India, Union, Budget, 2009, demystified, little, bit).

Budget 2009 overall is disappointing. Punters were ruthless in pulling the money in turn sending Sensex and Nifty into a free fall. There is nothing particularly bad about the budget. It is just that - it is not spectacular.

The reaction to the budget yesterday has more to do with the expectations (which can be dreams as well). The reaction today was more to the reality. Yesterday’s reaction was what someone called - “Overdose of hope”. To which I totally subscribe.

Banking and Insurance companies will remain government owned (more than 51% stake). There will be divestment in other public sector units but no clear roadmap or a guideline announced. The investment target set is 1120 crores which is very less. In turn the government plans to pump 25000 crores into PSU’s. - Irony

Government will borrow heavily to fund its 10.21 lakh crore rupee budget. The fiscal deficit is at an alarmingly high level.  Lack of  plan to bridge the gap with divestment in PSU’s is a cause of concern.

For the corporates, the fringe benefit tax removal was balanced with increasing the MAT by 50% (from 10% to 15%). This alone would cost Reliance Industries an additional 1200 crores in tax outflow.

For the salaried employees, the 10000 rupee tax break would fetch an additional 83 rupees per month. That is worth 2 kothu parathas and a coke. The 10% surcharge removal is super but I don’t pay that yet.

The fringe benefits tax removed from the employer is transferred to the employee. The same things are taxable under perquisites. Which kind of negates the surcharge and the increased IT exemption limit. Here is a detailed look.

A massive project like the national identification project headed by Nandan Nilekani will get 120 crores ONLY. I bet Infosys will not bid on that project. Ironically most of the funds are given to the NREG, which in turn would be the biggest beneficiary from the national ID project. As there are multiple leaks in the pipeline and a direct transfer to the worker would be an efficient way of using the money granted to NREG, instead of increasing the spending on it.

Removal of Commodity transaction tax should bring the interest back to the commodity trading which disappeared after it was introduced in the earlier budget.

IT companies get a 1 year extension of the tax holiday under STPI.

Nutrient based subsidy on the fertilizers will directly help the farmers. The whole budget’s focus is on rural India which is clearly evident from the increased spend of 45% in the budget. If the government does not help rural India who would?

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