His 2009-10 budget presented to Lok Sabha on July 6 makes a calibrated approach to major issues of critical fiscal importance like subsidies, disinvestment in public undertakings, oil price deregulation and path of return to fiscal stabilisation, pointing out one budget cannot solve all issues. Big ticket reforms are put off for another day.

In the result, the Union Government expenditure will for the first time cross the Rs.10 lakh crore mark and the fiscal deficit would remain as high at 6.8 per cent, up from 6.2 per cent in 2008/09. Economic slowdown must be reversed first along with broadening the inclusive growth programmes, he said.

Mr. Mukherjee left the tax structures broadly untouched while calling for tax reforms, with no changes in direct taxes, especially corporate tax, while doing away with 10 per cent surcharge on income tax on higher slabs, the fringe benefit tax and commodity transaction tax. He however raised MAT (Minimum Alternate Tax) to 15 per cent.

There was more to cheer than jeer in his proposals when he raised the slabs for exemption by Rs,10,000 for all tax payers including women and by 15,000 for senior citizens, and extended interest subsidy on educational and home loans and a cut of one per cent in farm credit rate to 6 per cent while the overdues repayment date under debt waiver scheme was extended till the end of December 2009. The earlier duty reliefs given for labour-intensive sectors including medium and small enterprises and textiles have been extended.

He justified the stimulus in terms of reviving growth as the global slowdown with the underlying presumption that the boost to expenditure on infrastructure and flagship programmes would generate demand enabling India to return to the 9 per cent growth trajectory in the next year or two. He hoped to take infrastructure investments to 9 per cent of GDP by 2014.

The UPA electoral promise of providing rice and wheat at Rs.3 per kg was reaffirmed by Mr. Mukherjee who said a food security bill would come up before the House. He has maintained the rural focus by raising the allocations under Bharat Nirman by 40 per cent, the level of credit to farmers to over Rs.325,000 crores in the current year and the provisions under the accelerated development of irrigation and power projects. For the rural employment guarantee programme, the budget makes a provision of Rs.39,000 crores. The country-wide scheme which has proved a success in improving incomes for the poor would ensure wages at Rs.100 per day for the workers.

The Finance Minister lauded the role of public sector and ruled out any measures to whittle down their state-owned character, especially in banking and insurance though fresh infusion of capital would be needed for banks to remain globally competitive.

While realising the magnitude of fiscal deteriorating from subsidies, especially fuel and fertilisers, Mr Mukherjee announced that a scheme would be worked out by which the subsidy is nutrient-based and the subsidy goes to the farmer and not the manufacturer. A panel would go into pricing of petroleum products to make them aligned to global prices.

The budget anticipates a revenue of Rs.2000 crores from relatively minor changes like extension of service tax to legal consultants and raising of customs duty on gold bars.

The national Goods and Services Tax would be introduced from April 1, 2010, Mr. Mukherjee announced but he said there would be, taking into account the views of states, a Central GST and State GST. The 13th Finance Commission would be embodying this tax in framing its devolution scheme for the next five years.

Mr. Mukherjee looks to the Kelkar Report due in October before announcing the medium-term restoration of the Fiscal Reduction and Budget Management Act, which had to be given up in view of the economic slowdown in the wake of the global economic and financial crisis.

With the exemptions announced in income tax, the tax-free limit now stands at Rs.1.6 lakhs for individuals other than women and senior citizens. Mr. Mukherjee announced that the new Tax Code would be introduced in 45 days. The tax return has been simplified.

Taking cognisance of electoral finances, Mr. Mukherjee has come up with 100 per cent tax reduction for “political funding”.

In indirect taxes, he restored the 4 per cent excise duty on cotton textiles and 8 per cent on man-made fibre while extending the tax holiday for textile units till 2011.

The stock market gave hostile reception to the 2009-10 budget proposals as the Finance Minister did not follow-up the “bold” reform measures mentioned in the “Economic Survey” released on July 2. But the core issue for the Government was to bring about inclusive growth faster in the current fiscal and then to take up the new reform measures in the following years.

Mr. Mukherjee has stuck by what the Prime Minister Dr. Manmohan Singh said after the Lok Sabha elections results were out on May 16. “It is a mandate for inclusive growth and equitable development”. The second UPA Government's first full budget is a reflection of this objective. (IPA)