As the Finance Minister (F.M.) Pranab Mukherjee walked into the Parliament with his usual dignified style for his Budget speech 2010, India Inc. was on the edge because the gamut of measures and reforms they expected to be taken by the government for the current fiscal year were to decide what would happen.

It was going to tell whether the roll back of the Booster measures announced to combat last year’s slowdown would be reversed or possibly the same path would be fortified once again. .

Speech was delivered but was greeted neither with Razzmatazz nor with stoicism, but the package on a whole presaged a fiscal consolidation. A vision was promised in the last year’s Budget session but it seems rather just a revision was possible owing to the ‘Tsunami’ of the financial crisis hit the world economy and nearly wiped out the economic gains of past decade.

Without delving into the labyrinth of statistical figures and to put all the aspects of the budget in a simple order let us look at the major provisions of the Budget by the F.M.

We The People

The Increase in the slab for Income Tax is surely a ‘Holi’ bonanza for the common man with a great amount of saving promised in the Budget by the F.M. This certainly has put more money in the hands of the people and paves a way for stronger economy with the money in the hands of the consumer. We can envisage a better financial consolidation soon.


While the Minimum Alternative Tax (M.A.T) has been raised the surcharge on the corporate tax has been cut by 2.5% which will alleviate the industry stake holders. The government plans to collect revenues from disinvestment of public sector companies and also by the 3G SPECTRUM auctions hence government will borrow little money from the market in line with its target to contain fiscal deficit. These lower government borrowing will ensure funds are available to the private sector at reasonable prices.

The Auto sector will be hard hit with the price hike of petrol and diesel, but the decrease in the tax slabs for the middle and high income families will put the Automakers in a position to pass their tax burden on the consumer without much effect on both the supplier and the consumer side.


With the new policy allowing direct hand over of subsidies to the farmers in form of cash in lieu of oil bonds, the F.M. has struck the right note enabling the Monsoon struck poor farmer to get out of his predicament.
Although more than 50% of the farmer subsidies will land into the pockets of the Agriculture-Industrialists but still it will cascade the overall effect of the development of the Indian agriculture since these subsidies will pave the path for the construction of cold stores and would hence prevent the damage to the crop and hence will boost the sales.

Also the 6 months extension on the repayment of loan proposed by the F.M. is a ray of hope for the farmers suffocating in the dungeon of the crisis due to poor Monsoon.


In accordance with the Loan waiver policy adopted last year the F.M. has gifted the Harvester of the Indian economy, the farmer, a 6 months extension on the repayment of loan which has benefited the Banks considerably.

Had the relief not come banks would have been force to categories the overdue farmer loans in their books as ‘NPA’ (Non-performing loans) in the fourth quarter which would have showed in their results in March ’10.
Also after the rise in the loan deposit ratio banks will now re-deploy assets from their low yielding bonds to loans.

Major Criticism

The fuel price hike has certainly the potential to be the Nemesis of the U.P.A. government for the next general election but it was an imperative move which was required to keep the State owned companies from going under because they need humungous subsidies to balance their chart-sheets which the our debt ridden economy can’t provide.

The deregulation of the oil prices will profits of the government owned companies like –IOCL, ONGC, GAIL would increase. After initial inflation it will eventually contain overall inflation in the long run and improve efficiency from competition among retailers .and search for alternative fuels, boost energy conservation and rein in fiscal deficit.

Pragmatic Moves

A Central Electronic Registry will be established soon. The Central Electronic Registry would be a database of all mortgages and the banks that have a charge, so whenever a borrower seeks to avail loan against a property, lender will be able to verify whether anyone has already got a charge of the property.
The announcement of the Financial Stability and Development council is a good move to control the financial Infrastructure of the Nation.

To round up simply, the government works in a loop. It takes money from the people in through Direct and Indirect taxes and simultaneously delivers it back to the same people by plethora of social services. Budget presented by our F.M. has sensibly managed the conflicting objectives of growth, inflation and fiscal prudence. The partial rollback of the fiscal stimulus in form of increased excise duty is in line with the market expectations and is considered prudent by the market analysts.

Budget has some inflationary effects too but it won’t be more than 0.4% according to our responsible F.M. and he assures that it would be contained effectively.

Certainly the F.M. could not have nipped the Recession in the “BUD” but most positively he has tried to Nip it in his “BUDGET”.


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