This Budget 2009-10 must be looked at against the larger backdrop of the unprecedented global economic crisis. Finance minister had to do a fine balancing act between fiscal compulsions and the need to provide continued stimulus to the economy. In the given circumstances, he has done reasonably well though clearly he has not been able to meet the expectations of all sections in the economy.

The focus of the Budget has been on infrastructure development, agriculture, exports, the social sector and education and skill development. The initiatives in these areas are largely aimed at supporting short-term economic revival. Increased allocation for highways, urban infrastructure, power and the national gas grid are welcome. However, the relief to exporters could have been more.

The finance minister has proposed medium-term stimulus for the economy through institutional reforms. We will have to wait for specifics in areas of petroleum product pricing, taxes, disinvestment and the proposal to raise the threshold for non promoters’ shareholding in listed companies, though.

In the area of direct taxes, finance minister has significantly met the industry’s expectation by abolishing of surcharge, fringe benefit tax and commodity transaction tax. Extension of tax benefit under Sections 10A and 10B are also welcome though this could have been for a longer period of three years, which would have provided more visibility. The industry’s demand for reduction in rates of corporate tax has unfortunately not been accepted this time.

The decision to introduce a full-fledged GST from April 1, 2010 is perhaps the most notable announcement in the area of indirect taxes. Besides this however, there is no relief for the struggling medium and heavy commercial vehicle industry and the automotive component sector.

... contd.