The Union Budget on Friday proposed major personal income tax sops but effected a two per cent hike in excise duty across the board while slapping levies on petrol and diesel, partially rolling back stimulus measures in the face of economic revival.
Presenting the budget for 2010-11, Finance Minister Pranab Mukherjee was severe on petroleum products, slapping customs duty of five per cent on crude, tripling it to 7.5 per cent on petrol and diesel and doubling it on some other oil products. This apart, central excise duty on petrol and diesel was raised by Rs one per litre.
Consequently petrol would cost more by Rs 2.71 a litre while diesel would be dearer by Rs 2.55 a litre from tonight. Jet fuel would be costlier by upto Rs 1500 per kilolitre.
The budget hiked excise duties on non-oil items from eight per cent to ten percent, a move that would increase prices of cars, TVs, ACs, tobacco, cigarettes and cement among other items.
The Opposition dubbed the budget as "highly inflationary" and staged a rare walkout as Mukherjee read out proposals on petrol and diesel. The BJP has threatened to move cut motions and oppose the budget in Lok Sabha.
However, to buoy tax payers, he broadbased Income tax structure as a result of which income between Rs 1.6 lakh to Rs 5 lakh would attract a 10 per cent tax, income between Rs.5 and Rs 8 lakh would be levied 20 per cent and income beyond Rs 8 lakh 30 per cent. The changes would help taxpayers save upto Rs. 50,000 at higher income levels.
Besides, he offered a deduction on investment upto Rs 20,000 in long term infrastructure bonds over the prevailing Rs one lakh deduction on savings.
For farmers, the budget proposed a concessional interest of five percent on timely payment by doubling the subvention to two per cent, apart from incentives for sector like housing, and banks.
Mukherjee proposed a total expenditure of Rs 11,08,749 crore including Rs 3,73,092 on planned activities for which he would raise a non tax and tax revenue of Rs 6,82,212 crore leaving a deficit of Rs 3,81,408 crore, which would be bridged by borrowing.
As per the plan allocations announced in the budget, 37 per cent has gone to social sectors, 46 per cent has gone to infrastructure sector out of which 25 per cent is for rural infrastructure.
The Plan allocation for school education was raised to Rs 31,036 crore, while outlay for defence was increased by a paltry four per cent to Rs 1,47,344 crore from last year's Rs 1,41,703 crore.
But despite the borrowings to meet expenditure, the government would still face a fiscal deficit of 5.5 per cent of GDP, to cover for which Mukherjee has brought in more areas like air journeys of all classes and rental into service tax net, which would help him raise an additional Rs 3000 crore. In all, net revenue gain is placed at Rs 20,500 crore.
During the year he also proposed to mobilise Rs 40,000 crore through sale of government equity in PSUs, up from an estimated Rs 25,000 crore this year.
On the decision to raise duties, Mukherjee told reporters later that "customs duty was withdrawn when the prices of petroleum reached as high as 122 USD per barrel. Now it is much softer and there is no reason to continue the same concession."
Crude oil quoted at USD 78 a barrel in Asian trade today compared to a high of over USD 147 a barrel in July 2008.
Leader of Opposition Sushma Swaraj, who led the walkout against many of the Budget proposals, alleged that the hike in the prices of petrol and diesel would have a cascading effect and hit the common man hard.
At a joint press conference, along with other opposition veterans, SP leader Mulayam Singh Yadav appealed to the people to hit the streets in protest against government's move and sought their support like they did "during the Emergency".
Mukherjee said he had three considerations while proposing the budget -- how quickly can the economy come back nine per cent growth, to achieve fiscal consolidation and ensure inclusive growth.
The stock market welcomed the Budget, with the benchmark Sensex putting up a 350 point rally in noon trade. But it closed higher by 175 points on account of profit booking owing to a long weekend.
"A job well done" was how Prime Minister Manmohan Singh summarised Mukherjee's Budget for 2010-11, and said: "You must look at the total picture emerging from the budget. The net revenue gain for the Finance Minister is only Rs 20,000 crore. In an economy as large as India, this resource mobilisation effort and balance should not trigger any inflationary expectation." PTI
