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March 1st, 2009

FM presents Interim Budget with status quo on tax rates

Union Finance and External Affairs Minister Pranab Mukhherjee arrives at Parliament

External Affairs Minister Mr. Pranab Mukherjee, who is also holding charge of the Finance Ministry, tabled a $190.6 billion interim budget for 2009-10 that keeps tax rates unaltered and steps up social sector spending, while giving a skip to fiscal prudence in times of "extraordinary" circumstances.

Primarily devoting his 69-minute speech to highlighting the achievements of the United Progressive Alliance (UPA) Government, Mr. Mukherjee expressly chose to leave additional measures required to counter the economic slowdown for the regular budget to address.

Nevertheless, he said that India's growth story had remained intact and that the steps taken by the government as well as the Reserve Bank of India had helped in cushioning the impact of the global crisis on the country's economy.

"In these difficult times, when most economies are struggling to stay afloat, a healthy 7.1 percent rate of gross domestic product (GDP) growth still makes India the second fastest growing economy in the world," he said.

"Extraordinary economic circumstances merit extraordinary measures. Now is the time for such measures," Mr. Mukherjee said, but stuck to presenting what was essentially a vote-onaccount, seeking parliament's approval to finance government expenditure till, the regular budget is presented and passed. Mr. Mukherjee was chosen to present the interim budget as Prime Minister Dr. Manmohan Singh, who holds the Finance portfolio, was convalescing from a heart surgery and gave the additional charge of the Ministry to his Foreign Minister.

The interim budget had a clear focus on social sectors, and the higher spending on rural job guarantee scheme, on education and the midday meal scheme will take huge toll on the country's fiscal deficit, now budgeted at 5.5 percent of the GDP during 2009-10. The External Affairs Minister said the current year, too, fiscal deficit would climb to 6 percent, against the budgeted 2.5 percent, while revenue deficit would move up to 4.4 percent against 1 percent.

"Since the scope for revenue mobilization is bound to be limited in a period of economic slowdown, any increase in plan expenditure will increase the fiscal deficit. Indeed, we may have to consider additional plan expenditure of anything from 0.5 percent to 1 percent of GDP and gear up our system accordingly," the Minister said.

Two new schemes were unveiled in the budget - the Indira Gandhi National Widow Pension Scheme and Indira Gandhi National Disability Pension Scheme - for widows and disabled people in the age group 18-40 years.

The Minister also stepped up the allocation for defence to Rs.1,417.03 billion against the budget estimates of Rs.1,146 billion and justified it saying India was facing a renewed threat perception. "We are going through tough times. The Mumbai terror attacks have given an entirely new dimension to cross-border terrorism. A threshold has been crossed. Our security environment has deteriorated considerably."

Continues on Page 2

Highlights of Interim Budget

  • Total expenditure for 2009-10 pegged at Rs. 9.52 trillion
  • Plan expenditure for 2009-10 at Rs. 2.85 trillion
  • Non-plan expenditure at Rs. 6.68 trillion
  • Provision for subsidy on food, fertiliser and petroleum at Rs. 955.79 billion
  • Defence allocation increased to Rs. 1.417 trillion
  • Urban renewal spending pegged at Rs. 118.42 billion
  • Rural job schemes to get Rs. 301 billion in 2009-10
  • National rural health mission spending at Rs. 120.7 billion
  • Rural infrastructure development outlay at Rs. 140 billion
  • India remains second-fastest growing economy in the world
  • Economy expected to grow 7.1 percent this fiscal
  • Government spent Rs. 700 billion on 37 infrastructure projects in 2008-09
  • Under public-private partnership (PPP), 54 central infrastructure projects approved
  • Country's agriculture outlook is encouraging
  • Plan allocation for farm sector hiked 300 percent in past five years
  • Farm debt worth Rs. 653 billion waived of 360 million farmers
  • Government will continue to provide additional subsidy to farmers
  • Corpus of Rural Infrastructure Development Fund hiked to Rs. 140 billion from Rs. 55 billion

Bhavan celebrates Republic Day

The Sarang helicopter team of Indian Air Force

On February 11, the Bharatiya Bhavan in West Kensington welcomed a full house for the Republic Day celebration in its Mountbatten Auditorium. The Chief Guest was the Indian High Commissioner, Shiv Shankar Mukherjee. Also present were Lord Hameed, Lord Parekh and the Mayor of Hammersmith and Fulham, Councillor Andrew Johnson.

In his speech of welcome, the Bhavan's chairman, Maneck Dalal, OBE, thanked the High Commission and the Borough of Hammersmith and Fulham for their support of the Bhavan over the years.

Dalal then went on to say how proud he was of the fact that the Indian Government had recently honoured two members of the Bhavan's executive committee - Lord Hameed who had received a Padma Bhushan, and Dr. John Marr who had received a Padma Shri. Both were worthy recipients of the honours bestowed on them, and the Bhavan was delighted at the recognition they had received.

Dalal then introduced Lord Hameed who said that he had been very honoured, to receive the Padma Bhushan. He had been lucky enough to receive honours from many countries, but there was something special about an award from one's mother country.

Lord Bikhu Parekh, in his speech said that he hoped that the Indian Government would issue more honours to deserving recipients. He recalled that India had come a long way since it was declared a Republic "India's constitution had been created at a time when literacy rates were much lower than today. Poverty had also been much more prevalent and it was a tribute to the country that the constitution, which had been created under such circumstances, was still very much alive today," he said.

Mr. Shiv Shankar Mukherjee congratulated Lord Hameed and Dr. Marr for their honours and said they were "luminaries of the Bhavan" in London. He went on to say that despite recent economic downturns, India had managed to progress and its economy was fundamentally sound. Growth rates were now 6.5 percent. In 1947 when the Republic was born, the question was - "would India survive?" Now India was seen as a regional and a global player, and for that, he emphasised that we owed a debt of gratitude to our founding fathers for giving us those institutions which define India today: democracy, pluralism and secularism. India remained an open society and was strong enough to withstand outside pressures such as terrorism, Mr. Mukherjee said. "Bigoted minds will not win," he said.


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