The Interim Budget 2009-10: A Brief Overview - Atasi Das

Latest IMF forecasts released on 28th January predict that the world is in for a tough global recessionary phase in 2009. Governments worldwide are scampering to resuscitate staggering economies burdened with the ill effects of falling demand, declining wealth and rising unemployment. It was in this backdrop that Mr. Pranab Mukherjee, India’s stand-in finance minister, presented the Congress led UPA government’s Interim Budget for fiscal year 2009-10 on 16th February 2009. This is a brief overview of India’s (reportedly Asia’s third largest economy) recent Interim Budget, 2009-10.

The Confederation of Indian Industries (CII) has lauded the government’s sustained focus on infrastructural development; however this has been deemed as ‘precious little’ by most. CII has also hailed the aid provided by the government to labor intensive industries like textile in the form of reduced cost of credit. The Rs 30,100 crore allocations for National Rural Employment Guarantee Scheme are expected to boost rural employment. Allotment for provision of drinking water for rural areas has increased to Rs 7,400 crores from Rs 7,300 crores last year; comparable figures for rural health are Rs 12,070 crores and Rs 12,050 crores respectively.

The interim budget has however failed to impress industrialists who rued the absence of a well structured economic retrieval package in face of the ongoing global economic slump. The disappointment was reflected in the phenomenon of investors dumping stocks in the market. The rising fiscal deficit has also remained a cause for concern.  Pranab Mukherjee has projected a 6% fiscal deficit (excluding off-budget items), which according to Deputy Chairman of Planning Commission, Mr. Montek Singh Ahluwalia could shoot up to around 7.8 % on the inclusion of off-budget items. A high fiscal deficit will eventually crowd out private investment and investors are anticipating a ratings downgrade due to this. Taxpayers have been left bereft of any substantial lollypops.

Some budget highlights are presented below.

• Nuclear Power outlay is 28% greater than that of previous year. A substantial chunk of this outlay is meant for procurement of fuel inventory. However, outlay for atomic research has been slashed to some extent.
• Departments of Earth Sciences and Space have received a hike in budgetary allocation.
• Budgetary allocation for pro-poor schemes has been fixed at Rs 1.3 lakh crore.
• Budgetary allocation for Department of Higher Education has shot up by 21%. Comparable figure for UGC is 28%. The funds are mostly to be channelized for new organizations.  Allocation for Department of School Education has risen by 3% in the recent budget in comparison to last year’s figure. Substantial grants have been given towards the propagation of secondary education among masses.
• Ministry of Women and Child development has had only a marginal increment in fund allocation (Rs 7278 crore from Rs 7262 crore in 2008-09). Somewhat similar is the case for Ministry for Social Justice.
• Defense allocations have shot up by 34% in wake of the November 2008 Mumbai terrorist attacks. In a bid to stimulate capacity creation, ‘capital outlay’ has been raised to Rs 54,824 crore, more funds being promised on requirement so as to update the obsolete defense equipments. Nearly 15% of total Interim budgetary allocation has been earmarked for the defense sector.
• Rs 850 crore has been earmarked for Lok Sabha elections, which is a 3.8% increment compared to 2004 allocations.