Bengal Chambers opinion of the Interim Budget 2009-2010

The Finance Minister in-charge Mr Pranab Mukherjee presented the Interim Budget for 2009-2010. He highlighted the salient achievements of the UPA Government in all spheres in the first four years of its tenure. In respect of taxes, he mentioned that necessary measures have already been taken for expansion of tax base, computerization through e-payments /e-filing and rationalization/ reduction in tax rates for removing distortions as obtained in the last few years.

He also explained that in the context of the increased globalization of the Indian economy and the global meltdown in the second half of 2008, the growth rates have been affected. The consequential impact was felt in terms of high commodity prices and high inflation which touched nearly 13%. Thereupon the Government took a large number of fiscal, monetary and administrative measures along with the RBI and was successful in bringing down the inflation sharply in the last few months. There was also a blanket reduction in Central Excise rates during the year.

Mr. Mukherjee opined that 2009 may turn out to be worse than 2008. In fact, he mentioned that fiscal deficit will go up to 6% of GDP against the earlier target of 2.5% for 2008-09.  The Revenue deficit has gone up from 1% in the Budget estimate to 4.4% of GDP.  Tax collections for the year will also fall from  Rs.6.8 lac crores to Rs.6.2 lac crores.

He further highlighted the increased emphasis on grant of loans to farmers in the agricultural sector and increased flow of agricultural credit.  He made mention of increased investments in infrastructure and continuance of food/fertilizer subsidies.  Thereafter, he specifically indicated interest rate subvention for textiles and gem & jewellery sectors.  In specific terms, there has been fairly substantial resources provided for flagship projects like the NRGEA, JNNURM, SARVA  SIKSHA, etc.

However, he specifically mentioned that this was a vote on account for the next few months since the elections were round the corner and the regular budget will be presented by the new Government during the year. Accordingly, this interim budget does not contain any special stimulus packages or any special proposals on direct and indirect taxes and to that extent it could be viewed as a non-event at this juncture, although the figures definitely indicate a sharply deteriorating fiscal deficit situation which could be a cause of concern.