Interim Union Budget (2009-10)

Belying all expectations of India Inc. of fiscal sops to weather the impact of the global downturn, the United Progressive Alliance Government, in the Interim Union Budget for 2009-10 presented by the External Affairs Minister Pranab Mukherjee, who holds charge of Finance on February 16,2009 in the Parliament, announced a massive allocation of Rs. 1,31,317 crore for its various flagship programmes to spur the economy and benefit the common man. It also indicated the need for tax relief in 2009-10, when the regular budget is presented by a new regime after the Lok Sabha elections. Presenting the Interim Budget for a vote-on-account for the necessary Government expenditure in the first four months of the new fiscal, the Minister desisted from announcing any sops as he did not have the parliamentary mandate to “tweak” the rates and did whatever he could under the constraints.
The Interim Budget is a stop-gap measure intended to take care of the essential Government spending until a new Government is voted to power. Despite avoiding giveaways on election eve, the Minister was accused of making “the first election speech in Parliament”. Given the deepening economic gloom, there were expectations that the government would announce another fiscal stimulus and direct or indirect tax breaks for at least some of the beleaguered sectors of the economy.
The Interim Budget for 2009-10, by resisting the regulatory reflex to a rapidly deteriorating external situation is the strongest signal yet that our economic managers think enough has already been done to insulate India. On current indications, the economy next year should not be too far off the 7.1 per cent growth rate it is slated to notch up in 2008-09. The fiscal deficit will, in the process, keep yawning — it will be a long climb back from the precipitous fall to seven per cent in 2008-09.
Plan Allocation
The Interim Budget provides for Rs.9,53,231 crore of expenditure, of which plan expenditure accounts for Rs.2,85,149 crore and non-plan expenditure Rs.6,68,082 crore. The Finance Minister has said that an additional plan expenditure of 0.5-1 per cent of the Gross Domestic Product (GDP) will need to be considered in the regular Budget, which will be left with the challenge of mobilising the resources. Anticipating lower tax revenues, the Budget has provided for a higher fiscal deficit. Revenue and fiscal deficits are estimated at four per cent and 5.5 per cent of the GDP respectively. Though lower than in 2008-09, these will not meet the canons of fiscal prudence but clearly in a downturn rigid fiscal targets that seemed achievable when the economy was on a high-growth path cannot be mechanically adhered to.
Higher Allocation for Defence
Another area which was expected to be at the centre-stage of the UPA fund allocations was defence. The terrorist attacks in Mumbai have changed the security scenario, giving a new dimension to cross-border terrorism, and relations between India and Pakistan have deteriorated. Experts have been emphasising the need for retaliatory action. India’s defence preparedness, therefore, has to be strengthened. In view of this, the government has raised the country’s defence budget by 35 per cent to Rs 1,41,703 crore, which non one would grudge. Besides, the paramilitary forces have also been given a higher allocation of Rs 4,500 crore.
Other Sectors
The Minister announced massive spending on social sector schemes for the larger benefit of the aam aadmi. Among these, the Bharat Nirman programme was allocated Rs. 40,900 crore while Rs. 30,100 crore has been set apart for the National Rural Employment Guarantee Scheme (NRGES) for the new fiscal. With the thrust on higher spending on the social sector, the Sarva Siksha Abhiyan (SSA) has been allocated Rs. 13,100 crore, the Integrated Child Development Services (ICDS) Rs. 6,705 crore, the Jawaharlal Nehru Urban Renewal Scheme (JNURS) Rs. 11,842 crore, the National Rural Health Mission (NRHM) Rs. 12,070 crore, the Rajiv Gandhi Rural Drinking Water Mission (RGRDWM) Rs. 7,400 crore and the Total Rural Sanitation Programme (TRSP) Rs. 1,200 crore. All these programmes aim at employment generation and infrastructure development and promise to keep the job market going--something the Government wants to ensure ahead of Lok Sabha elections.
Among ministries, the biggest chunk of enhanced allocations has gone to the Ministry of Sports and Youth Affairs and the Ministry of Culture, which need to be supported to host the Commonwealth Games. While revised estimates for Ministry of Culture were Rs 595 crore in 2008-2009, the budgetary estimates for the current year have been pegged at Rs 700 crore.
Sports Ministry’s revised estimates last year were Rs 1,311 crore, but the budgetary estimates this year have been proposed at Rs 1,490 crore. This has been done to ensure availability of resources for the Commonwealth Games to be hosted in Delhi in 2010.
The irony of the last budget of the outgoing Government is that it comes after the tide has turned. The achievements the economy has notched up in each of the four preceding years are remarkable. It does the UPA credit for not succumbing to the temptation of fresh giveaways, particularly when it would have conventional economic wisdom on its side. The Vajpayee government handed over fairly healthy Government books to Manmohan Singh. The next Government’s inheritance need not have a bigger hole than there is already. Continuity in economic management despite a change of the political guard portends well for India.