Union Budget 2010-11-Sector-wise Analysis
India received FDI equity inflows of US$ 20.9 billion during April-December, 2009.
FDI- Foreign Direct Investment
India received FDI equity inflows of US$ 20.9 billion during April-December, 2009. This implies that (FDI) inflows during the year have been steady in spite of the decline in global capital flows. 2010-11 budget mentions specific measures to ensure steady flow of FDI to the country.
• Government has taken steps to simplify the FDI regime in order to make it easily comprehensible to foreign investors.
• Ownership and control were recognised as central to the FDI policy, and methodology for calculation of indirect foreign investment in Indian companies was defined
• Complete liberalization of pricing and payment of technology transfer fee, trademark, brand name and royalty payments was announced. Such payments can now be made under the automatic route.
• A consistent policy on downstream investment was formulated.
• Government planned to consolidate all prior regulations and guidelines into one comprehensive document to enhance clarity and predictability of the FDI policy to foreign investors.
Agriculture and Allied Sector
The agriculture sector was focused on in the 2010-11 budget to attain inclusive growth, enhance rural incomes and sustain food security. Four-pronged strategy namely- (a) agricultural production; (b) reduction in wastage of produce; (c) credit support to farmers; and (d) a thrust to the food processing sector.
• The Government planned to extend the green revolution to the eastern region of the country comprising Bihar, Chattisgarh, Jharkhand, Eastern UP, West Bengal and Orissa. Emphasis was laid on the active involvement of Gram Sabhas and the farming families. Rs 400 crore was sanctioned for the initiative in the 2010-11 budget.
• The budget proposed to organize “pulses and oil seed villages" in rain-fed areas during 2010-11. Provision for an integrated intervention for water harvesting, watershed management and soil health to be made with the objective of enhancing productivity of the dry land farming areas. Rs 300 crore was allocated for this purpose which is an integral part of the Rashtriya Krishi Vikas Yojana
• Rs.200 crore was allocated for launching the climate resilient agriculture initiative.
• With the objective to address the problem of wastage in storages and in the operation of existing food supply chains in the country, the Prime Minister insisted on taking a firm view on opening up of retail trade. Retail trade is expected to bring down the considerable difference between the farm gate prices, wholesale prices and retail prices.
• FCI has been hiring godowns from private parties for a guaranteed period of 5 years to ensure that there is no wastage of food grains procured for buffer stocks and public distribution system due to acute shortage of storage capacity in the Food Corporation of India. The budget of 2010-11 granted the FCI to hire godowns for 7 years instead of 5 years.
• In the 2010-11 budget the target for the banks for agricultural credit flow was raised from Rs 3,25000 crore to Rs 3,75, 000 crore.
• The period for repayment of the loan amount by farmers was extended by six months from December 31, 2009 to June 30, 2010 in view of the recent drought in some States and the severe floods in some other parts of the country.
• The 2010-11 budget inclided provisions for granting farmers who repay their short-term crop loans as per schedule a 2 per cent interest subvention as an incentive. Thus those farmers would have to pay only 5 per cent rate of interest.
• The Government decided to set up 5 mega food park projects in addition to the 10 that is in the process of being set up. The provision of this state-of-the art infrastructure is provided to give an impetus to the development of food processing sector.
• External Commercial Borrowings would be available for cold storage or cold room facility. This is a part of the farm to market initiative and would be available for farm level pre-cooling, for preservation or storage of agricultural and allied produce, marine products and meat.
• A Mahila Kisan Sashaktikaran Pariyojana with a provision of Rs 100 crore to meet the specific needs of women farmers would be launched.
Government would ensure that nutrient based fertiliser prices for the year 2010-11, would remain around MRPs currently prevailing. The Government had in the 2009-10 budget provided for a Nutrient Based Subsidy policy for the fertiliser sector. This policy would come into effect on 1 April 2010 and is expected to promote balanced fertilization through new fortified products and focus on extension services by the fertiliser industry. This will lead to an increase in agricultural productivity and consequently better returns for the farmers. In due course the policy is expected to reduce volatility in the demand for fertiliser subsidy in addition to containing the subsidy bill.
The 2010-11 budget recognises the importance of the development development of high quality physical infrastructure, such as roads, ports, airports and railways is essential to sustain economic growth. Rs.1,73,552 crore, which accounts for over 46 per cent of the total plan allocations, for infrastructure development in the country was allocated.
• The allocation for the development of road transport was raised by over 13 per cent from Rs.17,520 crore to Rs.19,894 crore. The Government planned to construcy national highways at the pace of 20 km per day. Changes were prescribed in policy framework specially for those projects implemented through public private partnerships (PPPs) to increase the pace of implementation.
• The 2010-11 allocates Rs.16,752 crore for Railways to modernise and expand the network.
• The Delhi-Mumbai IndustrialCorridor project has been taken up for integrated regional development. The Finance Minister said in his budget speech that preparatory activities for creation of six industrialinvestment nodes with eco-friendly world class infrastructure are completed.
• Government established the India Infrastructure Finance Company Limited (IIFCL) to provide long term financial assistance to infrastructure projects. Its disbursements are expected to reach around Rs.20,000 crore by March 2011. IIFCL was authorised to refinance bank lending to infrastructure project.
2010-11 budget provides for significant allocations and measures to bring about major development in the social sector. According to the 2010-11 budget spending on Social sector to account for 37 per cent of total plan outlay at RS.1,37,674 crore.
• The Government planned to set up a mission for empowerment of women. The ICDS platform would be expanded for effective implementation of the Rajiv Gandhi Scheme for Adolescent Girls.
• Earlier National Literacy Mission was recast as a new programme "Saakshar Bharat" to improve the female literacy rate.
• A Mahila Kisan Sashaktikaran Pariyojana to meet the specific needs of women farmers would be launched. Rs.100 crore was provided for as a sub-component of the National Rural Livelihood Mission.
• The plan outlay of the Ministry of Social Justice and Empowerment was raised by 80% and presently stands at Rs 4500 crore. The fund is meant to support the programmes being implemented for the target population groups such as the Scheduled Castes, Other Backward Classe disabilities, senior citizens and victims of alcoholism and substance abuse. This enhancement, the Ministry will be able to revise rates of scholarship under its post-matric scholarship schemes for SCs and OBC students.
• Indian Sign Language Research and Training Centre would be set up for the benefit of the hearing impaired. District Disability Rehabilitation Centres would be set up in 50 additional districts along with two composite regional centres for persons with disabilities.
• The 2010-11 budget proposed to raise the plan allocation for the Ministry of Minority Affairs from Rs.1,740 crore to Rs.2,600 crore.
Rural Development: Finance Minister Pranab Mukherjee mentioned in his budget speech that for the UPA government rural development is a high priority area. The 2010-11 budget allocates Rs.66,100 crore for Rural Development.
• The allocation for NREGA was increased to Rs.40,100 crore in 2010-11 budget. Rs.48,000 crore was allocated for various programmes under Bharat Nirman to frther upgrade rural infrastructure.
• In the 2010-11 budget the allocation for the Indira Awas Yojana was raised to Rs 10,000 crore. The unit cost under this scheme was raised to 45,000 in the plains and to 48,000 in the hilly areas due to the increase in the cost of construction.
• The allocation for the Backward Region Grant Fund was enhanced by 26 per cent from Rs.5,800 crore in 2009-10 to Rs.7,300 crore in 2010-11 to bridge the infrastructure gap in backward districts of thecountry.
Urban Development and Housing: Adequate allocations was made in the sector of Urban Development and Housing in the 2010-11 budget.
• The allocation for urban development was increased by more than 75 per cent from Rs.3,060 crore to Rs.5,400 crore in 2010-11 budget. The Government planned to strengthen the Swarna Jayanti Shahari Rozgar Yojana designed to provide employment opportunities in urban areas.
• The duration of the scheme of one per cent interest subvention on housing loans up to Rs.10 lakhs where the cost of the house does not exceed Rs.20 lakhs introduced in 2009-10 budget was extended up to March 31, 2011. Rs.700 crore was allocated for this Scheme for the year 2010-11.
• The 2010-11 budget allocated 1,270 crore for the Rajiv Awas Yojana (RAY). The Rajiv Awas Yojana (RAY) for slum dwellers and urban poor is an initiative to extend support to States that are willing to provide
• property rights to slum dwellers.
Health: An Annual Health Survey would be conducted in 2010-11 to prepare the District Health Profile of all Districts. The findings of the Survey benefit the major public health initiatives particularly the National Rural Health Mission, which has successfully addressed the gaps in the delivery of critical health services in rural areas.
• The plan allocation for the Ministry of Health and Family Welfare was increased from Rs.19,534 crore to Rs.22,300 crore for 2010-11.
• The Rashtriya Swasthya Bima Yojana was launched in October 1, 2007 to bring poverty line workers and their families under the health insurance cover. It came into operation April 1, 2008.So far more than 1 crore smart cards was issued under this scheme.
Education: Sarva Shiksha Abhiyan (SSA) made significant contribution in improving enrolment and infrastructure for elementary education. About 98 per cent of habitations are now covered by primary schools. 2010-11 budget includes measures to further enhance the literacy rate.
• The plan allocation for school education was increased from Rs.26,800 crore in 2009-10 to Rs.31,036 crore in 2010-11. States will also have access to Rs.3,675 crore for elementary education under the Thirteenth Finance Commission grants for 2010-11.
The Government gives utmost importance to the power sector. The Mega Power Policy was modified and made consistent with the National Electricity Policy, 2005 and Tariff Policy, 2006. It will help in lowering the cost of generation and the cost of power purchased by distribution utilities. The framework for induction of super critical technology in large capacity power plants of National Thermal Power Corporation is in place.
• The plan allocation for power sector was doubled from Rs.2,230 crore in 2009-10 to Rs.5,130 crore in 2010-11. This allocations would not include allocations for RGGVY, which is a part of Bharat Nirman.
• 75 per cent of the power generation in India is currently coal based. It was therefore proposed in the 2010-11 budget to introduce a competitive bidding process for allocation of coal blocks for captive mining to ensure greater transparency and increased participation in production from these blocks.
• The Government proposed to set up a "Coal Regulatory Authority" to facilitate resolution of issues like economic pricing of coal and benchmarking of standards of performance.
• The plan outlay for the Ministry of New and Renewable Energy was increased by 61 per cent from Rs.620 crore in 2009-10 to Rs.1,000 crore in 2010-11. This enhancement would give impetus to the Jawaharlal Nehru National Solar Mission that aims to establish India as a global leader in solar energy. An ambitious target of 20,000 MW of solar power by the year 2022 has been set under the mission.
• To address the problem of energy deficiency due to harsh climate in the Ladakh region of Jammu & Kashmir, the Government proposed to set up solar, small hydro and micro power projects at a cost of about Rs.500 crore.
• The Government propose to establish a National Clean Energy Fund for funding research and innovative projects in clean energy technologies. In those areas of the country where the pollution level is high the principle of "polluter pays" would be the basic guiding criteria for pollution management.
The Government made available the National Social Security Fund for unorganised sector workers recognising the need for providing social security to the workers in the unorganised sector and also as a follow up to the Unorganised Sector Workers Social Security Act, 2008, it has been decided to set up a National Social Security Fund for unorganised sector workers with an initial allocation of Rs.1,000 crore in the 2010-11 budget. This fund would support schemes for weavers, toddy tappers, rickshaw pullers, bidi workers etc.
• The Rashtriya Swasthya Bima Yojana was launched in October 1, 2007 to bring poverty line workers and their families under the health insurance cover. It came into operation April 1, 2008.So far more than 1 crore smart cards was issued under this scheme. Following the success of this scheme the Government proposed to extend its benefits to all such Mahatma Gandhi NREGA beneficiaries who have worked for more than 15 days during the preceding financial year.
• The Government would contribute Rs.1,000 per year to each NPS account opened in the year 2010-11 with a view to encourage people from the unorganised sector to voluntarily save and also to lower the cost of operations of the New Pension Scheme (NPS) for such subscribers. This initiative is known as "Swavalamban" and would be will be available for persons who join NPS, with a minimum contribution of Rs.1,000 and a maximum contribution of Rs.12,000 per annum during the financial year 2010-11. The budgetory allocation for Swavalamban is Rs.100 crore for the year 2010-11 and would benefit 10 lakh NPS subscribers of the unorganised sector. The scheme would be managed by the interim Pension Fund Regulatory and Development Authority. The Finance Minister Pranab Mukherjee appealed to the State Governments to contribute a similar amount to the scheme and participate in providing social security to the vulnerable sections of the society.
• Prime Minister's Council on National Skill Development set a mission of creating 50 crore skilled people by 2022. Of these the National Skill Development Corporation, which started functioning from October, 2009 is expected to create 15 crore. Three projects worth about Rs.45 crore to create 10 lakh skilled manpower at the rate of one lakh per annum.
• The Government proposed to launch an extensive skill development programme in the textile and garment sector. An outcome - based approach would be adopted to incentivise training. The Ministry of Textiles set an ambitious target of training 30 lakh persons over 5 years through the adoption of various measures.
Consolidated Growth and Financial Stability
Government decided to setup an apex-level Financial Stability and Development Council to strengthen and institutionalise the mechanism for maintaining financial stability. The Council would monitor macro prudential supervision of the economy, including the functioning of large financial conglomerates, and address inter-regulatory coordination issues. It willalso focus on financial literacy and financial inclusion.
• With the objective to consolidate growth Finance Minister Pranab Mukherjee insisted on moving towards the preferred path of fiscal consolidation that facilitated the remarkable growth in the pre-crisis five year
period. He talked of the need to make growth more broad-based and ensure that supplydemand imbalances are better managed.
Fiscal Consolidation: In shaping the fiscal policy for 2010-11 the Finance Minister acted on the recommendations of the Thirteenth Finance Commission.
• The Government aimed to increase disposable income in the hands of the people by effecting reductions in indirect taxes and by expanding public expenditure on programmes like the Mahatma Gandhi National Rural Employment Guarantee Scheme and rural infrastructure.
• Public spending would be reviewed and resources would be mobilised and geared towards building the productivity of the economy.
• As a part of the fiscal consolidation process the Government would target an explicit reduction in its domestic public debt- GDP ratio. Within six months a status paper giving a detailed analysis of the situation and a road map for curtailing the overall public debt would be produced and it would be followed by an annual report on the subject.