How did 300 Crores get into Budget?
THE position of the undivided Government as on the date of partition was that its outstanding liabilities exceeded its assets so that ultimately it was the debt that was being divided between the two Governments of India and Pakistan. On a rough estimate the outstanding debt of the Central Government as on the 14th August 1947, was likely to be of the order of Rs. 3,300 crores.
In his Budget Speech of 1948, Finance minister Shanmukham Chetty said, “On a very rough estimate this debt is likely to be of the order of Rs. 300 crores and the rate of interest may be near about 3 per cent. Pakistan's total debt is to be repaid in Indian rupees in fifty annual equated instalments for principal and interest. As a measure of assistance to the new Dominion in its earlier years it has been agreed that the first repayment should commence only in 1952. In addition to the Rs. 75 Crores given to her out of the cash balance of the undivided Government it has also been agreed that India would make available to Pakistan a further sum of Rs. 6 crores for meeting the expenditure on the setting up of Ordnance factories and similar special institutions required by her. This amount will also be added to Pakistan's debt. With this settlement, the terms of which, as the Deputy Prime Minister has already told the House, are generous and conceived in a real spirit of assistance to Pakistan, the purely financial problems arising out of the partition may be said to have been satisfactorily solved."
That was in 1948, but when it came to payment, nothing came from Pakistan.
In the 1952-53, budget, credit had been taken for a recovery of Rs.9crores from Pakistan as the first instalment of its debt repayment to India, but not a paisa came.
In his 1954 Budget Speech, Finance Minister Deshmukh said, “ the budget for the current year placed the revenue at Rs.439.26crores and the expenditure at Rs.438.81crores leaving a nominal surplus of Rs.45 lakhs. In balancing this budget, I had taken credit for a recovery of Rs.18crores from Pakistan on account of two instalments due from that country in repayment of the partition debt. I have been having discussions on this subject with the Finance Minister of Pakistan and we both hope that it will be possible to commence the repayment of the debt in the coming year. This single factor has made for a deterioration of Rs.18crores in the revenue budget for the current year, and converted the surplus of Rs.45 lakhs into a deficit of Rs.16.96crores .”
In the next year's budget speech, he said, “I am not taking any credit for repayment of partition debt by Pakistan in view of what has happened in the last two years .”
So the debt continues and is without fail shown in every budget!