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.

1. INDIA BUDGET 2009-10 WHAT’S IN IT? Indicus Analytics 16 th February 2009

2. 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.htm G iven 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.

3. 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

4. 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.

5. 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

6. 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.

7. 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

8. 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

9. 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.

10. 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’.

11. 5.5 6.0 2.5 % of GDP 332,835 326,515 133,287 20. Fiscal Deficit 4.0 4.4 1.0 % of GDP 238,534 241,273 55,184 19. Revenue Deficit (17-1) 105,146 97,507 92,765 18. Capital Expenditure 848,085 803,446 658,119 17. Revenue Expenditure 953,231 900,953 750,884 16. Total Expenditure 36,800 41,301 33,619 15. On Capital Account 248,349 241,656 209,767 14. On Revenue Account 285,149 282,957 243,386 13. Plan Expenditure 68,346 56,206 59,146 12. On Capital Account 225,511 192,694 190,807 11. Interest Payments 599,736 561,790 448,352 10. On Revenue Account of which, 668,082 617,996 507,498 9. Non-plan Expenditure 953,231 900,953 750,884 8. Total Receipts (1+4)$ 332,835 326,512 133,287 7. Borrowings and other Liabilities $ 1,120 2,567 10,165 6. Other Receipts 9,725 9,698 4,497 5. Recoveries of Loans 343,680 338,780 147,949 4. Capital Receipts (5+6+7)$ 111,955 96,203 95,785 3. Non-tax Revenue 497,596 465,970 507,150 2. Tax Revenue(net to Centre) 609,551 562,173 602,935 1. Revenue Receipts 2009-2010 Budget Estimates 2008-2009 Revised Estimates 2008-2009 Budget Estimates (In Crore of Rupees)

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