On November 26, 1947—just three months after the blood-soaked trauma of Partition—India’s newly formed government faced an almost impossible task: present a national budget for a country that barely existed as a unified entity. With refugees flooding in, industries shattered, and borders redrawn overnight, Finance Minister R. K. Shanmukham Chetty stood before Parliament not with grand visions of growth, but with a survival plan. That moment marked the birth of India’s first budget—a modest Rs 197 crore document where a staggering **47% was allocated to defence** [[1]].
Fast forward to 2026, and India’s Union Budget runs into trillions of rupees, funding space missions, digital infrastructure, and green energy. But to understand how far we’ve come, we must revisit where it all began: a fragile nation stitching itself back together, one rupee at a time.
Table of Contents
- The Man Behind the Moment: Who Was R.K. Shanmukham Chetty?
- Why 47% Went to Defence: The Urgency of 1947
- Key Features of India’s First Budget
- From Survival to Strategy: How Budgets Evolved
- Legacy and Lessons from the 1947 Blueprint
- Conclusion: A Budget Born in Crisis, Built for Resilience
- Sources
The Man Behind the Moment: Who Was R.K. Shanmukham Chetty?
R. K. Shanmukham Chetty wasn’t just India’s first Finance Minister—he was a seasoned economist, industrialist, and former Diwan of the Cochin princely state. Appointed by Prime Minister Jawaharlal Nehru, Chetty had the unenviable job of crafting fiscal policy for a nation with no central banking system, fragmented revenue streams, and a war-ravaged economy [[2]].
Interestingly, his budget speech lasted only 35 minutes—one of the shortest in history—and notably avoided introducing new taxes. Instead, he focused on stabilizing existing revenue and prioritizing urgent national needs. His calm, pragmatic approach reflected the mood of a leadership trying to project confidence amidst chaos.
Why 47% Went to Defence: The Urgency of 1947
The allocation of **47% of total expenditure to defence** wasn’t a choice—it was a necessity. India was embroiled in its first war with Pakistan over Kashmir, while simultaneously managing the largest mass migration in human history [[3]]. Over 14 million people were displaced, and communal violence had left cities in ruins.
In this context, national security wasn’t just a line item—it was the bedrock of survival. The military needed resources to secure borders, maintain internal order, and protect refugee convoys. As historian Ramachandra Guha notes, “The state’s first duty in 1947 was not to build schools or factories, but to ensure that the state itself would survive” [[4]].
Key Features of India’s First Budget
Beyond the headline-grabbing defence spend, India’s first budget had several defining characteristics:
- Total Expenditure: Rs 197.29 crore
- Revenue Receipts: Rs 178.56 crore (showing a small surplus)
- No New Taxes: Chetty deliberately avoided burdening a traumatized populace
- Focus on Relief & Rehabilitation: Significant funds were quietly routed to refugee camps, food distribution, and basic healthcare
- Interim Nature: Officially labeled an “interim budget,” it covered only the remainder of the 1947–48 fiscal year
This budget wasn’t about long-term planning—it was triage economics. Every rupee had to count, and every decision carried existential weight.
From Survival to Strategy: How Budgets Evolved
Compare Chetty’s 1947 budget to India’s 2025–26 Union Budget, which allocates over ₹47 lakh crore across sectors like AI, semiconductors, and climate resilience [[5]]. The shift is staggering. Where once defence dominated, today’s priorities include education (₹1.12 lakh crore), health (₹90,000 crore), and infrastructure (₹11.11 lakh crore) [[6]].
Yet, echoes of 1947 remain. Even in modern budgets, national security remains a top priority—defence still receives the largest single ministry allocation. This continuity underscores a core truth: India’s fiscal philosophy has always balanced immediate security with aspirational development.
For more on how budget priorities have shifted, see our deep dive on [INTERNAL_LINK:evolution-of-indian-union-budget].
Legacy and Lessons from the 1947 Blueprint
The legacy of India’s first budget isn’t just historical—it’s instructive. It teaches us that fiscal policy is never just about numbers; it’s a reflection of a nation’s deepest anxieties and highest hopes.
Three enduring lessons stand out:
- Context is King: Budgets must respond to the moment—whether it’s post-Partition chaos or a global pandemic.
- Fiscal Prudence in Crisis: Chetty’s avoidance of new taxes showed restraint, proving that responsible finance can coexist with emergency spending.
- Institutional Foundations Matter: This interim budget paved the way for India’s Planning Commission, Reserve Bank autonomy, and a structured five-year planning model.
As the World Bank observes, “India’s early commitment to institutional fiscal discipline, even in crisis, laid the groundwork for its later economic resilience” [[7]].
Conclusion: A Budget Born in Crisis, Built for Resilience
India’s first budget was more than a financial statement—it was a declaration of intent. In a world that doubted India’s viability as a nation, Chetty’s Rs 197 crore document said: *We are here to stay*. Today, as India stands as the world’s fifth-largest economy, that spirit of pragmatic resilience—forged in the fires of 1947—continues to shape every rupee allocated in Parliament.
Sources
- [[1]] The Times of India: “47% for defence, Rs 197 crore expenditure: A look at India’s first Budget in 1947”
- [[2]] Ministry of Finance, Government of India: “Historical Budget Documents”
- [[3]] National Archives of India: “Records of the 1947–48 Interim Budget”
- [[4]] Guha, Ramachandra. India After Gandhi. Picador, 2007.
- [[5]] Economic Survey 2024–25, Government of India
- [[6]] Union Budget 2025–26 Highlights, Ministry of Finance
- [[7]] World Bank Report: “Fiscal Institutions and Economic Development in South Asia”, 2023