BUDGET 2009

Finance Minister Pranab Mukherjee set a sharply higher fiscal
deficit target to 6.8% for the financial year ending March 2010.

Volatility was immense. The market surged in choppy trade ahead of
the Union Budget in early trade. The Sensex crossed the
psychological 15,000 mark in early trade. The market extended gains
gains after the Finance Minister Pranab Mukherjee said there is
need to return to 9% growth at the earliest. A sell-off gripped the
market later. The market cut losses after a sharp intraday fall in
early afternoon trade.

The market was expecting some announcement on decontrol on fuel
prices but the FM only said that a panel will be set up to look
into the pricing of petrol and diesel. The market was also
surprised the FM keeping quiet on Foreign Direct Investment policy.


The projected FY 2010 fiscal deficit is much higher than the 5.5%
deficit forecast by Mukherjee in an interim budget in February
2009, and also higher than the 6.2% deficit recorded by the
government in the previous year ended 31 March 2009.

The finance minister has forecast an increase in plan expenditure
by 34% and non-plan expenditure by 37%. The total projected
budgetary spending in 2009-10 stands at Rs 10.23 lakh crore. The
government has proposed an increase in the allocation for
government welfare schemes by 45%. Expenditure on Bharat Nirman has
been hiked by 45%. The government has allocated Rs 3,91,000 crore
under the National Rural Employment Guarantee Scheme this year. The
allocation for rural roads scheme has been raised by 59% in
2009-10.

FM has increased personal income tax exemption by Rs 15,000 for
senior citizens and by Rs 10000 for others. The 10% surcharge on
personal income tax has been scrapped. The FM minister has scrapped
the Fringe Benefit Tax and also suggested removal for the
Commodities Transaction Tax (CTT). He has proposed no changes in
corporate tax structure. He said states agreed on basic structure
of goods and services tax. He said the government will pursue
structural changes in direct and indirect taxes and committed for
further tax reforms. He said fiscal expansion to go a long way in
reviving growth.

The Minimum Alternate Tax (MAT) has been hiked to 15% of book
profit from 10% of boom profit

The Finance Minister (FM) said the plan it to a return to a path of
9% at the earliest and to deepen and broaden the agenda for
inclusive development. The FM forecast a 6.7% GDP growth for FY
2010.

The government has extended agriculture debt waiver by 6 months and
provided additional Rs 1000 crore over interim budget for
irrigation. Budget will provide additional subvention of 1% to
farmers who pay short term farm loans on schedule and target for
agriculture credit is set at Rs 3,25,000 crore. He said government
will develop long distance gas pipelines to develop national grid
and LNG infrastructure in the country.

The government has restored 8% excise duty on manmade fibres. It
has meanwhile, scrapped the excise duty on branded jewellery. With
regards to the customs duty, the duty on LCD panels has been cut to
5% from 10%. The government has imposed a 5% customs duty on set
top boxes. The customs duty on wind power equipment has been cut to
5% from 7.5%.

The finance minister said fiscal deficit target will be closer to
3% of GDP by FY 2011-12 assuming a global economic recovery. He has
assumed GDP growth of 8% in FY 2011 and 9% in FY 2012.