Date: July 6, 2009
Ref. No. MPML/PMS/296/2009
Dear Investor,
Subject: Highlights of Union Budget 2009-10
Finance Minister Pranab Mukherjee has tried to balance between populist sops to boost demand and grow infrastructure, a move urgently required for sustained economic growth. Sticking to its mandate of "inclusive growth", Finance Minister Pranab Mukherjee unveiled direct subsidies for farmers. There were some breaks for exporters hard-hit by the global downturn, but his main focus remained rural and urban consumers. He also emphasized the need to sustain 9% growth rate and strengthen the economy's mechanism to create 12 million jobs .
• Fiscal deficit seen at 6.8 pct
• Significant hike in foreign capital
• Infra investment to exceed 9% of GDP by 2014
• Policy target to revive agriculture and industrial growth
Sensex closed at 14,043 down by 870 points. The market was disappointed as there was nothing on the fuel policy, foreign direct investment, and disinvestment roadmap.
However, t his is a good opportunity for investors who missed out previous rally. Hence we suggest you to buy infrastructure and power sector stocks in this market fall.
Personal Taxation: A key sop is his proposal to increase the income tax exemption limit for senior citizens by Rs 15,000, for women and others by Rs 10,000 each, while keeping the corporate tax rate unchanged. The exemption limit will now be Rs 240,000 for senior citizens, Rs.190,000 for women and Rs 160,000 for others. Interest subsidy for home loans hiked to Rs 1 lakh. Saral-II forms to simplify taxation process
Corporate Taxation: Bowing to the long standing demand of India Inc, FM has proposed that fringe benefit tax and commodity transaction tax be abolished leaving the Corporate tax unchanged. However, Minimum Allocation Tax (MAT) on book profits has been increased from 10 per cent to 15 per cent, but with a provision of carrying forward the tax credit on MAT to 10 years from the current seven years. Commodities Transaction Tax to be abolished
Indirect Taxation: • Service tax exempted for exporters on select services and imposed on certain legal a.aservices
• Customs duty to be reduced on drugs for heart treatment
• Mobile phone accessories to become cheaper
• Branded jewellery to become cheaper
• Customs duty on bio-diesel reduced
• Tax holiday textile units extended
• Customs duty on gold and silver import increased
• Small businesses exempt from advance tax
• Tax holiday to natural gas extended
• Anonymous funds to charitable bodies get tax relief
• Tax holiday for exporters extended until 2012
Some important Budget expenditures: • Total budget expenditure for 2009-10 will Rs 10, 28,032 cr.
• Defence gets Rs 1,41,703 crores for 2009-10, a 34 pct hike from last year
• Total fiscal stimulus during FY09 is Rs 1,86,000 cr
• Plan expenditure, for Centre and States, to go up by Rs 61,000 cr
• Rs 500 crore allocated for rehabilitation of internally displaced Tamils in Sri Lanka
• Rs 1,000 crore for rebuilding infrastructure damaged by 'Aila' in West Bengal
• Rs 2,113 cr for IITs and NITs
• Commonwealth allocation hiked to Rs 16,300 cr
• Govt to hike allocation to National Ganga Project to Rs 562 cr
• First Unique ID to citizens to roll out in 12-18 months; Rs 120 crore proposed for the aa.project
• Allocation for National Rural Health Mission to be raised by Rs 257 cr
• Rashtriya Mahila Kosh allocation to be raised to Rs 500 cr
• Allocation for Bharat Nirman progamme raised by 45 pct
• Full interest subsidy for poor students for higher education
• Rs 100 cr one-time grant to expand banks in unbanking areas
• Indira Awaas Yojna hiked by 63 pct to Rs 8,883 cr
• Rs 31,100 crore allocated to NREGA
• Mumbai flood management allocation hiked to Rs 500 cr
• Target for agriculture credit raised to Rs 3,25,000 cr in FY10
• Allocation of Rashtriya Krishi Vikas Yojna stepped up by 30 pct
• Farmers loan interest to come down to 6 pct
• Fund allocation for urban poor accommodation is 3,973,000 crs
Other Measures: • Subsidy regime for fertilisers to change to nutrient-based rather than price-based
• Banking network to be expanded
• Banks and insurance firms to remain in public sector
• Work on National Food Security scheme for providing food at cheaper rates to the poor aa.has begun
The budget is looking very positive but there are certain sectors which are kept untouched in this budget and they remained unchanged.
Thanks and Regards,
Mideast portfolio Management Ltd.