New Delhi: Promising more money in the hands of households by hiking the income tax exemption limit and lowering tax surcharge for corporates, Finance Minister Pranab Mukherjee Monday presented the general budget for the next fiscal with a fair dose of reforms and steps to curb inflation, check corruption and push growth.
Seemingly aware of the elections due soon in five states and of general negative perception on issues such as graft and lack of reforms, the finance minister also proposed higher outlays for health, infrastructure, education and farming, as also new subsidy schemes that will give money directly to users of fertilisers and kerosene.
In his 110-minute speech in the Lok Sabha, the lower house of parliament, he proposed to enhance the income tax exemption limit to Rs.1.8 lakh (Rs.180,000 or $4,000) for the next financial year, from Rs.1.6 lakh now, even as credit flow to farmers was sought to be substantially enhanced.
At the same time, he said, while the minimum alternate tax levied on the book profit of the corporate sector will be increased to 18.5 percent from 18 percent, the surcharge will be lowered to 5 percent from 7.5 percent. He also kept the customs duty unchanged.
The finance minister also said he was proposing a very senior category of income tax payers, above the age of 80, for whom the tax exemption will be up to Rs.5 lakh. The qualifying age limit for senior citizens was being lowered to 60 years from 65 years.
He set the tone for his sixth budget by stating that India had bounced back after the global financial crisis with broadbased growth, even as inflation remained a matter of concern, especially food prices - though it had dipped from over 20 percent to around 7 percent now.
This apart, he said the foreign direct investment policy was being revamped, which may result in the entry of multinational firms in the country's $300 billion retail trade industry, apart from liberalising the norms governing pension and insurance funds.
"We are reaching an end to a remarkable year with high growth and many challenges. Our growth in 2010-11 has been swift and broad-based. Economy is back to pre-crisis growth trajectory," Mukherjee said in his opening remarks.
"In the medium term, our three priorities of maintaining high growth trajectory, making development more inclusive and improving our institutions remain relevant," the minister added in the largely speech.
This is the sixth such exercise for the 75-year-old politician. He tabled three budgets between 1982 and 1984. The one unveiled Monday was the third successive for the United Progressive Alliance (UPA) government.
Expectations were high from both households and the corporate sector as this budget is being presented against the backdrop of high inflation, fluctuating industrial growth, erratic exports and a general perception that the reform process has retarded.
"I do not foresee resources being a major constraint, at least in the medium term," Mukherjee said, referring to the money needed to address the larger agenda of growth, social programmes and infrastructure development.
He said the farm sector had shown a rebound with 5.4 percent growth, industry was regaining its earlier momentum and services continued to grow at double digits. He added that fiscal consolidation too was impressive.
Following are the highlights of his speech and proposals:
Tax reductions to result in revenue loss of Rs.11,500 crore.
Rs.3.43 lakh crore of market borrowings in 2011-12.
Had option to roll back indirect tax rates to 2008 levels but will maintain standard rate of central excise duty at 10 percent.
Service tax to stay at 10 percent.
Excise duty on hybrid car kits reduced.
Works of art exempt from customs when imported for exhibition in state-run institutions; this now extended to private institutions.
Expenditure in 2011-12 estimated at Rs.12,57,729 crore, an increase of 13.4 percent.
Tax receipts in 2010-11 at Rs.932,440 crore, an increase of 24.9 percent; non-tax receipts at Rs.125,435 crore
Tax exemption limit raised from 160,000 to 180,000; for senior citizens qualifying age reduced from 65 to 60 years.
Rs.1.64 lakh crore for defence; more will be given if required.
Twenty-four percent increase in educational outlay; Rs.21,000 crore for Sarva Siksha Abhiyan.
Rs.500 crore more for national skill development fund.
Rs.54 crore each for AMU (Aligarh Muslim University) centres at Murshidabad and Mallapuram.
Anganwadi workers salary raised from Rs.1,500 to Rs.3,000.
Age for below poverty line old age pension scheme to be reduced from 65 to 60 years.
Five-fold strategy against black money; 13 new double taxation avoidance agreements; foreign tax division of CTBT strengthened; strength of Enforcement Directorate increased three-fold.
Close to finalising food security bill.
Rs.58,000 crore for Bharat Nirman; increase of Rs.10,000 crore.
Mahatma Gandhi National Rural Employment Guarantee Scheme wage rates linked to consumer price index; will rise from existing Rs.100 per day.
Increased outlay on social sector schemes.
Infrastructure critical for development; 23 percent higher allocation in 2011-12.
Rs.30,000 crore to be raised through tax-free bonds.
Food storage capacity to be augmented - 15 more mega food parks to be set up in 2011-12; of 30 sanctioned in previous fiscal, 15 set up.
Cold storage facilities to be recognised as infrastructure sector.
Comprehensive policy on further developing PPP (public-private-partnership) model.
Farmers need access to affordable credit.
Moving to improve nutritional security.
Necessary to accelerate production of fodder.
Number three (third consecutive budget) may be lucky for me.
Women's self-help development panel to be set up.
FIIs can invest $40 billion in corporate bonds.
Rs.100 crore equity fund for microfinance companies.
Mortgage risk guarantee fund to be created for economically weaker sections.
Housing loan limit for priority sector lending raised to Rs.25 lakh.
Agriculture growth key to development: Green Revolution waiting to happen in eastern region.
Growth at 8.75 percent to 9.25 percent in 2011-12.
Bills on insurance, pension funds, banking to be introduced.
Gap between wholesale and retail prices not acceptable.
Setting up independent debt management office; public debt management bill to be introduced in parliament.
Seek Lord Indra's blessings for good monsoon.
Introduction of GST will improve compliance; bill in current session; setting up strong IT network for implementation.
Expenditure has to be oriented towards production of goods and services.
Government committed to retaining 51 percent stake in public sector enterprises.
FDI policy being liberalised.
Current account deficit at 2009-10 levels.
Corruption a problem we have to fight collectively.
Development needs to be more inclusive.
Stronger fiscal consolidation needed.
Setting tone for newer, vibrant economy.
Economy has shown remarkable resilience to external and internal shocks.
Economy back to pre-crisis trajectory.
Set pace for double digit growth.
Total food inflation declined to less than 9 percent in January.
Could have performed better.