India budgets income tax relief, higher excise
Presenting the budget in the Lok Sabha, the lower house of parliament, Finance Minister Pranab Mukherjee also estimated a lower fiscal deficit of 5.5 percent of gross domestic product (GDP), against the revised estimates of 6.7 percent for this fiscal.
He said 46 percent of the plan allocation will be set aside for infrastructure alone and 37 percent for social welfare programmes, while substantially hiking outlays for rural and urban development schemes, as also for education and healthcare.
"Today, as I stand before you, I can say with some confidence that we have weathered the crisis well," Mukherjee said in his 100-minute speech, recalling the hard days faced by the economy in the past two years and preparing himself to roll back some purse-loosening measures.
"That is not to say the challenges today are any less than they were nine months ago, when the UPA (United Progressive Alliance) was voted back to power under the leadership of Sonia Gandhi and Prime Minister Manmohan Singh."
The finance minister proposed the following slabs for individual tax payers: No tax for an annual income of up to 160,000, a rate of 10 percent for up to 500,000, then 20 percent for up to 800,000 and finally 30 percent on anything higher. (50 approximately equals $1)
At the peak rate this will entail a saving of up to 50,000, and an overall hit of 26,000 crore ($5.2 billion) for the exchequer. "The proposal to reduce the tax slab will benefit 60 percent of all tax payers," said Mukherjee.
But he also sought to hike the minimum alternate tax to 18 percent of book profits from the present 15 percent, though he lowered the surcharge from 10 percent to 7.5 percent, which will have a direct impact on the bottomlines of large companies.
The finance minister was interrupted several times, led by an eventual walkout by most opposition members, when he sought to restore 5 percent basic duty on oil and 7.5 percent each on petrol and diesel, and imposed a 1 excise on these two fuels.
"The customs duty was withdrawn when the prices of the petroleum crude reached as high as $122 per barrel. When it is much softer, there is no reason to continue the same concession," he told reporters later, setting the stage for higher fuel prices.
On augmenting resources, Mukherjee said 25,000 crore ($5 billion) was raised by way of divestment in state-run companies during the current fiscal, adding he was budgeting for 40,000 crore ($8 billion) for the ensuing year.
The finance minister also promised to implement the direct tax code from April next year and assured a simplified foreign investment policy soon, even as excise rates were hiked across the board by 200 basis points.
Those in the packed house presided over by Speaker Meira Kumar included Prime Minister Manmohan Singh, United Progressive Alliance (UPA) chairperson Sonia Gandhi and Leader of Opposition Sushma Swaraj.
This was Mukherjee's fourth budget of his career as finance minister and the second for the United Progressive Alliance (UPA) government in its second straight term after being voted back to office in May last year.
"The finance minister has done a right mix of estimating the growth requirements and at the same time building in it a certain amount of moderation on the price front," said Manmohan Singh, who has himself presented five budgets in the past.
"He has done a commendable job."
Stock markets also gave thumbs up to the budget, which resulted in the sensitive index (Sensex) of the Bombay Stock Exchange closing with a gain of nearly 185 points, or 1.15 percent, while industry hailed the proposals as pragmatic and growth oriented.
During his speech, Mukherjee said three challenges remained for the economy - to quickly revert to high growth of 9 percent and cross to double-digit expansion; make growth more inclusive and develop infrastructure; and strengthen food security.
"We hope to breach the 10 percent growth mark in not-too-distant future."
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