RTTNews - India's Finance Minister, Pranab Mukherjee, in his maiden budget proposals of the United Progressive Alliance or UPA government for the year 2009-10, suggested improvement in infrastructure, growth in the agriculture sector, and marginal relief to income-tax payers, besides increasing customs and excise duties, barring some goods.
The budget proposal seek to address the three challenges facing the economy - to lead it back to the high GDP growth rate, to deepen and broaden the agenda for inclusive development and to energize government and improve delivery mechanism.
Mukherjee said that the government would set up an expert group on the pricing of petroleum products. Stating that PSUs would remain with the public sector, he proposed people's participation in divestment programmes.
He said the budget for fiscal year 2010 would have a total expenditure of Rs.10,20,838 crore, comprising Rs.3,25,149 crore under Plan and Rs.6,95,689 crore under non-Plan. The total expenditure this year was 36% higher than that in 2008-09.
Gross tax revenue receipts are put at Rs.6,41,079 crore, lower than last year, while non-tax revenue receipts have been estimated at Rs.1,40,279 crore--higher than last year.
The revenue deficit as a percentage of GDP is projected at 4.8%, compared to 1% in the preceding year budget, while the fiscal deficit as a percentage of GDP is projected at 6.8%, compared to 2.5% in the last year's budget.
The minister said, This level of deficit is a matter of concern, and the government would address this issue in right earnest to come back to the path of fiscal consolidation at the earliest.
The minister said the government took several measures to counter the negative fall-out of the global slow-down on the Indian economy. He added that this fiscal accommodation led to an increase in fiscal deficit to 6.2% from 2.7% in 2007-08 of GDP in 2008-09. This fiscal stimulus at 3.5% of GDP at current market prices for 2008-09 was Rs.1,86,000 crore.
He pointed out that these measures were effective in arresting the fall in the growth rate of GDP in 2008-09 to 6.7%. He said that the efforts would be continued to provide further stimulus to the economy.
The minister placed a return to 9% economic growth at the earliest, saying that the country had seen off the worst of the global financial crisis. He added that the first challenge was to return to the GDP growth rate of 9% per year at the earliest and the second challenge was to deepen and broaden the agenda for inclusive development. And, the third was to re-organize the government and improve delivery mechanisms.
To improve the infrastructure of the country, he said, investment in the sector would be increased to 9% of GDP by 2014. He proposed a total investment of Rs.100,000 crore in infrastructure, and said that India Infrastructure Finance Co. Ltd. or IIFCL would be given greater flexibility for long-term funding of key projects.
The credit outlay for agriculture was increased to Rs.3.25 lakh crore from Rs.2.87 lakh crore and said the farm loan waiver scheme has been extended up to December 31, 2009. He said the government would ensure the growth of the agriculture sector at 4%.
The Budget provides a special fund of Rs.4,000 crore to support micro, small and medium enterprises. This fund provide incentives to banks and State Finance Corporations to lend to micro and small enterprises by refinancing 50% of incremental to them. The allocation for the Market Development Assistance Scheme, which provides support to exporters in developing new markets has been enhanced by 148%. The 2% interest subvention on pre-shipment credit to the employment-oriented export sector has been extended till March 31, 2010.
The Finance Minister proposed to increase the income tax exemption limit by Rs.15,000 for senior citizens, and for women and others by Rs.10,000 each. The exemption limit will now be Rs.2,40,000 for senior citizens, Rs.1,90,000 for women and Rs.1,60,000 for others. The minister abolished 10% surcharge on personal income-tax and has not proposed any change in corporate tax rate.
He abolished the fringe benefit tax. However, Minimum Allocation tax or MAT on book profits was increased to 15% from the present 10%, but with a provision of carrying forward the tax credit under MAT to 10 years from the current 7 years.
Similarly, all purchase and sale of equity shares and derivatives will also be exempted 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 of declaring their income from business at 8% of their turn-over and simultaneously enjoying exemption from the compliance burden of maintaining books of accounts.
On indirect taxes, Excise Duty has been hiked on several items to 8%, barring food items, drugs, pharmaceuticals, paper, paper board, pressure cookers, lower-cost electric bulbs and low-price footwear. Excise duty on man-made fibre and yarn has been increased to 8% from 4%. It has also been increased on PTA, DMT and polyester chips to 4% from 8%. Excise duty on petrol-driven trucks has been brought down to 8% from from 20%.
TV set-top boxes will attract Customs Duty of 5%, while Customs Duty on LCD panels has been halved from 10%. The basic Customs Duty on bio-diesel has been brought down from 7.5% to 2.5%.
Service tax are proposed on service provided in relation to the transport of goods by rail, coastal cargo and goods through inland water including National Waterways. Cosmetic and plastic surgery and advice, consultancy and technical assistance in law will also attract service tax. This however, will not be applicable, if the service provider or the service receiver is an individual.
A new direct tax code will be introduced in 45 days to bring changes in indirect taxes, the minister said.
The minister added that the tax proposals on direct taxes would be revenue-neutral, while on indirect taxes the estimated net gain would be Rs.2,000 crore for a full year.
Reiterating his commitment to expedite tax reforms, he also said he would aim at introducing the goods and services tax by April 10, 2010.
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