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WHAT’S IN IT? Indicus Analytics 16th February 2009 Budget speech focuses on government’s achievements in its 5 year term. Given upcoming polls, government presented an Interim Budget, so that expenditures of the next four months could be met. Though full year’s accounts have been presented there are no significant changes compared to the current fiscal year. But, important changes that happened in the current fiscal have been extended into the next year, assuming low growth in continuation of the present slowdown. Estimated GDP growth at 10.97% in current prices : though no inflation estimates have been made, this would mean growth in the 6-7% GDP growth in real terms.Risks do lie ahead of lower growth and higher inflation Major changes in current fiscal i.e. budget estimates compared to revised estimates for 2008-09 Revenue receipts fallen by 7%, due to fiscal measures and tax relief worth Rs. 40,000 crore given as part of fiscal stimulus this year. Capital receipts risen from budgeted Rs. 147949 crore to revised Rs. 338780 crore, an increase of 129%, thanks to rise in market borrowings of the govt. to offset fiscal expenses on stimulus.
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INDIA BUDGET 2009-10
WHAT’S IN IT?Indicus Analytics
16th February 2009
Budget speech focuses on government’s achievements in its 5 year term. Read the whole
speech at http://indiabudget.nic.in/ub2009-10(I)/bs/speecha.ht
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Given upcoming polls, government presented an Interim Budget, so that expenditures of the next four
months could be met.
Though full year’s accounts have been presented there are no significant changes compared to the current fiscal year.
But, important changes that happened in the current fiscal have been extended into the next year, assuming low growth in continuation of the present slowdown. Estimated GDP growth at 10.97% in current prices : though no inflation estimates have been made, this would mean growth in the 6-7% GDP growth in real terms.
Risks do lie ahead of lower growth and higher inflation
Major changes in current fiscal i.e. budget estimates compared to revised estimates for 2008-09 Revenue receipts fallen by 7%, due to fiscal measures and tax relief worth Rs. 40,000 crore given as part of fiscal stimulus this year. Capital receipts risen from budgeted Rs. 147949 crore to revised Rs. 338780 crore, an increase of 129%, thanks to rise in market borrowings of the govt. to offset fiscal expenses on stimulus.
Total expenditure rose by 20% compared to budget estimates – e.g Rs., 70,000 crore worth infrastructure projects were approved Aug08-Jan09, higher payouts in subsidies, defence etc. Net impact -
Fiscal deficit rose from estimated 2.5% of GDP to 6.0 % of GDP, with revenue deficit rising from estimated 1% of GDP to 4.4% of GDP
For 2009-10
Revenue receipts expected to be in line with budgeted estimates for current year Rs. 609551 crores compared to Rs. 602935 crores.
Tax revenue projected lower than current year’s budgeted estimates, but higher than the revised estimates.
There has been growth in non-tax revenue in 2008-09, this is assumed to continue in the year ahead, this includes interest on loans, dividends and profits of PSUs, royalty on offshore crude oil and gas production, charges for services provided by govt etc.
Huge borrowing continues.
Receipts and expenditures estimated to be 6% higher than the revised estimates for 2008-09. Fiscal deficit therefore estimated at 5.5% of GDP and revenue deficit at 4% of GDP Stress in budget speech on social sector, rural development, infrastructure, highways etc.
BUT No major change in social sector spending from last year – despite budget speech claims
Is this a ‘Good’ Budget?
Given the circumstances, it is a sensible budget.. major changes can be made in June, with revised numbers depending on the scenario as it unfolds.
Full scale budget in a few months – that’s where the action should be, if at all
What about the Fiscal Deficit worry?
It remains – such high fiscal deficit numbers will impact economic growth down the road.
Flip side is the expenditure on infrastructure and rural development can work to providing incomes and employment potential for growth.
Govt. should concentrate on more effective utilization of funds.
Why has the stock market reacted unfavourably?
Stock market reaction unreal…. plunges 3% as ‘budget disappoints’
But, there was no need to raise expectations for anything very different – as Pranab Mukherjee says, ‘There is no mandate to tweak taxes.. I can’t indulge in reckless borrowing’.
(In Crore of Rupees)2008-2009
Budget Estimates2008-2009
Revised Estimates2009-2010
Budget Estimates
1. Revenue Receipts 602,935 562,173 609,551
2. Tax Revenue(net to Centre) 507,150 465,970 497,596
3. Non-tax Revenue 95,785 96,203 111,955
4. Capital Receipts (5+6+7)$ 147,949 338,780 343,680
5. Recoveries of Loans 4,497 9,698 9,725
6. Other Receipts 10,165 2,567 1,120
7. Borrowings and other Liabilities $ 133,287 326,512 332,835
8. Total Receipts (1+4)$ 750,884 900,953 953,231
9. Non-plan Expenditure 507,498 617,996 668,082
10. On Revenue Account of which, 448,352 561,790 599,736
11. Interest Payments 190,807 192,694 225,511
12. On Capital Account 59,146 56,206 68,346
13. Plan Expenditure 243,386 282,957 285,149
14. On Revenue Account 209,767 241,656 248,349
15. On Capital Account 33,619 41,301 36,800
16. Total Expenditure 750,884 900,953 953,231
17. Revenue Expenditure 658,119 803,446 848,085
18. Capital Expenditure 92,765 97,507 105,146
19. Revenue Deficit (17-1) 55,184 241,273 238,534
% of GDP 1.0 4.4 4.0
20. Fiscal Deficit 133,287 326,515 332,835
% of GDP 2.5 6.0 5.5
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