corporation tax at current levels of
taxation, are expected to show an improvement
of Rs. 80 crores, and Union
Excise Duties Ra. 196 crores. Small Savings are continuing to show progress in
collections and are expected to yield Rs. 325 crores next year, as compared to
Rs 300 crores this year. Repayment of loans by the State next year will also
be higher in view of the massive loan assistance extended to them this year.
38 I am glad to confirm that the Refugee Relief Levies will be withdrawn
with effect from 1st April, 1973, Necessary legislation for this purpose will be
introduced separately before the end of this financial year.
39 After taking into account the improvement in revenue, the increased out-
lays on the Plnn, and other commitments, the year 1973-74 will, at the existing-
level of taxation, show a
deficit
of
Rs. 335 crores. This figure makes no-
allowance for
requirements
arising
out of the
coming
report of the Pay-
Commission.
40. Honourable Members, I am sure, will agree with me that in the present
Inflationary situation which the economy faces, the size of the deficit must be
kept to a low level
In order to accomplish that, it becomes necessarv for me to
make proposals for increased taxation which will
reduce this deficit. Now I
shall deal with these proposals.
PART "B' OF THE BUDGET SPEECH FOR 1973-74
41 Before describing the tax proposals in detail. I would like to share with.
Honourable Members
the general
considerations
underlying these proposals.
As I have already mentioned, in the prevailing inflationary conditions in
the
country it would not be prudent to have a large deficit in1 the Budget. More-
over there are the inevitable commitments arising out of the resource require-
ments for the Fifth Plan.
If adequate resources are to be raised for
finandn*
the Fifth Plan, action has to begin in this very year. I have therefore no alter-
native but to propose some additions to the tax burden1.
234
T H E GAZETTE OF INDIA EXTRAORDINARY
[PAHT I—SEC. 1]
42. Both direct taxea and indirect taxes have to contribute to raising resources
for our development. As Honourable Members are aware, the Direct Tax^ff-
Enquiry Committee, under the chairmanship of Shri K. N. Wanchoo, ex-Chief
Justice of India, has made a number oi proposals in the field of direct taxation.
I have carefully examined these proposals and am submitting a separate Bill
to give effect to such oi1 these
recommendations
as are acceptable to the
Government. Some of the recommendations which have a bearing on the raising
oil resources are being implemented through the present Budget proposals. In
making these proposals I have also taken account of the Report of the Com-
mittee on Taxation of Agricultural Wealth and Income headed by Dr. K. N. Raj.
43. In the present circumstances, there is no escape from using indirect taxes
also to raise additional
resources. However, I have
taken care that in the
process articles of mass consumption are left untouched. This will become evi-
dent as I unfold my proposals.
DIRECT TAXATION
44. As Honourable Members are not doubt aware, the Committee on Taxation
of Agricultural Wealth and Income has suggested several measures for mofbilisa-
tion of resources from the agricultural sector. One of their principal recom-
mendations is that
agricultural
income
should be taken
into account in
determining the rate of tax applicable to non-agricultural income. This will
help to reduce sharp disparities in the tax burden on persons with similar
incomes. I consider this recommendation of the Committee to be well-conceived,
and am accepting it. I am therefore making provision in the budget for aggre-
gation of both the agricultural and non-agricultural components of a taxpayer's
income for purposes of determining the rates of income-tax that will apply to
the non-agriculxural portion in cases where the taxpayer has non-agricultural
income exceeding the exemption limit. For the purpose of determining the
rate of income-tax applicable to the non-agricultural portion of a taxpayer's
income, the first 5,000 rupees of his non-agricultural income will be appropriated
to the lowest slab, which is exempt from tax. The agricultural income will be
appropriated to the middle slabs, and the balance of the non-agricultural income
will be appropriated to the upper slobs of the aggregate income. This scheme
of partial integration will apply to the case of individuals, Hindu undivided
families, unregistered firms, association of persons, bodies of individuals, and
artificial juridical persons.
45. It is generally recognised that the present system of tax treatment of
Hindu undivided families has encouraged tax avoidance. It is my view that
the unintended tax benefits currently available to Hindu undivided families
should, to the extent possible, be neutralised. I therefore propose to provide
separate rate schedules, in respect of both income-tax and wealth-tax, with
higher rates apDlicable to Hindu undivided families having one or more mem-
bers with independent income or wealth exceeding the exemption' limit.
This
is one of the recommendations of the Direct Taxes Enquiry Committee. It is
also proposed to bring the minimum exemption limit in the case of all Hindu
undivided families to the uniform level of Rs. 5,000 applicable in the case of
individuals.
'
'
'f^'i
46. Capital gains tax can become a means of avoiding or reducing the burden
of payment of income-tax. At present capital gains arising from the sale or
transfer of capital assets held by a taxpayer for a period exceeding 24 months
are entitled to concessional tax treatment. I propose to extend this period to
60 months. As a result, only capital assets held by a taxpayer for a period
exceeding 60 months will qualify for concessional tax treatment applicable in
relation to long-term capital assets.
47. Where industrial undertakings are required to shift as a result of com-
pulsory acquisition of land and buildings, I propose to exempt, as a measure of
relief, capital gains arising from the payment of compensation in such cases if
the gains are reinvested for the acquisition of land and buildings for re-
establishing the undertakings or starting new industrial ventures within a period
of three years of the acquisition.
48. I also wish to encourage long-term savings through life insurance, and
provident fund contributions. At present, 100 per cent of the first Rs. 1,000 of
qualifying savings, plus 50 per cent of the next Rs. 4,000, and 40 per cent of the
balance is allowed as deduction in computing taxable income, I propose to
.allow ii deduction equal to 100 per cent of the first Rs, 2,000 of the qualifying
LfAWT I—SEC.IJ
THE GAZETTE OF INDIA EXTRAORDINARY
235
savings. The quantum of deduction in respect of next Rs. 3,000 will continue at
the existing rate of 50 per cent and in respect of the balance at the rate of 40
per cent.
Sports lovers will be glad that donations to approved sports institutions will
qualify for tax-relief in the same manner as donations to charities. I shall be
happy if this leads to improvement in the facilities provided to young sports-
men.
49. It has been a basic policy of the Government t0 encourage srnall and
medium entrepreneurs with comparatively small resources to form public com-
panies. Towards this
objective, I
propose to raise the
limit up to which a
concessional rate of income-tax is applicable in the case of widely-held com-
panies from Rs. 50,000 at present to Rs. 1 lath. Under the existing schedule of
rates, closely-held companies in the corporate sector pay income-tax at a con-
cessional rate on the first Rs. 10 lakhs of their industrial profits. I propose to
reduce the slab on which the concessional rate is applicable from Rs. 10 lakha
to Rs. 2 lakhs. It is hoped that this measure will encourage conversion of these
companies into widely-held companies,
and
thereby broaden the base of the
ownership of industry.
50. At present there is some doubt
whether
management compensation In
respect of business undertakings or other property the management of which is
taken over by the Government is liable to tax. To set this matter beyond doubt,
I intend to introduce a provision to treat such management
compensation as
income from business liable to tax. This will apply retrospectively from
the
assessment year 1972-73.
,
51. Under the existing law, income-tax j 3 deductible at source from the pay-
ments made by Government, statutory corporations, local authorities and com-
panies, to contractors in respect of works or
labour contracts, I propose to
include cooperative societies also in the category of taxpayers required to deduct
tax at source from payments made by them to contractors.
52. The Credit Guarantee Corporation of India has been formed for the pur-
poses 01 guaranteeing advances
made by banking
companies, to the hitherto
neglected sectors of the economy. This is a laudable purpose and I propose to
exempt the income of this Corporation from tax for a period of five years.
53 In' my budget speech for 1971-72, I gave notice of Government's intention
to withdraw the development rebate in respect of ships acquired or plant and
machinery installed after May 31 1974. In response to the demand Pthat thli
should be substituted by pthcr fiscal concessions to impart a continuing momen-
tum to industrial growth in the country, I had indicated that I would come uo
with some specific proposals for encouraging industries in selected sectors and
those in backward areas. In pursuance
of this
undertaking, I am giving an
indication of certain measures which Government has in mind for this purpose
as also for promotion of research and development, and exports. I propose to
bring necessary legislation in the
course of the year t0 give effect to these
proposals.
1
54. It is my intention to provide an initial depreciation altowance of 20 per
M
?i l ^ / 0 ™9
machinery and plant installed in selected industries after
May 31, 1974. This would provide additional resources to the concerned enter-
prises m the early years of their development. A list of the industries to which
this will apply is under consideration.
+n •>;>•*£ ordf
to provide a stimulus to investment in backward areas I intend
M-rSE 11 Pi07t r e ni l a l *flX ,V e a t m e n t t 0 lndustries to bo set up in such areas after
Maich 31 1973. Specifically, the intention is to allow a deduction equal to 20
per cent of the profits derived by an industrial undertaking set up in the back-
ward areas m computing its taxable profits. This concession will be available
for a period of 10 years from the establishment of the industry. The ceilmg on
investment eligible for subsidy will also be raised from Rs. 50 lakhs to Rs 1
cenT'of le^fnvCtment^ °f "
^
^
b e r a i > c d
frOm 10 * * Cent * 15 P«
resjSiTffd^^^^
expenditure in regard to scientific research related to the b u s S activity o*
236
THE GAZETTE OF INDIA EXTRAORDINARY
[PAHT I—Stec. IJ
the taxpayer during three years immediately preceding the commencement of
business is allowed to be written off against the profits of the year in which the
business is commenced.
I propose to extend this concession, covering
revenue'
expenditure, in regard to payment of salaries to
research
personnel, and on
material inputs, during the pre-investment period. I also propose to allow a.
•weighted deduction equal to one and one-third the amount paid
for sponsored
research and development work, in approved laboratories.
57. Honourable Members will agree with me that it will be a paying proposi-
tion for sizeable development expenditure t0 be incurred in developing exports,,
particularly
of
non-traditional
products.
At present
expenditure
on
export
market development is deductible for tax purposes to the extent of 133.3 per cenv,
of actual costs. In view of the great importance of promoting our exports, ][
propose to increase the weighted deduction to 150 per cent in the case of widely-
held companies.
58. I am very conscious of the need to encourage the increase of employment
in industry so that its growth may be oriented towards labour rather than capital
intensive techniques. We are considering schemes which may serve this purpose,
59. The total additional revenue from the various measures in the field of
direct taxes enumerated by me will be Rs. 31 crores in a full year and Rs. 18.6;
crores in the year 1973-74, of which the share of the Central Government will
be approximately Rs. 14 crores.
INDIRECT TAXES
60. Sir, in turning to indirect taxes next, I intend to take up Central excises
ahead of customs, in reversal of the normal order of precedence in deference to
the former being the major contributor to our revenues.
EXCISE DUTIES
61. In doing so, I would like fllrst, to refer to the effort I propose to make
for raising revenue on Ibehalf of the State's through additional duties of excise.
Honourable Members will recall that this is the third and final year for the ful-
filment of our commitment to the States to raise these duties in lieu of sales tax
leviable on three commodities, namely, sugar,
tobacco and
textiles, so as to
achieve an overall incidence of 10.8 per cent of the value nf their clearances by
the end of 1973-74. To reach this target, I
shall
have to raise about Rs. 25
crores in this Budget. In carrying out this exercise, I have been faced with con-
siderable difficulty because one of the commodities, sugar, is at the moment a
somewhat sensitive item, and, another, namely textiles, does not seem to offer
much scope. That
leaves mq with no choice but to fall
back on the "old
faithful", cigarettes, to help me out of the predicament. Tobacco has been a
much maligned commodity almost from the days of its disepvery. While I would
certainly refrain from adopting any attitude of castigation towards the numerous
devotees of the tobacco leaf, I shall be content if those who take pleasure from
the use of this weed will contribute in
some higher measure to the national
Exchequer.
62. Experience has shown that the existing slab system whereby cigarettes!
pay fixed percentages of ad valorem duties depending on the ranges or slabs
of value in which they fall, has been leading t0 the creation' of Sead areas in
which no brands of cigarettes can flourish. By the very nature of the scheme-
there is also an in-built temptation towards the artificial depression of the values
of certain brands which, I feel, will not only affect their quality but also, in the
long run', the revenue from cigarettes. I. therefore propose to resort; to a more
progressive system by adopting the simple principle that the better a cigarette,
the more it pays.
Starting with an aggregate base of 100 per cent ad valorem
(for both hasie and additional duties) as a value of ten rupees per thousand,
the lew will rise at a steady rate of 5 ver cent for every additional rupee or Dart-
thereof in value, till it reaches the present aggregate statutory ceiling of 300 per-
cent, which, if this is any consolation to smokers. I do not intend to revise up-
ward. By suitable inter se adjustments in the basic and additional duties I hope
to raise Rs. 32 crores in a full year of which the maior share of Rs. 24 crores
will go to the States by way of additional excise duties.
69. I am afraid I cannot, while coming down on the citrarette smoker make
things easier for the Dlpe smoker or the person who rolls his own cigarettes. 1
therefore propose to levy a duty on manufactured smoking mixtures for pipes
[PART I—SEC.IJ
THE OAZETTE OF INDIA EXTRAORDINARY
237
, and cigarettes, which will yield about Rs. 80 lakhs, of which Rs. 22 lakhs will
-jpecrue to the States.
64. I have been qoncerned over the tendency of certain textile manufacturers
t0 avoid payment of the legitimate duties on cotton and art silk fabrics by cutting
up good fabrics inio smaller piece* of fents and, into pieces of cloth which are
euphemistically called
rags. I
have, as the first step towards curbing this,
tendency, already revised the definitions 01 fents
and rags by reducing their
length criterion. As the second step I now propose to increase suitably the duties
on fents and, for the first time, prescribe duties for rags. If these measures do
not have the desired effect, it might become necessary to consider more drastic
steps.
65. There have (been complaints that the duty incidence on certain blended
fabrics manufactured with an
ingredient of
cotton is lower than on similar
fabrics in which viscose is used in place of cotton. I propose to remove this
disparity.
66. A situation has (been
created
where,
because of the total exemption
enjoyed by artificial silk fabrics processed without the aid of power or steam,
there is a growing tendency on the part of some art silk units to resort more
and more to processing their fabrics with non-power operated machines. This
cannot be allowed to continue. In making such fabrics also liable to duty now,
I have, however, ensured, in the interests of equity, that the incidence on them
is kept 40 per cent lower than it would be had power been used.
67. The above measures on textiles are expected to yield Rs- 3.65 crores of
which about Rs, 1 crore will accrue to the States iby way of additional excise
duties.
68. The combined effect of the proposals detailed so far will net for the States
a total revenue of Rs. 25 crores in a full year.
09, With my commitment to the State by way of additional duties thus ful-
filled, I must now, in my continuing search for extra resources, turn to another
commodity that has often come to the help of the Finance Minister in the past.
I am referring to motor spirit. Honourable Members will recall that I had
increased steeply the duty on motor spirit in 1971 with a view to curbing it3
consumption. Since then, and as though to give me adequate justification for
resorting again to the curbing mechanism, thete has been a pronounced spurt in
the use of petrol. I propose therefore to apply the curb and also raise some- '
revenue by increasing the duty on motor spirit by Rs. 80 per kilolitre so as to
yield Rs. 19.20 crores per year.
70. I also intend to take thi3 opportunity for making a few modifications in
regard to certain petroleum fractions
which are
classifiable as motor spirit,,
particularly raw naphtha, where there is need for economy in its consumption.
However, in doing so, the..existing
concessions for
the use of naphtha in the
manufacture of fertilisers, as also fuel in the manufacture of steel, will be left
untouched. These minor modifications will net an additional revenue 0? Rs. 1.60=
crores.
71. When the levy was. first imposed on compounded and blended lubricating
oils and greases I had granted relief to the smaljer manufacturers by exempting"
such products manufactured without the aid of
power from duty. I, however,,
find that even some of the bigger manufacturers have stepped into a territory
not really meant for them, by changing their
production to
methods where
power is not used so as t0 avoid paying duty. Honourable Members will appre-
ciate that I cannot allow such avoidance to go unquestioned. I, therefore; pro-
pose to withdraw the existing criterion and effectively confine the concession to*
the smaller manufacturers by
prescribing it on a
quantity-slab basis. I alsoi
propose to increase the effective rate of duty on such oils and greases from 1.1
per cent to 15 per cent. These measures will yield Rs. 2.35 crores.
1%. While on this subject of the ingenuity of manufacturers I would like to
mention the parallel instance of nylon yarn' spinners who have started adjusting
the denierage of their yarn in a way that will enable them to pay lower duties:
taking advantage of the denierage grouping system on the basis of which the-
rates of duty are levied. To cite an Instance, in the first group where the cut-oft?
a38
THE GAZETTE OF INDIA EXTRAORDINARY
[PART I—Sac, 1]
point is 30 denlers, production has shifted to yarn of 31 and 32 deniers whicC^-
therefore pays only a lower duty. I propose to rectify the situation by suitably
re-adjusting the existing denier groups.
73. The next measure I propose is meant to facilitate the collection' of duty
on 'synthetic fibres
and
yarn. This I
intend
doing
by
exempting "the raw
materials, such as polymer chips,
used in
such
manufacture, from duty and
suitably readjusting the duties on the finished nylon', acetate and polyester yarn
and fibres. However, in doing so, I have ensured that the existing incidence of
duty on nylon yarn used in the manufacture of fishing nets and parachute cords
remains unaffected.
74. These measures relating to
synthetic
yarn and
fibres will result in an
additional revenue of Rs. 7.85 crores.
75. Keeping in view the need i'or a higher degree of taxation on luxury arti-
cles used by the more affluent, I propose to increase the duties on a few selected
items. Refrigerators and air-conditioners will pay 60 per cent and their parts,
including parts of their machinery, will pay 75 per cent. The proposed increase
on refrigerators will not, however, affect those of a capacity not exceeding 165
litres which are used by the
middle
class
consumer. Refrigerating and alr-
conditioninjr machinery for industrial undertakings and public-run hospitals are
not being touched. The duty on domestic electrical appliances, as als0 on deco-
rative plywood, will be raised to 25 per cent. However, commercial plywood
will pay lower rates of 20 per cent and 15 per cent depending on the square area
of such plywood. Plywood for tea-chests also remains unaffected.
The rest of
this list of items consists of motor vehicle parts, instant coffee, shaving cream
and long playirie records. The proposed duty on gramophone records will apply
to the more expensive long-playing variety only.
76. These various measures in the aggregate will yield Rs. 8.33 crores.
77. My next proposal is for the addition of a few items to those already in
the excise net, namely, caustic potash, carbon black, carbide tool tips, wire ropes,
and certain rubber chemicals. All these, (except carbide tool tips which will
pay 20 per cent), will bear a duty at the normal general rate of 10 per cent that
• is levied on raw materials in the Central Excise tariff.
Glycerine which has so
long been paying specific duty will also join their number. These levies are
expected to yield Rs. $.60 crores.
78. I also propose to modify, enlarge, or rescind a number of concessions that
exist at present. Without cataloguing them in detail, I shall mention a few of
each variety. Some of the existing concessions given for paper mills some years
back have been found to be out-dated. I propose to replace them with certain
others aimed at benefiting future expansions of
smaller
paper mills and also
attracting new capital investment tp the Industry. The scope of exemption ftxed
on a quantitative basis for paper mills having no bamboo plants attached t«
them will also be
enlarged. The use of
unconventional
raw materials ljke
bagasse, and cereal straw, will be further encouraged by liberalising the existing
concession. Among the list of concessions that are being withdrawn are those
relating to certain producers of rayon yarn and to low-voltage electric motors,
sheet glass and plate glass, and glass fibre and yarn. Acrylic sheets produced out
of duty paid plastic materials, and p.v.c. films of specified thickness and layflat
tubings produced by the small scale sector, will be
exempted. These diverse
measures will result in an additional revenue of Rs. 3.60 crores.
79 Before I tfo on to deal with customs duties. I would like to make a re-
ference to a matter which concerns both kinds of duties. Honourable Members
are aware that Parliament has been sanctioning enabling provisions for levy of
regulatory duties of excise and customs on a year to year basis from 1963. Re-
nulatory duties were intended as special fiscal measures to be resorted to only
for certain purposes, I propose to replace them by new straightforward revenue
raising provisions. For certain reasons it is not possible to incorporate the pro-
visions in rate tariffs, or make them part of taxation statutes and they would there-
fore have to be revived from year to year for the present. The new provisions
now proposed levy auxiliary duties both on excisable goods and imported poods
at an amount equal to 20 per cent of the value of such goods. These levies have
however been limited to a level needed to raise resources for the Centre by
[PART I—SEC.IJ
THE GAZETTE OF INDIA EXTRAORDINARY
239,
planting exemptions wherever and to the extent warranted, for which suitable
provisions have been made in the relevant clauses of the Finance Bill.
80, I shall wind up my catalogue of excise proposals by referring to how
I
intend to resort to this provision on the excise side. In the case of aluminium,
jute yarn .and jute manufactures, other than hessian, copper and zinc, the auxiliary
levies will continue at the same levels at which they were hitherto charged by
way of regulatory duties. In the case of steel ingots and iron and steel products
(other than skelp), however, the rate will be 75 per cent of the effective basic
duty aa against 50 per cent hitherto levied as regulatory duty. This measure in.
the case of iron and steel is necessary in order to bring about a further reduction,
in the gap between imported and indigenoua prices.
81, In the case of steel as well as all other metals, the auxiliary duties will
apply, however, only to indigenous production, and will not be attracted by way-
of countervailing duty on imports.
82, While on this subject I would also like to mention a modification I pro-
pose to make in the exemption on steel products produced by electric furnaces.
These secondary steel producing units which are scrap-based are at present en-
joying an exemption of the ingot-stage duty on the products made by them. The
extent of such benefit, which was only 75 rupees per metric tonne prior to
December, 1971, has nearly doubled since then, and is likely to increase further-
with the modification now being made on iron and steeL In the circumstances
I propose to impose on furnace steel a levy of Rs. 50 per metric tonne at the
ingot stage. This will, of course, be subject to 75 per cent Of this basic duty as
auxiliary duty, in the same way as other steel. I would not consider this im-
post in any way inequitable, for it still leaves a considerable advantage in favour
of furnace steel as compared to what the major steel plants have to pay at the-
ingot stage.
83 These proposals after setting off the revenue that will be foregone
by
dropping regulatory duties, will yield Rs. 34.60 crores of which Rs. 29 crores will
accrue to the Centre.
Import Duties
84. It Is time now to turn to customs duties where my proposals can be broadly
categorised under three main heads.
85. The first relates to auxiliary duties, which I propose to apply on the Cus^
toms side by means of three differential rates of 20 per cent, 10 per cent and 5
per cent of the value of imported goods. All those paying an effective customs
duty of 100 per cent ad valorem or more, will pay 20 per cent as auxiliary duties;
those naying fiO per cent ad valorem and more, but less than 100 per cent, will
pay 10 per cent; and the rest of the goods will pay 5 per cent. However, food-
grains, books, family planning appliances and a few other selected categories of'
goods, as well as three other items to which I shall presently refer, will be totally
exempt from auxiliary duties of customs.
86. After making allowance for the revenue that will be foregone by dropping
regulatory duties this measure is expected to bring in an additional revenue of
Rs. 36.50 crores.
87. The second proposal is regarding the modification of the rates of dutiea-
presently bound under the General Agreement on Tariff and Trade. Pending re-
negotiations with the concerned contracting parties we have been permitted
to
modify the bound rates under the Agreement to the extent necessary for the
rationalisation of the tariff rate structure. Consequent on this I have decided to
revise the rates of duty on a number of items which among them will include
wood pulp, tallow and a few olastic materials. These revisions of rates are ex-
pected to yield an additional Rs. 18.70 crores in a full year.
68. My last proposal relating to customs is a selective revision of the existing
rates of duty On a few items.
89. It is necessary to give a further iniDetus to import substitution and en-
courage more extensive manufacture of machinery in our country. I feel that a-
fiscal incentive is needed for this purpose which I propose to administer by mak-
2 40
THE GAZETTE OP INDIA EXTRAORDINARY
[PART I—SEC. 1J
ing an across-the-board increase in the rate of duty on all machinery from the
InfodTtemr
Pei" CCnt t0
Pei" Cent ThlS Wil1 bG appUed als0 t0 certa^
90. Raw cotton has been enjoying a privileged position for a long time with
only a nominal concessional duty of 10 paise per kilogram.
Since imported cotton
is used mainly for the production of fine and superfine fabrics and comparatively
expensive varieties of blended fabrics which, in the nature of things, are expected
to be used by the more affluent sections of society, I propose to withdraw this
concessional rate and make raw cotton liable to its 40 per cent statutory rate
which is the normal level of taxation for raw materials in the Customs Tariff.
91. However, raw cotton along with two other items, namely, tallow
and
machinery, will not be subjected to auxiliary duties of customs.
92. Copper which has been paying a rate of duty at 30 per cent will pay 48
per cent which is the normal rate applicable to non-ferrous metals.
93. Since the margin of profit on stainless steel sheets is considerable, I pro-
pose to raise the rate of duty on them from 100 per cent to 200 per cent.
How-
ever, the duty on stainless steel plates and strips will be fixed at a lower rate of
•60 per cent.
94. As a measure of assistance to indigenous industry, the concessional rate
of 60 per .cent so far applicable to nylon yarn used in tyre manufacture is pro-
posed to be withdrawn.
95. I also propose to raise the rate of duty on unexposed cinematograph films
from 15 paise to 50 paise per linear metre.
96. These various measures relating to revisions of rates of customs duties are
expected to yield Rs. 97.30 crores In a full year.
97. In addition to this, countervailing duties of customs which will automati-
cally accrue because of the proposed changes in excise duties will account for an
additional Rs. 3.50 crores.
98. To sum up, all the proposals regarding excise and customs duties that
I
have listed so far will yield about Rs. 274 crores. The measures relating to cus-
toms duties will yield about Rs. 1S6 crores. From the excise duties, which will
be of the order of Rs. 118 crores, Rs. 38 crores will accrue to the States.
99. I may now briefly summarise the revenue implications of the various pro-
posals that I have outlined earlier in my soeech. The additional yield from direct
taxes in 1973-74 will be Rs. 18.6 crores. Of this, Rs. 4.7 crores will accrue to the
States, leaving Rs. 13.9 crores for the Centre. The excise duty proposals will yield
additional revenue worth Rs. 118 crores in 1973-74. Of ihis amount,
nearly
Rs 38 crores will go tn the States ana" the balance of Rs, 80 crores will accrue
to the Centre. The additional revenue from customs duties will amount to Rs. 156
crores.
Tn all the Central revenues will benefit from the total package of my
proposals to the extent of "Rs. 250 erorcs,
As a result, the initial deficit of Rs, 335
crores estimated at 1972-73 tax rates will be reduced to Rs. 85 rrores.
This
however will be increased bv the provision which will have to be made in con-
nection with the report of the Pay Commission.
100. Sir, before concluding I would like to point out that this is the third
regular budget that I have been privileged to
present to this august
House.
During each of these budcets, I have had to come forward with proposals for
significant amounts of additional taxation. This was not a pleasant task. It WRB
however inevitable in the light of resources required to meet our ba^ic commit-
ments to the peonle snd the unprecedented challenges of +he difficult times we
have lived through. Thp noverty and the associated inpqualities *n income and
wealth that prevail in th's country cannot be afinlish^d nwr night.
But there
can never be anv doubt about the direction in which the Government is
deter-
mined to move- trt sustain people's faith in our democratic polity as an effective
vehfde of ranid social change. It is In this context of our r>m romrmtmpnt to
socialism rapid economic growth flnrt a self-reliant e<-onomv that the budget pro-
posals must be appraised.
The building-up of a socialist society requires a sus-
itPAKT I—SEC.1]
THE GAZETTE OF INDIA EXTRAORDINARY
241/46
tained multi-dimensional effort to transform our social and economic structure.
In an economy where a large number
of
people
are ill-fed and
ill-clothed
we cannot afford the luxury of maintaining the status quo. Fiscal policy must
assist in this process. This is the vision I have kept in mind in formulating this
.year's budget.
101. The. increased provisions for employment programmes and the continuing
lemphasis on selected schemes of social welfare are part of an attempt to reduce
the existing inequalities of income and consumption. The partial integration of
agricultural and non-agricultural income, and the imposition of higher income-tax
rates on Hindu unlivided families, are designed to make our tax system more
equitable and progressive. The pattern of proposed additions to indirect
taxes
will also serve the same purpose. I have made every effort to ensure that ad-
ditional levies do not impose on undue burden on the common man. On the
other hand, small savers will benefit positively by the proposed liberalisation of
tax exemptions for contributions to provident funds and liic insurance. The in-
troduction of initial depreciation allowances for selected high priority industries
after 31st May 1974, will strengthen this country's industrial structure and there-
by help in the realisation of the goal of self-reliance. Concessions for research
and development will further stimulate the growth of Indigenous technology and
contribute to self-reliance. The enhancement of the weighted deduction present-
ly allowed in respect of export market development must also be seen in. the
context of the nation's determination to move speedily towards
self-reliance.
Incentives for industrialisation of backward areas that I have indicated will help
to reduce the existing regional inequalities in the level of development which
are clearly inconsistent with the ideals of a socialist
society. As I see it, the
budget for 1973-74 represents another major effort, on the part of this Govern-
ment to get the country moving towards the goal of an expanding self-reliant
economy based on social justice.
PRINTED BY THE MANAOER, GOVERNMENT Off1 INDIA PRESS, MINTO ROAD, NEW
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PUBLISHED
BY
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MANAGER
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PUBLICATIONS,
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1973
