When Muslim League joined the Interim Government, differences arouse between the two major parties over the issue of the distribution of portfolios. Muslim League wanted one of the three important ministries, i.e. External Affairs, Home or Defence, but Congress was not ready to give any of them to the League. Nehru considered himself as the best possible choice for the External Affairs, while Patel thought it was better for him to remain outside the cabinet, if he was not made in charge of the Home department. When pressure was put on the Congress to give something of a significant importance to the Muslim League, on the advice of Rafi Ahmad Kidwai, a Muslim Congress member, they offered Muslim League the Finance ministry. They were sure that since the League had no finance expert in their leadership, they would either decline the offer or would badly fail in running the ministry. To their surprise Muslim League accepted the challenge and nominated Liaquat Ali Khan as the Finance Minister. Knowing the importance of the ministry Liaquat started putting financial checks on all the ministries run by the Congress members. They could not even hire a peon without the prior consent of Liaquat.
The greatest contribution of Liaquat as Finance Minister, however, was the budget he presented on February 28, 1947. This was the first time when an Indian presented the budget of his country and that also proved to be the last budget of British India. The budget, which was prepared with the help of financial experts like Malik Ghulam Muhammad, Chaudhari Muhammad Ali and Zahid Hussain etc. was a poor’s friendly budget and is known in the history as Poor Man’s Budget. While presented the budget in the Central Assembly Liaquat declared, “It will be my particular endeavour to reduce, to the maximum extent possible, the glaring disparities that exist today between the income and standards of life of the wealthy classes and the vast multitude of poverty-stricken masses and to contribute to the best of my ability to the improvement of the lot of the common man.” He further stated, “I do believe in the Quranic injuctions that wealth should not be allowed to circulate among the wealthy and the stern warning given against accumulation of wealth in the hands of individuals.”
Following were some of the main features of the Poor Man’s Budget:
Salt Tax was completely abolished for the first time.
Minimum exemption limit for income tax was raised from Rs. 2000/- to Rs. 2500/-
Special income tax of 25% was introduced on the businessmen whose annual profit was more than Rs. 100000/-
A graduated tax was introduced on the capital gains exceeding Rs. 5000/-
A commission was proposed to look in to the accounts of those who accumulated wealth during the Second World War and to introduce heavy taxes on them.
By presenting the Poor Man’s budget, Liaquat was able to kill two birds with one stone. On one hand the budget was hailed in the local press and was appreciated by the common people. The popularity of Muslim League further enhanced and it was proved, i.e. if the proof was still required, that Muslim League was competent enough to run the affairs of an independent state. On the other the hand the capitalist, most of whom were the pro-Congress Hindu industrialists and businessmen, termed it as “Millionaire’s howls” and decided to stop the funding of the Indian National Congress. The budget presented by Liaquat compelled the Congress leaders to accept that giving Finance ministry to the Muslim League was a blunder on their part.