Monday, July 6, 2009

Highlights of the Union Budget 2009-10

The Budget 2009-10, presented by the Minister of Finance Shri Pranab Mukherjee on 6 July, 2009, promised to lead the Indian economy back to the high gross domestic product (GDP) growth rate of 9 per cent per annum at the earliest. It vowed to strengthen the institutional mechanisms for inclusive growth to create about 12 million new work opportunities per year. The Finance Minister said during his Budget speech that during the year 2008-09, there has been a dip in the growth rate of GDP from an average of over 9 per cent in the previous three fiscal years to 6.7 per cent. This has made an adverse impact on employment creation and the investment climate of the country. The Economic Survey 2008-09 earlier found out that the growth rate of agricultural and allied activities GDP at factor cost (at 1999-2000 prices) decelerated to 1.6% in 2008-09 from 4.9% in 2007-08. The manufacturing, electricity and construction sectors decelerated to 2.4, 3.4 and 7.2 per cent during 2008-09 from 8.2, 5.3 and 10.1 per cent in 2007-08, respectively. In order to generate additional demand in the economy, the fiscal stimulus provided by the Government has led to an increase in the fiscal deficit from 2.7 per cent in 2007-08 to 6.2 per cent of GDP in 2008-09, according to the Budget 2009-10. The fiscal stimulus, which has been provided by the Government at 3.5% of GDP at current market prices for 2008-09 amounted to Rs. 1,86,000 crore.

The highlights of the Budget 2009-10 are as follows:

* The allocation National Highways Authority of India (NHAI) for the National Highways Development Programme (NHDP) is being stepped up by 23 per cent over the 2008-09 (BE), during 2009-10.

* The allocation for Jawaharlal Nehru National Urban Renewal Mission (JNNURM) is being stepped up by 87 per cent to Rs. 12,887 crore in the current budget.

* The allocation for housing and provision of basic amenities to urban poor has been increased to Rs. 3,973 crore in the current year’s budget. A new scheme Rajiv Awas Mission for the urban poor has been mentioned in the Budget.

* In areas like banking and insurance, specifically, the majority control in state-run companies would remain in the hands of the Government with fresh infusion of equity to help them remain globally competitive.

* The Budget Speech proposed disinvestment of the public sector undertakings (PSUs), while retaining 51% Government equity.

* The India Infrastructure Finance Company Limited (IIFCL) has been created as a special purpose vehicle for providing long term financial assistance to infrastructure projects.

* The allocation for the Accelerated Power Development and Reform Programme (APDRP) has been increased to Rs. 2,080 crore.

* Agriculture credit flow was Rs. 2,87,000 crore in 2008-09. The target for agriculture credit flow for the year 2009-10 is being set at Rs. 3,25,000 crore.

* Under the interest subvention scheme for short-term crop loans to farmers for loans upto Rs.3 lakh per farmer, the interest rate has been fixed at 7 per cent per annum. However, additional subvention of 1 per cent on the part of the Government would bring down the net interest rate for these farmers to 6 per cent per annum.

* Under the Agricultural Debt Waiver and the Debt Relief Scheme, the last date to repay back 75% of the outstanding loans by farmers owning more than two hectares of land has been extended from 30 June to 31 December, 2009 due to late arrival of the monsoon.

* A special taskforce would be prepared to seriously check the debt crisis in Maharastra, where farmers have borrowed from private moneylenders.

* The allocation for Rastriya Krishi Vikas Yojana has been increased by 30% over Budget Estimates of 2008-09.

* During 2008-09, NREGA provided employment opportunities for more than 4.47 crore households as against 3.39 crore households covered in 2007-08. An allocation of Rs.39,100 crore for the year 2009-10 for NREGA has been made, which amounted to an increase of 144% over 2008-09 Budget Estimates. Hope, the NREGA funds are utilized for watershed management and rainwater harvesting.

* The Food Security Act would ensure that every family living below the poverty line in rural or urban areas will be entitled by law to 25 kilos of rice or wheat per month at Rs. 3/- per kilo. The Government of India proposes to put the draft Food Security Bill on the website of the Department of Food and Public Distribution for public debate and consultations very soon.

* An allocation of Rs. 7000 crore has been made to Rajiv Gandhi Grameen Vidyutikaran Yojana, which represents a 27 per cent increase over 2008-09 (BE).

* The allocations for Bharat Nirman has been stepped up by 45 per cent in 2009-10 over the BE of 2008-09.

* An allocation of Rs. 100 crore has been made for a new scheme named Pradhan Mantri Adarsh Gram Yojana for 44,000 villages, where population of scheduled castes exceeds 50%.

* Swarna Jayanti Gram Swarozgar Yojna (SGSY) is being restructured as the National Rural Livelihood Mission to make it universal in application, focused in approach and time bound for poverty eradication by 2014-15.

* Seeing that 22,000 Self-help groups (SHGs) are currently linked with banks, the Government has proposed to enroll at least 50% of all rural women in India as members of Self-help groups (SHGs) over the next five years.

* The corpus of the Rashtriya Mahila Kosh (RMK) would be raised from Rs. 100 crore to Rs. 500 crore over the next 5 years.

* A National Mission for Female Literacy has been mentioned.

* An increase of Rs. 2,057 crore over and above Rs. 12,070 crore provided in the Interim Budget would be made on National Rural Health Mission (NRHM).

* An amount of Rs. 350 crore, marking 40% increase over the previous allocation, is being provided in 2009-10 Budget Estimates for the Rashtriya Swasthya Bima Yojana (RSBY).

* The budgetary outlay for the National River and Lake Conservation Plans has been increased to Rs. 562 crore in 2009-10 from Rs. 335 crore in 2008-09.

* The Finance Minister has proposed to increase the personal income tax exemption limit by Rs.15,000 from Rs.2.25 lakh to Rs.2.40 lakh for senior citizens.

* The basic customs duty on permanent magnets-a critical component for Wind Operated Electricity Generators-has been reduced from 7.5 per cent to 5.00 per cent to enhance environment-friendly energy creation.

* The Budget has reduced the basic customs duty on LCD panels from 10 per cent to 5 per cent in order to support indigenous production of LCD televisions. Excise duty on petrol-driven trucks and lorries has also been reduced to 8 per cent from 20 per cent. The Government has reduced additional excise duty on those with engine capacities of 2,000cc and above by Rs. 5,000 per unit.

* The Government has reduced basic customs duty on influenza vaccine and nine other specified life-saving drugs used for treating breast cancer, hepatitis-B, rheumatic arthritis, etc.

* The exemption limit for income tax for women raised by Rs 10,000 to Rs 190,000. For all others, exemption limit raised by Rs 10,000 from Rs 150,000.

* No change in corporate tax. IT returns to be made simpler.

* Fringe Benefit Tax abolished.

* Minimum Alternate Tax on book profits increased to 15 per cent from 10 per cent.

* Commodities Transaction Tax abolished.

* First Unique Identification Card to citizens to roll out in 12-18 months. FM proposed Rs. 120 crore (Rs 1.2 billion) for the project.

* 100 per cent tax deduction for donations for electoral funds to improve transparency in political funding.