The layout of union budget 2009- 10 is a great show of prudent realpolitik over the complex and cumbersome technical expertise of economics and finances. Policy framing of present year’s union budget was heavily emerged from the world wide economic downturn which was started since the year 2007 and substantially rocked the fine pace of liberalization programme across the length and breadth of the entire world.
Thanks to a much regulated financial system and culture of government ownership in strategic sector; Indian economy any how became able to manage a decent 6.7% GDP growth even though it is considerably low from recent year’s growth. So, keeping prevailing adversity in mind finance minister Pranab Mukherjee has remain steadfast on spurting growth in economy through domestic demand instead of foreign investments; however this trend is reversal from recent standing on liberalization of economy and present years economic survey.
The most striking fact of budget remains the government’s very soft treatment on financial sector reform that further restrained the divestment in banking and insurance sector. Apart from financial sector budget also hardly kept its promises of divestment in other public sector units; despite this finance minister shown his empathy for public ownership in PSUs.
Indeed that refers to right timing of execution which is not ripe as par the situation government facing today albeit convention has been showing that very few new government opted for any huge divestment plan in its very first budget.With sharp increase in spending to relentlessly stimulate the economy is a major thrust of this budget whose proper enactments are possible only through the surge of rural economy and enhanced productive activities in rural areas.
A huge impetus to rural development is a very formidable act of government which visualizes the respect for mandate. So, the budget is a win- win situation for rural development and employment generation; total allocation of Rs 39,100 crores with an increase of 144% over preceding budget for the funding of NREGS is very boosting stance for this acclaimed programme. Establishment of National Food Security Act for the families fall below the poverty line can be conceived as very candid response to struck with the plight of hunger and malnutrition; launching of Pradhan Mantri Adarsh Gram Yojna initially to 1,000 chosen villages consisted with 50% or more scheduled castes is a welcome step.
Rural housing and sanitation given utmost importance; allocation of Rs 8,800 crores to Indira Awas Yojna with a forwarded increase of 63% over preceding budget and allocation of Rs 2,000 crores for Rural Housing Fund in the National Housing Bank would positively met with the plights of rural housing.
Allocation of Rs 12,000 crores for Pradhan Mantri Grameen Sadak Yojana with a steep increase of 59% is a very commendable measure taken for the strengthening of rural infrastructure; Rs 7,000 crores of allocation to Rajeev Gandhi Grameen Vidyutikaran Yojna with a 27% increase from previous year would be equally beneficial in this regard.
Further enhancement of allocation by 45% to Bharat Nirman programme for year 2009-10 and proposal for strengthening of Swarn Grameen Swarojgar Yojna with the better channelisation of Self Help Groups are very symmetrical to the needs of rural areas. With having 4% of agricultural growth; the target for agricultural credit flow for the year 2009-10 is being set at Rs 3,25,000 crores over last years Rs 2,87,000 crores to accelerate the growth momentum.
Ceiling of overdue payment to bank by the farmers is further stipulated up to 31st December 2009 besides loans up to Rs3 lakhs for farmers at the interest rate of 7% per annum is a big relief. Its noteworthy that allocation for the Rashtriya Krishi Vikas Yojna is also being stepped up by 30 percent; apart from these increase of 75% over the allocation in 2008-09 (An additional increase of 1,000 crores for Accelerated Irrigation Programme) is very stimulating for farming sector.
In health sector National Rural Health Mission given an increase of Rs 2,057 crores over Rs12, 070 crores provided in the interim budget. For education, launching of National Mission for Female Literacy and modernization of employment exchange are very innovative steps taken to rationalize the gain of education in equal manners to different strata of society.
There are also provisions made for soft student loans to weaker sections; regarding Integrated Child Development Scheme, although all services under this scheme have extended with quality to every child under the age of six albeit it failed on the claim of universalisation in education. Higher education has greatly benefited in this budget as proposals are made for the establishment of one central university to each state where presently it’s not existed.
Up gradation of polytechnics and allocation of Rs2, 113 crores for IIT’s and NIT’s which also includes a provision of Rs 450 crores for new establishment of these institution. These are very forwarded approach taken in the direction of making technical education more rampant, overall an increase of Rs 2,000 crores over last budget are being taken into account for spurting the higher education scenario.
On the power front, Accelerated Power Development and Reform Programme is a vital scheme for reducing the gap between power demand and supply. Allocation for this scheme is Rs2,080 crores, a steep increase of 160% above the allocation in the budget of 2008-09. On oil sector global situation of petroleum products have taken into account for any further deliberation. In gas segment a crucial proposal are introduced to develop a blueprint for long distance gas highways leading to a National Gas Grid.
On infrastructural development plans has drawn to stimulate public investment in India Infrastructure Finance Company Limited with more emphasis on public private partnership besides provision for Rajeev Awas Yojna for urban poors are introduced. Infrastructure is very imperative for economic growth, so its vitality taken in consideration.
Allocation for the Jawaharlal Nehru National Urban Renewal Mission being stepped up by 87% to Rs12,887 crores besides provision of basic amenities to urban poor are being set to Rs3,973 crores in current budget. Further the allocation during the current year to NHAI for the National Highways Development Programme has lifted up by23 percent over the preceding budget; also enhancement being evident in the allocation for the Railways from Rs10,800 crores in the interim budget to Rs15,800 crores.
Due diligence have been made for the allocation of defense expenditure, steep increase in allocation was made because of having state of turmoil in neighboring countries; for strengthening of border management an additional amount of Rs2,284 crores are provided beside this One Rank One Pension for Ex-servicemen are also introduced.
For internal security, modernization of police system have given due concern and in this regard additional Rs430 crores would be spent. For restructuring export growth, interest subversion of 2% has extended for seven critical sectors besides huge credit infusion and rationalization of custom and various services are made.On fertilizers subsidy, government intends to move towards a nutrient based subsidy regime instead of the current product pricing regime which is as par with the productivity enhancement in agriculture.
Policies are framed for the cluster wise development of handlooms to spurt the growth momentum in consistently thickening manufacturing sector; emphasis on implementation of The Unorganised Workers Social Security Bill2007 is a major boost in this regard.
In another move of social security scheme allocation for minority welfare has been raised to Rs1740 crores over Rs1,000 crores in preceding budget. The setting of Unique Identification Authority of India with a provision of Rs120 crores is a great move in the direction of modern governance.
Increase in allocation for the National River and Lake Conservation plans to Rs562 crores over the preceding budgets allocation of Rs355 crores and proposal for National Ganga River Basin Authority are some of key steps taken for the environment and climate change. In sports segment allocation for Commonwealth games has been increased from Rs2,112 crores to Rs 3,472 crores, this huge allocation would be equally benefited the infrastructure of Delhi.
For rehabilitations to cyclone Aila strucked West Bengal has given Rs1, 000 crores and being consistent with India’s emerging role in South Asia, a decent amount of Rs500 crores has allocated for the internally displaced Srilankans.Taxation is supposed as the most sought after concern of a budget; so the budget given some respite by raising ceiling of tax exemption by Rs10,000 to all and senior citizens have given the exemption of Rs 15,000 besides 10% surcharge on personal income tax exceeding Rs10 lakh being scrapped.
So, such progressive move would infuse more money in the hand of salaried class that certainly fuelled the spirit in market. Introduction of Goods and Services Tax from April1st 2010 have also announced which would restructured the prevailing dual mode of taxation. Abolition of Commodity Transaction Tax and Frindge Benefit Tax is a major relief for corporate world even though enhancements of Minimum Alternate Tax from present 10% to 15% would reduce the pressure from treasury; corporate tax and Security Transaction Tax remain unchanged.
In some more changes in indirect taxes; excise duty have increased from 4% to 8% with some exceptions, customs duty on gold increased, service tax extended to legal services and excise duty on branded diesel and petroleum products has been modified. These changes should impart positive implication for export sector.This budget has honour to cross the total allocation of 1 million crores in first time in history to Rs 10,20,838 crores; this growth of Indian economy is indeed an auspicious sign in present circumstances.
On FRBM, finance minister has judiciously court the reference of Kautilya and likewise he doesn’t stressed the pressure of fiscal deficit on peoples money instead he announced to cover the fiscal deficit of 6.8% of GDP by market borrowings and rest via printing notes. Indeed budget shown some major relief like Tax Holidays to specific sector like IT but it sends out a clear message that corporates must have their own land to secure their feet’s. So, overall it’s a balancing budget in broader context for an inclusive growth of economy.
Atul Kumar Thakur
11th July, 2009, New Delhi