The forgotten finance minister: RK Shanmukham Chetty and India’s first budget #IndiaFinance

His tenure, however, was short-lived—lasting just over a year—and ended abruptly. That wasn’t due to incompetence. A sharp economic thinker, Chetty had already proven his acumen as the Diwan of Cochin (1935-41), initiating key reforms, including improvements to the Cochin port.

His real misstep? He belonged to the wrong party. As one of only three non-Congress members in Nehru’s first cabinet, Chetty found himself ideologically out of sync with the socialist-leaning government. His budget speech on 26 November 1947, was telling: “I hold the belief that for many years to come there is need and scope for private enterprise in industry. We cannot afford to lose the benefit of the long years of experience which private enterprise has gained in the building up of our industrial economy.”

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Yet, beyond ideology, Chetty’s speech remains invaluable for what it reveals about India’s economic condition at the moment of independence. The horrors of Partition often overshadow the financial turmoil that gripped the country in 1947. Today, it is easy to criticize the government’s economic path—especially given how its socialist model eventually morphed into the stifling licence-permit raj that stunted growth for decades.

But to understand why those choices were made, we must turn to Chetty’s budget speech. Presenting the 1947-48 budget, he laid out a stark assessment of Partition’s economic toll: “The budget of the central government for the next few years will be materially affected by this unexpected development in the country, our whole programme of post-war development will have to be reviewed in the light of this context.”

Those words reflected a deep awareness of the humanitarian crisis shaping India’s economic policies. Critics of the era often overlook the immediate realities that forced certain decisions.

Chetty, however, articulated them clearly—pointing to the severe food crisis, the urgent need for grain imports, and the resulting strain on the exchequer. His explanation of rising inflation—“the money demand for goods is colossal compared to their local production”—showcased his sharp grasp of economic fundamentals.

No surprise, given his background and training.

Born into a prosperous business family in Coimbatore, Shanmukham Chetty received his early education there before moving to Madras to study economics at Madras Christian College. He later earned a law degree from Madras Law College but never joined the bar, opting instead to manage the family business.

His true calling, however, lay in public life. In 1916, he joined the Justice Party, founded that same year by Dr. C. Natesa Mudaliar, T. M. Nair, P. Theagaraya Chetty, and Alamelu Mangai Thayarammal, as part of the rising Dravidian movement advocating for non-Brahmins. He remained deeply committed to the cause, actively campaigning against Hindu religious superstitions while championing the social reform initiatives of E.V. Ramasamy “Periyar.”

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The following year, at just 25, he was elected a councillor in the Coimbatore municipality, marking the beginning of a long and influential political career. In 1920, he secured a seat in the Madras Legislative Council, serving until 1922. Two years later, he joined the Swaraj Party and, in 1924, was elected to the Central Legislative Assembly. His tenure lasted until 1935, when he lost re-election.

By then, however, he had earned the confidence of the British administration—particularly Lord Willingdon, the then viceroy and governor-general of India, who once described Gandhi as “a Bolshevik, and for that reason very dangerous.”

Recognizing his contributions, the British conferred upon Chetty the title of Knight Commander of the Order of the Indian Empire in June 1933.

Given his close ties to the departing British administration, Chetty’s appointment as finance minister was contentious. Many Congress leaders were reluctant, but Mahatma Gandhi advocated for his inclusion.

Chetty’s credentials were undeniable. A seasoned economist, he had represented Indian employers at the International Labour Conference in Geneva (1928, 1929, 1932) and served as India’s delegate at the 1932 Imperial Economic Conference in Ottawa. In 1944, he was also part of the Bretton Woods Conference, which laid the foundation for the global financial order.

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After his abrupt exit from the Union cabinet, Chetty returned to state politics, winning a seat in the 1952 Madras State Legislative Assembly as an independent.

He passed away the following year, leaving behind a legacy defined not by his brief stint as finance minister, but by his keen grasp of India’s economic realities—an insight often overshadowed by the dominant political narrative of his time.