PA’s Aam Admi Budget 2009-10 with special focus on rural infrastructure, employment, agriculture, education etc. aim to regional balance growth and economic stabilisation has many criticisms from tax payers. Power, electricity and urban development are directly hit to tax payers and quick return; therefore, tax payers enjoy benefit. .Rural development has little impact to tax payers and investment return benefits are slow. Last interim budget 2008-09, focus on rural development and agriculture had also many criticisms from tax payers, market experts and economic analysis etc. In this budget 2009-10, Market analysis has many criticisms following with stocks market crash. Interestingly, stocks market was highest point value when UPA II came to power and sharp decline at the time of budget speech. UPAs agenda for Aam Admi had already been announced before election. It is a hard bargaining from tax payers to review the taxation policy in favor of their trade benefits and expansion. Therefore Ups and Down of share market should not have any impact to the budget. Every plan budget has a special focus or model because of one budget can not fulfill the all problem of economy. However, an appropriate taxation and monetary policy, disinvestment and divestment policy, FDI policy is required for immediate returns of investment benefit as well as quick recovery of fiscal deficit. Experts has some worry about the nature of government borrowing programme and its impact on interest rate and role of private investments and the nature of programme implementation and monitoring. Even Insurance sectors are expecting exemptions and benefits for insurance premiums or separate section in Section 80C, so that it could have provided a boost for long term investments like life insurance of India via rationalization of tax regime. Like wise, a real estate developer has many demands, lawyers’ strikes over service tax and correction of gold prices and tax cut etc. etc. Government confidence and long term roadmap of fiscal consolation is waiting by the experts. Stocks market plays an important role to face value of rupees in case of deficit finance budget; however, Indian economic policy should not hit directly by FDIs and share brokers.
Democracy is the art and science of mobilizing the entire physical, economic and spiritual resources of various sections of the people in the service of the common good of all. One Budget speech won’t address all the problems the economy faces. In the last one month, there has been a lot of hype. I have provided necessary relief to each sector. We have also provided support wherever needed, Shri Pranob Mukherjee, Finance Minister said. The budget is based on mid term projections (1st phase of phase III). Special emphases has been given to rural infrastructure, enhancement to social sectors, education, agriculture and increased in investment. Some of the important monetary and fiscal reforms are fringe- benefit tax abolished, tax holiday to exporters’ etc. Fiscal deficit to 6.8 % and economic growth targeted 9%, growth rate to the end of financial year will not be less the 7%. This Budget focus on skill development mission, 12 million jobs creation in a year and divestment will be done and it is a process not an event. Now, people will get more money in hand and it will encourage spending more (purchasing power) on consumer items and saving as well. Consumers’ goods and domestic product will be boom. Foreign Direct investment (FDI) on consumer goods will be profitable and will flow in. North Eastern Ministry (DONER) will get 10% over head of various ministries new project / scheme for infra structural development in NE. Prime Minister Dr. Manmohan Singh and Bangali Babu Shri Pranab Mukherjee, FM can do anything changes. This is a favorable Budget to North east and common people (Aam Admi).
Back Ground :
The word Budget was derived from the Middle English word bowgette, which came from Middle French bougette, which in turned is a diminutive of bouge, meaning a ‘ a leather bag’. On Nov26, 1947, RK Shanmukham Chetty had presented the first Budget of Independent India. But actually it was a review of the economy and no new taxes were proposed as the Budget day for 1948-49 was just 95 days away. The decision to set up the planning Commission to review the existing programmes of development and schemes of production came in the 1950-51 budgets. The first report of the commission came following years, and the first Five year Plan in the next. Since then, Five year plan model budget introduced with special emphases on infrastructure, agriculture, heavy machinery, industries, fiscal and monetary policy etc. etc. for every five year. In 1953-54, a group of technical experts from the International monetary fund (IMF) came on the agency’s first Five year Plan as well as fiscal, economic and monetary policies. Demands for grants for various ministries submitted for the first time in 1959-60. The document shows their expenditure requirements, separately, a practice that continues to this day. P. Chidambaram rewrote India’s export –import (Exim) policy in one non stop eight hours sitting in July 1991 when he becomes commerce minister. Five years ago the people of India had vote for chance. In the word of Prime Minister, Dr. Manmohan Singh, people had sought ‘a change in the manner in which this country is run, a change in the national priorities and a change in the processes’. This year budget 2009, has emphases on rural infrastructure, agriculture etc.
Initially, Budget papers were printed in Rastrapati Bhawan. But in 1950, the budget papers were leaked. Thus, the printing venue was shifted to security press located in Minto Road, New Delhi. However, since 1980, the budget papers are being printed in North Block. There is a special printing press in the basement of the North block to print the Budget. The employees printing the budget papers are kept in complete isolation (quarantine) in the finance ministry for one week before the Budget.
Budget at a Glance:
Apart from Bharat Nirmal and nine flagships schemes, newly introduce attractive schemes in this Budget are Pradhan Mantri Ardarsh Gram Yojna (PMAGY ) ,a pilot project to provide financial assistance to fight rural poverty in schedule cast 50% population villages for Rs 10 lacs over and above the allocations under Rural development and Poverty Alleviation Schemes. National Rural Livelihood Mission to make it universal in application focused to eradicate poverty by 2014-15, providing bank linkage to women self help groups (SHG).National mission for female literacy, with focus on minorities, SC, ST and other marginalised groups. The aim will be to reduce by half, the current level of female literacy, in the three years. Another feature of the budget for the social security of the workers in unorganized sector is that social security schemes for occupations like weavers, fishermen and women, toddy tapers, leather and handicraft workers, planters, bidi workers, and rickshow puller are implemented at the earliest. Necessary financial allocations will be made for these schemes. Employment exchange will be modernized that a job seeker can register on line from any where. A national web portal with common soft ware will be developed in this regard. This budget has increase 74% for minorities welfare i.e. Rs.1740 crores has been allotted.
Students of weaker section will get full interest subsidy bank loans during the period of moratorium. It is estimated that over 5 lacs students would avail of this benefit. Government has proposed to launch Massive programme of housing to create 1 lakh dwelling units for central Para military forces personnel and increased pension money for ex service man. The National Action Plan for Climate Changes and Unique Identification Card to citizen are major challenges of the new UPA. Government has announced National food Security Act; to ensure that every family living below poverty line in rural or urban area will be entitled by law to 25 Kilos of rice or wheat per month at Rs.3/-.
Further, the new budget targeted agricultural credit flow to 3, 25000 crores for the year 2009-10 at an interest rate of 6% per annum and debt relief for farmers extended for 6 months. Government intends to move towards a nutrient base subsidy regime on fertilizers instead of current product pricing regime amount to Rs66537 crores in 2009-10. Petroleum and Diesel pricing policy will be announce soon and PSU disinvestment programme will be encourage to 51% government equity.
Infra structure :
A. Public Private Partnership (PPP) Project refinance: (60 % refinancing on PPP projects by IIFCI) Finance Minister has insured a sharp increase in institutional funding by asking IIFCL to evolve a takeout financing scheme in consultation with banks to ensure greater funds to the infrastructure sectors. The proposal is to make IIFCL refinance 60% of commercial banks loan for PPP projects in critical infrastructure projects.
B. National Highway Project: .23% increased in National highway programme: NHDP by 23% increased i.e. Rs.13, 646 crores. The implementing agency, national highway authority of India (NHAI) can use the money to provide viability gap funding (VGF) to private developers who develop the projects. NHDP envisages development and up gradation of national highways in seven phase. The 5,846 km Golden Quadrilateral, which is almost complete and 6647 North south East West connectivity corridor form the first two phases of the mega highways construction scheme. In addition to this, government also provided for a grant of Rs.1988 crores to the States. For expansion of expressways, nexal affected areas; government has earmarked a capital outlay of Rs.4, 140.55 crores and Rs. 1319.51 crores for certain strategic roads in border areas.
C. Pradhan Mantri Gram Sadak Yojana (PMGSY): It has been hiked by 59% to Rs. 12,000 crores. The allocation will facilitate rural road building.
D. Jawaharlal Nehru National Urban Renewable Mission (JNNURM): to received 87% more funds in the current fiscal, at Rs.12, 887 crores. With this funds for urban developments will exceed Rs. 1, 00,000 crores though projects sanctioned under the mission are for nearly half the amount. Expect better infrastructure in tier-II and III cities and towns in the coming years.
E. Accelerated Power Development & Reforms Programme: 160% hike in allocation i. e. Rs.2080 crores, should bring cheers to the producers, investors, and financers of infrastructural equipment and services on roads, urban services and power equipment especially distribution and transmission equipment and manufacturers.
F. Indira Awaas Yojana: It is proposed to increase by 63 % to Rs. 8,800 crores. To broaden the pace of rural housing, it is proposed to allocate, from the shortfall in the priority sector lending of commercial bank, a sum of Rs.2, 000 crores for Rural Housing Fund in the National housing bank.
G. Rajiv Gandhi National Drinking water mission: Budget allocation increased to 27%, i.e. Rs.7000 crores over 2008-09(BE)
H. Education: Mission in education through ICT has been substantially increased to Rs. 900 crores, the provision of setting up polytechnics under the skill development Mission has been increased to Rs.495 crores. The Provision of IITs / NITs establishment allocation is Rs 2,113 crores which included new establishment amount of Rs.450 crores. The over all plan budget for higher education is proposed to be increased by Rs. 2000 crores over the interim BE.
I. Rural Employment Schemes: NREGS hike by 144%; National Rural employment guarantee scheme has increase of 144% over 2008-09 Budget estimate i.e. an amount of Rs. 39,100 crores.
J. Rural Health Mission: Increased of Rs. 2057 crores over and above Rs. 12,070 crores provided in the Interim Budget. Rastriya Swasthya Bima Yojana (RSBY) was operationalised last year and more the 46 lacs BPL families in 18 States and UTs have been issued biometric smart card. This scheme empowered poor families by giving them freedom of choice for using health care services from an extensive list of hospital including private hospital. An amount of Rs.350 crores, making 40% increase over the previous allocation is being provided in 2009-20 budgets.
K. Accelerated Irrigation Benefit Programme: An additional Rs.1000 crores over Interim BE for the accelerated Irrigation Benefit Programme (AIBP), marking an increase of 75% over allocation in 2008-09(BE). The allocation for the Rastriya Krishi Vikas Yojna (RKVY) is also being stepped up by the30% over Budget estimates of 2008-09.
L. Sarva Siksha Abhiyan (SSA) and Mid Day Meal Scheme, a key government initiative in education did not find mention in the budget speech 2009-10. One reason could be changing funding pattern of SSA that has now, become 60:40 between centre and State.
Physical progress against key inputs of SSA;
Items Commutative allocation including 2008-09 Achievement
Opening new school Rs. 3, 04853 crores 85.79%
Construction of School buildings Rs. 2, 48,853 85.73%
Construction of Addl. Class room Rs.9, 39,136 94.01%
Drinking water facilities Rs.1, 93,009 94.58%
Construction of toilets Rs. 2, 64,638 93.36%
Teachers appointment Rs.12.27 lakhs 90%
Supply of Free textbooks Rs. 8.97 crores* 90%
KGBV Schools Rs. 2598 crores 83%
* Annual 2008-09.
Total Budget Estimates
A. Fiscal deficit to be 6.8% of GDP compared with 2.5 % last fiscal
B. total expenditure goes up 36% to Rs. 10,20,838 crores, non-plan spend by 37%
C. Interest payments, at Rs.2.25 lakh crores, make up 36 % of non-plan spend.
D. Defence outlay hiked to Rs. 1, 41,703 crores from Rs. 1, 05,600 crores last fiscal.
Most favorable state:
1. Assam: capital subsidy of Rs.2, 138 crores will be provided of Rs. 5,461 crores Assam gas cracker project.
2. West Bengal: Rs 1000 crores scheme for cyclone Aila relief fund, Handloom mega cluster.
3. Maharashtra: Rs. 500 crores Brihan Mumbai storm Water drainage Project to solve the problem of flooding, Farmers loan waiver scheme,
4. Tamil Nadu: handloom mega cluster.
5. Rajasthan: Power loom mega cluster.
6. Utter Pradesh: Carpet mega cluster (Mirzapur).
7. Jammu and Kashmir: Carpet mega cluster (Srinagar).
Major Taxation policy and fiscal measures.
1. FBT abolished: Fringes benefit tax paid by employers on employee benefits that don’t form part of the salary. It is taxed a prescribed portion of the expenditure on ‘fringe benefits’ such as entertainment, festival celebration, gifts, used of club facilities and running of aircraft and as much as 17 categories were cover under is tax. Most benefits after tax abolition are celebrities, corporate executives etc.
2. MAT increased to15 %: Minimum Alternate Tax is the tax that a corporate compulsorily pays in case its corporate tax outgo- after accounting for all exemptions is below a threshold limit. It is the tax that corporate pays on its ‘book profit’, which is different from its profit in the ‘profit & loss account’. In India, a number of IT and infrastructural companies paying MAT. An increase of MAT from 10% to 15 % is company’s disappointment. However, MAT credit to be extended to 10 years from 7 years.
3. GST announcement; Introduction of indirect tax structure known as Goods and Service Tax (GST ), across the country from April 10,2010 after consultation with state will be a benefit to the government. GST is expected to replace excise duty and service tax at central and VAT at state level. At present, state levy 12% VAT on most of the items. Therefore most of the items taxable are 20% including 8% central excise. As a stimulus measure government has cut service tax by 2%. It was expected to raise service tax to 125 in this budget and 16% at the time of implementation of GTS. Country will have dual GDS i. e centre GDS and State GDS.
4. Tax cut for 9 live saving Drugs :Custom duties has been exempted for 9 live saving drugs for the patients of breast cancer, cardiac, Hepatitis-B, Rheumatic arthritis as well as influenza vaccine.
5. Extension of sunset clause for unit operating in free trade zones, export oriented units and set up for reconstruction or revival of a power generating units to assessment year 2011-12.
6. 100% deduction in respect of capital expenditure excluding land, goodwill and financing expenditure for the business of setting up and operating cold chain facility for specified products, warehousing facility for storage of agricultural produce, lying and operating a cross country natural gas, crude or petroleum oil pipeline network for distribution.
7. Definition of farm under Section 2 (23) has been amended to include limited liability partnership (LLP). However, in India, LLP will be taxed as a corporate entity and will not be a pass through. It will be treated on a par with the partnership tax mechanism.
8. Weight deduction of 150% for in house research expenditure (except land and building) incurred under section 35 (2AB) for selected industries extended to almost all sectors of the economy to promote research and development in all sectors of industry.
9. Rules for safe Harbour and alternative Dispute Resolution mechanism to be provided by the CBDT. These measures are intended to showcase India as an investment friendly country and provide clarity up front to tax payers and reduce litigation.
10. Chapter Vi-A, deductions to be allowed only if claimed in the return of income for profits and gains of a company falling or 10BB (free trade zones, special economic zones, export oriented undertakings)
11. The rate of TDS in respect of rentals have undergone a welcome revision from the existing 19% (on plant and machinery) and 15 5, 20% (land, building and furniture) to 2% and 10% respectively. This would help optimize cash flow in the hands of the recipient.
12. Donation made to electoral trust eligible for 100% deductions provided by the trust is approved by the prescribed authorities. This would help streamline the flow of donations to political parties and thereby result in clear visibility and transparency.
13. Government plans to raise Rs. 1,120 crores only this fiscal from sale of equity in PSUs such as RITES, Cochin shipyard, Manganese Ore India, Rastriya Ispat Nigam, MMTC, NMDC, NTPC, SAIL, Hind Copper etc. etc.
Source : kanglaonline.com