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The
Budget seeks to address the
three challenges facing the economy - to
lead the economy back to the high GDP growth rate of 9
per cent per annum at the earliest, to deepen and
broaden the agenda for inclusive development, and to
energize government and improve delivery mechanism.
INFRASTRUCTURE
Infrastructure
development will be given a big boost. Bottlenecks
for speedy implementation of infrastructure projects
will be removed to ensure that sufficient funds are made
available for this sector. Infrastructure Finance
Company Limited (IIFCL) will evolve a ‘Takeout
financing’ scheme in consultation with banks to
facilitate incremental lending to the infrastructure
sector.
Allocation
for the National Highways Development Programme is being
increased by 23 per cent, Jawaharlal Nehru National
Urban Renewal Mission by 87 per cent and Accelerated
Power Development and Reform Programme by 160 per cent.
A
new scheme, Rajiv
Awas Yojana will
be introduced with the aim to make the country slum free
in the next five years.
The
Government proposes to develop a blueprint for long
distance gas highway leading to a National Gas Grid. This
would facilitate transportation of gas across the length
and breadth of the country.
AGRICULTURE
The
target for agriculture credit flow has been increased
from Rs. 2,87,000 crore
last year to Rs. 3,25,000 crore for 2009-10. The
interest subvention available for short term crop loans
up to Rs. 3 lakh per farmer will continue and an
additional subvention of 1 per cent will be paid from
this year to those farmers who repay such loans on
schedule. Thus,
the interest rate for these farmers will come down to 6
per cent per year.
Under
the farm loan waiver scheme of Rs.71,000 crore
implemented in the last budget, the time for paying 75%
of overdues
has been extended to 31st December,
2009. A
Taskforce is being set up to suggest the course of
action regarding farmers of some regions of Maharashtra
who have taken loans from money lenders and the loan
waiver scheme did not cover them.
The
allocation for Rashtriya Krishi Vikas Yojna (RKVY) is
being stepped up by 30 per cent and that for Accelerated
Irrigation Benefit Programme by 75% over the allocation
last year.
To
ensure balanced application of fertilizers, the
Government intends to move towards a nutrient based subsidy
regime instead of the current product pricing regime. It
will lead to availability of innovative fertilizer
products in the market at reasonable prices and attract
fresh investments in this sector. In
due course, it is also intended to move to a system of
direct transfer of subsidy to the farmers.
The Finance Minister announced that the draft Food
Security Bill will soon be put on the net for public
debate and consultations. The
proposed National
Food Security Act will
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 a kilo.
EXPORTS
The
export sector will be provided all possible assistance to help
it overcome the impact of the global economic crisis. The
Budget provides a special
fund of
Rs. 4,000 crore to support the Micro, Small and Medium
Enterprises. This fund will incentivize
banks and State Finance Corporations to lend to micro
and small enterprises by refinancing 50 per cent of
incremental lending to them. The
allocation for the Market Development Assistance Scheme,
which provides support to exporters in developing new markets has
been enhanced by 148 per cent. The
2 per cent interest subvention on pre-shipment credit to employment-oriented
export sector has been extended till March 31, 2010.
TAX
PROPOSALS
Presenting
the Budget, the Finance Minister, Shri Pranab Mukherjee
said that the tax reforms initiatives have produced
impressive results. Tax-GDP ratio has increased to 11.5
per cent in 2008-09 from 9.2 per cent in 2003-04. The
share of Direct Taxes in Centre’s Tax Revenues has
increased to 56 per cent in 2008-09 from 41 per cent in
2003-04. There
is no change in the Corporate Tax rates while there has
been a modest hike in the exemption limit on personal
Income Tax. The
exemption limit for Senior Citizens has been increased
from Rs. 2.25 lakh to Rs. 2.40 lakh. For
Women tax payers the exemption limit has been increased
by Rs.10,000 to
from Rs.1.80 lakh to Rs. 1.90 lakh and from Rs. 1.50
lakh to Rs.1.60 lakh for all other categories of
individual taxpayers. The
surcharge of 10 per cent on personal IncomeTax has been
done away with.
The
Finance Minister also proposes to abolish the Fringe
Benefit Tax. He
said that this tax has been perceived as imposing
considerable compliance burden. The
minimum Alternate Tax rate to be increased from 10 per
cent to 15 percent. This,
he said, is for bringing greater equity. However, he
also proposed to extend the period allowed to carry
forward the tax credit under MAT from 7 years to 10
years.
To
provide necessary fiscal support to the New Pension
Scheme for establishment of the much needed social
security system. The Finance Minister also proposed to
exempt the income of the NPS Trust from Income Tax and
any dividend paid to this Trust from Dividend
Distribution Tax. Similarly
all purchase and sell of equity shares and derivatives
will also exempt from the Security Transaction Tax. The
Commodities Transaction Tax has been abolished. The
scope of Presumptive Taxation has been expanded to all
small businesses with a turn-over of Rs.
40 lakh. All
such tax payers will have the option to declare their
income from business @ 8
per cent of their turn-over and simultaneously enjoy
exemption from the compliance burden of maintaining
books of accounts.
Tax
holiday under Section 80–IB(9) will be extended in
respect of profits derived from the commercial
production of Mineral Oil and Natural gas from oil and
gas blocks which are awarded under the new Exploration
Licensing Policy- VIII round of bidding.
On
the Indirect Tax front, Excise Duty has been hiked on
several items to 8 per cent barring food items, drugs,
pharmaceuticals, paper, paper board, pressure cookers,
cheaper electric bulbs and low price foot wear. The
basic Customs Duty on bio-diesel has been brought down
from 7.5 to 2.5 per cent. Excise
duty on petrol driven trucks has been brought down from
20 per cent to 8 per cent. Excise
duty on man-made fibre and yarn has been increased from
4 to 8 per cent. It has also been increased on PTA, DMT
and polyester chips from 4 to 8 per cent. Set-top
box for television will attract Customs Duty of 5 per
cent while Customs Duty
on LCD panels will be reduced from 10 to 5 per cent.
Service tax will be imposed on service provided in
relation to transport of goods by rail, coastal cargo
and goods through inland water including National
Waterways. Cosmetic
and plastic surgery and advise,
consultancy and technical assistance in the field of law
will also attract service tax. This
however, will not be applicable if the service provider
or the service receiver is an individual.
The Finance Minister said the Tax proposals on direct
taxes will be revenue neutral while on indirect taxes
the estimated net gain will be Rs. 2,000 crore for a
full year.
BUDGET
ESTIMATES
The
Budget estimates 2009-10 provide for a total expenditure
of Rs. 10,20,838 crore. Out
of it, Rs. 6,95,689 crore
is non-Plan expenditure and Rs. 3,25,149 crore is Plan
expenditure. Thus,
the total expenditure this year is 36 per cent over that
of 2008-09. The
increase in Non-Plan expenditure comes to 37 per cent
whereas the increase in Plan expenditure is 34 per cent.
The Government has taken a conscious decision to enhance
the gross budgetary support for the Annual Plan 2009-10
by Rs. 40,000 crore over the Interim Budget. Bulk
of this enhanced GBS is directed towards public
investment in infrastructure with special emphasis on
rural infrastructure, raising growth potential and
leading to income generation. Besides,
the State Governments will be permitted to raise
additional open market loans of about Rs. 21,000 crore
in the current year. “This
fiscal expansion will go a long way in reversing the
impact of economic slowdown and accelerate our growth
revival in the medium term,” the Finance Minister
said.
The gross tax receipts are budgeted at Rs. 6,41,079
crore, lower than last
year while the non tax revenue receipts have been
estimated at Rs. 1,40,279 crore - higher
as compared to last year. The
revenue deficit as a percentage of GDP is projected at
4.8% compared to 1% in BE 2008-09 and 4.6% as per provisional accounts
of 2008-09. The
fiscal deficit as a percentage of GDP is projected at
6.8% compared to 2.5% in BE 2008-09
and 6.2% as per provisional accounts 2008-09. The
Minister explained: “This level of deficit is a matter
of concern and Government will address this issue in
right earnest to come back to the path of fiscal
consolidation at the earliest.”
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