Manege Rial Eco

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TERM PAPER

OF

MANAGERIAL ECONOMICS

(M.E)

TOPIC:- BUDGET 2009 AN EVALUATIO

OF ITS EFFECT ON SERVICE INDUSTRY

SUBMITTED BY:-

REYAZ AHMAD

MBA 1St

Sem

ROLL- A10

LIM,LPU SUBMITTED TO:-

Mr. SACHIN LAL KASHYA


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BUDGET 2009-2010

INTRODUCTION:-

Presenting the interim Budget for 2009-10 in Lok Sabha, acFinance Minister Pranab Mukherjee] claimed in ParliamentMonday thatevery efforthas beenmadeto fulfil promisesmadetocommonman.

HIGHLIGHTS OF THE INTERIM BUDGET 2009-10:-

The Gross Domestic Productincreased by 7.5 percent, 9.5 percent,9.7 percent and 9 percentinthe first fouryears from fiscal year2005 to 2007-08 recording a sustained growth of over9 percent for

three consecutive years forthe firsttime. Thegrowth drivers fortheperiod were agriculture, services, manufacturing along withtrade aconstruction.

Fiscal deficit down from 4.5 percentin 2003-04 to 2.7 percentin2007-08 and Revenue deficit from 3.6 percentto 1.1 percentin 2008.

The domestic investmentrate as a proportion of GDPincreased fro27.6 percentin 2003-04 to 39 percentin 2007-08. Gross Domestic

savingsrateshot up from 29.8 percentto 37.7 percent duringthisperiod.

The Gross capital formationin agriculture as a proportion ofagriculture GDPincreased from 11.1 percentin 2003-04 to 14.2 pecentin 2007-08.

Thetax to GDPratio increased from 9.2 percentin 2003-04 to 12.5percentin 2007-08.

Annual growthrate of agricultureroseto 3.7 percent during 2003-to 2007-08. The foodgrain productionrecorded anincrease of 10milliontonneseach yearduringthis period and touched an all timehigh of 230 milliontonnesin 2007-08.

Whilemanufacturingsectorrecorded growth of 9.5 percent perannuminthe period 2004-05 to 2007-08, communication and


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constructionsectorsgrew attherate of 26 percent and 13.5 percenperannum, respectively.

Exportsgrew at an annual averagegrowthrate of 26.4 percentin Udollartermsinthe period 2004-05 to 2007-08. Foreigntradeincrea

from 23.7 percent of GDPin 2003-04 to 35.5 percentin 2007-08.OUTLOOK FOR THE YEAR 2009-2010:-

Despitetheglobal financial crisis which beganin 2007 impactingmostemergingmarketeconomies, 7.1 percentrate of GDPgrowththe current yearmakes India thesecond fastestgrowingeconomy inthe world.

Fallout ofglobal slowdown on Indianeconomy were countered witfiscal stimulus packages announced on December7, 2010 and Janu

2, 2009 providingtax reliefto boost demand and increasingexpenditure on public projects.

Government accorded approval to 37 infrastructure projects worth R70,000 crore fromAugust, 2010 to January, 2009 alone.

UnderPPPmode, 54 Central Sectorinfrastructure projects with aproject cost of Rs 67,700 croregivenin-principal orfinal approval 23 projects amountingto Rs 27,900 crore approved forviability gapfundingin 2010-09.

India Infrastructure Finance Company Ltd. (IIFCL) to refinance up60 percent of commercial bank loans forPPP projectsinvolvingtoinvestment of Rs 1,00,000 croreininfrastructure overthenexteighteenmonths.

In additionto RBI takingnumberofmonetary easing and liquidityenhancingmeasuressuch asreductionin cashreserveratio, statutorliquidity ratio and key policy rates, Governmenthastakenspecificmeasures whichincludeextension ofexport credit forlabourintens

exports, improving pre and postshipment credit availability,additional allocations forrefund ofTerminal Excise Duty/CST andexportincentiveschemes besidesremoval ofexport duty and expor

ban on certainitems. A Committee of Secretariesset up to addressprocedural problems faced by exporters.


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The corpus of Rural Infrastructure Development Fund (RIDF)increased from Rs.5,500 crorein 2003-04 to Rs 14,000 crore fortheyear2010-09. Aseparate window forrural roads created with a corof Rs 4,000 crore foreach ofthe lastthree years.

As against 60 lakhhousesto be constructed underIndira AwaasYojana by 2010-09, 60 lakhtwelvethousand houses constructed

between 2005-06 to December, 2010. Panchayat Empowerment and Accountability Scheme (PEAIS)

proposed to beexpanded.

EDUCATION:-

Major initiatives including a new Centrally Sponsored Schelaunched to universalize education at secondary stage in the y2010-09.

Outlay on Higher Education increased 9 fold in the Eleventh FYear Plan. Ordinance promulgated for establishing 15 CenUniversities. In addition to 6 new Indian Institutes of Technol(IITs) in Bihar, Andhra Pradesh, Rajasthan], Orissa, Punjab Gujrat which started functioning in 2010-09, two more IITsMadhya Pradesh and Himachal Pradesh are expected to commetheir academic session in 2009-10. 5 Indian Institute of Scie

Education and Research (IISER) announced earlier have becofunctional. 2 new schools ofPlanning and Architecture at Vijayawand Bhopal have started functioning. Teaching is expectedcommence from academic year2009-10 in fourout ofsix new IndInstitute of Management proposed for the EleventhPlan in HaryaRajasthan, Jharkhand and Tamil Nadu.

Due to revision in Educational Loan Scheme by the Governmnumber of beneficiaries increased from 3.19 lakh to 14.09 lakh

amount of loan outstanding increased from Rs 4,500 crore asMarch, 31, 2004 to Rs 24,260 crore as on September30, 2010.

500 ITIs upgraded into centers of excellence. National SDevelopment Corporation created in July, 2010 withinitial corpuRs 1,000 crore.


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SOCIAL SECTOR:-

Authorised capital of National Safai Karamchari FinanceDevelopment Corporation (NSKFDC) is being raised from Rscroreto Rs 300 crore.

Scope ofthe pre-metric scholarship forchildren ofthoseengaged inunclean occupationsexpanded and rates ofscholarship doubled in2010-09. Annual ad-hoc grantincreased by about 50 percent ascompared to earlierrates.

Rashtriya Mahila Koshto bestrengthened by enhancingitsauthorized capital.

'PriyadarsiniProject' a rural women'semployment and livelihood

programme will beimplemented as pilotinthe district of Madhubaand Sitamarhiin Biharand Shravasti, Bahraich, Rai Bareli andSultanpurin UttarPradesh].

146 lakh persons benefited underIndira Gandhi National Old AgePension Schemeinthe current financial year.

Two new schemes 'Indira Gandhi National Widow PensionScheme' to provide pension of Rs 200 to widows between agegrouof 40-64 years and 'Indira Gandhi National Disability PensionScheme' to provide pension forseverely disabled persons.

Widowsinthe agegroup of 18-40 yearsto begiven priority inadmissionto ITIs, Women ITIs and National/Regional ITIs forwomen. Governmentto bearcost oftheirtraining and providestipeof Rs 500 permonth.

22 States and UnionTerritoriesinitiated processto implementRashtriya Swasthya Bima Yojana forBPL familitiesintheunorganised sectorand 60 lakhthirty two thousand persons coveredfordeath and disability under 'AamAdmni' Bima Yojana (AABY).

Public SectorEnterprises Turnoverof Central Public SectorEnterprisesincreased from Rs

5,87,000 crorein 2003-04 to Rs 10,81,000 crorein 2007-08 andprofitsgrew from Rs 53,000 croreto Rs 91,000 crore. Whilenumbof lossmakingenterprises came down from 73 in 2003-04 to 55 in


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2007-08, numberof profitmakingenterpriseshasgone up from 143158 duringthesame period.

Government approved implementation of Guidelines on CorporateGovernancein Central Public SectorEnterprises (CPSEs) in June,

2007. Corpus of National Investment Fund created out of disinvestment

proceeds from Central PSUsstood at Rs 1,815 crore as on Decemb31, 2010.Financial Sector Reforms

NPAs ofPublic SectorBanks declined from 7.8 percent on March2004 to 2.3 percent on March 31, 2010.

As a result ofinitiating process of amalgamation and recapitaliza

of Regional Rural Banks (RRBs) withnegativenet worth, 196 RRmerged into 85 RRBs. The Governmenthas contributed Rs 652 crforcapitalization of RRBs upto December31, 2010.

Number ofreforms undertaken in the last four years to deepenwiden the securities markets and strengthen the regulatmechanisms forthesemarkets.

The Companies Bill, 2010, undertaking comprehensive revisionCompaniesAct, 1956 to enable adoption of internationally accep

best practices, has beenintroduced intheParliament.

REVISED ESTIMATES:-

Thetotal expenditure at Rs 7,50,884 crorein B.E. 2010-09 revisedRs 9,00,953 crorein R.E. 2010-09 showing anincrease of Rs 1,50,0crore. Plan Expendituregone up from Rs 2,43,386 crorein B.E. 2010-

to Rs 2,82,957 crorein R.E. 2010-09. Non-Planexpenditureincreased by Rs 1,10,498 crorein R.E.2010-09 overB.E. 2010-09. Revised Estimate 2010-09 forNon-Tax Revenuesincreased fromRs 95,785 crorein Budget Estimate 2010-09 to Rs 96,203 crore.


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Revised Estimates ofgrosstax collection projected at Rs 6,27,94crore as against B.E. 2010-09 of Rs 6,87,715 crore, primarily dueto

pro-active fiscal measuresinitiated to countertheimpact ofglobalslowdown onthe Indianeconomy.

Revised Revenue deficitto be at Rs 2,41,273 crore (4.4 percentGDP) as against budgeted figure of Rs 55,184 crore (1 percent ofGDP). Fiscal deficitto go up from Rs 1,33,287 crore (2.5 percent ofGDP) in B.E. 2010-09 to Rs 3,26,515 crore (6 percent of GDP).BUDGET ESTIMATES:-

Total expenditure forfiscal 2009-10 estimated at Rs 9,53,231crore. Planexpenditureestimated at Rs 2,85,149 crore and Non-Pla

expenditure at Rs 6,68,082 crore. Budgetary supportinPlan B.E. 2009-10 in comparisonto B.E.2010-09 increased forDepartment of Rural Development, Departmof Road Transport & Highways, Railways, Ministry ofPower,Department of Industrial Policy and Promotion and Department ofInformationTechnology to meettherequirements ofrural andinfrastructure development along withhigherallocation forMinistrof YouthAffairs & Sports and Ministry of Cultureto ensure adequa

resources forhosting ofthe Commonwealth GamesAllocationstoflagship programme which directly impact 'AamAadmi' fully

protected. Rs.30,100 crore allocated forNational Rural EmploymentGuarantee Scheme forthe year2009-10. In 2010-09 employment o138.76 crore person days covering 3.51 crorehousehold alreadygenerated. About 98 percenthabitations covered by primary schools under

Sarva ShikshaAbhiyan.

Allocation forthis programmeincreased b571 percent between 2003-04 and 2010-09. Allocation of Rs 13,10

crore proposed for2009-10. Rs 8,000 crore allocated forMid-day Meals Scheme forthe year2009-10.


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Allocation of Rs 6,705 crore proposed forIntegrated ChildDevelopment Scheme (ICDS) forthe year2009-10. New WHO chigrowthstandards adopted formonitoringgrowth of children underICDS.

386 projects amountingto Rs 39,000 croresanctioned tillDecember31, 2010 underJawaharlal Nehru] National Urban RenewMission (JNNURM). Allocation of Rs.11,842 crore proposed forthyear2009-10. Rs.7,400 crore allocated forRajiv Gandhi Rural DrinkingWaterMission, Rs 1,200 crore forRural SanitationProgramme, Rs 12,07crore forNational Rural Health Mission, Rs 40,900 crore allocated Bharat Nirman forthe year2009-10.

A provision of Rs 100 croreintheAnnual Plan 2009-10 made fUnique IdentificationAuthority of India. RIDF-XV proposed with a corpus of Rs 14,000 crore. Separatewindow forrural roadsto continue with a corpus of Rs 4,000 crore Interestsubvention of 2 percent on pre and postshipment creditforcertainemployment oriented sectorsi.e. Textiles (includinghandlooms & handicrafts), Carpets, Leather, Gem & Jewellery,Marine products and SMEsextended beyond March 31, 2009 tillSeptember30, 2009 involving an additional financial outgo of Rs.5crore. Governmentto recapitalizethe public sectorbanks overthenexttwo yearsto enablethemto maintain Capital to RiskWeighted AssRatio (CRAR) of 12 percent. Allocation forDefenceincreased to Rs 1,41,703 crore whichincludes Rs 54,824 forCapital Expenditure. Majorsubsidiesincluding food, fertilizerand petroleumestimatat Rs 95,579 crore.

Forthe fiscal 2009-10, with Centre'snettax revenueestimated aRs 5,00,096 crore and Revenueexpenditure at Rs 8,48,085 crore,revenue deficitisestimated at 4 percent of GDP and fiscal deficit a5.5 percent of GDP.


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CHALLENGES:-

To lead economy to high GDPgrowthrate of 9 percent perannumtheearliest

To deepen and broaden the agenda for inclusive developmenimprove delivery mechanisms ofthegovernment.

OVERVIEW OF THE ECONOMY:-

Growth rate of Gross Domestic Product dipped from an averageover9 percentinthe previousthree fiscal yearsto 6.7 percent dur2010-09.

Whole sale price index rose to nearly 13 per cent inAugust, 2and had anequally sharp fall to zero percentin March, 2009.

The structure of Indias economy changed over the last ten yewith contribution of the services sector to GDP at well over 50 cent and share ofmerchandisetrade doublingto 38.9 percent of Gin 2010-09.

Recognisingeconomic recovery and growth as co-operativeefforthe Central and State Governments, meeting with Finance MinisterStatesheld as part of preparation of the Budget. This is intended

become an annual feature.TOWARDS ECONOMIC REVIVAL:-

Short-term Measures

To counterthenegative fallout oftheglobal slowdown onthe Indeconomy, Government responded by providing three focused fistimulus packagesinthe form oftax relief and increased expendion public projects along with RBI taking a numberofmonetary easand liquidity enhancingmeasures.

Fiscal accommodation led to anincreasein fiscal deficit from 2.7 centin 2007-08 to 6.2 percent of GDPin 2010-09.


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EFFECT ON SERVICE INDUSTRY:-

Themarkethad highexpectations fromthe Union Budget 2009-10,

especially withthe Economic Survey suggestingradical changes --

includingreview, phase outsurcharges, cesses and transactiontaxeand annual target of Rs 25,000 crore perannum from disinvestmen

stakeinPSUs forthenext five years.

While Union Budget did remove Fringe BenefitTax, markets found

thehikein MinimumAlternateTax from 10% to 15% a bigger

irritant.

Also, contrary to marketexpectations, fiscal deficitissetto zoomt6.8% inthe fiscal year2009-10, up from 6.2% as perprovisionalaccounts of FY 2010-09.

Themarkets wereexpectinginflows from auction of 3G spectrumauctions and theinflow from divestment ofstakeinPSUsto ensurethat fiscal deficit doesnotshoot over6.0%. However, the budgetdocumentsindicatethatthe deficit will touch 6.8% forFY 2009-10

Similarly, revenue deficitissetto increaseto 4.8% in FY 2009-10

from 4.6% in FY 2010-09 .

Hehikein MinimumAlternateTax (MAT) from 10% to 15% is anirritant forthe corporatesector. Onthe positiveside, thishikehascome with a benefit ofextendingthe period allowed to carry forwarthetax credit underMAT from 7 yearsto 10 years.

Also, thehikein MATwill not be 'earnings dilutive', but will only b'cash flow dilutive'. Theincreasein liability towards MATwill be

matched by anincremental deferred tax credit.Hence, thenet profit orEPS of a company will not change dueto hin MAT from 10% to 15%. However, it will lead to anincreaseincash outflow and ifthe company isnotreturningto profits as perthIncometax Act withinten years, thenitmay haveto forego these.


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So, fromthe current year's point ofview, theincreasein MAT from10% to 15% isnotearnings dilutive but cash flow dilutive.

Onthe otherhand, theremoval of Fringe BenefitTax (FBT) is a mpositive forcorporate India.

The financeministerhassaid thatsurcharge onincometax forindividuals will be waived.

The financeministerhassaid thatthe budget proposals arerevenueneutral as faras directtax is concerned. Thisisso despitethe factttheexemption limit on personal incometax has beenhiked by Rs15,000 to Rs 2.40 lakh forseniorcitizens.

Similarly, theexemption limit washiked by Rs 10,000 eachto Rs 1lakh forwomentaxpayers and to Rs 1.60 lakh forall othercategoriofindividual taxpayers.

Astheminimumtax bracketis 10%, thismeansthe benefit forsenicitizens will be Rs 1,500 perannum and forothers (including wometax payers) will be Rs 1,000 perannum. The benefit could bemoreincludingthesurcharge waived.

The Union Budgethasincreased the deduction undersection 80 DD

respect ofmaintenance, includingmedical treatment, of a dependenwithsevere disability has beenraised from Rs 75,000 to Rs 1 lakh (100,000).

In a way, the biggest (maximum) and the largest (coveringmorepeople) beneficiary ofthe Union Budget 2009-10 isthesalaried claTheirdisposableincomehas beenincreased throughhikein ITexemption limit and removal ofsurcharge.

The Union Budgethasrobbed corporatesto increase disposableincome ofindividuals. As a result, while corporatetaxes areexpecto rise by 15.6% to Rs 256,725 crore, personal incometax isexpectto fall by nearly 8% to Rs 112,850 crorein FY 2009-10.


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Auto sectorhasto contend withthereductioninexcise duty onvehiclesthat were left outinthethree-stimulus package announced2010-09.

The Union Budget 2009-10 has cuttheexcise duty forpetrol trucks8% from 20%. In addition, the ad valorem (duty by value) duty oncars and sports utility vehicles ofengine capacity equal and above2,000cc has beenreduced by Rs 5,000/unitto Rs 15,000, auguringwell forvehiclemanufacturers.

In addition, the budgethas furtherprovided fora more level playingfield betweenroad freight and othermodes oftransport (includingcoastal shipping and railways) by applying a uniformservicetax ra

This will reducetheincremental disadvantagein pricing faced by rofreight operators. Overall the Union Budget 2009-10 ismarginally

positive forthesector.

The Indiansoftwareindustry hassomethingto cheerfromthe Budg2009. The budget proposesto abolish FBT, which would mean lowcash outgo and loweradministrationhassles. Also, the budget

proposesextension of STPI scheme (sun-set clause) foronemoreyear, i.e. forFY2010-11.

This would mean onemore yearofrelief onthetaxation front forthIT companies. The budget proposesto exemptthevalue attributablthetransferoftherightto use packaged software fromexcise duty CVD.

Finally, the budget proposesto increasethe MAT limit from 10% t15% and extend the period allowed to carry forward thetax creditunderMAT from 7 yearsto 10 years.

Thoughthis would meanhighercash outgo dueto taxesto be paidonhighertax rate, on an overall basistheimpact onearnings wouldneutral.

Onthe administrativeside, the budget proposesset up of alternativedisputeresolutionmechanismto be created withinthe IncomeTax


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department fortheresolution oftransferpricing disputesempowerithe Central Board of DirectTaxes (CBDT) to formulate 'safeharborulesto reducetheimpact ofjudgmental errorsin determiningtrans

priceininternational transactions.

The budget proposesto continue withthestimulus packageextendein February, 2009 up to December31, 2009 to the printmedia,comprising waiverof 15% agency commission on DAVPadvertisements and a 10% increaseinthe DAVPratesto be paid as'special relief' subjectto documentary proof of loss ofrevenueinnogovernmental advertisements.

This will spell relief forthe printmedia sector, whichisreeling due

slowing advertisingrevenues.W

iththeelectionseason over, DA

VPadvertising would begin and is likely to fill up some oftherevenueshortfall created by theslowingeconomy.

However, the benefit would not bemajorastheshare of DAVP ofttotal advertisingrevenuesis 10-20%.

Looking atthe opportunity and growthinrural sector, FMCGcompanies arenow focussing ontherural region fortheirvolumegrowth.

The focus onrural sectorinthe budget -- likeincreasein agriculturcredit flow to Rs 325,000 crore, allocation of loanto farmerup to 3lakh attherate of 7%, and144% increasein allocation forNationalRural Employment Guarantee Schemeto Rs 39,100 crore -- will githerequired booststo the FMCG industry.

Along withit, anincreaseintehexemption limitin personal incomtax by Rs 15,000 to Rs 2.40 lakh forseniorcitizens; by Rs 10,000 t

Rs 1.90 lakh forwomentax payers; and by Rs 10,000 to Rs.1.60 laforall othercategories ofindividual taxpayers, eliminatingthesurcharge of 10% on personal income-tax, abolition of Fringe BeneTax (FBT) and introduction ofthe Goods and ServicesTax withefffromApril 1, 2010 will thehelp the FMCG sectorto continueitmoment forthe FY09.


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The papersectordidn'treceive any much attention fromthe financeminsterinthe budget. However, the paperindustry isthankful to thfinanceminister fornotincreasingtheexcise duty, which was cut b600 basis pointsinthe firsttwo-stimulus packagesto the current lev

of 4%.

The paperindustry, whichissuffering from low costexport, wasexpecting a risein basic custom duty (BCD) from 10% to 15% on

paper/paperboards along withre-introduce component ofspecialadditional duty to savethe domestic manufacturer.

The financeministerhasnotheard theirrequest. Thescripsto bewatch will be BallarpurIndustries (BILT), JKPaper, Tamil Nadu

Newsprint & Papers (TNPL).

ENTERTAINMENT:- (Customs duty imposed on STB at 5%)

The budget proposesto levy basic customs duty of 5% on Set-TopBoxes. This would be a negative forthe cable and DTH operators ware already reeling underlosses onthe back ofhighercustomeracquisition cost as compared to revenue percustomer.

In orderto ensure balanced application of fertilizersto increase

agri

cultural p

roduc

tivity,

thegovernment

inten

dstom

ove

towa

rds

nutrient-based subsidy regimeso asto coverlargerbasket of fertilizwithinnovative fertilizerproducts availableinthemarket atreasonable prices.

Besides, thegovernment also intendsto moveto a system of directtransferofsubsidy to the farmers. Thesystem of directtransferofsubsidy to farmersis laudable, but only if competitionis allowedamongst fertilizercompaniesto pricetheirproducts.

Herethe problem arises dueto substantial differencein cost ofproduction depending onthe feedstock used, likenatural gas,regassified LNG, naphtha, otheralternate fuelsetc. So, whileit wathegovernment whichencouraged fertilizercapacity additionsthrough feedstock otherthangas, it cannotshy away fromitsresponsibility.


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Also, if Indian fertilizerproduction comes down and domesticconsumption continuesto rise, the country may haveto pay heavy

price ofsharp spikeinglobal prices and importin largerquantitiessuchhigh prices.

Wehaveseenthisin wheat, sugar, etc, and hope weshall notseeitfertilizers. How thegovernment achievesthisremainsto beseen.

Customs duty onrock phosphate wasreduced to 2% from 5% earlieExcise duty onnaphtha was also reduced to 14%. Althoughthe lowcustoms duty and excise duty onrock phosphate and naphtharespectively will enablethe fertilizermanufacturersto reducetheir

production cost, importantissues likethetimely subsidy payment,

measureto attractnew investment went unaddressed.There was also no timeslab announced within whichthenutrient-

based subsidy regime and the direct payment ofsubsidy to the farmareimplemented. Thusthe budget wasreally a dull affairforthefertilizersector.

PESTICIDES FEELS UNCARED FOR:-

Although Fringe BenefitTax (FBT) was abolished, there wasno

clarity onthe otherdemand oftheindustry body.The pesticidesindustry had requested forreductioninexcise duty on pesticides fro

8% to 4%, besides loweringexcise duty to 4% fromthe current levof 16% forfurnace oil.

Theindustry had also requested forzero import duty formajorfuellike fuel oil, LSHS, coal, etc. None ofthese, however, materialisedthe budget.

Request forlowerimport duty oninputs and fuels forcaptive powe

plants and reduction ofservicetax was also denied. Thus, the budgforthe pesticidesindustry isnegative as farasimmediateimpactisconcerned.


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Inthe Budget 2009-10, full exemption from 4% special CVD on paformanufacture ofmobile phones and accessorieshas been proposeto bereintroduced forone year.

The proposal is positive forthetelecomservicesindustry asit willhelp in achievingthe key objective ofthegovernmentto ensure fasspread of affordable connectivity to therural areas.

But whetherthe cost ofmobile phones will come downis a mootpoint.

The financeministermade few announcements forthe oil and gassectorand one ofthemajorones wastheextension oftax holidayunderSection 80 IB (9) forproduction ofnatural gastoo.

The demand forderegulation ofthe oil sector, however, wasnotfulfilled. Butthegovernmentset up anexpertgroup to advise on aviable and sustainablesystem of pricing petroleum products.

The announcementsmadeinthe budget aremarginally positive forsectorinspite ofmajorexpectationsremaining unfulfilled.

Slew ofinitiatives forthe oil and gassectorhave been proposed inbudget. Theseinclude:

y Thegovernmentshall set up anexpertgroup to advise on a viable asustainablesystem of pricing petroleum products.

y Tax holiday undersection 80-IB(9) ofthe IncomeTax Act, which whitherto availableinrespect of profits arising fromthe commercial

production orrefining ofmineral oil, to beextended to natural gas.Thistax benefitto be availableto undertakingsinrespect of profitsderived fromthe commercial production ofmineral oil and naturalfrom oil and gas blocks which are awarded underthe NELP-VIIIround of bidding. Thesectionto beretrospectively amended to

providethat "undertaking" forthe purposes ofsection 80-IB(9) wilmean all blocks awarded in any single contract.

y Thegovernmentshall prepare a blueprintto be developed forlongdistancegas pipelines leadingto a National Gas Grid to facilitatetransportation ofgas acrossthe length and breadth ofthe country.


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y The outlay forAssam Gas CrackerProjectstepped up suitably in B2009-10.

y Excise duty onnaphtha to bereduced to 14%.y Duty paid High Speed Diesel blended with upto 20% bio-diesel to b

fully exempted fromexcise duties.y The ad valorem component ofexcise duty of 6% on petrol intended

forsale with a brand nameto be converted into a specific rate.Consequently, such petrol would now attracttotal excise duty ofRs.14.50 perlitreinstead of '6% + Rs.13 perlitre'.

y The ad valorem component ofexcise duty of 6% on diesel intendedforsale with a brand nameto be converted into a specific rate.Consequently, such diesel would now attracttotal excise duty of

Rs.4.75 perlitreinstead of '6% + Rs.3.25 perlitre'.y Customs duty on bio-diesel to bereduced from 7.5% to 2.5%y Thesteel industry wasexpecting anincreaseinimport duty on cert

steel and steel products and was also hopeful of a hikeinexporttaxiron ore.

y None ofthesetwo demands oftheindustry wasmet. However, focuoninfrastructureisexpected to provideindirect demand push.

y From a medium-term perspective, thegovernment plansto increasetheinvestmentininfrastructureto morethan 9 percent of GDP by2014. Overall, withindustry demandsnotmetthe Budgetisneutralforthesteel sectorwith a negative bias.

y Thereal estatesectorlooked up to to the budget withgreathope formeasuresto resurrectthehousing demand. Ithad asked forincrease80C benefitto Rs 3 lakh and of which 2 lakhexclusively forprinciprepayment, extension of 100% deduction ofinterest on payment for

owneroccupied house as well likerented house, extension ofsunseclause u/s 10A and 10B, etc.y Whiletheextension of 10A and 10B benefits weregranted forone

more year, auguring well forcommercial real estate -- especially,STPI space -- withno majorchangeintax benefits forinvestmenti


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real estatesector, the budgethasnot done any thing concretetoresurrectthe demand fortherealty sector.

y However, removal ofsurcharge forincome up to Rs 10 lakh (Rs 1million), increaseintax exemption by Rs 15,000 forseniorcitizens

and by Rs 10,000 forwomen and otherassesses will improvedisposableincome.

y Butthis will largely beinadequate consideringthe current propertypricesin urban centers and interestrates and will hardly be anyincentive forpushing up demand forreal estatesector.

Capital Goods :-( No clear measures to encourage

investments)

y Theincreased allocation forcentral funded schemessuch as

APDRRajiv Gandhi Grameen Vidyutikaran Yojana has beengood forthe

electrical equipmentindustry.y Onthe flipside, the budgethasnot clearly spelt out any measuresto

encourage privateinvestmentininfrastructure orthemanufacturingsector.

y Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) to becontinued duringthe EleventhPlan period with a capital subsidy of

28,000 crore. Allocation of Rs 5,500 crore for2010-09.y Corpus forthe Rural Infrastructure Development Fund (RIDF-XIV

beraised in 2010-09 to Rs 14,000 crore, with a separate window forural roads.

y Increaseinshortterm capital gains from 10 percentto 15 percent.y Changeintreatment ofsecuritiestransactiontax (STT) fromrebate

anexpenditure.

Impact on sector:-

y No reliefto theinfrastructure financingsectorinterms oftax rates.y Infrastructure financing companiesto benefit underthe public priva

partnerships proposed undervariousinfrastructureschemes. Thecorpus forthe Rural Infrastructure Development Fund will facilitatsuchPPP projectsintherural segments as well.


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y Companiesthat financerural electrification will benefit fromtheadditional subsidy offered to RGGVY.

Impact on companies:-

y Rural Electrification Corporation will benefit fromthe additionalsubsidy offered to RGGVY.

y IDFC to benefit from private participationininfrastructure projectsy HDFC to benefit fromthesubsidies offered to rural housing dueto

companys focus onthesame.y Broking firms like Indiainfoline, India Bullsto beimpacted by

reductionintradingvolumes arising out ofhighershorttermtax.y Treatment of STTisexpected to impact brokersespecially those wh

areinvolved in proprietary booktrading and arbitrage. Overall voluinthemarket can beimpacted dueto reductioninvolmes and cantincreaseimpact cost

BUDGET IMPACT ON SERVICE TAX:-

1.Threshold annual exemption limit:

y Thethreshold limit forsmall service providershas beenincreasedfrom Rs.800,000 to Rs.10,00,000/-

y Amendmentshall comeinto effect fromApril 1, 2010

1.Registration:_y Annual turnoverlimit forobtaining Servicetax registrationhas bee

increased from Rs.700,000 to Rs.900,000/-y Amendmentshall comeinto effect fromApril 1, 2010

2.Service tax net widened to include the following services:

y Stockexchange, commodity exchange and processing and clearinghouseservices

Stockexchange and commodity exchange perform duties andfunctions of processing and clearing oftransactions


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The aboveservices provided by themto be chargeableto serviceta

Information technology software services Interalia, includes, development, up-gradation, enhancement,

adaptation, implementation and otherservices Provision of advice and assistance onmattersrelated to ITsoftware Acquiringtherightto use, includingtherightto reproduce and sell

and softwaresupplied electronically

Investment management service provided under Unit LinkedInsurance Plan (ULIP)

Charges covered by insurance companies from policy holderssuchpremium allocation charges, fund management fees, fund switching

charges, surrenderchargesetc. (by whatever name called), chargeabto servicetax

However, therisk premium underULIP would betaxable underInsuranceservices

y Supply oftangiblegoods foruseservices Transferofrightto use any goods, in case when boththe possession

and control ofgoodsistransferred, is leviableto ValueAdded Tax(VAT)

Transaction of allowing anotherpersonto usethegoods withoutgiving legal rightto possession and effective control, not beingtreaassale ofgoods, istreated asservice, thereby chargeableto Servicetax underthishead

Internettelecommunicationservices Inthe budget of 2007-08, six separatetaxableservices, related to

telecommunication weremerged into singletaxableservice, viz.,Telecommunicationservice

Telecommunicationservices are also provided throughinternet, whwould be covered underInternettelecommunicationservices

This will interalia include, internet back boneservices (includingcarrierservice ofinternettraffic by one Internet ServiceProvider(ISP) to another ISP, internet accessservice


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2.Amendments in existing services:Foreign exchange broker service:

To include purchase orsale of foreign currency, includingmoney

changing, by an authorized dealeroran authorized money changerunderbanking and otherfinancial services

To include purchase orsale of foreign currency, includingmoneychanging, by an authorized dealeroran authorized money changerunderforeignexchange brokerservices provided by anindividual

Cargo handling service: To include packingtogetherwithtransportation of cargo orgoods,

with orwithout one ormoreservices like loading, unloading,

unpacking

Tour operator services: - To includeservices provided inrelationto ajourney from one place

another, in a contract carriagevehicle

Business auxiliary services:- To omit, referenceto informationtechnology service

3.Others:y Time limit forfilingrevised returnsincreased from 60 daysto 90 dy Monetary limit onself adjustment ofexcessservicetax paid,

increased from Rs. 50,000 to Rs.100,000/-y General penalty upto Rs. 5,000, in case of any contravention of any

the provisions ofthe CENVATCredit Rules, 2004

4.Service Tax Dispute Resolution Scheme,y Scheme applicable forresolution of disputerelatingto Servicetax

arrears pending as on March 1, 2010y Foramountsnotexceeding Rs.25,000/-


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CONCLUSION:-

Afterthisstudy thanget a conclusionthatthe presentthe pre

budgetaand also getthe budget analysisindia, budget analysis 09-10,

budget analysisexamples, budget analysis book, budget analysis

techniques. Here wegivethe details of budget analysis course, budget

analysis definition, budget analysisexamples, budget analysis

experience, budget analysis format.

FinanceministerPranab Mukherjee will presentthe Union Budget for

2009-10 to Parliamentin July first week. The budgettextisnot a

speech of financial records;itis also a agreement ofthegovernment

cost-effective policies. Thegovernment will give focused on flowing:1. Agriculture

2. Rural Development

3. Internal Security

4. Primary Education

5. Industry Growth

6. Natural Resource

Whilemaking of budgetso many surveys and analysisis doing likepre budgetsurvey, Industry key personsmeetings, different

government departmentshead & important personsseattogether,

financial organizationstalk, inthat way the budgetismaking.

Documents

Manege Rial Eco