“The Budget philosophy is that of inclusive growth,” said a Finance Ministry official a day ahead of Budget 2009-10. A hike in income tax exemption limit from Rs 1.5 lakh now or introduction of standard deduction is one proposal that was internally discussed. This will encourage spending by the salaried class. Besides this, an increase in the interest paid on housing loans that is eligible for tax benefit is also likely.
For corporates, the Budget is likely to be a mixed bag. Having halved the Central value added tax (Cenvat) or the principal excise duty rate to 8 per cent over the last two years, Finance Minister Pranab Mukherjee may be constrained to move it up marginally to 10 per cent. In doing so, he will, however, spare stressed sectors such as leather, textiles and chemicals.
In his pre-Budget interaction with India Inc, Mukherjee discussed the possibility of re-introducing investment allowance that encourages companies to continue with their expansion plans in times of a slowdown. The allowance, till it was withdrawn in 1990, allowed companies to claim deduction of 20 per cent of the cost on plant and machinery before calculating profits.
The Budget support to Plan expenditure, after discussion with the Planning Commission, is expected to be Rs 3,25,000 crore, an increase of Rs 40,000 crore compared with the Interim Budget of 2009-10 or Rs 82,000 crore more than the Gross Budgetary Support in 2008-09. The UPA’s showpiece flagship National Rural Employment Guarantee Scheme will get Rs 10,000 crore compared with the allocation during the Interim Budget, taking its total outlay to Rs 40,000 crore.
The Budget will be peppered with other sops to promote inclusivity such as — building of 100,000 urban houses for the poor at a cost of some Rs 1,500 crore and an income scheme for the old age — besides a significant increase in the outlays for other flagship programmes such as Jawaharlal Nehru National Urban Renewal Mission and the National Rural Health Mission.
For Nandan Nilekani’s Unique Identification Number project, the Finance Minister is likely to set aside Rs 200 crore in the Budget. Mukherjee will make a specific mention of the project given its scale and importance.