Union Budget 2010-11

When the Finance Minister Mr Pranab Mukherjee rose to present the Union Budget 2010-11 in Parliament on 26th Feb 2010, it was the sixth time over a span of 28 years that he was doing so. He presented three budgets during his first tenure as the Finance Minister from 1982 to 1984, and this was his third in the current stint, including an interim budget. The much anticipated annual event which takes place on the last working day of February was closely watched by people from all walks of life who are closely affected by it.

Anatomy of the Budget

The budget documents, include the following :

• Annual Financial Statement - This is the main Budget document and is commonly referred to as the Budget Statement.
• Demands for Grants - The estimates of expenditure from the Consolidated Fund included in the Budget Statements and required to be voted by the Lok Sabha are submitted in the form of Demands for Grants. Normally a separate demand is required to be presented for each of the major services under the control of a Ministry/Department.
• Receipts Budget - Estimates of receipts included in the "Annual Financial Statement" are further explained and analysed here. It also includes the trend of receipts - both revenue and capital - and details of External Assistance.
• Expenditure Budget Vol. 1 - Deals with the revenue and capital disbursements and gives the estimates in respect of "Plan" and "Non-Plan" and explains the variations in the estimates of both.

  It contains information of General Expenditure, Non Plan Expenditure, and Plan Outlay. The Statements relating to Gender Budgeting and Budget provisions for schemes for the Welfare of Children, position on guarantees given by Central Government and outstanding as at the end of March last are also shown in this document.

• Expenditure Budget Vol. 2 - To understand the objectives underlying the expenditure proposed in the Demands for Grants, a brief description of the various items of expenditure on major programmes included in the Demands together with the reasons for variation between the budget estimates and revised estimates for the previous year and the budget estimates for the current year are given in this volume.
• Finance Bill - The Finance Bill is presented in fulfilment of the requirement of Article 110(1)(a) of the Constitution, detailing the imposition, abolition, remission, alteration or regulation of taxes proposed in the Budget. It is accompanied by a Memorandum explaining the provisions included in it.
• Memorandum Explaining the Provisions in the Finance Bill - meant to facilitate understanding of the taxation proposals contained in the Finance Bill, with the provisions and their implications explained.
• Budget at a Glance - This document shows in brief, receipts and disbursements along with broad details of tax/non-tax revenues and other receipts and Plan and Non-Plan expenditure, including allocation of Plan outlays by sectors as well as by Ministries/Departments and details of resources transferred by the Central Government to State and Union Territory Governments. This document also shows the revenue deficit, the gross primary deficit and the gross fiscal deficit of the Central Government.
• Highlights of Budget - The key features of the Budget indicates prominent achievements in various sectors of the economy, new initiatives announced in the Budget, allocation of funds made in important areas, and a summary of tax proposals.
• Status of Implementation of Announcements made in Finance Minister's Budget Speech - This document indicates the action taken and action in progress on the announcements made in the last budget. The position reflected is updated to first week of February of the reporting year.
• Fiscal Responsibility and Budget Management Act related documents:
  
  
  1. Macro-economic Framework Statement;
  2. Medium Term Fiscal Policy Statement;
  3. Fiscal Policy Strategy Statement.

Mandated under Section 2(5), 3(4), 3(3), and 3(2) of the Fiscal Responsibility and Budget Management Act, these statements reflect the growth prospects of the economy with specific underlying assumptions, the strategic priorities of Government in the fiscal area for the ensuing financial year relating to taxation, expenditure, lending and investments, administered pricing, borrowing and guarantees, and sets out three-year rolling targets for four specific fiscal indicators in relation to GDP at market prices namely (i)Revenue Deficit, (ii) Fiscal Deficit, (iii)Tax to GDP Ratio and (iv) Total out-standing Debt at the end of the year.

Budget 2010

The Finance Minister began his budget speech by outlining the challenges faced by the government in ensuring continued growth and concurrently meeting social commitments in a global environment of economic recession. He described the role that he visualized for the government as that of an enabler so that individual enterprise and creativity can flourish. He also outlined the concerns of the government, primarily the rising food inflation, which needs to be brought down to ensure food security.

Some Key Indicators

• The Advance Estimates for Gross Domestic Product (GDP) growth for 2009-10 have been pegged at 7.2 per cent. The final figure expected to be higher when the third and fourth quarter GDP estimates for 2009-10 become available.
• The growth rate in manufacturing sector in December 2009 was 18.5 per cent - the highest in the past two decades.
• The kharif food grains production is estimated at 98.83 million tonnes which indicates a decline of 16 per cent compared to the fourth advance estimates of 2008-09, with paddy being the most affected crop. The area sown under food grains declined by 6.5 per cent in the kharif 2009-10 compared to the same season previous year.
• The cumulative growth in Index of Industrial Production (IIP) during April-December 2009 was 8.6 per cent, as compared to a growth of 3.6 per cent during April-December 2008. This is composed of a growth of 9.0 per cent in manufacturing, 8.5 per cent in mining and 5.8 per cent in electricity in April-December 2009 as against levels of 3.6 per cent, 3.2 per cent and 2.7 per cent respectively in April-December 2008.
• Inflation based on the consumer price index (CPI) for industrial workers showed an increase to 15 per cent on a year-on-year basis in December 2009 from 9.7 per cent a year ago.
• Net capital flows to India at US $ 29.6 billion in April-September 2009 was higher as compared with US $ 12.0 billion in April-September 2008.
• The level of foreign exchange reserves stood at US$ 281.0 billion at the end of January, 2010.

Highlights

Highlights of the budget can be viewed here (321 KB) - PDF file that opens in a new window . Some of the budgetary announcements relating to specific sectors are as under:-

Taxation

• Introduction of Goods and Service Tax (GST) and the new Direct Tax Code (DTC) likely by Apr 2011.
• Income tax slabs revised as under:-
  
  
  1. Income upto Rs 1.6 lakh - Nil
  2. Income between Rs 1.6 lakh and Rs 5 lakh - 10%
  3. Income between Rs 5 lakh and Rs 8 lakh - 20%
  4. Income above Rs 8 lakh - 30%
  
  
  
• Deduction of an additional amount of Rs. 20,000 allowed, over and above the existing limit of Rs.1 lakh on tax savings, for investment in long-term infrastructure bonds as notified by the Central Government.
• Besides contributions to health insurance schemes which is currently allowed as a deduction under the Income-tax Act, contributions to the Central Government Health Scheme also allowed as a deduction under the same provision.
• Limits for turnover over which accounts need to be audited enhanced to Rs. 60 lakh for businesses and to Rs. 15 lakh for professions.
• Rate reduction in Central Excise duties on all non-petroleum products to be partially rolled back and the standard rate on these enhanced from 8 per cent to 10 per cent ad valorem.
• Restore the basic duty of 5 per cent on crude petroleum; 7.5 per cent on diesel and petrol and 10 per cent on other refined products. Central Excise duty on petrol and diesel enhanced by Re.1 per litre each.
• Exemption of the transportation by road of cereals and pulses from service tax. Their transportation by rail would remain exempt.
• Enhanced excise duty on all non-smoking tobacco such as scented tobacco, snuff, chewing tobacco etc.
• Rate of tax on services retained at 10 per cent to pave the way forward for GST.
• Certain services, hitherto untaxed, to be brought within the purview of the service tax levy. These to be notified separately.

Defence / Security

• Allocation for Defence increased to Rs. 1,47,344 crore including Rs 60,000 crore for capital expenditure.
• About 2,000 youth to be recruited as constables in five Central Para Military Forces in the year 2010.
• Planning Commission to prepare an integrated action plan to address development problems of the thirty-three left wing extremism affected districts. Adequate funds will be made available to support the action plan.

Agriculture

• A Nutrient Based Subsidy policy for the fertiliser sector has been approved by the Government and will become effective from April 1, 2010.
• Four pronged strategy for agriculture growth, covering agricultural production, reduction in wastage of produce, credit support to farmers and impetus to food processing sector.
• Mahila Kisan Sashaktikaran Pariyojana to meet the specific needs of women farmers to be launched with a provision of Rs 100 crore as a sub-component of the National Rural Livelihood Mission.
• Five more mega food parks to be set up.

Infrastructure

• Rs 1,73,552 crore provided for infrastructure development which accounts for over 46 per cent of the total plan allocation.
• Allocation for road transport increased by over 13 per cent from Rs. 17,520 crore to Rs 19,894 crore.
• Rs 16,752 crore provided for Railways, which is about Rs.950 crore more than last year.
• Project import status to 'Monorail projects for urban transport' at a concessional basic duty of 5 per cent granted.
• To allow resale of specified machinery for road construction projects on payment of import duty at depreciated value.

Rural Development

• Rs. 66,100 crore provided for Rural Development.
• Allocation for Mahatma Gandhi National Rural Employment Guarantee Scheme stepped up to Rs.40,100 crore in 2010-11.
• An amount of Rs.48,000 crore allocated for rural infrastructure programmes under Bharat Nirman.
• Unit cost under Indira Awas Yojana increased to Rs.45,000 in the plain areas and to Rs.48,500 in the hilly areas. Allocation for this scheme increased to Rs.10,000 crore.
• Allocation to Backward Region Grant Fund enhanced by 26 per cent from Rs.5,800 crore in 2009-10 to Rs 7,300 crore in 2010-11.

Healthcare

• An Annual Health Survey to prepare the District Health Profile of all Districts shall be conducted in 2010-11.
• Plan allocation to Ministry of Health & Family Welfare increased from Rs 19,534 crore in 2009-10 to Rs 22,300 crore for 2010-11.
• Uniform, concessional basic duty of 5 per cent, CVD of 4 per cent with full exemption from special additional duty prescribed on all medical equipments.
• Full exemption currently available to medical equipment and devices such as assistive devices, rehabilitation aids etc. retained. The concession available to Government hospitals or hospitals set up under a statute also retained.
• Specified inputs for the manufacture of orthopaedic implants exempted from import duty.

Education

• Plan allocation for school education increased by 16 per cent from Rs.26,800 crore in 2009-10 to Rs.31,036 crore in 2010-11.
• In addition, States will have access to Rs.3,675 crore for elementary education under the Thirteenth Finance Commission grants for 2010-11.
• To further improve female literacy rate, the Government has recast the earlier National Literacy Mission as a new programme "Saakshar Bharat". It was launched in September, 2009 with a target of 7 crore non-literate adults which includes 6 crore women.

Social sector

• The spending on social sector has been gradually increased to Rs.1,37,674 crore in 2010-11, which is 37% of the total plan outlay in 2010-11.
• Rashtriya Swasthya Bima Yojana benefits extended to all such Mahatma Gandhi NREGA beneficiaries who have worked for more than 15 days during the preceding financial year.
• Plan outlay for Women and Child Development stepped up by almost 50 per cent.
• Plan outlay of the Ministry of Social Justice and Empowerment enhanced by 80 per cent to Rs.4500 crore. With this enhancement, the Ministry will be able to revise rates of scholarship under its post-matric scholarship schemes for SCs and OBC students.
• To encourage the people from the unorganised sector to voluntarily save for their retirement, a new initiative, "Swavalamban" will be available for persons who join New Pension Scheme (NPS), with a minimum contribution of Rs.1,000 and a maximum contribution of Rs.12,000 per annum during the financial year 2010-11, wherein Government will contribute Rs.1,000 per year to each NPS account opened in the year 2010-11. It will benefit about 10 lakh NPS subscribers of the unorganised sector. Allocation of Rs.100 crore made for this initiative.

Further details and full text of the Union Budget can be viewed here - External website that opens in a new window.

Watch the webcast of the Budget presentation here - External website that opens in a new window.

Railway Budget

The Railway Budget 2010-2011 was presented in Parliament by the Railways Minister Ms Mamata Banerjee on 24 Feb. Some highlights are:-

• Highest ever Plan Outlay at Rs 41,426 crore, an increase of Rs 1142 crore over 2009-10.
• No increase in fares or freight rates.
• 120 new trains, extensions and increase in frequencies announced.
• Incentives for recruitment of women and backward classes in Railways.
• 10 stations to be upgraded to international class and 94 as 'Adarsh Stations'.
• Enhanced Private Public Cooperation. Private operators to be permitted to invest in infrastructure and run special freight trains.

The highlights of the Railway Budget 2010-11 can be accessed here (60 KB) - PDF file that opens in a new window .

For full text of the Railway Minister's speech, click here (271 KB) - PDF file that opens in a new window .

Economic Survey

The Economic Survey of India 2009 - 10 was tabled in Parliament by the Finance Minister Mr. Pranab Mukherjee on 25th Feb 2010. The survey talks about some deep changes that have taken place in India, which suggest that the economy's fundamentals are strong. These include the rates of savings and investments. The survey expects the economy to get back to the robust growth path of around 9 percent it was on before the global crisis slowed it down. Full text of the Survey can be viewed here (414 KB) - PDF file that opens in a new window .