Finance minister Pranab Mukherjee unveiled the UPA’s third budget since it returned to power. Expectations were high, but many are disappointed by the lack of sweeping reforms or aggressive measures to fight inflation and spending. Here’s a look at the highlights.
Total expenditure has been hiked 13.4% in the next fiscal to Rs 12,57,729 crore.
Plan expenditure is up 18.3% to Rs 4,41,547 crore. And Non-Plan expenditure has increased by 10.9% to Rs 8,16,182 crore.
Here’s a look at what the government expects its revenues are going to look like. Mukherjee is expecting gross tax receipts in 2011-12 to go up 24.9% to Rs 9,32,440 crore.
That’ll mean a net tax revenue of Rs 6,64,457 crore. Non-tax revenue is Rs 1,25,435 crore.
All that revenue and expenditure translates into a fiscal deficit target of just 4.6% of GDP. That’s a 0.2% points lower than earlier estimates. And using old calculation methods, the revenue deficit is projected to be 3.4%. But the government says its numbers are actually better than they first look. Mukherjee announced a new method to calculate revenue deficit that takes into account money that goes to states for asset creation. Under the new system, India’s revenue deficit target for the nest fiscal is just 1.8% of GDP.
And this year’s budget did not alter India’s tax structure dramatically. Pranab Mukherjee’s priority appeared to be to ease the way for GST and the direct tax code next year. For individuals, the budget hiked the exemption limit from Rs160,000 crore to Rs180,000 crore. It also changed slabs, cutting the qualifying age for senior citizens from 65 years to 60 years. Mukherjee also proposed creating a category of very senior citizens for people 80 years and older. They’ll enjoy an exemption limit of Rs5 lakhs.
Meanwhile, it’s a mixed bag for corporate India. On the one hand, the surcharge on domestic companies is now at 5% instead of 7.5%. But the minimum alternate tax is up slightly to 18.5% from 18%. Mukherjee also announced the government planned to levy MAT on the developers and operators of Special Economic Zones.
And while the government expects a fall in its direct tax receipts, it expects to make up for most of that loss through indirect taxes. Pranab Mukherjee told Parliament the Central excise duty would remain at 10%, paving the way for GST. But the government will also levy a nominal central excise of 1% on 130 new items. Significantly, there will be a new 20% uniform export duty on iron ore. The only exemption will be processed pellets of the raw material. Mukherjee said iron ore was a precious natural resource and that the government wanted to encourage value addition.