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provides for a full year’s revenue from the enhanced duty on exports of cotton cloth andyarn imposed in the current year’s budget. The effect on our revenue of the restrictionon imports so as to conserve foreign exchange has been taken into account as also therestriction on the exports of raw cotton. Central excises are expected to bring in Rs. 34crores and receipts from income-tax which include Rs. 12 crores on account of ExcessProfits Tax and Rs. 17 crores on account of the Business Profit Tax, have been placed atRs. 130 crores. The divisible pool of income-tax is estimated at Rs. 80.24 crores ofwhich the Centre will retain Rs. 42.37 crores leaving Rs. 37.87 crores as the Provincialshare. The profits from Currency and Mint, after allowing for the share of Pakistanunder the arrangement for the management of the currency of both the Dominions bythe Reserve Bank up to the 30
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th September 1948, are estimated at Rs. 9.4 crores.12The revenue of the Posts and Telegraphs Department is expected to amount to
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Rs. 26.2 crores and working expenses and interest to Rs. 25.82 crores leaving a smallsurplus of Rs. 38 lakhs. In the current year, the surplus will be shared between general
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revenues and the Department in the ratio of three to one while next year only half the
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surplus will accrue outright to general revenues. The Department will get a rebate ofinterest on its share of the accumulated profits in the past which at the end of the budget
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year are expected to amount to about Rs. 8 crores.
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In my estimate of receipt for 1948-49 no credit has been taken for any contribution
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from the railway surplus. The position with reference to this matter was explained by
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the Hon’ble Minister for Transport in his Budget Speech the other day.
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EXPENDITURE
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27. The total expenditure for next year is estimated at Rs. 257. 37 crores of
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which Defence Services will account for Rs. 121.08 crores and Civil expenditure for
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Rs. 136.29 crores. Following the customary procedure, I shall first deal with the Defence
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estimates.
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28. Defence Services. - The reconstitution of the Armed Forces of the undivided
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Government of India into separate forces for the two dominions is now virtually complete.It was envisaged at an earlier stage that the re-organisation of the Armed Forces would
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be largely completed in the financial year 1948-49. With the alteration in the role of the
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“ Armed Forces as a result of the partition a redistribution of the available financial
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resources between the three services to allow for a more balanced development was
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contemplated. Unfortunately, however, the recrudescence of communal disturbances
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and the necessity in present circumstances of having to retain substantial forces till
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normal conditions return have made it impossible to undertake the long term planningof the Armed Forces so as to keep the expenditure on them at a level appropriate to the
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financial resources of the country.
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29. As the House is already aware, the process of demobilisation of the Armed
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Forces was arrested by the partition of the country in order to facilitate the division of
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the forces between the two dominions and to enable them independently to determine
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the size and composition of their respective Armed Forces. In the altered strategic
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situation following the partition and also in view of the recent disturbances in the country,it has not been possible to resume demobilisation in the Armed Forces of the Indian
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Dominion. The future strength and composition of these forces still remain to be decided
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and it may be some time before a decision is taken. Meanwhile, the Army is expected to
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be maintained at its present level.
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30. Certain decisions for the expansion of the Naval and Air Forces have been
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taken and a delegation was sent to the United Kingdom last November to discuss with
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the British Government the question of acquiring certain Naval vessels and aircraft and
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the provision of training and other facilities for officers and men of the Indian Forces.These discussions were successfully completed and arrangements have been made for13the acquisition of certain assets and for the training of Indian personnel. Honourable
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Members are aware of the decision by Government to strengthen the Navy with newtypes of ships, notably a cruiser and three destroyers. A party of officers and men of theRoyal Indian Navy has already been despatched to the United Kingdom to undergo thenecessary specialised training in order to ensure that these ships are manned as far aspossible by Indian nationals. The Royal Indian Air Force is also being expanded.
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31. The budget estimate for Defence Services for 1948-49 is, as I have
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mentioned, Rs. 121.08 crores. This is exclusive of expenditure of a capital natureamounting to Rs. 14. 99 crores to be incurred on the acquisition of land, the constructionof training institutions, the provision of accommodation for personnel, the acquisitionof new naval vessels, aircraft and connected equipment for the expansion of the Navyand the Air Forces which I have mentioned earlier. Provision for this expenditure hasbeen included in the Capital Budget. As the House is aware, this practice of providingfor capital expenditure outside the revenue account was introduced during the last War,and was discontinued only in 1947-48. I trust the House will agree with me that in thepresent abnormal conditions the decision to charge to capital the expenditure on theacquisition of permanent assets is unobjectionable.
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32. The partition of the country placed heavy responsibilities on the Armed
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Forces of this Dominion when they were in the process of reconstitution both in thematter of maintenance of law and order and in assisting the Civil authorities in theevacuation and relief of the minorities in the Punjab. A Military Evacuation Organisationwas set up during September 1947 with its headquarters at Amritsar and an advanceheadquarter at Lahore and this organisation succeeded in evacuating over 4 millionnon-Muslims from Western Pakistan and about 5 million Muslims from India within aperiod of 3 months. This stupendous task had to be performed under the most tryingconditions and the troops which took part in it have responded most magnificently to
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the call. While the energy and resources of the army were mobilised for this humanitarian
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work further calls were made on them for the defence of Kashmir. The fighting in
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Kashmir is being carried on in difficult terrain and severe climatic conditions. I am sure
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the House will join me in paying a tribute to the Army and the Royal Indian Air Forcefor the magnificent way In which they have responded to the call made on them.
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33. Civil Estimates. - Details of the estimates under individual heads are as
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usual, given in the Explanatory Memorandum circulated with the Budget papers and I
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do not propose to weary the House by repeating them here. I should like however to
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refer briefly to the provision included in these estimates for certain special items likethe expenditure on refugees and the subsidy for food. The expenditure on the relief and
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rehabilitation of refugees next year is estimated at Rs. 10. 04 crores. The expenditure
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next year will be largely on relief and rehabilitation as the evacuation of refugees has
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now been nearly completed, except from Sind and to some extent from the N. W. F. P.
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This estimate is necessarily tentative because In the rapidly changing conditions It hasnot been possible to frame a close estimate. In addition to direct relief and grants for14rehabilitation a comprehensive scheme for granting advances to the refugees to enable
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them to settle down in various walks of life has also been drawn up. A RehabilitationFinance Administration to which Government will advance Rs. 10 crores is also beingset up. I hope that the facilities provided by the Industrial Finance Corporation will alsobe available for the assistance of industries which have ad to be transferred to India onaccount of the communal disturbances. In addition to the provision of Rs.10.04 croresIn the revenue budget a sum of Rs. 10 crores has been included in the capital budget forthe Rehabilitation Finance Administration and Rs. 5 crores for loans and advances forrehabilitation, Including loans to Provinces for this purpose. The expenditure on foodsubsidies, including the bonus to Provinces on the internal procurement of grain underthe new food policy announced recently, is estimated at Rs. 19.91 crores next year. Theestimates also include a total provision of Rs. 10
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3/4 crores under various heads for
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expenditure upon development schemes and resettlement.
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34. The House would doubtless wish to know if in framing the budget for next
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year any allowance has been made for the implementation of the recommendations ofthe Economy Committee the appointment of which under the Chairmanship ofShri Kasturbhai Lalbhai was announced by me. The House will realise that it is obviouslyimpossible to forecast the directions In which the Committee may suggest economiesand the total amount that could be expected to he saved. I have however made a lumpcut of Rs. 21 crores under the various heads of civil expenditure in order to ensure thatsome economy is effected pending the report of the Committee. If the Committee’sreport suggests economies on a large scale I propose to take steps during the course ofthe year to see that they are realised. I wish to make it clear however that this lump cutis mainly in the nature of a token and should not be taken as giving any indication of thesize of the economy which I consider could be effected. This must necessarily dependon the considered judgement of the Committee after they have examined the variousdepartmental authorities and I do not wish in any way to anticipate their findings.
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35. Of the total expenditure of Rs. 136.29 crores provided in the budget for
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next year Rs. 29.95 crores are accounted for by the expenditure on refugees and thepayment of subsidies and bonus for foodgrains, leaving Rs. 106.34 crores for normalexpenditure. This includes Rs. 8.98 crores for tax collection, Rs. 43.86 crores forobligatory expenditure on payment of interests and pensions and provision for debtredemption, Rs. 3.15 crores for Planning and Resettlement, Rs. 2.2 crores for expenditureon the Mints and the Nasik Press, Rs. 2.95 crores for grants-in-aid to ProvincialGovernments and Rs. 20.93 crores for expenditure in the nation building sphere such asEducation. Medical, Public Health, Broadcasting, Aviation and the conduct of scientificsurveys and institutions in which the Central Government supplement the work of theProvincial Governments and provide valuable technical assistance and research. Thebalance of Rs. 24.27 crores represents the provision for ordinary administration, CivilWorks, etc., and this constitutes only 18 per cent, of the total civil expenditure. Inaddition to Rs. 20.93 crores in the nation building sphere mentioned above, provision15has been made in the capital budget for a grant of Rs. 30 crores to Provincial Governments
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for development and Rs. 34 crores for loans.
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36. On the basis of the estimates of revenue and expenditure that I have so far
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explained, the anticipated deficit in the Budget for 1948-49 is Rs. 26.85 crores. In alater part of my speech I shall revert to the question of how I propose to deal with thisdeficit.
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POST-WAR PLANNING AND DEVELOPMENT
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37. When I addressed this House last November I mentioned that the question
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of re-examining the development schemes of the Provincial Governments with referenceto the reduced resources likely to be available to the Centre for financing developmentand the changes resulting from the partition will be taken up. I have since had thisfurther examined and it has been decided that so far as the Centre is concerned thereshould be no reduction in the extent of assistance promised by it to the Provinces whenthe Provinces were asked to draw up their plans for development. The House willremember that the Provinces were informed in 1945 that they could draw up their plansof Post-war development on the assumption that in the five years beginning with 1947-48 they could expect assistance by way of grants of the order of Rs. 250 crores. Thisamount was provisionally distributed among the Provinces in the ratio of their population.But some special weightage was given to the backward provinces of Assam, the N.W.F.P.and Orissa and to Bengal, which with Assam, had been affected by the impact of war inthe north-east frontier. With this weightage the Centre’s promised contribution in fiveyears rose to Rs. 273.88 crores. The Provinces were given advance grants to cover theexpenditure incurred by them on development schemes in 1945-46 and 1946-47 to betaken against their share of the grant for the five year period. The progress of expenditureon the development schemes has been somewhat slower than anticipated mainly due tothe shortage of material and manpower and the time taken to formulate detailed schemes.In the current year a provision of Rs. 20.39 crores was included in the budget for theperiod 15
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th August 1947 to 31st March 1948 but it is unlikely that the whole of it will be
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spent. After allowing for the expenditure incurred up to the partition and for the areasnow in Pakistan and reallocating the balance to the Provinces in the Indian Dominionthe outstanding balance of the assistance from Centre to the Provinces at the end of thecurrent year, on approximately the same scale as was promised by the then Governmentof India In 1945, is estimated roughly at between Rs. 170 crores and Rs. 180 crores Ihave carefully considered whether in the altered circumstances the Centre should reduceits assistance to the Provinces but I have come to the conclusion that in the largerinterests of the development of the country as a whole it would be unwise to do so,particularly as the Provinces have framed their plans on the assumption that the promisedassistance would be forthcoming. In reaching this decision I have been influenced bythe fact that in actual practice the grants are likely to be spread over a somewhat longerperiod than the four years that remain out of the original five years period fixed for thisassistance. This, to some extent, will relieve the strain on the resources of the Centre.16But it is being made clear to the Provinces that in future the grants from the Centre up
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to the maximum agreed to will be contingent on the Provinces spending from their ownresources at least an equal amount and that the whole scheme of assistance would besubject to readjustment if in the new constitution there is any substantial transfer ofresources from the Centre to the units. I trust that with this assurance the Provinces willnow be in a position to go ahead with their schemes of development and that they willconserve and exploit all the available resources for this purpose. The budget for thenext year includes a provision of Rs. 30 crores for grants to Provinces for developmentand Rs. 34 crores for loans to them.
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38. For Central schemes of development including resettlement a provision of
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Rs. 10
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3/4 crores has been made in the revenue budget and Rs. 251/2 crores in the capital
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budget. Details of the provision are given in the Explanatory Memorandum circulatedwith the Budget papers and I do not propose to dilate at length on the individual schemesfor which provision has been included in the budget. But they cover a very wide fieldand among the important schemes I would mention the expansion of the Forest ResearchInstitute, DehraDun, the development of the valuable forests in the Andamans, thepreliminary work on the Kosi, Sone Valley, Ghandak and Assam Valley projects, all ofwhich form part of the large scale schemes of river development, the reorganisation ofthe Central Waterways Navigation and Irrigation Research Stations, the setting up of aTractor Testing Station, the establishment of a Central Agricultural College, the expansionof the Indian Agricultural Research Institute, the loan of Rs. 2 crores to the DamodarValley Corporation and the investment of Rs. 1 crore in the Industrial FinanceCorporation. In addition to provision for expenditure on the individual schemes justmentioned the budget also provides for an expenditure of over Rs. 2 crores for buildingsfor development schemes, Rs. 6
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1/4 crores for the construction and development of
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National Highways, 61/2 crores for the Fertiliser Factory under construction at Sindri,
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Rs. 4 crores for the expansion of civil aviation and Rs. 70 lakhs for the expansion ofbroadcasting facilities.
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CAPITAL EXPENDITURE
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39. Before I pass on to deal with the ways and means position I shall give the
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House a brief account of the provision included in the budget for normal capitalexpenditure. The revised estimate for this year includes a provision of Rs. 26
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1/2 crores
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of which the Railways account for Rs. 163/4 crores, Posts and Telegraphs for Rs. 21/2
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crores and schemes of State Trading for Rs. 43/4 crores. For next year the provision
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amounts to Rs. 76 crores of which Rs. 241/2 crores are for Railways, Rs. 31/4 crores for
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Posts and Telegraphs, Rs. 15 crores for Defence to cover expenditure on the purchaseof naval vessels aircraft and spares for the expansion of the Navy and Air Forces, theacquisition of land and the construction of accommodation for Defence Servicespersonnel, Rs. 3
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1/4 crores on the provision of additional accommodation in New Delhi,
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Rs. 23/4 crores for administrative buildings and communications costing over a lakh of
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rupees, the cost of which is now met from capital and Rs. 27 crores for the building-up17of the central reserve of 6 lakhs tons of foodgrains in accordance with the recently
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announced food policy of Government. The total provision in the Capital Budget fornormal requirements and for financing the development schemes both of the Centreand the Provinces comes to the impressive figure of Rs. 70 crores this year and Rs. 165
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1/
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2 crores next year.
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W AYS AND MEANS
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40. I now turn to a brief consideration of the ways and means position. During
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this year owing to the uncertain political conditions in the earlier months, the partitionof the country and the widespread communal disturbances in certain parts of the countryit was not possible to borrow from the market the substantial amount which it wasoriginally planned. Next year in addition to the interest-free prize bonds, with anoutstanding of a little over Rs. 5 crores, which mature in January 1949, Governmenthave the option of repaying the outstanding balance of the 2
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3/4 per cent Loan 1948-52
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and the 4 percent Loan 1948-53. A decision on the exercise of this option will be takenin the course of the year with reference to the conditions then prevailing. The marketborrowing next year have been taken at Rs. 150 crores but if circumstances are propitiousthe scale of borrowing will be stepped up. I would in this connection reiterate the appealI made on the floor of this House last November for the utmost co-operation from thepublic in the borrowing operations of the Government. Apart from the need which stillremains for withdrawing surplus purchasing power from the hands of the community asa measure of anti-inflation, the requirement of funds for financing the large scale plansof development which the Government have in view and for assistance to the Provincesfor Implementing their schemes Is as great as ever and unless the public co-operatewhole-heartedly with the Government by lending their savings it will be impossible toundertake all the schemes of development, necessary for raising the standard of life ofour people.
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41. I shall now pass on to the consideration of the all-important problem of
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how to deal with the deficit of Rs. 26.85 crores.
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42. I just mentioned a deficit of Rs. 26.85 crores. This is exclusive of any
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contribution from the railway surplus. As Honourable Members are aware, it has nowbeen decided that out of the railway surplus a contribution of Rs.4.5 crores should bemade to general revenues during the next year. The estimated deficit is therefore reducedto Rs. 22.35 crores.
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RELIEFS IN TAXATION
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43. The House will remember that in my Budget Speech last November I
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