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Effects of Budget on various Sectors

Mr. Pranab Mukherjee came out strongly in defense of the interim Union Budget (2009-10),
citing "Constitutional Constraints" as the prime reason for not making major changes in the
budget. He was however honest in his admission those corrective measures needed to be
taken as soon as the new government takes over as his mandate was only for less than two
months. Mr. Mukherjee clarified that the government has already introduced two stimulus
packages and approved two major infrastructure projects to boost up the sluggish economy.
He also stressed upon the fact that every time one should not expect lot of offerings and
goodies from the budget as these are unusual times and the government has already
reacted swiftly and on-time rather than waiting for the budget day to arrive.

Pranab Mukherjee who faced a lot of criticism after presenting a lackluster budget has
announced a cut in Service Tax and Excise Duty by 2%. Around ninety percent of
manufactured goods which at present attracted 10% of Excise Duty are set to go cheaper
with the cut in Excise Duty to 8%. Some of the products that will be subject to price
reduction are as follows;

Washing Machines
Television
Refrigerators
Soaps
Cola

Service charge is a factor that affects common people very much. Presently the service
charge is 12%. As per the new budget service Tax will be reduced by 2%. Below given charges
are set to go cheaper with the Service Tax reduction to 10%.

Phone bills
Airline tickets
Tour packages

This reduction of 2% in Service Tax is set to encourage consumer spending and contribute
towards strengthening of following sectors

Tourism
Telecom
Civil aviation
Hospitality

The Finance Ministry has surely touched the right notes at the right time after a heavy
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beating it got for its interim budget inside parliament. The cuts in Excise Duty will certainly
go down well with the India Inc. It will help the common man at large whose household
budget is set to come down in the wake of these fresh announcements.

Areas Covered under the Budget

As per the talk given by President Pratibha Patil, budget 2009 - 10 will give more importance
to the following areas.

Internal security and preservation of communal harmony

Stepping up of economic growth in agriculture, manufacturing and services Consolidation of
the existing flagship programs for employment, education, health, rural infrastructure,
urban renewal and introduction of new flagship programs for food security and skill
development. Concerted action for the welfare of women, youth, children, other backward
classes, scheduled castes, scheduled tribes, minorities, the differently-abled and the elderly
along with strengthened social protection Governance reform Creation and modernization
of infrastructure and capacity addition in key sectors Prudent fiscal management; Energy
security and environment protection Constructive and creative engagement with the world
and Promotion of a culture of enterprise and innovation.

Sectors to be benefited from Budget 2009 – 10

Following are the major sectors to be benefiting from the budget.

Infrastructure
Banking
Agriculture
Healthcare
Education

Infrastructure
As per government’s internal estimate India needs an investment of over $500-600 Billion to
build its infrastructure (power, ports, airports, roads, telecom, construction, steel, railways,
mining etc) in the next 5 years. India faces a 12% shortage in power during peak hours and is
expected to worsen due to lack of rainfall this year. So there will be a huge investment
expected in this Sector. Companies under this sector is expected to make benefit out of this.

Banking
Indian banking system is very small compared to China or US. India's financial depth is low
for an economy that promises much. Financial assets represent 160 per cent of gross
domestic product. This puts India on a par with Indonesia, but way behind China's 220 per
cent. A weakened financial system may help weather a global financial crisis in the short
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term, but it will not help India reach the higher growth levels to which it aspires. There is not
a single Indian bank that figures in top 20 global banks list. The market cap of Industrial and
Commercial Bank of China is more than the combined market cap of Indian banks. Because
of all these reasons decisions that will help banking sector is expected in the budget.

Agriculture
A country where over 60% population is employed in agriculture does not even have a
consistent sectoral growth rate of 4%. President Ms. Patil mentioned that a new law would
be formulated to implement Food Security Act, which will provide the families below
poverty line 25 kg of rice or wheat per month at Rs 3 a kg. With so much political stake
linked to agriculture and no changes done to the agriculture ministry, any reforms related to
agriculture seem unlikely.

Healthcare
India has 0.5 doctors for 1,000 people as compared to 2.3 doctors per 1,000 in the United
States. We need to have more doctors, healthcare workers and medical institution in rural
areas. The government has to take serious steps to push doctors to work in these areas and
create infrastructure for them. Some estimates say that India might have to spend $20
Billion annually to achieve its proposed health care facilities.

Education
India needs lakhs of new and good schools, thousands of colleges and hundreds of
universities in order to provide even basic education to all its students. The government may
allow foreign universities to allow tie-ups with local colleges or open their branches here.
There is a huge demand and supply gap that is forcing students to go abroad to seek
education. Indian students spend $20 Billion annually for foreign education due to lack of
quality education.

Defense Sector
Mr. Mukherjee, in his union budget speech announced the allocation of Rs. 1,41,703 for the
defense sector. He justified this allocation by saying that increase had to be made
considering the present security situation around the country especially in the wake of the
Mumbai terror attacks.

India's Fiscal Deficits:

It was brought to the knowledge of the parliament that the revenue deficit has outgrown
four-fold as a result of extension of stimulus package provided to lot of industries in the light
of the global economic meltdown.
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