Home sweet home
Finance minister Pranab Mukherjees budget has re-instilled confidence that the Indian economy is well on its way to recovery. This is best reflected in the finance ministers phased and methodical exit from the fiscal stimulus package.
Macro-economic data have been presenting mixed cues industrial growth over the last few months has been robust, but inflationary concerns continue to persist.
Due credit must be given to the finance minister for focusing on fiscal prudence, ensuring that the growth momentum continues and committing to a reduced market borrowing.
The key takeaway from the budget is that the finance minister plans to rein in the fiscal deficit at 5.5 per cent of GDP in 2010-11 and thereafter to 4.8 per cent and 4.1 per cent in the subsequent years.
The market was expecting the government borrowing programme for 2010-11 to be in excess of Rs 4,00,000 crore. With the borrowing programme budgeted lower at Rs 3,45,000 crore, there should not be any significant upward movement in interest rates nor should this result in crowding out of the private sector.
As far as the housing sector is concerned, the benefits under Section 80-IB of the income tax act have been extended for a year.
This will be beneficial to developers focusing on the affordable housing segment.
The other welcome measure for housing has been the one year extension of the 1 per cent interest subvention scheme on housing loans up to Rs 10 lakh and where the cost of the property is under Rs 20 lakh.
It is encouraging that the government is increasingly focusing on the acute housing shortage. This is reflected in increased outlays in the Indira Awas Yojana, focusing on rural housing and the Rajiv Awas Yojana, which tries to reduce slums in urban areas.
From the common mans perspective, the tweaking of the income tax slabs is beneficial, especially for the middle class who has already been reeling under the pressure of rising inflation, particularly food prices.
This change in income tax slabs will result in additional money in the hands of an individual of up to Rs 50,000, which in turn can be utilised for further consumption of various products and services.
Further, the introduction of long-term tax-free infrastructure bonds will not only help to promote investment in the infrastructure sector, but will also be an attractive savings instrument for individuals.
With the reduction in surcharge, the corporate tax now stands at 33.21 per cent, which is another welcome measure.
The budget, in line with expectations has continued to give a thrust to infrastructure, education and rural development initiatives.
The government has remained committed to its flagship programmes such as the NREGS, JNNURM and Bharat Nirman by increasing these programme outlays.
Overall, the finance minister has delivered a well-balanced and pragmatic budget.