Highlights of the Union Budget 2009-10: Part One

These are some of the highlights from the speech given by the Finance Minister Pranab Mukherjee, presenting the Budget in parliament. Part One deals with the state of the economy and key policy announcements while the second part will deal with tax proposals.

The Economy
The FM spoke moving to a GDP growth rate of 9% per annum. Create 12 million new job opportunities, reduce proportion of people living below the poverty line and increase investment in infrastructure as a percentage of GDP to 9% by 2014. The government has been taking measures to provide a fiscal stimulus, which has led to the fiscal deficit rising to 6.2% in 2008-09 from 2.7% in the previous year. This is due to tax reliefs given and increased expenditure on public projects.

In the Budget, the government has increased allocation to the various schemes, both for poverty alleviation, improving education and infrastructure – both urban and rural.

State of the nation

  • The Budget estimates total expenditure at Rs 10.2 lakh crore, an increase of 36% over 2008-10. Both plan and non-plan expenditure have contributed almost equally to this increase. Tax receipts have been budgeted lower, down by 6.8% though non-tax revenue receipts have been budgeted higher by 46% at Rs 140,279 crore.
  • The fiscal deficit is set to increase to a high level of 6.8% in the current year. Critical to it is for the economy to deliver and for the non-tax receipts to accrue during the current year. The government has not set a timeframe of bringing back the fiscal deficit back to its earlier levels.



  • National Highway Authority of India will get 23% more over last year at Rs 15,800 crore.
  • The Jawaharlal Nehru National Urban Renewal Mission which has been funding rapid transport buses and other urban infrastructure will get Rs 12,887 crore, 87% more than last year.
  • The government will encourage takeout financing for infrastructure projects.
  • The India Infrastructure Finance and Company (IIFCL) and banks are now in a position to support infrastructure projects worth Rs 100,000 crore.
  • Indigenous production of natural gas is set to double. LNG infrastructure is also being expanded in the country. The government will develop a blueprint for long distance gas highways leading to a national gas grid. This is in contrast to the current scheme where different organisations, in the public and private sector, and state governments too are vying to set up their own gas transportation systems.
    • The rural roads mission (Pradhan Mantri Gram Sadak Yojana) will get 59% more at Rs 12,000 crore.


  • The National Rural Employment Guarantee Scheme, will get 144% more at Rs 39,100 crore in 2009-10.
  • Revised pension –one man, one pension- for defence employees will lead to an additional outgo of Rs 2,100 crore per annum.


  • The government will continue the interest subvention scheme, to give farmers concessional loans. Additional incentive is being given to those farmers who repay their earlier loans on schedule.
  • Nutrient-based subsidies will replace the existing system. One of the weak points of the current system, for example, has been over-usage of urea that affects soil fertility. This will be a key change, although how it affects the overall fertiliser subsidy will be known only when the scheme is announced.


  • Interest concession of 2% on export credit to certain sectors has been extended by six months to March 31, 2010


  • A special fund is being created with a corpus of Rs 4,000 crore to Small Industries Development Bank of India. This fund will co-lend to SMEs along with banks, providing a 50% refinance on incremental lending.

Petroleum products’ price decontrol

  • The government will set up a committee under the Ministry of Petroleum and Natural Gas to suggest ways in which product pricing can be freed.


  • The government will seek to make the tax system more friendly and to simplify the process, including a having easier IT return forms.


  • Public sector undertakings will retain a 51% stake but at the same time, people can participate in these companies for the remaining 49%.
  • Public sector banks and public insurance companies will remain with the government. They will get whatever financial support they need.
  • The average public holding in our companies is less than 15%. This requirement should be uniformly applicable. The government plans to raise this in a phased manner, for both public sector and private companies.

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