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Interim Indian Union Budget 2009-2010

Further concessions in central excise & service tax announced: Customs duty exemption on naptha extended beyond this fiscal

Following are the extracts from the reply of Finance Minister, Shri Pranab Mukhejee on Interim Budget 2009-10, in Lok Sabha, on 24th Feb 2009:

“My friends from the other side have raised a number of issues. They have blamed the UPA Government for failure on the economic front, on the performance of the public sector, on employment generation, inflation, on fiscal deficit, plight of farmers, FDI and inadequacies of our regulatory framework. They have also pointed towards the “lost opportunities” in my Interim Budget speech.

Let me turn to some figures that tell their own story. A look at the comparative annual average figures between the two periods shows:

The GDP growth rate which was 5.8 per cent during 1999-2004 rose to 8.6 per cent during the 2004-2009.

The fiscal deficit and revenue deficit that stood at 5.5 per cent and 4.0 per cent respectively during 1999-2004 declined to 4.1 per cent and 2.5 per cent during 2004-09.

The Tax to GDP ratio went up from 8.8 per cent during 1999-2004 to 11.1 per cent during 2004-09, while the Savings to GDP ratio which was 25.6 per cent in 1999-2004 shot up to 34.8 per cent during 2004-08.

Similarly, Investment to GDP ratio at 25.2 per cent during 1999-2004 went upto 35.9 per cent during 2004-08.

The Government’s policy on disinvestment does not envisage any outright or strategic sale of a Central Public Sector Enterprise (CPSE). The focus of the policy is to enable unlisted and profitable CPSEs to raise capital through Initial Public Offerings (IPOs) with the Government offering a minority shareholding for divestiture. The intent is to ensure that Government equity remains above 51% and Government retains management control. However, because of the adverse market conditions during the year 2008-09, there has not been a single IPO and nor has there been any disinvestment.

The UPA Government is making all possible efforts to turnaround the loss making Central PSE’s like Indian Telephone Industries (ITI) through the infusion of funds and superior techno-managerial practices.

It is important to recognize that the Union Budget statement is just one of the instruments for addressing economic policy concerns. Indeed, right from the day when the financial crisis erupted in the middle of September 2008, the Government has been alert and responsive to the fast changing developments. Government has undertaken the required administrative and fiscal measures in tandem with the monetary policy initiatives of the RBI by announcing two stimulus packages on December 7, 2008 and January 2, 2009.

A number of Tax and other fiscal measures have been undertaken. These include:

• An across the board cut in CENVAT by 4 percentage points benefitting all sectors;

• Reduction of the rate of duty on cotton textiles and textile articles from 4% to Nil.

• Provision of additional funds of Rs.1100 crore to ensure full refund of Terminal Excise duty/CST.

• Specific measures on customs duties on sectors such as steel and cement through restoration of the levels of protection;

• Service tax concessions and enhancement of drawback rates for exports.

• Interest subvention on pre and post shipment credit for labour intensive exports like textiles, leather, gem and jewellery, carpets and handicrafts; and

• Extension of a Line of Credit (LoC) by Rs.5000 crore to EXIM Bank from RBI to provide pre-shipment and post-shipment credit, in rupees or dollars, to Indian exporters at competitive rates.

• Refinance facilities respectively of Rs.4000 crore for the National Housing Bank for housing sector.

• Announcement of a package by Public sector banks for borrowers of home loans of up to 20 lakhs. This sector will be kept under a close watch and additional measures would be taken as necessary to promote an accelerated growth trajectory.

• Provision of additional allocation of Rs.1400 crore to clear the entire backlog in Technology Upgration Fund (TUF) Scheme in the textile sector.

• Inclusion of all items of handicrafts under 'Vishesh Krishi & Gram Udyog Yojana'.

• To facilitate the flow of credit to Medium, Small and Micro Enterprises (MSMEs), RBI has announced a refinance facility of Rs.7000 crore for SIDBI which will be available to support incremental lending, either directly to MSMEs or indirectly via banks, NBFCs and SFCs. In addition, the following steps are being taken.

(a) To boost collateral free lending, the current guarantee cover under Credit Guarantee Scheme for Micro and Small enterprises on loans will be extended from Rs.50 lakh to Rs.1 crore with guarantee cover of 50 percent.

(b) The lock in period for loans covered under the existing credit guarantee scheme will be reduced from 24 to 18 months, to encourage banks to cover more loans under the guarantee scheme.

(c) Public Sector Banks have announced a reduction of interest rates on existing as well as new loans to MSME sectors.

(d) Special monthly meetings of State Level Bankers’ Committees would be held to oversee the resolution of credit issues of micro, small and medium enterprises by banks. Department of MSME and Department of Financial Services will jointly set up a Cell to monitor progress on this front. Matters of MSMEs remaining unresolved with the Banks- SME Helpline for more than a fortnight may be brought to the notice of this Cell.

To provide a measure of security to unorganized workers, we have enacted the Unorganized Worker Sector Social Security Bill, 2008. The National Commission of Enterprises in the Unorganized Sector (NCEUS) has been asked to work out the detailed schemes in this regard.

The recommendations of the Committee of Governors for speedy socio economic development and empowerment of Women is under the active consideration of the Government. Meanwhile, the UPA Government has decided:

(i) to set up a High Power Committee of eminent persons and experts to study the Status of Women of India to enable the Government to take expeditious action.

(ii) to set up a ‘National Mission for Empowerment of Women’ for implementation of women-centric programmes in a Mission mode to achieve better coordination and synergy amongst the participating stakeholders.

(iii) to restructure and revitalize the Rashtriya Mahila Kosh (RMK) to scale up their activities including that of backward and forward linkages to function as a single window facilitator and service provider for women Self-Help Groups (SHGs). The authorized and paid-up capital of RMK will be enhanced in a phased manner.

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