Monday, July 6, 2009

Key Features of Budget 2009-2010

CHALLENGES

to lead economy to high GDP growth rate of 9 per cent per annum at the earliest

to deepen and broaden the agenda for inclusive development

to improve delivery mechanisms of the government.

OVERVIEW OF THE ECONOMY

Growth rate of Gross Domestic Product dipped from an average of over 9 per cent

in the previous three fiscal years to 6.7 per cent during 2008-09.

Whole sale price index rose to nearly 13 per cent in August, 2008 and had an

equally sharp fall to zero per cent in March, 2009.

The structure of India's economy changed over the last ten years with contribution

of the services sector to GDP at well over 50 per cent and share of merchandise

trade doubling to 38.9 per cent of GDP in 2008-09.

Recognising economic recovery and growth as co-operative effort of the Central

and State Governments, meeting with Finance Ministers of States held as part of

preparation of the Budget. This is intended to become an annual feature.

TOWARDS ECONOMIC REVIVAL

Short-term Measures

To counter the negative fallout of the global slowdown on the Indian economy,

Government responded by providing three focused fiscal stimulus packages in the

form of tax relief and increased expenditure on public projects along with RBI

taking a number of monetary easing and liquidity enhancing measures.

Fiscal accommodation led to an increase in fiscal deficit from 2.7 per cent in

2007-08 to 6.2 per cent of GDP in 2008-09.

The fiscal stimulus at 3.5 per cent of GDP at current market prices for 2008-09

amounts to Rs.1,86,000 crore.

Measures taken by the Government were effective in arresting the fall in GDP

growth rate in 2008-09. 6.7 per cent growth rate recorded in 2008-09.

Infrastructure Development

IIFCL to evolve a Takeout financing scheme in consultation with banks to facilitate

incremental lending to infrastructure sector.

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IIFCL to refinance 60 per cent of commercial bank loans for PPP projects in critical

sectors over the next fifteen to eighteen months. IIFCL and Banks are now in a

position to support projects involving total investment of Rs.1,00,000 crore.

Highway and Railways

Allocation to National Highways Authority of India (NHAI) for the National

Highway Development Programme (NHDP) increased by 23 per cent over

B.E. 2008-09 in B.E. 2009-10 and allocation for Railways increased from Rs.10,800

crore in Interim B.E. 2009-10 to Rs.15,800 crore in B.E. 2009-10.

Urban Infrastructure

Allocation under Jawaharlal Nehru National Urban Renewal Mission (JNNURM)

stepped up by 87 per cent to Rs.12,887 crore in B.E. 2009-10 over B.E. 2008-09.

Allocation for housing and provision of basic amenities to urban poor enhanced to

Rs.3,973 crore in B.E. 2009-10. This includes provision for Rajiv Awas Yojana

(RAY), a new scheme announced.

Brihan Mumbai Storm Water Drainage Project (BRIMSTOWA)

Provision for the project BRIMSTOWA initiated in 2007 and funded through Central

Assistance to address the problem of flooding in Mumbai, enhanced from Rs.200

crore in Interim B.E. 2009-10 to Rs.500 crore in B.E. 2009-10 to expedite

completion of the project.

Power

Allocation under Accelerated Power Development and Reform Programme

(APDRP) increased by 160 per cent to Rs.2,080 crore in B.E. 2009-10 over

B.E. 2008-09.

Gas

Blueprint to be developed for long distance gas pipelines leading to a National Gas

Grid to facilitate transportation of gas across the length and breadth of the country.

Assam Gas Cracker Project

Outlay for Assam Gas Cracker Project stepped up suitably in B.E. 2009-10.

AGRICULTURE DEVELOPMENT

Target for agriculture credit flow set at Rs.3,25,000 crore for the year 2009-10.

In 2008-09 agriculture credit flow was at Rs.2,87,000 crore.

Interest subvention scheme for short term crop loans up to Rs.3 lakh per farmer at

the interest rate of 7 per cent per annum to be continued. Additional subvention of

1 per cent to be paid from this year, as incentive to those farmers who repay short

term crop loans on schedule. Additional allocation of Rs.411 crore over Interim

B.E. 2009-10 made for this.

Debt Relief for Farmers

Time given to the farmers having more than two hectares of land to pay 75 per cent

of their overdues under Debt Waiver and Debt Relief Scheme extended from 30th

June, 2009 to 31st December, 2009.

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Taskforce to be set up to examine the issue of debt taken by a large number of

farmers in some regions of Maharashtra from private money lenders who were not

covered by the loan waiver scheme announced last year.

Accelerated Irrigation Benefit Programme

Allocation under Accelerated Irrigation Benefit Programme (AIBP) increased by

75 per cent over B.E. 2008-09.

Allocation under Rashtriya Krishi Vikas Yojana (RKVY) stepped up by 30 per

cent in B.E. 2009-10 over B.E. 2008-09.

RESTORING EXPORT GROWTH

Adjustment assistance scheme to provide enhanced Export Credit and Guarantee

Corporation (ECGC) cover at 95 per cent to badly hit sectors extended upto

March 2010.

Allocation for Market Development Assistance Scheme enhanced to Rs.124 crore

in B.E. 2009-10.

Interest subvention of 2 per cent on pre-shipment credit for seven employment

oriented export sectors extended beyond the current deadline of September 30,

2009 to March 31, 2010.

To facilitate flow of credit at reasonable rates, Rs.4,000 crore provided as special

fund out of Rural Infrastructure Development Fund (RIDF) to Small Industries

Development Bank of India (SIDBI). This will incentivise Banks and State Finance

Corporations (SFCs) to lend to Micro and Small Enterprises (MSEs) by refinancing

50 per cent of incremental lending to MSEs during the current financial year.

Stimulus package for print media comprising waiver of 15 per cent agency

commission on DAVP advertisements and 10 per cent increase in DAVP rates to be

paid as a special relief subject to documentary proof of loss of revenue in nongovernmental

advertisements, extended from 30th June, 2009 to 31st December, 2009.

MEDIUM-TERM SUSTAINABILITY

To bring the fiscal deficit under control, institutional reform measures to be initiated

during the current year itself.

Fertilizer Subsidy

To ensure balanced application of fertilizers for increasing agricultural productivity,

Government intends to move towards a nutrient based subsidy regime so as to

cover larger basket of fertilizers with innovative fertilizer products available in the

market at reasonable prices.

It is intended to move to a system of direct transfer of subsidy to the farmers in due

course.

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Petroleum and Diesel pricing Policy

With almost three quarters of our oil consumption met through imports, it is

important to recognise that domestic prices of petrol and diesel are broadly in sync

with global prices. Government to set up an expert group to advise on a viable and

sustainable system of pricing petroleum products.

Taxation

SARAL – II forms to be introduced early.

People's ownership of PSUs

While retaining at least 51 per cent Government equity in Public Sector

Undertakings, people's participation in disinvestment programmes to be encouraged.

Public Sector Enterprises such as banks and insurance companies to remain in

public sector and will be given full support including capital infusion to grow and

remain competitive.

Financial Sector

The threshold for non-promoter public shareholding for all listed companies to be

raised in a phased manner.

Scheduled commercial banks allowed to set up off-site ATMs without prior approval

subject to reporting.

A sub-committee of State Level Bankers Committee (SLBC) to identify and

formulate an action plan for providing banking facilities in under-banked/unbanked

areas in the next three years. Rs.100 crore set aside as one-time grant in-aid to

ensure provision of at least one centre/Point of Sales (POS) for banking services in

each of the unbanked blocks.

Government has established Competition Commission of India, an autonomous

regulatory body. An Appellate body headed by a retired judge of Supreme Court

also constituted.

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