summary of union budget 2010-11

8/8/2019 Summary of Union Budget 2010-11

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Summary of Union Budget 2010-11

GENERAL BUDGET 2010-11

The Union Budget this year has aimed to focus on inclusive growth and insuringfood security. These concerns for aam aadami have gone hand in hand withcredible measures for improving investment climate, strengthening infrastructureand fiscal consolidation. As the country looks to ‘quickly revert to high GDPgrowth path’ in the wake of ‘uncertain times’, concerns for inclusive growthtargeting the disadvantaged sections form the defining features of the Budget.

Many new initiatives have been introduced for sustained and inclusive growth.These include setting up of Mahila Kisan Sashaktikaran Pariyojana, FinancialStability and Development Council, Gold Regulatory Authority, TechnicalAdvisory Group for Unique Projects, National Mission for Delivery of Justice andLegal Reforms, Independent Evaluation Office and National Clean Energy Fund,

Presenting the Union Budget 2010-11 in the Lok Sabha today, the FinanceMinister Shri Pranab Mukherjee, said that three challenges would continue toengage the Indian policy planners for next few years. The first challenge is toquickly revert to the high GDP growth path of 9 per cent and then find the meansto cross the double digit growth barrier. The second challenge is to consolidaterecent gains in making development more inclusive. The third challenge is toremove weaknesses at different levels of governance and to improve publicdelivery mechanism. The Budget, therefore, focuses on fiscal consolidation,making growth more broad-based and ensuring that supply-demand imbalancesare better managed.

The Minister expressed the hope that the economy will reach 10 per cent growthin not too distant a future. The Minister explained that after a fall in GDP growthin 2008-09 to 6.7 per cent, the growth has built up and 7.2 per cent growth isexpected in 2009-10. The Minister said that the recovery is very encouraging asit has come about despite negative growth in agriculture sector. The growth ratein manufacturing in December 2009 was 18.5 per cent, the highest in past twodecades. Similarly, there are also signs of a turnaround in the merchandiseexports with a positive growth in November and December 2009 after a declinein about twelve successive months.

Expressing concern at the emergence of double digit food inflation, the Ministersaid that the Government has set in motion steps in consultation with the StateChief Ministers to bring down the inflation in the next few months and ensurebetter management of food security.



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FISCAL CONSOLIDATION

The Minister said that now that the recovery has taken roots, there is a need toreview public spending, mobilize resources and gear them towards building theproductivity of the economy.

The government will follow the recommendations of the Thirteenth FinanceCommission by capping the government debt. The Commission hasrecommended a capping of the combined debt of the Centre and the States at 68per cent of the GDP to be achieved by 2014-15.For the first time, the Government would target an explicit reduction in itsdomestic public debt-GDP ratio. A status paper would be brought out within sixmonths, giving a detailed analysis of the situation and a road map for curtailingthe overall public debt. This would be followed by an annual report on the

subject.

The Finance Minister expressed the hope that a broad consensus would beachieved on the Direct Tax Code and the Goods and Service Tax (GST) andthese would be introduced from April 2011.

IMPROVING INVESTMENT ENVIRONMENT

The Finance Minister said that a number of steps have been taken to simplify theForeign Direct Investment (FDI) regime. The government also intends to makethe FDI policy user-friendly by consolidating all prior regulations and guidelines

into one comprehensive document. This would enhance clarity and predictabilityof our FDI policy to foreign investors, he said.

With a view to strengthen and institutionalize the mechanism for maintainingfinancial stability, Government has decided to set up an apex-level FinancialStability and Development Council. It would monitor macro prudential supervisionof the economy, including the functioning of large financial conglomerates.

Towards strengthening the banking system, the Budget provides Rs.16500 croreas Tier-I capital. It would ensure that the Public Sector Banks are able to attain aminimum 8 per cent Tier-I Capital by March 2011. Further capital would also be

infused into the Regional Rural Banks (RRBs). The Minister also informed thatthe RBI is considering giving some additional banking licenses to private sectorplayers. Non Banking Financial Companies could also be considered, if theymeet the RBI’s eligibility criteria.

AGRICULTURE GROWTH

A four-pronged strategy would be followed to spur growth in agriculture sector.The elements of the strategy are (a) agricultural production; (b) reduction inwastage of produce; (c) credit support to farmers; and (d) a thrust to the foodprocessing sector.



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The Budget provides Rs.400 crore for extending the green revolution to theeastern region of the country comprising Bihar, Chattisgarh, Jharkhand, EasternUP, West Bengal and Orissa, with the active involvement of Gram Sabhas andthe farming families.

60,000 ‘pulses and oil seed villages’ will be organized in rainfed areas with anoutlay of Rs.300 crore during 2010-11. This will provide water harvesting,watershed management and soil health facilities to enhance to productivity ofdryland farming areas. Another Rs.200 crore have been provided in the Budgetfor conservation farming.

To improve the storage capacity of food grains, Food Corporation of India isbeing allowed to hire godowns from private parties for a guaranteed period ofseven years. This period so far was five years.

The target for farm credit is being raised to Rs.3,75,000 crore in 2010-11 fromRs.3,25,000 crore in the current year.

The period for repayment of loans under the Debt Waiver and Debt ReliefScheme is being extended by six months to June 30,2010.

The interest subvention for timely repayment of crop loans is being raised from 1per cent to 2 per cent. Thus, the effective rate of interest for crop loans forfarmers who repay their crop loan as per schedule will now be 5 per cent peryear.

Five more Mega Food Parks will be set up in addition to the 10 already beingestablished. External Commercial Borrowings will henceforth be available forcold storage, farm level pre-cooling and preservation and storage of agriculturaland allied produce marine products and meat.

INFRASTRUCTURE

The Budget provides Rs.1,73,552 crore for infrastructure, accounting for over 46per cent of the total Plan allocation.

The allocation for road transport is being increased by over 13 per cent from Rs

17,520 crore to Rs.19,894 crore.

Disbursement for infrastructure by India Infrastructure Finance CompanyLtd(IIFCL) is expected to reach Rs.20,000 crore in 2010-11 as against Rs.9,000crore this year. Refinancing of bank landing to infrastructure projects by IIFCL isexpected to be more than double in 2010-11.

ENERGY

The Plan allocation for power sector is being more than doubled from Rs.2,230crore in 2009-10 to Rs.5,130 crore in 2010-11.



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A Coal Regulatory Authority is proposed to be set up for creating level playingfield in the coal sector and resolving various issues.

The Plan outlay for New and Renewal Energy Ministry is being increased by 61per cent from Rs. 620 crore to Rs.1,000 crore, especially to support theambitious solar energy programme.

INCLUSIVE DEVELOPMENT

Stating that inclusive development is an act of faith for the UPA government, theFinance Minister said that after the Right to Information, Right to Work and Rightto Education, the government is now ready with the draft Food Security Bill. Asums of Rs.1,37,674 crore, representing 37 per cent of the total outlay, will bespent on social sector programmes.

Plan Allocation for school education is being increased from Rs.26,800 crore toRs.31,036 crore to support the children’s rights to free and compulsoryeducation. In addition, States will have an access to Rs. 3,675 crore forelementary education under the Finance Commission grant for 2010-11.

It has been decided to provide appropriate banking facilities to habitationshaving population in excess of 2000 by March 2012. It is also proposed to extendinsurance and other services to the targeted beneficiaries. These provisions areexpected to cover 60,000 habitations.

Rs.66,100 crore have been provided for Rural Development. Mahatma GandhiNational Rural Employment Guarantee Scheme gets Rs.40,100 crore and BharatNirman Programme, Rs.48,000 crore.

Indira Awas Yojana gets Rs.10,000 crore. The unit cost under this scheme isbeing raised to Rs.45,000 in plain areas and Rs.48500 in hilly areas to cover theincrease in cost of construction of houses.

The allocation to Backward Region Grant Fund is being enhanced by 26 per centfrom Rs.5,800 crore to Rs.7,300 crore. An additional Central assistance ofRs.1,200 crore is being provided for drought mitigation in the Bundelkhand

region.

Swarna Jayanti Shahari Rozgar Yojana gets 75 per cent increase in allocationfrom Rs.3,060 crore to Rs.5,400 crore. In addition, the allocation for Housing andUrban Poverty Alleviation is also being raised from Rs.850 crore to Rs.1,000crore in 2010-11.

The 1 per cent interest subvention on housing loans upto Rs.10 lakh (where thecost of the house does not exceed Rs.20 lakh) provided in the Budget for 2009-10 has been extended by another year.



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Rajiv Awas Yojana, a scheme for housing to slum dwellers and urban poor, getsa huge jump in allocation from Rs.150 crore last year to Rs.1,270 crore in 2010-11.

It has been decided to set up a National Social Security Fund for unorganizedsector workers with an initial allocation of Rs.1,000 crore. This fund will supportschemes for weavers, toddy tappers, rickshaw pullers, bidi workers etc.

The Rashtriya Swasthya Bima Joyana is being extended to all Mahatma GandhiNREGA beneficiaries who have worked for more than 15 days during thepreceding financial year.

The Swavalamban initiative started last year, under which the governmentcontributes Rs.1,000 per year to each New Pension Scheme (NPS) account, will

now be available for another three years.

Plan outlay for Women and Child Development is being stepped up by 50 percent. A Mahila Kisan Sashaktikaran Pariyojana is being launched to meet thespecific needs of women farmers.

The Plan outlay of Ministry of Social Justice and Empowerment gets a boost of80 per cent to Rs.4,500 crore. Besides supporting the programmes for the targetbeneficiaries, the Ministry will be able to raise the rates for scholarship schemesfor SC and OBC students. Similarly, the Ministry of Minority Affairs allocation hasbeen raised by 50 per cent to Rs.2,600 crore.

STRENGTHENING TRANSPARENCY AND PUBLIC ACCOUNTABILITY

The government proposes to set up a Financial Sector Legislative ReformsCommission to rewrite and clean up the financial sector laws to bring them in linewith the requirements of the sector.

Rs.1,900 crore has been allocated for the Unique Identification Authority of India.

A Technology Advisory Group for Unique Projects (TAGUP) is proposed to beset up under the Chairmanship of Shri Nandan Nilekani for creation of reliable

and secure IT projects.

Defence gets an allocation of Rs.1,47,344 crore. As a one time confidencebuilding measure in Jammu and Kashmir about 2000 youths will be recruited asconstable in five Central Para-Military forces in 2010. Adequate funds will bemade available to support the action plan to be prepared by the PlanningCommission for development of 33 left wing extremist affected districts.An Independent Evaluation Office is to be set up to undertake impartial andobjective assessment of various public programmes and improve theeffectiveness of public interventions in Planning Commission.A National Mission for Delivery of Justice and Legal Reforms is also to be set up.



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TAX PROPOSALS

The Finance Minister emphasized the need for continued Tax Reforms. The TaxReturns form are being simplified and the Income Tax Department is now readyto notify Saral-2 forms for individual salary tax payers. The Sevottam projectstarted in four cities to provide a single window system for registration andgrievance redressal will be extended to four more cities. Two more centres willbe opened for bulk processing of Tax Returns. The Indirect Tax Administrationsare being revamped to achieve the roll out of Goods and Services Tax (GST).Rs.1133 crore have been budgeted for a mission mode project to achieve this.

Major relief has been provided to individual tax payers by enhancing exemptionlimit and reducing tax in different slabs of personal income.. Deduction of anadditional amount of Rs.20000 for investment in long term infrastructure bonds

will be available in addition to the existing limit of Rs.1 lakh available for specifiedsavings.

The surcharge on domestic companies is being reduced from 10 per cent to 7.5per cent. However, the minimum alternate tax (MAT) is being increased from 15per cent to 18 per cent.

Exemptions and deductions have been provided to increase spending onresearch.

The investment linked deduction to new hotels of two star category and above is

being extended to give boost to investment in Tourism sector.

A one time interim relief is being provided to the housing and real estate sectorby allowing pending projects to be completed within a period of five years insteadof four years for claiming a deduction on their profits.

The Finance Minister has proposed to partially roll back the rate deduction inCentral Excise duties and enhance the standard rate on all non-petroleumproducts from 8 per cent to 10 per cent ad valorem. The specific rates of dutyapplicable to Portland cement and cement clinker are also being adjustedupwards proportionately. Similarly, the ad valorem component of excise duty on

large cars, multi-utility vehicles and sports utility vehicles which was reduced aspart of the first stimulus package, is being increased by 2 percentage points to 22per cent.

The basic duty of 5 per cent on crude petroleum; 7.5 per cent on diesel andpetrol and 10 per cent on other refined products is being enhanced. The CentralExcise Duty on petrol and diesel is being enhanced by Rs.1 per litre.

Excise duty on non-smoking tobacco is being enhanced. In addition acompounded levy scheme is being introduced by chewing tobacco and brandedunmanufactured tobacco based on the capacity of pouch making machines.



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A number of duty concessions are being proposed to support agriculture andallied sector. Mechanised handling systems in warehouses will get project importstatus with a concessional import duty of 5 per cent. Installation andcommissioning of such equipment will be fully exempt from service tax.Concessional duty will also be applicable for cold storages, food processingunits, specified equipment for food preservation etc. The concessional importduty to specified machinery for use in the plantation sector is being furtherextended upto March 2011. Testing and certification of agricultural seed is beingexempt from service tax.

Tax exemptions have been announced for equipment used in solar systems andwind energy system, LED lights, electric cars, cycle rickshaw, mobile phonecomponents and certain medical equipment.

The rate of tax on services has been retained at 10 per cent.

BUDGET ESTIMATES

The Budget Estimates 2010-11 provides for a total expenditure of Rs. 11,08,749crore. Out of this, Rs 3,73,092 crore is plan expenditure and Rs.7,35,657 crore isnon-plan expenditure. The plan expenditure has increased by 15 per cent whilethere is only 6 per cent in increase in non-plan expenditure.

The total receipt are estimate Rs.7,46,651 crore.

The Fiscal deficit is pegged at 5.5 per cent. In the Medium Term Fiscal PolicyStatement being presented along with other Budget documents in the Housetoday, the rolling targets for fiscal deficit are pegged at 4.8 per cent and 4.1 percent for 2011-12 and 2012-13, respectively. These projections improve upon therecommendations of the Thirteenth Finance Commission.

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summary of union budget 2010-11

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