M A I N   N E W S

Pranab’s ALL-INCLUSIVE BUDGET
The Finance Minister focuses on the ‘aam aadmi’, boosts spending on the health and education sectors, bets big on growth to meet the deficit but concerns remain on inflation
Sanjeev Sharma
Tribune News Service

New Delhi, February 28
Finance Minister Pranab Mukherjee started his Budget 2011-12 speech by saying, “At times the biggest reforms are not the ones that make headlines but the ones concerned with the details of governance, which affect the everyday life of aam aadmi”.

The Union Budget presented today was not headline grabbing nor full of breathtaking reforms. It did not disturb too many things, did not have too many negatives, so was comforting in a way. And since there had been so many challenges surrounding the economy and the Budget, more than anything else there was a sense of relief that nothing too painful had come.

The Budget’s focus was inclusive growth, fiscal consolidation, fighting inflation with reforms in agriculture, social sector, infrastructure and sending the message that the reforms are still on.

The Finance Minister is clearly betting on the 9 per cent growth projected for next year and the resulting tax buoyancy as he announced higher spending outlays without raising too many taxes and also projected a much lower fiscal deficit next year at 4.6 per cent. The total tax revenue in 2011-12 would be up 18.50 per cent at Rs 9.32 lakh crore.

The income tax exemption limit for individuals has been raised from Rs 1.6 lakh to Rs 1.8 lakh, giving a relief of Rs 2000 to every taxpayer. Benefits for senior citizens will now be eligible at 60. The service tax net was widened to cover more services that will raise the cost of air travel, health check-ups, hotel accommodation and eating out. Excise duties were not raised at the 10 per cent range but 130 consumer items were brought into the tax net with a nominal one per cent central excise duty. However, in what would make several items expensive, the lower rate of excise duty was raised from 4 per cent to 5 per cent. Branded garments are now costlier but diapers are cheaper.

The FM also announced the proposal to implement the Direct Taxes Code (DTC) by April next year. It will replace the existing direct tax structure. Goods and Services Tax (GST) amendment bill will also be introduced in the budget session of Parliament. This was a major reason why the direct taxes and excise duties were not tinkered too much as the rates have to move towards a road map.

The big bold move was in the form of phased move towards direct transfer of cash subsidy to BPL families for kerosene, LPG and fertilisers.

Since the FM had invoked Lord Indra last year to seek rains, this year he said diversifying risk is a good strategy and invoked Goddess Lakshmi also to shower wealth. Hedging was the theme of the day.

The Budget announced several measures to strengthen agriculture. Credit flow to farmers was raised from Rs 3.75 lakh crore to Rs 4.75 lakh crore. Reduction in interest rate to 4 per cent was also announced for farmers, who repay loans on time.

Faced with high food inflation, various schemes were announced with an outlay of Rs 2,200 crore to increase production of vegetables, millets, milk, pulses, palm oil and fodder. With its continuing focus on social sector, spending was increased by 17 per cent to Rs 1.60 lakh crore, which accounts for more than 36 per cent of total plan allocation. Allocation for the UPA flagship programme, Bharat Nirman, was hiked by Rs 10,000 crore to Rs 58,000 crore. The allocation on education was increased by 24 per cent to Rs 52,057 crore. In a relief to salaried class, the government has come out with a new scheme in which they will not have to file IT returns once TDS has been done by the employer and they do not have any other income.

Taking the reforms process forward, the Budget also announced a disinvestment revenue target from PSUs of Rs 40,000 crore.

For India Inc, the surcharge on corporate tax on domestic companies was cut from 7.5% to 5%. However, the Minimum Alternate Tax was hiked to 18.5% from 18%. However, in a dampener, MAT was levied on SEZs. In a boost for low cost housing, the FM announced that the 1 per cent interest rebate will now apply to be available for loans upto Rs 15 lakh where the cost of the house does not exceed Rs 25 lakh.

The total plan expenditure has been increased by 18.3 per cent to Rs 4.41 lakh crore and non-plan expenditure by 10.9 per cent to Rs 8.16 lakh crore.

For infrastructure, the tax benefit for investment in long term infrastructure bonds will continue for another year.