Budget 2010

The growth had actually started decelerating during the presentation of 2009-2010
budget. There was added uncertainty due to southwest monsoons. Yet one can
definitely say that our economy is in a much better condition than it was 8 years
ago. The global recession or the worldwide economic crisis was weathered well by
India and we have come out in a very fast pace compared to other countries, even
the developed countries.

Before moving on to establishing my views on the budget 2010, let us have a brief
look at some of the highlights of the same.

 To quickly revert to the path of high growth rate of 9% and to achieve

double digit growth rate in the near future.

 Harness economic growth to make it more inclusive and consolidate gains.

 Food security has been strengthened.

 Overcoming the weaknesses in government’s public delivery mechanism.

 Merchandise exports figures have been encouraging since December last

year.

 Double digit food inflation due to droughts and bad monsoons last year.

 Government is taking steps to counter the increasing rise in price.

 Maintain a balance between demand and supply.

 Review public spending and mobilize resources.

 Hopes to implement direct tax code and general sales tax from April 2011

 Steps taken to simplify FDI regime.

 Government to provide Rs16,500 crore to public-sector
banks to maintain tier-I capital.

 RBI considering issuing banking licences to private companies. Non-

banking finance companies will also be considered if they meet the criteria.

 Government to continue interest subvention of 2% for one more year for

exports covering handicrafts, carpets,handlooms and small and medium
enterprises.

 Government to provide Rs300 crore to organise 60,000 pulse and oilseed

villages and provide integrated intervention of watershed and related
programmes.

 Rs 200 crore provided for climate-resilient agriculture

initiative.

 Government committed to ensuring continued growth of

special economic zones.
 Deficit in foodgrains storage capacity to be met with private-sector
participation.
 Period for repayment of loans by farmers extended by six months to June 30,
2010, in view of the drought and floods in some parts of the country.

 Road transport allocation raised by 13% to Rs19,894 crore.

 Mega power plant policy modified to lower cost of generation; allocation to

power sector more than doubled to Rs5,130 crore in 2010-11.

 Allocation for railways fixed at Rs16,752 crore, an increase of Rs950 crore

over the last financial year.

 Rs500 crore allocated for solar and hydro projects for the Ladakh region in
Jammu & Kashmir.

 Clean Energy Fund to be created for research in new energy sources.

 One-time grant of Rs200 crore provided to Tirupur textile cluster in Tamil

Nadu.
 Outlay for social sectors pegged at Rs1,37,674 crore, accounting for 37% of
the total plan allocation.

 Plan allocation for school education raised from Rs26,800 crore to Rs31,036
crore in 2010-11.

 25% of plan outlay earmarked for rural infrastructure development.

 Plan allocation for health and family welfare increased to Rs22,300 crore
from Rs19,534 crore.

 For rural development, Rs66,100 crore have been allocated.

 Allocation for National Rural Employment Guarantee Authority stepped up

to Rs40,100 crore in 2010-11.
 Allocation for urban development increased by 75% to Rs5,400 crore in
2010-11.

 Rs1,270 crore provided for slum development programme, marking an

increase of 700%.

 Government to set up National Social Security Fund with initial allocation

of Rs1,000 crore to provide social security to workers in the unorganised
sector.

 Allocation for woman and child development increased by 80%

 Gross tax receipts pegged at Rs7,46,656 crore for 2010-11, non-tax revenues
at Rs1,48,118 crore.

 Total expenditure pegged at Rs11.8 lakh crore, an increase of 8.6%.

 Fiscal deficit at 5.5%.
 Personal income-tax rates pruned:
Income up to Rs1.6 lakh — nil
Income above Rs1.6 lakh and up to Rs5 lakh — 10%
Income above Rs5 lakh and up to Rs8 lakh — 20%
Income above Rs8 lakh — 30%

 Revenue loss of Rs26,000 crore on direct tax proposals.

 Central excise duty on all non-petroleum products raised to 10% from 8%.
 FM increases customs duty on crude oil to 5%, on diesel and petrol to 7.5%,
and on other petroleum products to 10%.
 Structural changes in excise duties on cigarettes, cigars, and cigarillos.
 Clean energy cess of Rs50 per ton to be levied on coal produced in India.
 Concessional excise duty of 4% on solar cycle-rickshaws.
 Balloons exempted from central excise duty.
 Customs and central excise proposals to result in a net revenue gain of
Rs43,500 crore.
 More services to be brought under the service tax net.
 Net revenue gain from tax proposals pegged at Rs20,500 crore.

These are just some of the major aspects of the budget of 2010.

Railway budget 2010

The railway budget of 2010 has come out with quiet possible and practical
schemes. The Indian Railways site IRCTC is one of the most visited sites in
traffic and also the largest e-commerce portal in the country with total
transactions over 3500 crores per year. Reduction in online ticket booking
service charges will encourage more people to book tickets online.

SMS updates will also be provided to people on reservation status and trains
arrival/departure timings.
 Setting up of Railway research centre in IIT, Kharagpur for research in
railway technologies. Such strong partnerships can reap rich dividends.

However providing houses to all railway employees within the next 10 years
when a government is in power only for 5 years is questionable.

There was emphasis on adoption of some special efforts to clear outstanding

debts of the railways, but what are these efforts are yet unknown.

2010/11 PROJECTIONS

- Plan outlay set at 414.26 billion rupees ($9 billion)

- Freight target set at 944 million tonnes
- Aims to spend 131.4 billion rupees on wagons, other locomotives
- Proposes to spend 50 billion rupees on new tracks
- Passenger traffic to increase at 5.3 pct

Introduction of several new trains along different routes has also been projected.
 Defence budget 2010

Defence expenditure has been raised to Rs 147344 crores (3.8%) .

This year, the Defence Ministry has not spent Rs 7,000 crores that had been
allocated for modernization of the forces. Army has been the biggest loser with
close to Rs 3,000 crores earmarked to buy new equipment and for construction
works being returned. The Navy has not managed to spend close to Rs 1,500 crores
that had been marked for upgrading the naval fleet while the Air Force has also
returned a substantial amount planned for acquisitions of aircraft and aero systems.
Largest gainer has been the Indian Air Force. It has been allocated Rs 15205 crores
to purchase aircrafts and aero-engines.
Naval fleet has been given Rs 6950 crores.
The army has been allocated Rs 637 crores.
The allocation for defence ordnance factories has been slashed by Rs.1,835 crores
to Rs.1,999 crores.
The Defence Research and Development Organisation (DRDO) has got a hike of
Rs.881 crores to Rs.5,260 crores.
The largest weapons buyer among emerging countries, India has imported military
hardware worth 28 billion dollars since 2000 mainly from Russia, Israel, France
and Britain.
India, which last month inducted its longest range nuclear-tipped missile into the
army, has plans to spend up to US$30 billion ($42 billion) on modernizing its
military.

The GST is a very good measure and will come into effect from April 2011.
Commodities like consumer durables, gold etc will have a common tax rate once
this comes into effect all across the country.

But I feel something more could have been done on the banking and insurance
sectors along with the education. But I came to know that in an interview after the
budget, the finance minister said that he is working on these reforms and said that
they required a broad political consensus. So we can remain hopeful.

The handing of licenses to non-banking financial institutions is a positive step

provided there is strict regulation.

Consumer products like cars, cigarettes etc are going to cost more which is partly
due to the hike in excise duties.

But I feel for the common man the budget gives a sort of a mixed feeling. The
revision of the tax structure has ensured that the savings are going to increase, but
along with it there has been an increase in the price of fuel and airline tickets
which means that the cost of travel is going to increase.

The budget gives priority to fiscal management. NREGA program receives another
big backing which is heartening to see. The minister hopes that India will grow at
10% this year. But with a little more focus on the banking and insurance,
education and fuel prices the progress might have been much more.

But if you look at it from a bird’s view point you can see that a sort of inclusive
growth has been advocated by the government. This is a very good policy as it
covers all sections of the population and all sectors of the society. Whether it is
railways, defence, agriculture, infrastructure all have been given due consideration.

One can never hope that all sectors can be given equal importance which is
impossible to do so. So keeping in mind the future objectives certain sectors are to
be given a higher priority than others.
Thus this is a budget that has provided the people with a high expectation through
the introduction of several new and practical schemes which ensures the growth of
our country in the right direction. Whether the policies will be followed as per the
schedule or will be discarded as is the usual practice is something which we will
have to wait and watch.

Submitted by :-
ROHITH R NAIR
PGP