Looking Back: Last 5 Budgets

Written by Reuters | Updated: Feb 27 2013, 08:17am hrs
The countdown has begun for the biggest business and economic event of the year, the release of the annual Budget on February 28, and finance minister P Chidambaram has a tough job on his hands. With general elections a year away, he must please voters, boost growth and control deficits. As the economy battles slowing growth, investors will take cues from Chidambarams plans to rein in spending and boost growth. Heres a look at Budgets between 2008 and 2012 the hits, the misses and how they affected the common man.

2012 : Finance minister: Pranab Mukherjee

Highlights

Projects a decline in the fiscal deficit to 5.1% of GDP in 2012/13. GDP expected to grow at 7.6%.

Controversial proposal to retrospectively tax cross-border transactions in which the underlying assets are located in India. The move amounts to a push to get foreign companies that have invested millions in India to pay more taxes. Or in Indias words, its supposed to counter aggressive tax avoidance schemes

Service tax rate raised to 12% from 10%, double basic customs duty on gold

No change in corporate tax rates. Personal taxation: minimum threshold of income not chargeable to tax increased to R200,000.

The 30% tax slab applicable on income above R10,00,000.

Market reaction on Budget day

The Sensex fell 210 points (1.2%) to close at 17,466 as the Budget was seen as too modest for a corporate sector looking for more concessions. During trade, the index fell nearly 250 points.

Rating agency reactions

Standard & Poors said the Budget was mildly negative for Indias credit rating, noting that the timing remained uncertain for long-awaited reforms.

Moodys said: mildly negative for Indias credit rating. Indias Budget lacks new solutions to address its fiscal constraints and is credit negative for the sovereign.

2011 : Finance minister: Pranab Mukherjee

Highlights

Social spending to rise by 17% in 2011-12, helping millions of Indians. Fiscal deficit seen at 4.6% of GDP in 2011-12.

Spending on infrastructure increased by 23%.

Service tax rate kept at 10%, but scope widened. Minimum Alternate Tax (MAT) raised to 18.5% from 18%.

Personal income tax exemption limit raised to R180,000. Surcharge on domestic companies reduced to 5%.

Market reaction on Budget day

The Sensex ended up 0.69% at 17,823.40 points after rising as much as 3.4% after the Budget was unveiled.

Rating agency reactions

Standard & Poors said Indias fiscal deficit target for 2011-12 may be bit difficult to attain given upside risks to oil subsidy and wage bill under the social employment programmes.

2010 : Finance minister: Pranab Mukherjee

Highlights

Plans record levels of borrowing for 2010-11 and counts on big growth to help cut fiscal deficit to 5.5% of GDP.

Excise duty raised on petrol, diesel by R1 per litre. Excise duty cuts on cement, cement products and large cars partially rolled back.

Minimum alternate tax rate raised to 18% from 15%. Service tax rate kept unchanged at 10%.

Corporate tax rate unchanged. Personal income tax slabs widened.

Market reaction on Budget day

The Sensex rose as much as 2.6% after the Budget before paring gains. The index ended with gains of 175.35 points (1.08%) at 16,429.55.

Rating agency reactions

Standard & Poors: We believe the steps announced could signal a turning point that reverses the recent deterioration in Indias fiscal position.

2009 : Finance minister: Pranab Mukherjee

Highlights

Plans outlined to speed infrastructure development and increase spending for farmers and the poor. Additional spending to push the fiscal deficit to a 16-year high of 6.8% of GDP, the finance minister said.

Minimum Alternate Tax raised to 15% from 10%.

Fringe benefit tax scrapped.

Corporate tax rates unchanged. Personal income tax exemption for senior citizens increased by R15,000; raised by R10,000 for others.

Market reaction on Budget day

After falling more than 950 points during trade, the Sensex ended with an 870-point loss (5.8%) to close at 14,043.40. It was the indexs biggest drop in six months.

Rating agency reactions

Standard & Poors said Indias BBB-minus sovereign rating does not face any significant rating pressure despite a sharply higher fiscal deficit unveiled by the government.

Fitch Ratings said that given Indias ever-widening physical and social infrastructure deficit, the expectations that the Budget for fiscal 2010 would provide a boost to the sector were very high.

* (The Budget was presented on July 6. The interim Budget was presented on February 16, ahead of the 2009 elections)

2008 : Finance minister: P chidambaram

Highlights

Fiscal deficit for 2008-09 seen at 2.5% of GDP.Ahead of the 2009 elections, the government proposed to waive R600,000 crore of bank loans to farmers.

The Budget raised the short-term capital gains tax, when an investment is sold for profit before one year, to 15% from 10%.

Excise duty on pharmaceuticals sector cut to 8%; Duty on small and hybrid cars to be cut. 6% duty on petrol and diesel abolished and replaced with specific duty of R1.35 per litre.

Corporate tax rates unchanged. Income tax threshold raised to R150,000.

Market reaction on Budget day

The Sensex ended down 246 points(1.4%) at 17,578.72 after falling as much as 3.2%

Rating agency reactions

Standard & Poors said the Budget was largely in line with expectations but more work needed to be done for upgrading ratings.

Fitch Ratings said India needs to do more for fiscal improvement to catch up with its peer group

Source: Reuters