While enhancing the plan outlay by 15 per cent to Rs.373,092 crores in the new fiscal year, there is no significant moderation in the growth of non-plan expenditure which accounts for over 70 per cent of the Rs 11,08,749 crores budget for 2010/11, an increase of 8.6 per cent over the current year. But Mr. Mukherjee has managed to give a credible start to fiscal consolidation, targeting gross fiscal deficit at 5.5 per cent of GDP next year, to be lowered to 4.8 and 4.1 per cent over two subsequent years, in line with the 13th Finance Commission's roadmap.

The Commission has urged the Centre and the States to get back to fiscal consolidation to eliminate revenue deficit and bring down fiscal deficit to 3 per cent od GDP by 2013/14.

Also in terms of the Commission's recommendation, Government would target an explicit reduction in its domestic public debt-GDP ratio at 68 per cent of GDP, taking Centre and States together by 2014.

The fiscal deficit of 5.5 per cent of GDP in 2010-11 works out to Rs.3,81,408 crores. 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 crores, lower than in the current year. There would be enough room to meet the needs of credit for the private sector and Government would plan the borrowing programme in consultation with the RBI.

With major tax reforms like the Director Tax Code and GST put off till April 1, 2011, the Finance Minister confined himself to some readjustment of personal income tax slabs to provide “substantial relief” to tax-payers. The tax exemption limit remains at Rs.160,000. For incomes between Rs.1.6 to 5 lakhs, the rate would be 10 per cent, Rs.5 to 8 lakhs 20 per cent and above Rs.8 lakhs 30 per cent.

Expressing optimism about economy's growth potential, he announced a number of investor-friendly proposals to give a push to private investment. FDI would be simplified and RBI is considering additional banking licences for the private sector. The corporate sector surcharge has been reduced from 10 to 7.5 per cent.

The Finance Minister anticipated GDP growth to exceed 7.2 per cent in the current year and has projected 8 per cent in the new fiscal year. He said Government was aiming to achieve higher growth closer to 8 per cent in the next three years and to make development more inclusive. At the same time, his budget was focussing on fiscal consolidation making growth more broad-based and ensuring that supply-demand imbalances are better managed.

He admitted that double-digit food inflation was a major concern for Government and said he expected the steps set in motion in consultation with states, would help to bring down inflation in the next few months. Mr. Mukherjee said a new agricultural strategy would be pursued with focus on eastern India for “green revolution”.. The farm credit allocation has been raised by Rs.60,000 crores next year and a two per cent subvention would be provided on timely repayment of crop loans. The period of repayment for loans under debt relief scheme has been extended till June 30, 2010.

Mr Mukherjee's additional revenue effort was on indirect taxes to yield Rs.46,500 crores while revenue loss under direct tax and other concessions would be Rs.26,000 crores. He has assumed Rs.25,000 crores under disinvestment receipts in the new fiscal year. On subsidies, Mr. Mukherjee said the changes in fertiliser subsidy system to become nutrient-based would help to rationalise the use of fertilisers and would move towards direct transfer of subsidy to farmers.

Despite the change, fertiliser prices would remain at current levels during 2010/11, he said. On oil subsidies, the Finance Minister said that decisions on the Kirit Parikh Committee's report suggesting move to market-based pricing of oil products would be made by the Petroleum Ministry “in due course”.

The major proposals under indirect taxes include a partial rollback of the rate reduction in Central Excise duties and enhance the standard rate on all non-petroleum products from 8 per cent to 10 per cent ad valorem. Upward adjustment of duty applicable to portland cement and cement has also been made. Excise duty for large cars would be increased to 22 per cent, removing the 2 per cent cut as part of stimulus. The Finance Minister also restored the basic duty of 5 per cent on crude petroleum, 7.5 per cent on diesel and petrol and 10 per cent on other refined products. (IPA)