UNION BUDGET

2009-10

Pranav Mukherj
Finance Ministe
India
First Budget

 On Nov 26,1947 RK Shanmukham

Chetty
presented the first budget of
Independent
India.
Some Interesting Facts

 Morarji Desai holds the record for

presenting the maximum number of
budgets.
 He holds the unique distinction of
presenting the budget twice on his
birthday(1964 & 1968)-both leap years
 Initially,budget papers were printed in
Rashtrapati Bhawan.But in 1950,the
budget papers were leaked
 Now it is printed in the basement of a
North Block
Budget at a glance

 Total estimated Expenditure is Rs.

10,20,838 crore, 36 % more than
prev.

 Total estimated Income is Rs.

6,14,497 crore.

 Sustain a growth rate of 9% p.a. over

an extended time.
Taxation
 Only two things in life are certain Death
and Taxes, said Benjamin Franklin.
 First Income tax in the world was levied in
England in 1404 AD.

Comparison of Indian Tax system with other

countries
 Tax Rates for AY – 2009-
For Men
65 yrs)
10 (Below

üThere is a 3% education cess, so 10%become 10.3%, and saving Rs.1000

become Rs.1030
 Tax Rates for AY – 2009-
65 yrs)
10
For Women (Below

üThere is a 3% education cess, so 10%become 10.3%, and saving Rs.1000

become Rs.1030
 Tax Rates for AY – 2009-
For Senior10 Citizens (more
than 65 yrs)

üThere is a 3% education cess, so 10%become 10.3%, and saving Rs.1000

become Rs.1030
Other changes in the Tax Liability
 Wealth tax now payable on taxable wealth over
Rs. 30 lakh instead of Rs. 15 lakh.

 Interest on loans for studies in any field after

Class-10th now tax deductible.

 Advance tax to be paid only if tax liability exceeds

Rs 10,000 against Rs 5,000 earlier.
 Most gifts in kind worth over Rs
50,000 to become taxable post
October 1. Non cash gift to be taxed.

 MAT (Minimum Alternative Tax) is paid

by corporates on the profit declared in
their balance sheet.

 Rise in MAT by 5%. (10% to 15%)

 Introduction of GST by April1, 2010.
 Sec. 80DD deduction limit increased
from Rs.75,000 to Rs.1 lakh.

 Because of Increase in exemption

limit of personal IT, the govt. will lose
Rs. 3,500 crore.

 The department is likely to earn Rs

7,804 crore from education cess.
 Abolition in fringe benefit tax (FBT)
will cost the govt. around Rs 10,500
Budget & Infrastructure
 Budget and Infrastructure
 China spends 11% of its GDP on infrastructure
development.

 Inadequate Infrastructure is responsible for

pushing back India’s GDP by about 2%.
Budget and Infrastructure
Cotd…
 9% of the country’s GDP will be spent
on Infrastructure by 2014 from
current 5%. One third of this
investment would come from private
companies.

 Investment in Infra
2007 -2012 = $500 bn
2012 -2017 = $1.5 tn
 Infrastructure

 60% of Public Private Partnership (PPP)

projects by Indian Infrastructure Finance
Company Limited (IIFCL); ‘takeout
financing’.
Urban & Power

 Allocation under Jawaharlal Nehru

National Urban Renewal Mission
(JNNURM) up 87% from Rs. 6,891 to
Rs12,887 crore.

 160% hike i.e. Rs. 2080 Crore in

allocation of Accelerated Power
Development & Reform Program.
 Housing
 Subsidy of 1% on home loan upto Rs 10 lac.
House should not cost more than Rs. 20 lac.

 Govt has tightened the regulations of section 80 IB

(under this section developers get total tax
concessions for residential units of 1,000 sq ft in
big cities and 1,500 sq ft in smaller ones.
Transport

 23% increase in National Highways

Development Program (NHDP) from Rs 12,966
crore to 15948.18 crore.

 Allocation in railways increased from Rs.

10,800 crore to 15,800 crore.
Sports

Commonwealth Games 2010

 The allocation raised from Rs 2,112 crore to Rs

3,472 crore.
 With more than Rs. 30,000 Crore directed
towards this sector & provisions for Rs. 1 lac
Crore of budgetary support,infrastructure
development appears to be heart of union
budget.
AGRICULTURAL SECTOR
Agriculture has been the mainstay of our
economy with 60 per cent of our
population deriving their sustenance
from it.

In the recent past, the sector has recorded

a growth of about 4 per cent per annum
with substantial increase in plan
allocations and capital formation in the
sector.
 Our Finance minister Mr. Pranab Mukherjee has
announced different schemes for the development
of agricultural sector in the Union Budget 2009-
2010.

 This includes schemes like –

 Financial support on interest available for short

term crop loans.

 Increase in allocation for Rastriya Krishi Vikas Yojns

(RKVY).

 Food Security Bill,

 Fertilizer Subsidy etc

AGRICULTURE
DEVELOPMENT

 Target for agriculture credit flow set at

Rs.3,25,000 crore for the year 2009-10.

 In 2008-09 agriculture credit flow was at

Rs.2,87,000 crore.
 Interest subvention scheme for short term crop
loans up to Rs.3 lakh per farmer at the interest
rate of 7 per cent per annum to be continued.

 Additional subvention of 1 per cent to be paid

from this year, as incentive to those farmers
who repay short term crop loans on schedule.
DEBT RELIEF FOR FARMERS

 Under the Agricultural Debt Waiver and Debt

Relief Scheme (2008), farmers having more
than two hectares of land were given time upto
30th June, 2009 to pay 75% of their overdues.

 Due to the late arrival of monsoon this period is

extented by six months upto 31st December,
2009 .

 Taskforce to be set up to examine the issue of

debt taken by a large number of farmers in
some regions of Maharashtra from private
money lenders who were not covered by the
loan waiver scheme announced last year.
ACCELERATED IRRIGATION BENEFIT
PROGRAMME

 Allocation under Accelerated Irrigation Benefit

Programme (AIBP) increased by 75 per cent
over B.E. 2008-09 because of an additional
Rs.1,000 crore over Interim B.E.

 Allocation under Rashtriya Krishi Vikas Yojana

(RKVY) stepped up by 30 percent in B.E. 2009-
10 over B.E. 2008-09.
FOOD SECURITY BILL

 The FM 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 (BPL) in rural or urban areas will be
entitled by law to 25 kilos of rice or wheat per
month at Rs. 3/kg.
FERTILIZER SUBSIDY

 To ensure balanced application of fertilizers for

increasing agricultural productivity,Government
intends to move towards a nutrient based
subsidy regime so as to cover larger basket of
fertilizers with innovative fertilizer products
available in the market at reasonable prices.

 It is intended to move to a system of direct

transfer of subsidy to the farmers in due
course.
IMPACT

 Higher liquidity in the hands of indian farmers

will benefit companies providing direct or
indirect inputs to the agriculture industry such
as-

 Seeds,
 Fertilizer,
 Agrochemicals,
 Pumps and pipes for irrigation,
 Warehousing infrastructure and
 Transportation.
 The government has to support the small
farmer. This budget has allocated a lot of
money for irrigation, but has not said anything
about small irrigation schemes, which benefit
small farmers.

 Big and medium irrigation projects, on the

other hand, displace small farmers and should
be stopped.

 We need a separate budget for agriculture just

like we have it for railways.
Outmost importance has to be given to
agriculture to –

 Promote usage high tech technology,

 Increase land ownership,

 Help conserve water and

 Connect indian farmers with national as well as

global markets to know price movements and
demand of every agricultural commodities
Banking & Financial Sector
 BANKING & FINANCE
 SECTOR
The average public float in Indian listed companies
is less than 15 percent.

 Deep non-manipulable markets require larger and

diversified public shareholdings. This requirement
should be uniformly applied to the private sector as
well as listed public sector companies.

 The threshold for non-promoter public shareholding

for all listed companies to be raised in a phased
manner.
 Scheduled commercial banks allowed to set up
off-site ATMs without prior approval subject to
reporting.

 A sub-committee of State Level Bankers

Committee (SLBC) to identify and formulate an
action plan for providing banking facilities in
under-banked/unbanked areas in the next three
years.

 Rs.100 crore set aside as one-time grant in-aid

to ensure provision of at least one centre/Point
 Government has established Competition
Commission of India, an autonomous regulatory
body to promote and sustain competition in
markets, protect interests of consumers and to
prevent practices having adverse effect on
competition .

 An Appellate body headed by a retired judge of

Supreme Court also constituted.
IMPACT

 The overall impact of the budget on the

banking and finance sector was positive,
though not up to the expectations of the
industry.

 The budget specified that public sector banks

would remain in the public sector.

 The government reiterated its commitment

towards providing capital support to banks to
retain growth and competitiveness.

 Observing that the industry has made

significant strides towards financial inclusion in
the past few years, the budget made ambitious
plans with respect to financial inclusion in the
 Emphasis has been laid on priority sector lending.
Refinance schemes of Rs 40 billion and Rs 20 billion will
enhance credit flow to micro and small enterprises and
rural housing, respectively.

 For 2009-10, banks have been directed to lend Rs 3,250

billion to the farm sector - a 13 per cent increase over
the previous year.

 The reduction in targeted growth rate, over the previous

year, will give banks a breather to consolidate their
origination systems for farm credit
 The addition to the Debt Waiver and Debt Relief
Scheme continued, with the increase in the
time allowance to repay 75% of the debt.

 The scheme also influenced the introduction of

an interest subvention of 1 percent for farmers
repaying loans on time. It might impact the
banks’ profitability.

 Most of the announcements made in the

budget were aimed at increasing the credit flow
to needy sectors, and not at directly facilitating
 Rural
Development
National Rural Health Mission

 Increase of Rs.2,057 cr

 Rs.12,070 cr was provided in Interim

budget
Weaker Sections

 Plan outlay of ministry of minority

affairs has been increased from
Rs.1000 cr in 2008-09 to Rs.1740 cr in
2009-10.

 Provide full interest subsidy on

education loan during the period of
moratorium.
YOJNAS

 Pradhan Mantri Adarsh gram yojna

has been initiated for integrated
development of 1000 villages.
Allocation-Rs.100 cr.

 Allocation under Rajiv gandhi Gram

Vidyutikaran yojna is up by 27% to
Rs.7000 cr.
YOJNAS Contd….

 Allocations under Pradhan Mantri

Gram Sadak Yojna increased by 59%
to Rs.12,000 cr.

 Expenditure on Indira Awas Yojna by

63% to Rs.8,800 cr.
 National Rural Employment
Guarantee Act
 It was started by former P.M Mr. Atal
Bihari Vajpayee in Feb 2006.

 Opportunities for more than 4.47 cr.

Households during 2008-09

 Real wage of Rs.100 a day as an

entitlement under the NREGA
NREGA Contd…
Contd

 32% or 24.3 mn household fall in BPL.

 NREGA to benefit by Rs.4450 to each

household family get work for for 44.5
men days

 Allocation increased by 144% to

Rs.13,100 cr
EDUCATION SECTOR
 Overall Plan expenditure for Education sector in
Budget 2009-10 is 3.25 lakh crore.

 This is 34% up from the previous year.

 Higher education
 Over all plan allocations have increased by RS.2000
crore(26%) previous Year’s Budget amount of
Rs.7600 crore.
 Among initiatives in Higher education, proposed
RS.2,113 crore for IITs,and NITS, which includes a
provision of 450 crore for the new IITS and NITS.
Central Plan Outlay by ministries/departments

 Allocations in primary and secondary

education, government has increased
allocation
in higher education by 26%.
Central Plan Outlay by ministries/departments
CENTRAL UNIVERSITY

 The Government plan to establish one

central
university in each Uncovered State and
proposed for
this plan is Rs. 827 crore.
EDUCATION LOAN FOR THE
POOR
Finance minister has announced a full
interest subsidy for poor students for
higher education.
 National mission for female
literacy
 Focus on minorities, SC,ST,and other
marginalised groups.

 Main Aim of this mission is, in next 3 years

reducing
by half the current of female Illiteracy that
stands
about 50%.
Budget & Oil & Gas
 Oil & Gas (Budget measure)
 Tax holiday u/s 80-IB (9) OF THE IT Act
on the profits from the production or
refining of mineral oil, has been
extended to natural gas.
 Tax incentives will be provided on capital
expenditure on the laying and operating
of cross country natural gas, crude or oil
pipeline networks for Excise duty on
naphtha reduced to 14%
 Oil & Gas (cont.)

 Scope of Service Tax has been widened to

include all offshore activities within 200
nautical miles from India baseline which
will increase the impact of service tax
cost on the upstream players.

 Diesel blended with up to 20% bio-diesel

fully exempted from excise duty.
Budget & POWER SECTOR
Announcements

 There were no major announcements

with respect to the power sector.
 Allocation under Accelerated Power
Development and Reform Programme
(APDRP) increased by 160 per cent to
Rs.2,080 crore in B.E. 2009-10 over
B.E. 2008-09.
 IIFCL has been given greater flexibility
to re-finance infrastructure projects.
Impact on renewal energy front

 Customs duty on permanent

magnets for PM synchronous
generator above 500 KW used
in wind operated electricity
generators to be reduced from
7.5% to 5%.
 Customs duty on bio-diesel has
been reduced from 7.5% to
2.5%.
Finance Minister’s speech on Power
Sector
 The Accelerated Power Development
and Reform Programme (APDRP) is an
important scheme for reducing the
gap between power demand and
supply. I propose to increase the
allocation for this scheme to Rs.2,080
crore, a steep increase of 160 per
cent above the allocation in the BE of
2008-09.
OTHER INDUSTRIES
CEMENT INDUSTRY

 The Union Budget 2009-10 is not

expected to have any major impact on
the cement sector. Cement prices are
not expected to be affected as excise
and customs duties for cement and
clinker have remained unchanged.
 Similarly, duties on key inputs such as
coal, limestone and gypsum have not
been changed.
 Measures to spur infrastructure
investments will have a marginally
HOUSEHOLD APPLIANCES

 The reduction in customs duty on LCD

panels from 10 per cent to 5 per cent
is likely to have a marginally positive
impact on the industry.
 This cut in duty would also boost
domestic
assembling of LCD TVs.
 The marginal rise in disposable
income due to the increase in
personal tax exemption limit by Rs
MEDIA AND ENTERTAINMENT

 It will have neutral impact. The hike in

customs duty on set top boxes - from nil
to 5 per cent - is expected to incentivize
its domestic production. However, the
move will also increase the subsidies
borne by digital pay-tv operators, and
hence, will marginally impact their
margins.
 A 15 per cent waiver of agency
commission and 10 per cent increase in
the rates of DAVP advertisements in
print media, and exemption of customs
STEEL

 No change in the customs or Central

Value Added Tax duty related to steel
products, the prices are not to be
impacted.
 However, with the provision of higher
investment in infrastructure segments
such as roads, railways and urban
infrastructure under Jawaharlal Nehru
National Urban Renewal Mission
(JNNURM), the demand for steel is
likely to improve marginally.
FMCG Sector
Budget & FMCG Sector

 Rural focus, employment generation

and infrastructure spending will
improve rural income.
 Exemption on the personal income
tax would increase the income in the
hands of the consumers.
 FMCG sector will benefit with the
removal of the FBT as it adds to the
costs unnecessarily.
 For Customers (Good News)

 Cuts in customs duties for some life-saving

drugs & medical equipment.
 LCD TV’s may be cheaper due to reduction in
custom duty by 5% on LCD panels.
 Branded jewellary exempted from excise.

(Bad News)
 Excise on several household items to rise from
4 % to 8%. These include contact lenses, tooth
brushes and man-made fabrics.
 Customs duty doubled on import of gold $
silver bars, 5% duty on se-top boxes.
Overview of the economy

 Growth rate of GDP dipped from an

avg of over 9% in the prev. year to
6.7% during 2008-09
 Whole sale price index rose to nearly
13% in August, 2008 and had an
equally sharp fall to 0% in Mar. 2009.
 The structure of India’s economy
changed over the last ten years with
contribution of the service sector to
GDP at well over 50%.