INDIAN BUDGET 2009 key features
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Government of India
“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.”
Mahatma Gandhi
BUDGET 2009-10
July 6, 2009
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Key Features of Budget 2009-2010
CHALLENGES
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to lead economy to high GDP growth rate of 9 per cent per annum at the earliest!
to deepen and broaden the agenda for inclusive development!
to improve delivery mechanisms of the government.OVERVIEW OF THE ECONOMY
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Growth rate of Gross Domestic Product dipped from an average of over 9 per centin the previous three fiscal years to 6.7 per cent during 2008-09.
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Whole sale price index rose to nearly 13 per cent in August, 2008 and had anequally sharp fall to zero per cent in March, 2009.
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The structure of India’s economy changed over the last ten years with contributionof the services sector to GDP at well over 50 per cent and share of merchandise
trade doubling to 38.9 per cent of GDP in 2008-09.
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Recognising economic recovery and growth as co-operative effort of the Centraland State Governments, meeting with Finance Ministers of States held as part of
preparation of the Budget. This is intended to become an annual feature.
TOWARDS ECONOMIC REVIVAL
Short-term Measures
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To counter the negative fallout of the global slowdown on the Indian economy,Government responded by providing three focused fiscal stimulus packages in the
form of tax relief and increased expenditure on public projects along with RBI
taking a number of monetary easing and liquidity enhancing measures.
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Fiscal accommodation led to an increase in fiscal deficit from 2.7 per cent in2007-08 to 6.2 per cent of GDP in 2008-09.
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The fiscal stimulus at 3.5 per cent of GDP at current market prices for 2008-09amounts to Rs.1,86,000 crore.
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Measures taken by the Government were effective in arresting the fall in GDPgrowth rate in 2008-09. 6.7 per cent growth rate recorded in 2008-09.
Infrastructure Development
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IIFCL to evolve a Takeout financing scheme in consultation with banks to facilitateincremental lending to infrastructure sector.
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IIFCL to refinance 60 per cent of commercial bank loans for PPP projects in criticalsectors over the next fifteen to eighteen months. IIFCL and Banks are now in a
position to support projects involving total investment of Rs.1,00,000 crore.
Highway and Railways
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Allocation to National Highways Authority of India (NHAI) for the NationalHighway Development Programme (NHDP) increased by 23 per cent over
B.E. 2008-09 in B.E. 2009-10 and allocation for Railways increased from Rs.10,800
crore in Interim B.E. 2009-10 to Rs.15,800 crore in B.E. 2009-10.
Urban Infrastructure
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Allocation under Jawaharlal Nehru National Urban Renewal Mission (JNNURM)stepped up by 87 per cent to Rs.12,887 crore in B.E. 2009-10 over B.E. 2008-09.
Allocation for housing and provision of basic amenities to urban poor enhanced to
Rs.3,973 crore in B.E. 2009-10. This includes provision for Rajiv Awas Yojana
(RAY), a new scheme announced.
Brihan Mumbai Storm Water Drainage Project (BRIMSTOWA)
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Provision for the project BRIMSTOWA initiated in 2007 and funded through CentralAssistance to address the problem of flooding in Mumbai, enhanced from Rs.200
crore in Interim B.E. 2009-10 to Rs.500 crore in B.E. 2009-10 to expedite
completion of the project.
Power
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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.
Gas
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Blueprint to be developed for long distance gas pipelines leading to a National GasGrid to facilitate transportation of gas across the length and breadth of the country.
Assam Gas Cracker Project
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Outlay for Assam Gas Cracker Project stepped up suitably in B.E. 2009-10.AGRICULTURE DEVELOPMENT
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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.
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Interest subvention scheme for short term crop loans up to Rs.3 lakh per farmer atthe 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. Additional allocation of Rs.411 crore over Interim
B.E. 2009-10 made for this.
Debt Relief for Farmers
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Time given to the farmers having more than two hectares of land to pay 75 per centof their overdues under Debt Waiver and Debt Relief Scheme extended from 30th
June, 2009 to 31st December, 2009.
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Taskforce to be set up to examine the issue of debt taken by a large number offarmers 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
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Allocation under Accelerated Irrigation Benefit Programme (AIBP) increased by75 per cent over B.E. 2008-09.
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Allocation under Rashtriya Krishi Vikas Yojana (RKVY) stepped up by 30 percent in B.E. 2009-10 over B.E. 2008-09.
RESTORING EXPORT GROWTH
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Adjustment assistance scheme to provide enhanced Export Credit and GuaranteeCorporation (ECGC) cover at 95 per cent to badly hit sectors extended upto
March 2010.
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Allocation for Market Development Assistance Scheme enhanced to Rs.124 crorein B.E. 2009-10.
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Interest subvention of 2 per cent on pre-shipment credit for seven employmentoriented export sectors extended beyond the current deadline of September 30,
2009 to March 31, 2010.
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To facilitate flow of credit at reasonable rates, Rs.4,000 crore provided as specialfund out of Rural Infrastructure Development Fund (RIDF) to Small Industries
Development Bank of India (SIDBI). This will incentivise Banks and State Finance
Corporations (SFCs) to lend to Micro and Small Enterprises (MSEs) by refinancing
50 per cent of incremental lending to MSEs during the current financial year.
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Stimulus package for print media comprising waiver of 15 per cent agencycommission on DAVP advertisements and 10 per cent increase in DAVP rates to be
paid as a special relief subject to documentary proof of loss of revenue in nongovernmental
advertisements, extended from 30
th June, 2009 to 31st December, 2009.MEDIUM-TERM SUSTAINABILITY
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To bring the fiscal deficit under control, institutional reform measures to be initiatedduring the current year itself.
Fertilizer Subsidy
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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.
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It is intended to move to a system of direct transfer of subsidy to the farmers in duecourse.
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Petroleum and Diesel pricing Policy
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With almost three quarters of our oil consumption met through imports, it isimportant to recognise that domestic prices of petrol and diesel are broadly in sync
with global prices. Government to set up an expert group to advise on a viable and
sustainable system of pricing petroleum products.
Taxation
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SARAL – II forms to be introduced early.People’s ownership of PSUs
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While retaining at least 51 per cent Government equity in Public SectorUndertakings, people’s participation in disinvestment programmes to be encouraged.
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Public Sector Enterprises such as banks and insurance companies to remain inpublic sector and will be given full support including capital infusion to grow and
remain competitive.
Financial Sector
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The threshold for non-promoter public shareholding for all listed companies to beraised in a phased manner.
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Scheduled commercial banks allowed to set up off-site ATMs without prior approvalsubject to reporting.
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A sub-committee of State Level Bankers Committee (SLBC) to identify andformulate 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 of Sales (POS) for banking services in
each of the unbanked blocks.
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Government has established Competition Commission of India, an autonomousregulatory body. An Appellate body headed by a retired judge of Supreme Court
also constituted.
TOWARDS INCLUSIVE DEVELOPMENT
National Rural Employment Guarantee Scheme (NREGS)
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Allocation under NREGS increased by 144 per cent to Rs.39,100 crore inB.E. 2009-10 over B.E. 2008-09.
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To increase productivity of assets and resources under NREGA, convergence withother schemes relating to agriculture, forests, water resources, land resources, rural
roads initiated. In the first stage 115 pilot districts selected for convergence.
National Food Security Act
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National Food Security Act to be brought in to ensure entitlement of 25 kilo of riceor wheat per month at Rs.3 per kilo to every family living below the poverty line in
rural or urban areas. Food Security Bill to be put on the website of the Department
of Food and Public Distribution for public debate.
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Bharat Nirman
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Allocation for Bharat Nirman increased by 45 per cent in 2009-10 overB.E. 2008-09. Allocations under Pradhan Mantri Gram Sadak Yojana (PMGSY)
increased by 59 per cent over B.E. 2008-09 to Rs.12,000 crore in B.E. 2009-10.
Under Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), allocation increased
by 27 per cent to Rs.7,000 crore.
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Allocation under Indira Awaas Yojana (IAY) increased by 63 per cent to Rs.8,800crore in B.E. 2009-10. Allocation of Rs.2,000 crore made for Rural Housing Fund
(RHF) in National Housing Bank (NHB) to boost the resource base of NHB for
refinance operations in rural housing sector.
Pradhan Mantri Adarsh Gram Yojana (PMAGY)
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New scheme Pradhan Mantri Adarsh Gram Yojana (PMAGY) with an allocationof Rs.100 crore launched on pilot basis for integrated development of 1000 villages
having population of scheduled castes above 50 per cent.
EMPOWERMENT OF WEAKER SECTIONS
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The Swarna Jayanti Gram Swarozgar Yojana (SGSY) restructured as National RuralLivelihood Mission to make it universal in application, focused in approach and
time bound for poverty eradication by 2014-15. In addition to capital subsidy at
enhanced rate, interest subsidy to poor households to be provided for loans upto
Rs.1 lakh from banks.
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There are over 22 lakh Women’s Self Help Groups linked with banks. Reach ofSHGs to be widened to enrol at least 50 per cent of all rural women in India as
members of SHGs over the next five years.
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Corpus of Rashtriya Mahila Kosh to be increased from Rs.100 crore to Rs.500crore over the next few years.
Female Literacy
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National Mission for Female Literacy to be launched with focus on minorities, SC,ST and other marginalized groups with the aim to reduce level of female illiteracy
by half in three years.
Integrated Child Development Services (ICDS)
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All ICD Services to be extended to every child under the age of six byMarch, 2012.
Student Loans to Weaker Sections
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To enable students from economically weaker sections to access higher education,a scheme to provide full interest subsidy during the period of moratorium introduced
to cover loans taken from scheduled banks to pursue any of the approved courses
of study in technical and professional streams from recoganised institutions in India.
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Welfare of Minorities
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Plan outlay of Ministry of Minority Affairs enhanced from Rs.1,000 crore in B.E.2008-09 to Rs.1,740 crore in 2009-10 registering an increase of 74 per cent. This
includes Rs.990 crore for Multi-Sectoral Development Programme for Minorities,
Grants-in-aid to Maulana Azad Education Foundation, National Minorities Development
and Finance Corporation and pre and post matric scholarship for minorities.
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Allocations made for the new schemes of National Fellowship for Students fromminority community and Grants-in-aid to Central Wakf Council for computerization
of records of State Wakf Boards.
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Rs.25 crore each allocated for establishing new campuses at Murshidabad in WestBengal and Malappuram in Kerala by Aligarh Muslim University.
Welfare of workers in the unorganized sector
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Action initiated to ensure implementation of social security schemes for occupationlike weavers, fishermen and women, toddy tappers, leather and handicraft workers,
plantation labour, construction labour, mine workers, bidi workers and rickshaw
pullers. Necessary financial allocation will be made for these schemes.
Employment Exchanges
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New project for modernization of Employment Exchange in public privatepartnership to be launched so that a job seeker can register on line from anywhere
and approach any employment exchange.
Handloom
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One handloom mega cluster each in West Bengal and Tamil Nadu and onepowerloom mega cluster in Rajasthan to be set up. New mega clusters for carpets
to be also set up in Srinagar (J&K) and Mirzapur (UP).
Health
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Allocation under National Rural Health Mission (NRHM) increased by Rs.2,057crore over Interim B.E. 2009-10 of Rs.12,070 crore.
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All BPL families to be covered under Rashtriya Swasthya Bima Yojana (RSBY).Allocation under RSBY increased by 40 per cent over previous allocation to Rs.350
crore in B.E. 2009-10.
Environment and climate change
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In furtherance to National Action Plan on Climate Change, eight national missionsrepresenting a multi-pronged long-term and integrated approach to be launched.
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National Ganga River Basin Authority set up. Budgetary allocation under NationalRiver and Lake Conservation Plans increased from Rs.335 crore in B.E. 2008-09
to Rs.562 crore in B.E. 2009-10.
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Special one-time grant of Rs.100 crore given to Indian Council of Forestry Researchand Education, Dehradun.
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Rs.15 crore each to be allocated to Botanical Survey of India and Zoological Survey ofIndia. An additional amount of Rs.15 crore to be allocated for Geological Survey of India.
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TOWARDS BUILDING ACOUNTABLE INSTITUTIONS
Improving Delivery of Public Services
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Unique Identification Authority of India (UIDAI) to set up online data base withidentity and biometric details of Indian residents and provide enrolment and
verification services across country. Provision of Rs.120 crore made for this in the
Budget.
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First set of unique identity number to be rolled out in 12 to 18 months.National Security
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Additional amount of Rs.430 crore provided over Interim B.E. 2009-10to modernise police machinery in the States.
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Additional amount of Rs.2,284 crore proposed over Interim B.E. 2009-10 forconstruction of fences, roads, flood lights on the international borders.
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Programme for housing to create 1 lakh dwelling units for Central Para-militaryForces personnel to be launched through innovative financing model.
One Rank One Pension for Ex-servicemen (OROP)
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Based on the recommendation of the Committee headed by the Cabinet Secretaryon OROP, government has decided to substantially improve the pension of pre
01.01.2006 defence pensioners below officer rank and bring pre 10.10.1997
pensioners on par with post 10.10.1997 pensioners. The decisions to be implemented
from 01st July, 2009 and will cost more than Rs.2,100 crore annually.
Education
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Provision for the scheme ‘Mission in Education through ICT’ substantially increasedto Rs.900 crore and the provision for setting up and up-gradation of Polytechnics
under the Skill Development Mission enhanced to Rs.495 crore.
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Rs.827 crore allocated for opening one Central University in each uncovered State.!
Rs.2,113 crore allocated for IITs and NITs which includes a provision of Rs.450crore for new IITs and NITs.
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The overall Plan budget for higher education is to be increased by Rs.2,000 croreover Interim B.E. 2009-10.
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Rs.50 crore allocated for Punjab University, Chandigarh. Plan allocation forChandigarh to be suitably enhanced during the year to provide better infrastructure
to the people of Chandigarh.
Commonwealth Games, 2010
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Outlays to be stepped up from Rs.2,112 crore in Interim Budget to Rs.3,472 crorein regular Budget 2009-10.
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Srilankan Tamils
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Rs.500 crore allocated for rehabilitation of internally displaced persons andreconstruction of the northern and eastern areas of Sri Lanka. Ministry of External
Affairs to work closely with the Sri Lankan Government.
Cyclone Aila
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Rs.1,000 crore allocated for programme for rebuilding the damaged infrastructurecaused due to cyclone Aila in West Bengal.
BUDGET ESTIMATE 2009-10
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Budget Estimates provide for a total expenditure of Rs.10,20,838 crore consistingof Rs.6,95,689 crore under Non-plan and Rs.3,25,149 crore under Plan registering
an increase of 37 per cent in Non-plan expenditure and 34 per cent in Plan
expenditure over B.E. 2008-09.
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Total expenditure in B.E. 2009-10 increased by 36 per cent over B.E. 2008-09.!
Increase in Non-plan expenditure is mainly due to implementation of Sixth CentralPay Commission recommendations, increased food subsidy and higher interest
payment arising out of larger fiscal deficit in 2008-09.
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Interest payments estimated at Rs.2,25,511 crore constituting about 36 per cent ofNon-plan revenue expenditure in B.E. 2009-10.
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Subsidies up from Rs.71,431 crore in B.E. 2008-09 to Rs.1,11,276 crore in B.E.2009-10.
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Outlay for Defence up from Rs.1,05,600 crore in B.E. 2008-09 to Rs.1,41,703crore in B.E. 2009-10.
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Gross Budgetary Support for Annual Plan 2009-10 enhanced by Rs.40,000 croreover Interim B.E. 2009-10.
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State Governments to be permitted to borrow additional 0.5 per cent of their GSDPby relaxing the fiscal deficit target under FRBM from 3.5 per cent to 4 per cent of
their GSDP. This will enable the States to borrow Rs.21,000 crore additionally
over Interim B.E. 2009-10.
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Gross tax receipts budgeted at Rs.6,41,079 crore in B.E. 2009-10 compared toRs.6,87,715 crore in B.E. 2008-09.
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Non-tax revenue receipts estimated at Rs.1,40,279 crore in B.E. 2009-10 comparedto Rs.95,785 crore in B.E. 2008-09.
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Revenue deficit projected at 4.8 per cent of GDP in B.E. 2009-10 compared to 1per cent in B.E. 2008-09 and 4.6 per cent as per provisional accounts of 2008-09.
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Fiscal deficit as a percentage of GDP is projected at 6.8 per cent compared to 2.5per cent in B.E. 2008-09 and 6.2 per cent as per provisional accounts 2008-09.
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TAX PROPOSALS
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Tax reform, like all reforms, is a process and not an event. Thrust of reforms hasbeen to improve the efficiency and equity of our tax system. This is sought to be
achieved by eliminating distortions in the tax structure, introducing moderate levels
of taxation and expanding the base and accompanied by requisite re-engineering
of key business processes coupled with automation.
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Recent initiative, on direct taxes side, of the setting up of a Centralized ProcessingCentre (CPC) at Bengaluru where all electronically filed returns, and paper returns
filed in entire Karnataka, will be processed.
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Centre’s Tax-GDP ratio has increased to 11.5 per cent in 2008-09 from a low of 9.2per cent in 2003-04. Share of direct taxes in the Centre’s tax revenues has increased
to 56 percent in 2008-09 from 41 percent in 2003-04, reflecting sharp improvement
in equity of our tax system.
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Structural changes in direct taxes to be pursued by releasing the new Direct TaxesCode within the next 45 days and in indirect taxes by accelerating the process for
the smooth introduction of the Goods and Services Tax (GST) with effect from 1st
April, 2010.
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The Direct Taxes Code, along with a Discussion Paper, to be released to the publicfor debate. The Direct Taxes Code Bill will be finalised for introduction in Lok
Sabha sometime during the Winter Session based on the inputs received.
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The Authorities for Advance Rulings on Direct and Indirect Taxes to be merged byamending the relevant Acts.
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Agreement has been reached on the basic structure of GST in keeping with theprinciples of fiscal federalism enshrined in the Constitution. Broad contour of the
GST Model envisages dual GST comprising of a Central GST and a State GST.
The Centre and the States will each legislate, levy and administer the Central GST
and State GST, respectively.
Direct Taxes
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No changes made in the Corporate Tax rates.!
Exemption limit in personal income tax raised by Rs.15,000 from Rs.2.25 lakh toRs.2.40 lakh for senior citizens; by Rs.10,000 from Rs.1.80 lakh to Rs.1.90 lakh
for women tax payers; and by Rs.10,000 from Rs.1.50 lakh to Rs.1.60 lakh for all
other categories of individual taxpayers.
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Deduction under section 80-DD in respect of maintenance, including medicaltreatment, of a dependent who is a person with severe disability being raised from
the present limit of Rs.75,000 to Rs.1 lakh.
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Surcharge on various direct taxes to be phased out; in the first instance, byeliminating the surcharge of 10 percent on personal income-tax.
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Sun-set clauses for deduction in respect of export profits under sections 10A and10B of the Income-tax Act being extended by one more year i.e. for the financial
year 2010-11.
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Fringe Benefit Tax on the value of certain fringe benefits provided by employers totheir employees to be abolished.
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Scope of provisions relating to weighted deduction of 150% on expenditure incurredon in-house R&D to all manufacturing businesses being extended except for a
small negative list.
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Businesses to be incentivised by providing investment linked tax exemptionsrather than profit linked exemptions. Investment linked tax incentives to be
provided, to begin with, to the businesses of setting up and operating ‘cold chain’,
warehousing facilities for storing agricultural produce and the business of laying
and operating cross country natural gas or crude or petroleum oil pipeline network
for distribution on common carrier principle. Under this method, all capital
expenditure, other than expenditure on land, goodwill and financial instruments
to be fully allowable as deduction.
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Minimum Alternate Tax (MAT) to be increased to 15 per cent of book profits from10 per cent. The period allowed to carry forward the tax credit under MAT to be
extended from seven years to ten years.
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New Pension System (NPS) to continue to be subjected to the Exempt-Exempt-Taxed (EET) method of tax treatment of savings. Income of the NPS Trust to be
exempted from income tax and any dividend paid to this Trust from Dividend
Distribution Tax. All purchase and sale of equity shares and derivatives by the
NPS Trust also to be exempt from the Securities Transaction Tax. Self employed
persons to be enabled to participate in the NPS and to avail of the tax benefits
available thereto.
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Alternative dispute resolution mechanism to be created within the Income TaxDepartment for the resolution of transfer pricing disputes. Central Board of Direct
Taxes (CBDT) to be empowered to formulate ‘safe harbour’ rules to reduce the
impact of judgemental errors in determining transfer price in international
transactions.
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