The Union Budget was released amidst a lot of expectations from the industry.
Highlights of Budget 2010-11
* Rs 16,500 crore has been provided to ensure that Public Sector Banks are able to attain a minimum 8% Tier-I capital by March 31, 2011
Rs 1,73,552 crore has been provided for infrastructure development, which accounts for over 46% of the total plan allocation. Allocation for road transport has been increased by over 13% from Rs 17,520 crore to Rs 19,894 crore
* Plan allocation for the power sector excluding Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) doubled from Rs 2,230 crore in 2009-10 to Rs 5,130 crore in 2010-11
* The Plan and Non-Plan expenditures in BE 2010-11 are estimated at Rs 3,73,092 crore and Rs 7,35,657 crore, respectively. While there is a 15% increase in Plan expenditure, the increase in Non-Plan expenditure is only 6% over the BE of the previous year Fiscal deficit for BE 2010-11 has been estimated at 5.5% of GDP, which works out to Rs 3,81,408 crore
Direct Taxes
* Income tax slabs for individual taxpayers to be as follows
* Income up to Rs 1.6 lakh – Nil
* Income above Rs 1.6 lakh and up to Rs 5 lakh – 10%
* Income above Rs 5 lakh and up to Rs 8 lakh – 20%
* Income above Rs 8 lakh – 30%
* Deduction of an additional amount of Rs 20,000 allowed, over and above the existing limit of Rs 1 lakh on tax savings, for investment in long-term infrastructure bonds as notified by the Central Government
* Rate of minimum alternate tax (MAT) increased from the current rate of 15% to 18% of book profits
Indirect Taxes
* Rate reduction in central excise duties to be partially rolled back and the standard rate on all non-petroleum products enhanced from 8% to 10% ad valorem
* The specific rates of duty applicable to portland cement and cement clinker has also been adjusted upwards proportionately. Similarly, the ad valorem component of excise duty on large cars, multi-utility vehicles and sports-utility vehicles has been increased by 2 percentage points to 22%
* The basic duty of 5% on crude petroleum, 7.5% on diesel and petrol and 10% on other refined products has been restored. Central excise duty on petrol and diesel has been enhanced by Re 1 per liter each
Overall, we believe the budget is aimed to achieve consumption-driven growth, but it is inflationary, and the government will have to really work hard to ensure that the consumption SOPs offered to the middle class do not crush the poorer sections of the society. Controlling food price inflation is a must, and therefore measures to absorb liquidity from the system can be expected in the coming months, through interest rate hikes.
