Budget 1991: What Manmohan Singh promised and what was delivered

I do not minimise the difficulties that lie ahead on the long and arduous journey on which we have embarked. But as Victor Hugo once said, “no power on earth can stop an idea whose time has come”. I suggest to this august House that the emergence of India as a major economic power in the world happens to be one such idea. Let the whole world hear it loud and clear. India is now wide awake. We shall prevail. We shall overcome. — Budget Speech, July 24, 1991


WHAT HE SAID: It is essential to increase...competition between firms in the domestic market so that there are adequate incentives for raising productivity, improving efficiency and reducing costs.

WHAT CHANGED: End of licensing raj, companies were freed from quantitative restrictions

WHAT HE SAID: The time has come to expose Indian industry to competition from abroad... As a first step in this direction, the Government has introduced changes in import-export policy, aimed at a reduction of import licensing, vigorous export promotion and optimal import compression.

WHAT CHANGED: Import of plant and machinery as well as consumer goods became easier

WHAT HE SAID: After four decades of planning for industrialisation...we should welcome, rather than fear, foreign investment. Our entrepreneurs are second to none. Our industry has come of age. Direct foreign investment would provide access to capital, technology and markets.

WHAT CHANGED: Foreign companies were allowed to enter JVs with domestic companies and in due course set up 100% subsidiaries

WHAT HE SAID: Up to 20% of government equity in selected public sector undertakings would be offered to mutual funds and investment institutions in the public sector, as also to workers in these firms. Public enterprises which are chronically sick and which cannot be turned around, will be referred...for the formulation of revival or rehabilitation schemes.

WHAT CHANGED: Beginning of disinvestment of profitable PSUs. But revival of sick PSUs did not gain much traction

WHAT HE SAID: Full statutory powers will be given to the Securities and Exchange Board of India...to enable it to effectively regulate, promote and monitor the working of the Stock Exchanges in the country.

WHAT CHANGED: Sebi became the sole markets regulator. All listed companies have to comply with its rules and regulations

WHAT HE SAID: It is time we make all-out efforts to capture the overseas software market. With this objective, I propose to extend the tax concession under section 80HHC of the Income-tax Act to export of software. With this concession, the exports of this industry should register rapid growth.

WHAT CHANGED: This concession enabled Indian software companies to become more cost effective.

WHAT HE SAID: Resources for development must be raised from those who have the capacity to pay. For this purpose, we must place greater emphasis on direct taxes. This calls for increased rates wherever necessary and a better tax compliance. At the same time, rationalisation of the system, which reduces the maximum marginal rate of tax, simplifies the procedures, reduces the plethora of concessions, and brings the average rates of income tax at various levels of income to more appropriate levels, is necessary.

WHAT CHANGED: Peak income tax rate came down over the years to 30% and number of slabs to three. Tax-GDP ratio has improved, but still short of the ratios seen in developed nations.