Union Budget 2009-2010

The Budget presented by the Finance Minister, Mr Pranab Mukherjee, has left the equity market cold. In fact, the Sensex tanked by 953 points, intra-day. This was perhaps the result of unjustified euphoria generated by the vision presented by the Economic Survey, which seemed to promise bold reforms, including disinvestment and changes in foreign investment policies. Though there is a hint that disinvestment will be undertaken, it is in a sedate fashion.

For Pranab Mukherjee who stepped into the shoes of the Finance Minister at the last minute, the Interim Budget has been a case of managing expectations just as much as it’s been a case of managing financial numbers. Compounded by the fact that India finds itself in the midst of a global economic crisis that has inevitably led most of the world into recession, the expectations from this budget being an interim one were pretty contained.True to this sentiment Pranab Mukherjee has presented an extremely flat budget.


Highlights of Union Budget 2009

Sensex down 717 points as Pranab ends speech
Indirect taxes changes to yield 20 bln rupees in 2009/10
Anonymous funds to charitable bodies to get some tax relief
Small businesses exempt from advance tax
Rs 500 cr for rehabilitation of Sri Lankan Tamils
Drugs for heart diseases to become cheaper
Service tax on legal services imposed
Tax proposals on direct taxes are revenue-neutral
No new taxes on edible oil
No service tax on Consultancy provided by CA and CS
Excise duty on branded jewellery reduced
8% excise duty on manmade fibres
Custom duty on Bio-diesel reduced
4% Excise duty on cotton textiles restored
Custom duty on gold bars raised
Mobile phones to be costlier
LCD, Footwear, set-top boxes to be cheaper
Tax holiday extended for production of natural gas
Custom duty on set-top boxes at 5%
One central university in each uncovered state
Political funding to get 100% tax deduction
Tax holiday for exporters extended to 2011
Personal tax exemptions up to 1.6 lakh
National Pension Scheme exempted from STT
MAT tax credit extended from 7 to 10 years
Minimum alternate tax increased to 15% of book profits
Commodity Transaction Tax abolished
10% surcharge on personal tax removed
Fringe benefit tax scrapped
IT exemption for women up by Rs.10,000
IT exemption for senior citizens up by Rs.15,000
No change in corporate tax
New Direct Tax Code in 45 days
Share of direct taxes increased to 56%
To introduce GST by April 1, 2010
Centralised tax processing centre at Bangalore
Tax distortions to be eliminated
Plan expenditure raised by 34%
Govt to spend Rs. 1.42lakh cr for Defence
Total expenditure crosses Rs. 10 lakh cr
missions being launched under Plan on climate change
Missions being launched under Plan on climate change
46 lakh BPL families under rural insurance plan
Rs.50cr allocation for Punjab University
Hike in allocation for minority ministry
Interest subsidy for home loans upto Rs. 1 lakh
Rs. 2113 cr for IITs, NITs
More IITs on cards
Hike in allocation for Commonwealth Games
Pension of non-commissioned officers hiked
One rank one pension for ex-servicemen
Sensex nosedives 220 points
Biometric smart cards in 12 to 18 months
Employment exchanges to be modernised
Female literacy to be doubled in three years
Rs. 350cr allocation for BPL families
National literacy mission for women to be launched
Full interest subsidy for education loans
Govt to move food security bill soon
Indira Awaaz Yojana outlay raised by 63%
Food security to provide rice and wheat at Rs. 3 per Kg for poor
Banks , Insurance companies outside divestment plan
NREGA allocation up at Rs. 39, 100cr in 09
PSUs to remain under Govt control
To hike public ownership of all listed companies
One banking centre in every block in next three years
Fertiliser subsidy to reach farmers directly
Stimulus package to print media extended to Dec 31
Expert committee on petroleum products to be set up
More funds SIDBI for SMEs
Work on Saral II form to be taken
Farmer loan waiver period extended by 6 months
Allocation for schemes for the urban poor to be raised to Rs.39,730 crore in 2009-10
Local production of natural gas to double
Interest subvention to exporters extended to March 2010
75% hike for accelerated irrigation
Agricultural credit target: Rs. 3.25 lakh cr
Allocation to Railways up from Rs. 10,800 cr to Rs. 15,800cr
Additional Budget allocation to farmers
Hike in allocation for Mumbai flood management
Blueprint for national gas grid
Housing allocation hiked under Rajiv Awaaz Yojana
87% hike to urban renewal mission
NHAI allocation up by 23%
Government successful in attracting private investment
IIFCL to be given greater flexibility.
Increase investments in infrastructure to 9% of GDP by 2010
Signs of revival in domestic industry
Achieved growth of 6.7%
Move towards energy security via Integrated Energy Act
Foreign capital inflow must increase
Focus to sustain momentum in exports
Lead economy to 9%
' One Budget cannot solve all issues'
To ensure agricultural growth @ 4%
Strengthen primary healthcare delivery
Strong mandate for growth
'We will do all we can for the welfare of nation'

Highlights Source:Sify

Market Response on Budget-
The lack of a fiscal stimulus package is questionable. Perhaps the Ministry is waiting for the effects of the first two packages to fully trickle down to the various sectors of the economy. In the short term the government might be hoping to provide further stimulus via the Reserve Bank of India.
The markets have not appreciated the interim budget. Both the Sensex and the Nifty closed at lower levels due to a combination of weak global sentiments and the disappointment of a lack luster budget.

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