Budget 2009-10

M.Ravindran is a senior consultant in FInancial Technologies Group
with domain expertise in Banking.Prior to the present assignment,he
workerd in Canara Bank and Indian Overseas Bank for more than 20
years.

M.Ravindran
203,A Wing.Amrapali,
Pirojsha Nagar,
Vikroli East,
Mumbai 400078.

Budget 2009-10

The budget proposals 2009-10 is high on populism with a plethora of
reliefs and consessions to different segments of the vote bank and in
the process fiscal prudence has become a casuality.The balooning of
fiscal deficit from 2.7% to 6.8 % is a worrisome factor.The budget
proposals are a mix of good politics and bad economics and
indifferent to some of the vital areas of the economy..

The budget has not focusssed on the reforms of banking sector and
the implementation of Raguram Rajan Committee Report would have a
positive impact on the financial sector..

On the direct taxes front, the exemption limit for senor citizens is
raised by Rs.50000 and it is only marginally increased by Rs.10000
for others.
the individual tax payers are neither better off not worse off because
of this marginal increase ,as the tax savings on an account of
Rs.10000 would be wiped out by the annual increment and other
allowances to most of the tax payers.The FInance Minister should have
gone for Rs.50000 for all classes of individual tax payers which would
have cheered a large number and would have resulted in a considerable
reduction in the number of tax returns and better management of
processing of returns.

Some of the measures announced would bear fruit only if the economy
bounces back to growth path in the near future and this is possible
only if the global economy behaves normally.

There is a renewed emphasis on infrastructure in the budget proposals.But ,
there is a lull in financing to the infrastructure sector of late by
banks and the propsals of the FInance Minister are intended to put
infrastrcture lending back on rails.The measures viz IIFCL to
evolve mechanism for increased funding of infra and IIFCL to
re-finance commercial bank loans up to 60 per cent in critical
projects through PPP to tune of Rs 1,00,000 crore will bear friut
only if the enabling environment is created.

The allocation to housing and amenities to urban poor (less than RS.
3987 crores) in a country of our size is inadequate.

The Finance Minister has hiked the farm credit target up at Rs
3,25,000 cr from Rs 2,87,000 cr and announced interest rates
incentive to farmers to repay loans on time and an additional
allocation of Rs 1,000 crore for accelerated irrigation scheme .Going
by the past years performance of commercial banks ,most banks have not
attained the target of 18% under direct lending to agriculture.With
poor recovery rate and a fall in credit off take , it would be
difficult for banks to pump in more credit to the farm sector .

Full interest subsidy for students in select institutions which would
benefit five lakh students is a welcome step .There is a need to look
at the interest rate structure charged by different banks in this
regard.
.
The industrial and sevices sectors are turning around slowly but the
credit demand is yet to pick up. The abolition of STT would have
helped the cause of stock exchanges which is reeling under a downward
spiral in turnover.The stock market has expressed its disapproval to
the budget proposals with a sharp decline in sensex on the day of the
budget..

In short,the budget has not played the catalyst role in reviving the economy.

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