Faced with the challenge of inflation and charges of governance failures to check widespread corruption and the evil of black money, Mr Mukherjee brought all the skills of a seasoned politician into play to turn the opposition receptive to the political, economic and fiscal measures packed into his two-hour budget speech. While terming as 'misplaced' the impressions of a Government in drift, Mr Mukherjee said a task force was being formed to deal with black money along with other actions against illicit funds and money-laundering while a Group of Ministers was working on corruption which has to be fought 'collectively'

Mr Mukherjee was not unduly worried over inflation though he said food price inflation was a matter of concern. He expected average inflation to decline in 2011 with further measures by RBI, as the huge gap between wholesale and retail prices was not acceptable. He announced a few steps to reduce supply side constraints contributing to the food inflation.

Maintaining that fiscal consolidation was on track with GDP growth rates of 8.6 per cent in the current year and a projection of 9 per cent in 2011-12, Mr Mukherjee announced direct tax reliefs totalling Rs.11,500 crores which he nearly balanced with proposals in indirect taxes so as not to impact on the fiscal deficit estimated at 4.6 per cent in 2011-12, while the current year it would be less at 5.1 per cent as against the budgeted 5.5 per cent of GDP

The personal income tax exemption limit has been raised from Rs.1.6 to 1.8 lakh, the qualifying age for senior citizens reduced to 60 from 65 entitled to exemption limit of Rs. 2.5 lakhs while a new category of super-citizens of 80 and above would have their exemption limit raised to Rs. 5 lakhs. In corporate taxation, the surcharge has been further reduced from 7.5 to 5 per cent. Broadly, the Minister left the indirect tax structure intact with excise at 10 per cent as at present with minor variations and a 1 per cent tax on 130 consumer items. The lower rate of 4 per cent has been raised to 5 per cent. The service tax retained at 10 per cent has been extended to more services including domestic and international air travel. The additional revenue from changes in excise, customs and service taxes would yield Rs. 11,300 crores which is almost equivalent to the loss of revenue under direct taxes.

The Finance Minister announced significant step up in agriculture, education and health, enhanced provisions for Bharat Nirman and a few other rural programmes. Institutional support has been increased for farmers, small-scale industries, micro-financing and self-help groups.

Among proposals to help farmers, Mr Mukherjee increased the subvention on crop loans by three percentage points to make such loans effective as 4 per cent where repayments are made on time. There would be a large increase in agricultural credit while provisions have been made for marketing and other support to farmers. Agricultural credit would be raised by Rs. 100,000 crores to Rs. 475,000 crores in the coming year.

Announcing Government's intention to move toward subsidy reform, he said a scheme of direct cash transfer to farmers for fertiliser subsidy and for kerosene to people below poverty line would be launched in a phased manner. A task force has already been set up to work out to modalities and its interim report is expected by March next. The Food Security Bill would be introduced in Parliament soon.

On the legislative agenda are the Direct Tax Code to be operationalised from April 2012 while a while a Constitution Amendment Bill is proposed to be introduced during the current session of Parliament as a step towards roll out of the Goods and Services Tax (GST). Mr Mukherjee said the introduction of DTC and GST will result in moderation of rates, simplification of laws and better compliance. The bills to amend Banking, Insurance and Pension enactments would be taken up in the current session of parliament.

On infrastructure, the Finance Minister announced tax free bonds would be undertaken by government undertakings. FIIs would be allowed to increase investment in infrastructure corporate bonds by 25 billion dollars. Fertilisers would be included under infrastructure, Government are considering further liberalisation of climate for foreign direct investment. Disinvestment in public undertakings while maintaining government majority at 51 per cent would be undertaken for an amount of Rs.40,000 crores.

The Union Budget for 2011-12 provides for total expenditure of Rs. 12,57,729 crores and gross revenue receipts Rs. 932,440 crores. Net market borrowing is limited to Rs. 343,000 crores. Plan provision has been increased by 18.3 per cent.

Mr Mukherjee closed his speech with plea 'not to let recent strains and tensions' hold the country back from converting the 'immense possibilities' as India's emerging economy, with a global voice, stands 'at the threshold of a decade with a voice on the global stage'. (IPA)