Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Budget 2009-10: Past perfect, future tense - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Feb 16, 2009

    Budget 2009-10: Past perfect, future tense

    Conforming to the tradition of interim budgets being non-eventful in terms of policy actions, the acting Finance Minister Mr. Pranab Mukherjee presented the interim budget for the year 2009-10 today with very limited specifications about the government's future fiscal plans. It gave a detailed account of the outgoing government's performance for the previous four fiscals (FY05 - FY08) but had little to offer to Indian citizens and India Inc by way of fiscal incentives.

    Piggybacking on the past. Pushing present problems to the future.

    Choosing to rest on the laurels for the commendable economic performance during the initial four years of its tenure, the government's interim budget for 2009-10 was largely a reflection on the past. Without delving on the probable solutions for the present problems, particularly the poor fiscal situation, the budget in fact made more room for expansion of the non-planned expenditure allocation. Not throwing much light on specific policy measures to revive the economy, it indicated the possibility of ongoing monetary and fiscal measures to stimulate the economy, while temporarily relaxing the FRBM (Fiscal Responsibility and Budgetary Management) targets.

    Key takeaways

    1. The revised estimates pegged the government's gross tax collection in FY09 8.7% lower than the budgeted figures due to the recently announced fiscal stimulus packages.
    2. The revised revenue deficit has been estimated at 4.4% of GDP as against the budgeted figure of 1% of GDP while fiscal deficit is expected to go up from the budgeted 2.5% of GDP to 6% of GDP in FY09.
    3. For FY10, while the revenue deficit is estimated to come down to 4% of GDP, the fiscal deficit is expected to rest at 5.5% of GDP (without accounting for off balance sheet items).
    4. Offering some relief to export and employment oriented sectors, the budget extended the interest subvention of 2% on pre and post shipment credit for sectors such as textiles, leather, gems & jewellery etc. from March to September 2009, which would involve an additional outgo of Rs 5 bn.
    5. In order to sustain the health of the financial system, the government plans to recapitalise the public sector banks that are in need of capital to maintain capital adequacy ratio (CAR) in excess of 12% (as per the Basel II norms).
    6. Keeping in mind India's security needs, the budget increased allocation towards defence expenditure to Rs 1,417 bn. Also the major subsidies including food, fertiliser and petroleum have been estimated at Rs 956 bn (19% of estimated net tax revenue in FY10).
    7. Retaining the government's focus on rural infrastructure development, the budget proposed a corpus of Rs 140 bn for the same.

    What to expect?
    What clearly came out of the interim budget was that the government is not done with its borrowing programme and will have to continue to borrow heavily in the coming months to meet its expenditure plans. This is particularly in the wake of lower tax collections. Having said that, the yields on long term government papers are expected to remain under pressure, thus making it more expensive for corporates to raise long term money. While infrastructure funds will be partially taken care of by the refinancing of bank debt by Infrastructure Investment Finance Company Ltd. (IIFCL), India Inc. may have to defer the capex plans a little longer. Meanwhile, the softening of short term interest rates cannot be ruled out.

    Further, with the government being committed to revive the economic growth by undertaking more fiscal expenditures, allocation towards subsidies and higher wage payments are expected to put more money in the hands of people. This may bode well for Indian corporates in terms of stimulating higher demand for goods and services.

    In all, the interim budget set a cautionary tone to withstand difficult times.



    Equitymaster requests your view! Post a comment on "Budget 2009-10: Past perfect, future tense". Click here!


    More Views on News

    Insider Leaks Equitymaster Stock Picks (The 5 Minute Wrapup)

    Jul 25, 2017

    Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?

    Raymond and Other 'For Profit' Companies Who Don't Care about Shareholder Returns (The 5 Minute Wrapup)

    May 27, 2017

    What happens when minority shareholders are short-changed in the normal course of business?

    Why Commission Driven Model In Mutual Funds Should Be Eliminated... (Outside View)

    Feb 15, 2017

    PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.

    This Book Changed How I Looked at the World of Man and Money (Vivek Kaul's Diary)

    Aug 24, 2016

    And here's your chance to claim a free copy of this book...

    The Developed World is Dying because of Demographics, Debt, and Deflation (Vivek Kaul's Diary)

    Aug 12, 2016

    And Why India's demographic dividend could turn out to be a doubtful debt...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms