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Union Budget 2009 - Effects On Different Sector Research Team | Posted On Friday, July 03,2009, 08:19 PM

Union Budget 2009 - Effects On Different Sector



Mr. Pranab Mukherjee came out strongly in defense 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 honest in his admission those 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 two major infrastructure projects to boost up the sluggish economy. He also stressed upon the fact that every time one should not expect lot of offerings 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.

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%. Around ninety percent of manufactured goods which at present attracted 10% of Excise Duty are set to go cheaper with the cut in Excise Duty to 8%. Some of the products that will be subject to price reduction are as follows;
  • Washing Machines
  • Television
  • Refrigerators
  • Soaps
  • Cola
Service charge is a factor that affects common people very much. Presently the service charge is 12%. As per the new budget service Tax will be reduced by 2%. Below given charges are set to go cheaper with the Service Tax reduction to 10%.
  • Phone bills
  • Airline tickets
  • Tour packages
This reduction of 2% in Service Tax is set to encourage consumer spending and contribute towards strengthening of following sectors
  • Tourism
  • Telecom
  • Civil aviation
  • Hospitality
The Finance Ministry has surely touched the right notes at the right time after a heavy beating it got for its interim budget inside parliament. The cuts in Excise Duty will certainly go down well with the India Inc. It will help the common man at large whose household budget is set to come down in the wake of these fresh announcements.

Government Budget 2009

As per the talk given by President Pratibha Patil, budget 2009 - 10 will give more importance to the following areas.
  1. Internal security and preservation of communal harmony
  2. Stepping up of economic growth in agriculture, manufacturing and services
  3. Consolidation of the existing flagship programs for employment, education, health, rural infrastructure, urban renewal and introduction of new flagship programs for food security and skill development
  4. Concerted action for the welfare of women, youth, children, other backward classes, scheduled castes, scheduled tribes, minorities, the differently-abled and the elderly along with strengthened social protection
  5. Governance reform
  6. Creation and modernization of infrastructure and capacity addition in key sectors
  7. Prudent fiscal management;
  8. Energy security and environment protection;
  9. Constructive and creative engagement with the world and
  10. Promotion of a culture of enterprise and innovation.


Sectors to be benefited from Budget 2009 – 10

Following are the major sectors to be benefiting from the budget.

  1. Infrastructure
  2. Banking
  3. Agriculture
  4. Healthcare
  5. Education

Investment In Infrastructure

As per government’s internal estimate India needs an investment of over $500-600 Billion to build its infrastructure (power, ports, airports, roads, telecom, construction, steel, railways, mining etc) in the next 5 years. India faces a 12% shortage in power during peak hours and is expected to worsen due to lack of rainfall this year. So there will be a huge investment expected in this Sector. Companies under this sector is expected to make benefit out of this.


Banking Sector Reforms

Indian banking system is very small compared to China or US. India's financial depth is low for an economy that promises much. Financial assets represent 160 per cent of gross domestic product. This puts India on a par with Indonesia, but way behind China's 220 per cent. A weakened financial system may help weather a global financial crisis in the short term, but it will not help India reach the higher growth levels to which it aspires. There is not a single Indian bank that figures in top 20 global banks list. The market cap of Industrial and Commercial Bank of China is more than the combined market cap of Indian banks. Because of all these reasons decisions that will help banking sector is expected in the budget.

See Also: All You Must Know About Online Banking

Investing In Agriculture

A country where over 60% population is employed in agriculture does not even have a consistent sectoral growth rate of 4%. President Ms. Patil mentioned that a new law would be formulated to implement Food Security Act, which will provide the families below poverty line 25 kg of rice or wheat per month at Rs 3 a kg. With so much political stake linked to agriculture and no changes done to the agriculture ministry, any reforms related to agriculture seem unlikely.


Investment In Healthcare

India has 0.5 doctors for 1,000 people as compared to 2.3 doctors per 1,000 in the United States. We need to have more doctors, healthcare workers and medical institution in rural areas. The government has to take serious steps to push doctors to work in these areas and create infrastructure for them. Some estimates say that India might have to spend $20 Billion annually to achieve its proposed health care facilities.

See Also: Advantages Of Buying A Health Insurance Plan

Investment In Education Sector

India needs lakhs of new and good schools, thousands of colleges and hundreds of universities in order to provide even basic education to all its students. The government may allow foreign universities to allow tie-ups with local colleges or open their branches here. There is a huge demand and supply gap that is forcing students to go abroad to seek education. Indian students spend $20 Billion annually for foreign education due to lack of quality education.

See Also: 10 Rules for planning your child future


Investment In Defense Sector

Mr. Mukherjee, in his union budget speech announced the allocation of Rs. 1,41,703 for the defense 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.

See Also: Why Invest In Defense Stocks?


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.

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