Budget 2010 Part-1

Key Features of Budget 2010-2011
CHALLENGES
To quickly revert to the high GDP growth path of 9 per cent and then find the
means to cross the ‘double digit growth barrier’.
To harness economic growth to consolidate the recent gains in making development
more inclusive.
To address the weaknesses in government systems, structures and institutions at
different levels of governance.
OVERVIEW OF THE ECONOMY
India among the first few countries in the world to implement a broad-based
counter-cyclic policy package to respond to the negative fallout of the global
slowdown.
The Advance Estimates for Gross Domestic Product (GDP) growth for 2009-10
pegged at 7.2 per cent. The final figure expected to be higher when the third and
fourth quarter GDP estimates for 2009-10 become available.
The growth rate in manufacturing sector in December 2009 was 18.5 per cent – the
highest in the past two decades.
A major concern during the second half of 2009-10 has been the emergence of
double digit food inflation. Government has set in motion steps, in consultation
with the State Chief Ministers, which should bring down the inflation in the next
few months and ensure that there is better management of food security in the
country.
CONSOLIDATING GROWTH
Fiscal Consolidation
With recovery taking root, there is a need to review public spending, mobilise
resources and gear them towards building the productivity of the economy.
Fiscal policy shaped with reference to the recommendations of the Thirteenth
Finance Commission, which has recommended a calibrated exit strategy from the
expansionary fiscal stance of last two years.
It would be for the first time that the Government would target an explicit reduction
in its domestic public debt-GDP ratio.
Tax reforms
On the Direct Tax Code (DTC) the wide-ranging discussions with stakeholders
have been concluded – Government will be in a position to implement the DTC
from April 1, 2011.
Centre actively engaged with the Empowered Committee of State Finance Ministers
to finalise the structure of Goods and Services Tax (GST) as well as the modalities
of its expeditious implementation. Endeavour to introduce GST by April, 2011
People’s ownership of PSUs
Ownership has been broad based in Oil India Limited, NHPC, NTPC and Rural
Electrification Corporation while the process is on for National Mineral
Development Corporation and Satluj Jal Vidyut Nigam. This will raise about
Rs 25,000 crore during the current year.
Higher amount proposed to be raised during the year 2010-11.
Fertiliser subsidy
A Nutrient Based Subsidy policy for the fertiliser sector has been approved by the
Government and will become effective from April 1, 2010.
This will lead to an increase in agricultural productivity and better returns for the
farmers, and overtime reduce the volatility in demand for fertiliser subsidy and
contain the subsidy bill.
Petroleum and Diesel pricing policy
Expert Group to advise the Government on a viable and sustainable system of
pricing of petroleum products has submitted its recommendations.
Decision on these recommendations will be taken in due course.
Improving Investment Environment
Foreign Direct Investment
Number of steps taken to simplify the FDI regime.
Methodology for calculation of indirect foreign investment in Indian companies
has been clearly defined.
Complete liberalisation of pricing and payment of technology transfer fee and
trademark, brand name and royalty payments.
Financial Stability and Development Council
An apex level Financial Stability and Development Council to be set up with a
view to strengthen and institutionalise the mechanism for maintaining financial
stability.
This Council would monitor macro-prudential supervision of the economy,
including the functioning of large financial conglomerates, and address interregulatory
coordination issues.
Banking Licences
RBI is considering giving some additional banking licenses to private sector players.
Non Banking Financial Companies could also be considered, if they meet the RBI’s
eligibility criteria.
Public Sector Bank Capitalisation
Rs.16,500 crore provided to ensure that the Public Sector Banks are able to attain
a minimum 8 per cent Tier-I capital by March 31, 2011.
Recapitalisation of Regional Rural Banks (RRB)
Government to provide further capital to strengthen the RRBs so that they have
adequate capital base to support increased lending to the rural economy.
Corporate Governance
Government has introduced the Companies Bill, 2009 in the Parliament to replace
the existing Companies Act, 1956, which will address issues related to regulation
in corporate sector in the context of the changing business environment.
Exports
Extension of existing interest subvention of 2 per cent for one more year for exports
covering handicrafts, carpets, handlooms and small and medium enterprises.
Agriculture Growth
Government will follow a four-pronged strategy, covering
(a) Agricultural production
Rs. 400 crore provided to extend the green revolution to the eastern region of the
country comprising Bihar, Chattisgarh, Jharkhand, Eastern UP, West Bengal and
Orissa.
Rs. 300 crore provided to organise 60,000 “pulses and oil seed villages” in rain-fed
areas during 2010-11 and provide an integrated intervention for water harvesting,
watershed management and soil health, to enhance the productivity of the dry land
farming areas.
Rs. 200 crore provided for sustaining the gains already made in the green revolution
areas through conservation farming, which involves concurrent attention to soil
health, water conservation and preservation of biodiversity.
(b) Reduction in wastage of produce
Government to address the issue of opening up of retail trade. It will help in bringing
down the considerable difference between farm gate, wholesale and retail prices.
Deficit in the storage capacity met through an ongoing scheme for private sector
participation – FCI to hire godowns from private parties for a guaranteed period of
7 years.
(c) Credit support to farmers
Banks have been consistently meeting the targets set for agriculture credit flow in
the past few years. For the year 2010-11, the target has been set at Rs.3,75,000
crore.

In view of the recent drought in some States and the severe floods in some other
parts of the country, the period for repayment of the loan amount by farmers extended
by six months from December 31, 2009 to June 30, 2010 under the Debt Waiver
and Debt Relief Scheme for Farmers.
Incentive of additional one per cent interest subvention to farmers who repay
short-term crop loans as per schedule, increased to 2% for 2010-11.
(d) Impetus to the food processing sector
In addition to the ten mega food park projects already being set up, the Government
has decided to set up five more such parks.
External Commercial Borrowings to be available for cold storage or cold room
facility, including for farm level pre-cooling, for preservation or storage of
agricultural and allied produce, marine products and meat.
Infrastructure
Rs 1,73,552 crore provided for infrastructure development which accounts for over
46 per cent of the total plan allocation.
Allocation for road transport increased by over 13 per cent from Rs. 17,520 crore
to Rs 19,894 crore.
Rs 16,752 crore provided for Railways, which is about Rs.950 crore more than last
year.
India Infrastructure Finance Company Limited (IIFCL)
IIFCL’s disbursements are expected to touch Rs 9,000 crore by end March 2010
and reach around Rs 20,000 crore by March 2011.
IIFCL has refinanced bank lending to infrastructure projects of Rs. 3,000 crore during
the current year and is expected to more than double that amount in 2010-11.
The take-out financing scheme announced in the last Budget is expected to initially
provide finance for about Rs. 25,000 crore in the next three years.
Energy
Plan allocation for power sector excluding RGGVY doubled from Rs.2230 crore
in 2009-10 to Rs.5,130 crore in 2010-11.
Government proposes to introduce a competitive bidding process for allocating
coal blocks for captive mining to ensure greater transparency and increased
participation in production from these blocks.
A “Coal Regulatory Authority” to create a level playing field in the coal sector
proposed to be set up.
Plan outlay for the Ministry of New and Renewable Energy increased by 61 per
cent from Rs.620 crore in 2009-10 to Rs.1,000 crore in 2010-11.
Solar, small hydro and micro power projects at a cost of about Rs.500 crore to be
set up in Ladakh region of Jammu and Kashmir.

Environment and Climate change
National Clean Energy Fund for funding research and innovative projects in clean
energy technologies to be established.
One-time grant of Rs.200 crore to the Government of Tamil Nadu towards the cost of
installation of a zero liquid discharge system at Tirupur to sustain knitwear industry.
Rs.200 crore provided as a Special Golden Jubilee package for Goa to preserve the
natural resources of the State, including sea beaches and forest cover.
Allocation for National Ganga River Basin Authority (NGRBA) doubled in
2010-11 to Rs.500 crore.
Schemes on bank protection works along river Bhagirathi and river Ganga-Padma
in parts of Murshidabad and Nadia district of West Bengal included in the Centrally
Sponsored Flood Management Programme.
A project at Sagar Island to be developed to provide an alternate port facility in
West Bengal.
INCLUSIVE DEVELOPMENT
The spending on social sector has been gradually increased to Rs.1,37,674 crore in
2010-11, which is 37% of the total plan outlay in 2010-11.
Another 25 per cent of the plan allocations are devoted to the development of rural
infrastructure.
Education
Plan allocation for school education increased by 16 per cent from Rs.26,800 crore
in 2009-10 to Rs.31,036 crore in 2010-11.
In addition, States will have access to Rs.3,675 crore for elementary education
under the Thirteenth Finance Commission grants for 2010-11.
Health
An Annual Health Survey to prepare the District Health Profile of all Districts
shall be conducted in 2010-11.
Plan allocation to Ministry of Health & Family Welfare increased from Rs 19,534
crore in 2009-10 to Rs 22,300 crore for 2010-11.
Financial Inclusion
Appropriate Banking facilities to be provided to habitations having population in
excess of 2000 by March, 2012.
Insurance and other services to be provided using the Business Correspondent model.
By this arrangement, it is proposed to cover 60,000 habitations.
Augmentation of Rs.100 crore each for the Financial Inclusion Fund (FIF) and the
Financial Inclusion Technology Fund, which shall be contributed by Government
of India, RBI and NABARD.
Rural Development
Rs. 66,100 crore provided for Rural Development.
Allocation for Mahatma Gandhi National Rural Employment Guarantee Scheme
stepped up to Rs.40,100 crore in 2010-11.
An amount of Rs.48,000 crore allocated for rural infrastructure programmes under
Bharat Nirman.
Unit cost under Indira Awas Yojana increased to Rs.45,000 in the plain areas and
to Rs.48,500 in the hilly areas. Allocation for this scheme increased to Rs.10,000
crore.
Allocation to Backward Region Grant Fund enhanced by 26 per cent from Rs.5,800
crore in 2009-10 to Rs 7,300 crore in 2010-11.
Additional central assistance of Rs 1,200 crore provided for drought mitigation in
the Bundelkhand region.
Urban Development and Housing
Allocation for urban development increased by more than 75 per cent from Rs.3,060
crore to Rs.5,400 crore in 2010-11.
Allocation for Housing and Urban Poverty Alleviation raised from Rs.850 crore to
Rs.1,000 crore in 2010-11.
Scheme of one per cent interest subvention on housing loan upto Rs.10 lakh, where
the cost of the house does not exceed Rs.20 lakh — announced in the last
Budget — extended up to March 31, 2011. Rs.700 crore provided for this scheme
for the year 2010-11.
Rs.1,270 crore allocated for Rajiv Awas Yojana as compared to Rs.150 crore last
year.
Micro, Small & Medium Enterprises
High Level Council on Micro and Small Enterprises to monitor the implementation
of the recommendations of High-Level Task Force constituted by Prime Minister.
Allocation for this sector to be increased from Rs.1,794 crore to Rs.2,400 crore for
the year 2010-11.
The corpus for Micro-Finance Development and Equity Fund doubled to Rs.400
crore in 2010-11.
Unorganised Sector
National Social Security Fund for unorganised sector workers
National Social Security Fund for unorganised sector workers to be set up with an
initial allocation of Rs.1000 crore. This fund will support schemes for weavers,
toddy tappers, rickshaw pullers, bidi workers etc.
Rashtriya Swasthya Bima Yojana benefits extended to all such Mahatma Gandhi
NREGA beneficiaries who have worked for more than 15 days during the preceding
financial year.
A new initiative, “Swavalamban” will be available for persons who join New
Pension Scheme (NPS), with a minimum contribution of Rs.1,000 and a maximum
contribution of Rs.12,000 per annum during the financial year 2010-11, wherein
Government will contribute Rs.1,000 per year to each NPS account opened in the
year 2010-11. Allocation of Rs.100 crore made for this initiative.
Skill development
National Skill Development Corporation has approved three projects worth about
Rs 45 crore to create 10 lakh skilled manpower at the rate of one lakh per annum.
An extensive skill development programme in the textile and garment sector to be
launched by leveraging the strength of existing institutions and instruments of the
Textile Ministry to train 30 lakh persons over 5 years.
Social Welfare
Plan outlay for Women and Child Development stepped up by almost 50 per cent.
The ICDS platform being expanded for effective implementation of the Rajiv Gandhi
Scheme for Adolescent Girls.
“Saakshar Bharat” to further improve female literacy rate launched with a target
of 7 crore non-literate adults which includes 6 crore women.
Mahila Kisan Sashaktikaran Pariyojana to meet the specific needs of women
farmers to be launched with a provision of Rs 100 crore as a sub-component of the
National Rural Livelihood Mission.
Plan outlay of the Ministry of Social Justice and Empowerment enhanced by 80
per cent to Rs.4500 crore. With this enhancement, the Ministry will be able to
revise rates of scholarship under its post-matric scholarship schemes for SCs and
OBC students.
Plan allocation for the Ministry of Minority Affairs increased by 50 per cent from
Rs.1,740 crore to Rs.2,600 crore for the year 2010-11.
STRENGTHENING TRANSPARENCY & PUBLIC ACCOUNTABILTY
Financial Sector Legislative Reforms Commission to be set up to rewrite and clean
up the financial sector laws to bring them in line with the requirements of the
sector.
Rs 1,900 crore allocated to the Unique Identification Authority of India (UIDAI)
for 2010-11. UIDAI will be able to meet its commitments of issuing the first set of
UID numbers in the coming year
A Technology Advisory Group for Unique Projects (TAGUP) to be set up to look
into various technological and systemic issues for effective tax administration and
financial governance.
Independent Evaluation Office (IEO) chaired by the Deputy Chairman, Planning
Commission to be set up to evaluate the impact of flagship programmes.
Security and Justice
Allocation for Defence increased to Rs. 1,47,344 crore including Rs 60,000 crore
for capital expenditure.
About 2,000 youth to be recruited as constables in five Central Para Military Forces
from Jammu and Kashmir in the year 2010.
Planning Commission to prepare an integrated action plan for the thirty-three left
wing extremism affected districts. Adequate funds will be made available to support
the action plan.
Government has approved the setting up of the National Mission for Delivery of
Justice and Legal Reforms to help reduce legal backlog in courts from an average
of 15 years at present to 3 years by 2012.
BUDGET ESTIMATES 2010-11
The Gross Tax Receipts are estimated at Rs. 7,46,651 crore
The Non Tax Revenue Receipts are estimated at Rs. 1,48,118 crore.
The net tax revenue to the Centre as well as the expenditure provisions in 2010-11
have been estimated with reference to the recommendations of the Thirteenth
Finance Commission.
The total expenditure proposed in the Budget Estimates is Rs. 11,08,749 crore,
which is an increase of 8.6 per cent over last year.
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 15 per cent increase in
Plan expenditure, the increase in Non Plan expenditure is only 6 per cent over the
BE of previous year.
Fiscal deficit for BE 2010-11 at 5.5 per cent of GDP, which works out to Rs.3,81,408
crore.
Taking into account the various other financing items for fiscal deficit, the actual
net market borrowing of the Government in 2010-11 would be of the order of
Rs.3,45,010 crore. This would leave enough space to meet the credit needs of the
private sector.
The rolling targets for fiscal deficit are pegged at 4.8 per cent and 4.1 per cent for
2011-12 and 2012-13, respectively.
Against a fiscal deficit of 7.8 per cent in 2008-09, inclusive of oil and fertilizer
bonds, the comparable fiscal deficit is 6.9 per cent as per the Revised Estimates for
2009-10.
Conscious effort made to avoid issuing bonds to oil and fertilizer companies.
Government would like to continue with this practice of extending Government
subsidy in cash, thereby bringing all subsidy related liabilities into Government’s
fiscal accounting.



Source: http://indiabudget.nic.in/