Union Budget 2010-11 by Pranab Mukherjee

8/14/2019 Union Budget 2010-11 by Pranab Mukherjee

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FM- Mr. Pranab Mukherjee

UNION BUDGET A

Primer

2010-11

Niraj Agarwal

2/26/2010


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http://nirajagarwal.blogspot.com/ Page 2

Union Budget for the year 2010-11 was presented by Finance Minister Mr. Pranab Babu on the

26th

day of February at 11 A.M. The budget which used to be just a receipt and expenditure

account few years back has turn into policy statement by government, more so because of the

481 channels that beam the live telecast of the budget, which is maximum for any country.

The worry before the FM was the rising food items and poor Kharif crops.

The main take away from this year budget are

1. For the first time in the history of India, a finance minister in his budget speech looksconfident of double digit growth. It shows the confidence of the UPA government as a

whole.

2. It lays the roadmap for the both DTC & GST.3. It spells out the revenue the government expects to raise through the 3G spectrum.4. It promises an annual report on debt management.5. Infusion of 16500 cr in the PSU bank in the form Tier-I capital that do not presently meet

the 8% criteria. Uplifts the bank index of BSE.

6. For the first time, FM speaks about the transparency in an union budget. Talks aboutintroduction of companies bill 2009 which has a major emphasis on corporate

governance. Thus talking of transparency, FM do away with oil bonds which are mainly

below the line item used by government to fudge the data and present more attractive

account. Thus it is a welcome move which was accepted well by the market.

7. It stress on the needs for infrastructure. 46% of plan outlay or roughly 1.73 lakh crallocated to onfrastructure. Moreover investment upto 20000 in infrastructure bonds

exempted in the hands of tax payers. Thus welcome move stocks of L&T, Lanco

Infratech takes it positively,.

8. 25% of plan outlay on Rural Infrastructure.9. 31036 cr for school education.


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10.FM spends its kitty on financial inclusion as the message was spread by the PrimeMinister.

a. 66100 cr for Rural Development.b. 40100 cr for NREGA.c. 48000 cr for Bharat Nirman.d. 10000 cr for Indira Awas Yojana.

11.Social security for BPL workers and NREGA beneficiaries, plan to provide them muchneeded insurance.

12.Financial secrtor reform committee to be set up.13.1900 cr for the UID project in this fiscal year. Brings a smile to the IT sector and thus

lifts the IT Index.

14.Clean and distinguishable identity for Indian Rupee on the line of dollar and yen.15.147000 cr for defence, out of which 60% for Capital Expenditure.16.Fiscal Deficit from 6.8% to 5.5% this year. With the target of further reducing it to 4.1%

by 2012-13.

17.In the taxation front-a. 2 page SARAL-II form for individual tax payers.b. Direct Tax

i. Upto 1.6L-NILii. 1.6L TO 5L-10%

iii. 5L TO 8L-20%iv. Above 8L30%v. This will bring relief to 60% of tax payers, moreover exemption of 20000

more for investment in infrastructure bonds.

c. MAT increased from 15% to 18%. This will adversely impact companies such asRIL, Bharti and Pharma companies.

d. For corporate surcharge dropped from 10% to 7.5%.e. Higher weighted deduction for in house R&D. This will boost innovation and

research and will reduce technology import. The positive impact it will have on

pharma companies will be nulled by the negative impact of the rising MAT.


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f. To promote entrepreneurship and less compliance, companies having turnoverupto 60 lakhs need not have to mandatorily audit their accounts.

g. Limited Liability Partnership not subject to Capital Gains Tax. Thus it will benefitprofessionals such as CAs, Lawyers etc.

h. Corporate Tax rate at 33.21%.i. THE NET EFFECT OF THE REFORMS WILL BE A REVENUE LOSS OF

26000 CR.

18.In the Indirect Tax Fronta. Excise Duty rise from 8% to 10%.b. Excise Duty rise on cigaratees , will negaitively impact ITC Limited.c. Basic Duty rise on cruse petroleum, will increase price of diesel & petrol by

atleast 2 rupees. For the 1st time in the history of Indian Parliament opposition

walked out of the budget speech after the proposal of such duties at a time of high

inflation.

d. The fuel prices of petrol and diesel will be up by Rs 2.67/litre and Rs 2.58/litrerespectively due to the hike in custom and excise duties. Items like refrigerator,

washing machine, ACs, TV,cigarettes etc will cost more by 2-4% due to increase

in excise duty and fuel price rise.

e. No change in the Service Tax rate i.e, 10%.f. NET EFFECT OF SUCH REFORMS WOULD BE A REVENUE GAIN OF

46500 CR.

19.Thus overall Government is slated to gain 20500 cr due to the proposal of FM.20.Effect of Budget on Capital Market

a. The market has reacted very positively to the Indian Union Budget 2010-11. Themarkets opened in a positive bias and when the announcements from the budget

came in, markets reacted momentarily and went up by almost 300+ points in

sensex. Sensex closed 175 points up at 16429 and Nifty closed at 4922 levels up

by 62 points. Auto stocks, Metal stocks, and banking stocks reacted

positively.RCap, IFCI,Tata Motors, Hindalco,M&M gained smartly.


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Thus above were the main points which I thought needed special mention, the fine prints are

available freely for detailed reading. From my side I personally think this year s budget was

focused towards entrepreneurs, farmers and corporate. Though I must also mention that this

fiscal there are no major elections in any of the states and FM could have done some drastic steps

to revive the economy such as deregulation of oil prices or introducing food coupons instead of

PDS system which is largely corrupt. But nonetheless, the FM in the next year will face more

problems as there would be elections in West Bengal. Tamil Nadu etc which congress cannot

risk and hence we would be seeing a more of general, populist budget.

As I have mentioned previously that due to the presence of too many 24 hour news channels

budget has become a celebrated event and hence FM could have taken this to brand UPA better

and present more to the aam aadmi.

Thus if I have to critically analyse this budget the following points comes to my mind

1. Relaxation in Direct Tax would benefit at most 1 crore tax payers but increase in ExciseDuty would impact 100 cr people as it would result in higher prices of goods and if the

stimulus would have continued this year too, it might have resulted in more jobs and thus

higher purchasing power.

2. When Tax rate goes down, compliance increases phenomenally as we have seen in thepast too. Thus there would not be any revenue loss as projected by FM.

3. What was lacking in this years budget was reform in the higher education, which is verymuch needed for a country like India which is now more of a service industry driven

economy.

*Hope you all like this primer on Union Budget. As always your feedback and comments are

most welcome in my mail and blog. Thanks for your time.

Documents

Union Budget 2010-11 by Pranab Mukherjee