The UPA Government has finally gone into damage repair mode with the announcement of its third stimulus package to bolster the sagging economy. Sh. 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%.

Therefore, around ninety percent of manufactured goods which at present attracted 10% of Excise Duty, items like Washing Machines, Television, Refrigerators, soaps and cola are set to go cheaper with the cut in Excise Duty to 8%.

Phone bills, airline tickets, tour packages are all set to go cheaper with the Service Tax reduction to 10%. This reduction of 2% in Service Tax is set to spur consumer spending and contribute towards strengthening of sectors like tourism, telecom, civil aviation and hospitality.

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

Pranab Defends the Budget

Mr. Pranab Mukherjee came out strongly in defence 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 candid in his admission that 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 tow major infrastructure projects to boost up the slow economy. He also stressed upon the fact that every time one should not expect lot of sops 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.

Budget Impact:

The Market
The Dalal Streets immediate reaction to the budget was one of disappointment. Both the NIFTY and the SENSEX fell 3% each. Realty, banking and metal shares among the worst hit.

The Economy
Increased spending will be financed through borrowings. Central and state fiscal deficits to add up to 11% of GDP. Government to step up spending to boost up growth in the slow economy.

The Social Sectors
Farmer-friendly budget in the wake of the upcoming elections ensured the continuance of cheaper credit. Setting up of more primary health centres and an increased spending by the government on education. Pension schemes for widows below poverty line.

The Industry
Industries like cement, steel and construction to benefit from the boost provided to infrastructure. Lower interests rates for industries like carpets, gems & jewellery, textiles extended till September 30.

More Updates - Features of Interim Union Budget

• GDP increased by 7.5, 9.5, 9.7 and 9 percent in the first four years from fiscal 04-05 to 07-08 reflecting a sustained progression of more than 9 % for three successive years.
• Fiscal deficit down to 2.7% in 07-08 as compared to 4.5% in 03-04.
• Gross capital formation in agriculture as a proportion of agriculture GDP increased from 11.1% to 14.2% in 03-04 and 07-08 respectively.
• Tax to GDP ratio increased from 9.2% in 03-04 to 12.5% in 07-08.
• Annual growth of agriculture rose to 3.7% during 03-04 and 07-08.
• Exports grew at an annual average growth rate of 26.4% (USD terms) in the period 04-05 to 07-08.
• Manufacturing sector recorded a growth of 9.5% between the period 04-05 to 07-08.
• Communication and construction sector grew at the rate of 26 and 13.5 percent respectively.
• Domestic Investment rate as a proportion of GDP increased from 27.6% to 39% in 03-04 and 07-08 respectively.

Rs. 1,41,703 cr for Defence Sector:

Mr. Mukherjee, in his union budget speech announced the allocation of Rs. 1,41,703 for the defence 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.
The Finance Minister increased Plan expenditure for Defence this year to Rs 86,879 crore. Last years Plan expenditure was only Rs 73,600 crore, which contributed to an increase of Rs 13,279 crore this year.

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.

No Alteration to Tax Rates:

In his effort towards battling the on-going recession Mr. Mukherjee, allocated Rs. 30,100 cr to the rural development program of the government. He refrained from making any alteration in the tax and duty rates.

• Tax collections in 08-09 to race ahead of the ones in 07-08.
• Rs. 6705 cr to be put in to child development schemes.
• Infrastructure investment to be hiked to 9% of the GDP by 2014.
• 109 maiden vessels sanctioned for the customs department.
• Per capita income increased 7.4% p.a. during the tenure of the U.P.A. government.
• Export industry subsidy extended for some sectors.
• Rs. 8,300 cr earmarked for mid-day meal scheme.
• No tax changes in the budget speech.
• Rs. 1200 cr for Total Sanitation Program.
• The defence sector allocation has been set at Rs. 141703 crore.
• Subsidies to food, petroleum and fertiliser to go up.
• Export rate in the first nine months of the fiscal year has fallen to 17.1 %.
• Mr. Mukherjee acknowledged that the global economic conditions are not encouraging.

Budget proceedings resumes after a momentary halt: Kerala MP taken ill.

Budget proceedings were stalled for some time in the wake of a Member of Parliament getting ill. Ambulances were rushed in as Virender Kumar, JD(S) MP from Kerala suffered epileptic fit following which the Budget proceedings were stalled for a brief moment.
Sh. Pranab Mukherjee has resumed his budget speech now...

• A rate cut in custom duties announced.
• Rs. 65,300 crore of farmer loans waived off in the financial year 2008-09.
• A 15 point welfare programme for minorities set-up.
• New scheme for young widows in the age group 18 t0 40 yrs. Announced .
• Widows will get priority in admission to the ITI's and also a stipend of Rs. 500/ month.
• Outlay on higher education increased by 900% in the 11th. Five-Year Plan.
• There was a FDI inflow of $23.3 billion between Apr. and Nov. 08.
• Indira Gandhi nationall widow pension scheme for widows.
• Madhya Pradesh & Himachal Pradesh to have two more IIT's by 2010.
• Educational loan scheme is set to get revised.
• Mr. Mukherjee, proposed an outlay for higher education increased by 900 per cent.
• 60.12 lakh houses will be built under the Indira Awaas Yojna.
• Government plans to introduce 6 new IIM's which will be operational by 2010.
• Educational loan scheme to be revised.
• PSU turnover up by 84%.

1984 to 2009... Exactly after 25 years:

Sh. Pranab Mukherjee, the External Affairs Minister of India (In-charge of the Finance portfolio) will roll out this years interim Union Budget inside parliament. Mr. Mukherjee, is not new to the finance ministry, having successfully presented 3 budgets in succession after becoming the Finance Minister way back in 1982. It is quiet ironical that exactly after 25 years he gets to do it again. It all started with the move of the Ex-Finance Minister P.Chidambaram to the Home Ministry and the subsequent heart by-pass of the Prime Minister, the Congress-lead U.P.A. Government had no choice but to look up to the veteran septuagenarian congressman, the man for all seasons and reasons.