The Union Budget 2009-10, as Pranab Mukherjee mentioned, is one of continuity. No major new schemes. No major tax changes. No change in the thinking of the government with respect to the fiscal deficit. No major reforms announced in the Budget, either. The initial impression one gets is that the government is hoping that the external environment will improve, domestic demand will pick up and lift the economy out the trough.
It wants to be seen consistently as a government pursuing the goal of uplifting the lot of the common man, than to be seen as a visionary reformist government. If economic growth comes back and the fiscal deficit reduces, it is fine, but elections are not won and lost on economic issues. This government has its priorities clear.
A Budget Briefing. (Is based largely on the Budget speech and may change once the documents are analysed).
For the economy: The situation is worrisome as the fiscal deficit will actually increase from 6.28% to 6.8% during 2009-10. One has to wait to see the assumptions behind this figure, as there is no clear roadmap on disinvestment that is visible here. The government continues its strategy of trying to spend its way out of the downturn. It is investing more in existing schemes, especially those that affect the common man and infrastructure development.
a. Direct Taxes: The removal of FBT was a key demand that has been met. But it has been counter-balanced by a sharp jump in MAT to 15% from 10%. This will affect several companies. Dividend distribution tax remains. Sunset clause for the IT sector has been extended by a year. And natural gas exploration and production too will enjoy the same tax exemption extended to crude oil. Make tax payment simpler for individuals and smaller businesses.
b. On indirect taxes: GST to be introduced by April 2010. Overall customs duty rates have been held constant. A few duty rates have been changed. Gold and silver import duties have been hiked, been balanced by an exemption on excise duties of branded jewellery. Excise duty rates which had been lowered to 4% has been hiked back to 8%, except for certain items.
For the common man: Very little to cheer except for the token reduction in the exemption limit by Rs 10,000. Surcharge has been removed on personal income tax; this was being levied at 10% for those with incomes above a certain threshold (Rs 10 lakh). This will benefit people in this bracket, the upper middle class.
For the investor: Very little has been done here. All hopes on a removal in securities transaction tax have been nixed. Commodity transaction tax has been removed, but the impact is not the same as if STT had been removed.
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Next: Key announcements made in the Budget