When India gained their independence from the UK, during the early days of self-governing, from where did they get the money to operate as a country?

by ShadowMech_

Obviously tax is a source of income, but between the independence and the first tax income, how did India pay for their expenses. Did the UK provide some pocket money?

piyochama18

To better answer your question, I'd like to ask the following:

- Are you asking about the economy as a whole, or the finances of the state in particular?

I_am_oneiros

From the first budget for the period from 15th August 1947 to 31st March 1948

The revenue receipts, as I have said, are estimated at Rs. 171.15 crores. Customs receipts have been placed at Rs. 50.5 crores and take into account the effect of the recent restrictions on imports for conserving our foreign exchange resources.

Income tax is expected to yield Rs. 29.5 crores on account of E.P.T. and Rs. 88.5 crores on account of ordinary collections. Although the Niemeyer Award has now ceased to have effect it is proposed to maintain the share of the Provinces in the income tax revenue at approximately the same level as now after making an adjustment in respect of the Provinces and parts of Provinces now included in Pakistan. The Centre will retain Rs. 3 crores out of the Provincial moiety as provided in the original budget. On this basis, the divisible pool of income tax is estimated at Rs. 66 crores and the Provincial share at Rs. 30 crores.

Revenue from the Posts and Telegraphs Department is expected to amount to Rs. 15.9 crores and the working expenses and interest to 13.9 crores leaving a net surplus of Rs. 2 crores. The outright contribution of the department to general revenues will be three-fourths of the realised surplus, the department retaining the balance. The department will get a rebate of interest on its share of the accumulated profits in the past which, after allowing for the portion of the department transferred to Pakistan, is expected to amount to Rs. 71 crores. As regards the contribution from Railways we do not expect anything in the current year. The House is already aware of the reasons for this from the Railway Budget.

India was a functioning country which only slowly transitioned to a free nation, so institutions such as the Reserve Bank were already in place to set monetary policy. The budget in its entirety makes for a fascinating read, a window into a turbulent time for a nation and the steps taken to mitigate the disaster.

Source (pdf of budget): https://www.indiabudget.gov.in/bspeech/bs194748.pdf