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General Budget today
Published on 6 Jul. 2009 12:28 AM IST
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Amid high expectations in a slowing economy, Finance Minister Pranab Mukherjee will present India’s national budget for this fiscal Monday, seeking a fine balance between the need for resources to fund welfare schemes and minimising the burden on the average citizen and industry. The veteran politician will need to draw from his experience of having presented three regular budgets as finance minister between January 1982 and December 1984 and push forward the agenda listed in the interim budget he tabled in February. “Extraordinary economic circumstances merit extraordinary measures. Now is the time for such measures,” Mukherjee had said when he presented the interim budget in the Lok Sabha, the lower house of parliament, Feb 16. “Depending on the response of the domestic economy and the revival of the global economy, there may be a need to consider additional fiscal measures when the regular budget is presented by the new government after the elections.” Monday will be the day when he will have to consider these fiscal measures. At the macro level, the finance minister will be concerned over the fact that the growth rate of India’s $1.2 trillion economy had decelerated to 6.7 percent last fiscal from an average of over nine percent in the preceding three years. But his hands in terms of additional allocation will be tied by the high fiscal deficit of the central government that ballooned from 2.7 percent in 2007-08 to over six percent the next year. A low inflation rate, though, will be a comforting factor. Mukherjee also has to contend with his ministry’s Economic Survey for 2008-09 tabled in parliament Thursday that suggests some sweeping reforms - like resumption of divestment, a cut in subsidies and allowing foreign equity in retail and defence equipment. And slowdown-hit industry hopes for specific measures to suit the needs of sectors like steel, cement, auto, energy, textiles, banking, pharmaceuticals, chemicals, consumer goods and realty and construction. “This is necessary to curb the bloated fiscal deficit of the government,” said the Associated Chambers of Commerce and Industry of India Sunday, having already given its wish list to the finance ministry - as have other chambers. Experts, however, maintain the prospect of a cut in corporate taxes look bleak, with India Inc. only hoping that the across-the-board excise duty cuts in the interim budget is not reversed. The salaried class, though, is looking forward to the re-introduction of the standard deduction in income tax that will place more money in their hands and push demand. This apart, with most ministries having set their 100-day agenda at the instance of the prime minister, allocations for many of the outlined programmes are also expected to be addressed in the budget. Cess on petrol, diesel The Budget is not likely to raise the much-talked-about cess on diesel and petrol, used for building roads and highway infrastructure, from the present Rs two a litre. The cess is not likely to be increased even as the Ministry of Road Transport and Highways is pressing for a hike, sources said. Under the formula for sharing the cess, half of it on diesel goes for rural development. The remaining part of the diesel cess and the entire collection from petrol is shared between the NHAI (57.5 per cent), the Railways (12.5 per cent) and state road projects (30 per cent). Earlier, Road Transport and Highways Minister Kamal Nath had said the Railways and Rural Development Ministries have to be consulted before a decision in this regard can be taken. Meanwhile, Amarchand Mangaldas partner Aseem Chawla said, “Instead of the Union government raising cess, states should be encouraged to assess whether any cess can be imposed.” The pre-Budget Economic Survey, tabled in Parliament, also suggested reviewing and phasing out various forms of cess. The government collected around Rs 30,000 crore through the cess on diesel and petrol. Going by that trend, it could collect about Rs 15,000 crore from any additional Re one cess a litre. The additional cess is required to keep the long-term pace of the road sector. Currently, funds are not much of a problem because projects are moving at very slow pace. However, Nath is looking at a target of laying 20 km of highways per day against the below five km average at present. The National Highway Authority of India (NHAI) has not been able to utilise the funds allotted to it, Nath had said earlier. The NHAI, which was assigned the target of awarding 60 projects worth Rs 70,000 crore under the National Highways Development Project, could not attract bidders for most of them as contractors found them inviable.

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