Summary of Union Budget 2009-10 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. Inclusive Development Stating that „aam admi‟ is now the focus of all our programmes and schemes, the Finance Minister has announced a slew of provisions for inclusive development and empowerment of the weaker sections. The provision for the Bharat Nirman Schemes has been raised by 45 per cent. National Rural Employment Guarantee Scheme (NREGS) gets 144 per cent more, Pradhan Mantri Gram Sadak Yojana (PMGSY) 59 per cent more, Rajiv Gandhi Grameen Viduytikaran Yojana (RGGVY) 27 per cent more and Indira Awas Yojana (IAY) 63 per cent more than last year. A sum of Rs. 2,000 crore has been allocated for Rural Housing Fund. A new scheme, Pradhan Mantri Adarsh Gram Yojana (PMAGY) will be launched this year on a pilot basis for integrated development of 1000 villages with above 50 per cent Scheduled Caste population. Stress will be laid on the formation of women Self Help Groups (SHGs). Apart from providing capital subsidy at an enhanced rate, it is also proposed to provide interest subsidy to poor households for loans upto Rs. 1 lakh from banks. A National Mission for Female Literacy will be launched with the aim to reduce the current level of female literacy by half in three years. It will focus on minorities, SC, ST and other marginalized groups. Reach of Self Help Groups will be widened to enroll at least 50 per cent of all rural women as members of SHGs over the next five years. The Swarna Jayanti Gram Swarozgar Yojana (SGSY) is to be restructured as National Rural Livelihood Mission to make it universal in application, focused in approach and time bound, for poverty eradication by 2014-15. The Budget commits that all Integrated Child Development Services will be extended to every child under the age of six by March, 2012. The allocation for the Ministry of Minority Affairs has been increased by 74 per cent. The Budget has made allocations for the new schemes of National Fellowship for Students from minority community. A new project is being launched for modernization of the Employment Exchanges to enable job seekers to register on-line from anywhere and approach any employment exchange. The Government proposes to bring all BPL families under the Rashtriya Swasthya Bima Yojana (RSBY). The allocation for the scheme is being increased by 40 per cent. Improving Delivery of Services A number of initiatives have been proposed for improving delivery of public services. The Finance Minister has expressed the hope that the first set of unique identify numbers will be rolled out in 12 to 18 months. A provision of Rs. 120 crore has been kept for this purpose. The Budget provides additional funds for modernization of police forces and for strengthening border management. A massive programme of housing will be launched to create one lakh dwelling units for Central Para-Military Forces personnel. The Government has accepted the recommendations of the Committee for one Rank one Pension for ex-servicemen. It has been decided to substantially improve the pension of pre1.1.2006 defence pensioners below officer rank and bring pre-10.10.1997 pensioners on par with post-10.10.1997 pensioners. This will benefit more than 12 lakhs jawans and JCOs and would cost over Rs. 2,100 crore per year. A sum of Rs. 1,000 crore has been kept in the Budget for rebuilding the infrastructure damaged by Cyclone Aila. The Budget also provides Rs. 500 crore for the rehabilitation of the internally displaced persons and reconstruction of the northern and eastern areas of Sri Lanka. Among other major initiatives, the Government will set up an expert group to advise on a viable and sustainable system of pricing petroleum products. Rs. 100 crore has been earmarked to ensure provision of at least one centre / Point of Sales for banking services in each of the unbanked block in the country. Allocation for Commonwealth Games has been raised. Necessary provisions have been made for new IITs and NITs, opening one Central University in each uncovered State, and establishing campuses of Aligarh Muslim University at Murshidabad in West Bengal and Malappuram in Kerala. 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 Income Tax 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. Settop 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.” PIB.