The immediate reaction to the Union Budget 2010 presented by Finance Minster Pranab Mukherjee has been positive. The Sensex and Nifty registered sharp spikes, while most analysts called it a ‘balanced’ budget.
The standout feature of Budget 2010 for common Indians was the extension of income tax slab limits. Though the entry level slab for income tax has not been changed from Rs.1.6 lakh, there is a considerable jump in the other slabs. People with income up to Rs.1.6 lakh will pay zero tax, while those with income between Rs.1.6 lakh and Rs.5 lakh will sacrifice 10 per cent of income as tax.
In the words of the FM, this proposal will bring relief to about 60 per cent of the current tax payers, and will show up in higher consumption growth for the economy.
Meanwhile, there is also some relief for farmers and rural Indians. Farm loans have not just been given an extension of six months, new loans will be getting government support of two per cent reduction in interest rates. Effectively this brings down the farm interest rate to five per cent. The earlier support was limited to only one per cent.
On the downside, fuel prices are set to rise as a result of a partial stimulus rollback. In addition, the hike in excise duty is likely to effect prices in certain areas. Consumers will have to pay more for petrol, diesel, cars, TVs, cigarettes, tobacco, air-conditioners, gold and silver. Besides, a rise in fuel prices will most likely have a cascading effect on essentials and commodities, thereby somewhat diffusing the gains consumers may expect from the significant Income Tax relief.
Rural communities in non-arable areas get support from the continuation of the Mahatma Gandhi National Rural Employment Guarantee Scheme. The budget has allotted Rs.40,000 crore (Rs.400 billion) for this scheme, which is now being implemented across the country. Presenting the Budget, the FM recalled the hard days of the past two years and said that the worst was over for the Indian economy but warned the challenges were no less. “We have weathered this crisis well,” Mukherjee said, adding, “That is not to say that the challenges today are any less than they were nine months ago.
According to the FM, the three challenges from last year remained: to touch nine per cent growth and then the double-digit, which he was confident the world’s fastest growing economy would achieve; make growth more inclusive and develop infrastructure in rural areas; and to strengthen food security.
— Nupur Chakraborty