NEW DELHI: Finance Minister Pranab Mukherjee returned to Parliament as the Finance Minister after 25 years. Belying expectations but maintaining propriety, the Finance Minister shied away from announcing any new schemes but said taxes can head lower due to economic uncertainity. Also, past spending measures have taken a toll on the economic health with the fiscal deficit widening to eight-year high levels.

"We have weathered the global crisis but there is no room for complacency. India is still the fastest growing economy among emerging economies, and the second fastest growing economy in the world," Mukherjee said.

As political troubleshooter, Mukherjee presented the interim budget but the event itself failed to be historic. Set in the backdrop of huge expectations, Mukherjee dwelt at length on the government's achievements over the past five years but shied away from any new measures. With an eye firmly on polls, the Finance Minister promised lower taxes, more spending on rural and farm sector and increased allocation on the employment guarantee schemes.

"In the days of financial stress tax rates must fall and our ability to pay taxes must rise," Mukherjee said.

The budget extended the interest subvention of 2% to exporters in labour intensive sectors until September 30, 2009. He increased allocations on rural job guarantee scheme, health, education and farm sector but all at the expense of worsening finances.

As a result, the fiscal deficit will rise to 6% of gross domestic product in FY09, the highest level since FY02. The government had earlier estimated a fiscal deficit of 2.5%.

The government also decided to allow infrastructure financing firm IIFCL to fund up to 60% of the cost of all infrastructure projects. It also allowed the firm to raise Rs 30,000 crore in additional funds in the next financial year.
 
Faced with worsening relations with neighbour and arch rival Pakistan, the government raised defence spending by 24% in FY10 as against an increase of 10% in FY09.

HIGHLIGHTS OF THE SPEECH

FY10 Estimates

> Fiscal Deficit estimated at 5.5% of GDP
> Revenue Deficit estimated at 4% of GDP
> Revenue Deficit estimated at Rs 8.48 lakh crore
> Gross revenue seen at Rs 6.71 lakh crore
> Fiscal Deficit estimated at Rs 3.32 lakh crore
> Total expenditure estimated at Rs 9,53,231 crore
> Plan expenditure estimated at Rs 2,85,149 crore
> Non-Plan expenditure pegged at Rs 6,68,082 crore
> Revenue expenditure at Rs 8,48,085 crore
> Centre's net tax revenue pegged at Rs 5,00,096 crore
> Major subsidies estimated at Rs 95,579 crore
> 2% interest subsidy for exports extended till Sept for employment oriented sector.
> Defence allocation at Rs 1,41,703 crore
> Rs 30,100 crore allocated for rural employment scheme.
> Bharat Nirman allocated Rs 40,900 crore
> National Rural Health Mission allocated Rs 12,070 crore
> Rural drinking programme allocated Rs 7,400 crore
> Rural sanitation programme gets Rs 1,200 crore
> Rural infrastructure development gets Rs 14,000 crore
> Mid-day meal scheme allocated Rs 8,000 crore
> Integrated child development scheme gets Rs 6,705 crore
> Sarva Sikhsha Abhiyan allocated Rs 13,100 crore
> Urban renewal mission gets Rs 11,842 crore
> Government to recapitalise public sector banks
> Fiscal deficit seen at 6% of GDP as against Budget Estimate of 2.5% due to fiscal measures announced to boost growth
> Tax collection estimated at Rs 62,800 crore as against Budget Estimate of
Rs 68,800 crore.
> Spending increased to Rs 9.9 lakh crore
> Goods and Service Tax (GST) rollout by 2010
> Current global situation not encouraging
> IIFCL has raised Rs 10,000cr in FY09
> 60% of infra project loans to be refinanced by IIFCL
> April-Nov FDI at $23.3bn, up 45%
> Social security nets need to be strengthened
> Export rate for the first nine mths of FY09 has dropped to 17.1%
> Plan farm allocation raised by 300%
> Infra projects worth Rs 67,000cr get in-principle nod
> Farm debt waiver of Rs 65,000cr
> Short term crop loans given at 7%