In its first Budget after returning to power at the Centre, the UPA government will root for higher growth rate by taking fiscal measures that will boost consumer spending, while simultaneously earmarking higher funds for programmes that will promote inclusivity.

“The Budget philosophy is that of inclusive growth,” said a Finance Ministry official a day ahead of Budget 2009-10. A hike in income tax exemption limit from Rs 1.5 lakh now or introduction of standard deduction is one proposal that was internally discussed. This will encourage spending by the salaried class. Besides this, an increase in the interest paid on housing loans that is eligible for tax benefit is also likely.

For corporates, the Budget is likely to be a mixed bag. Having halved the Central value added tax (Cenvat) or the principal excise duty rate to 8 per cent over the last two years, Finance Minister Pranab Mukherjee may be constrained to move it up marginally to 10 per cent. In doing so, he will, however, spare stressed sectors such as leather, textiles and chemicals.

In his pre-Budget interaction with India Inc, Mukherjee discussed the possibility of re-introducing investment allowance that encourages companies to continue with their expansion plans in times of a slowdown. The allowance, till it was withdrawn in 1990, allowed companies to claim deduction of 20 per cent of the cost on plant and machinery before calculating profits.

The Budget support to Plan expenditure, after discussion with the Planning Commission, is expected to be Rs 3,25,000 crore, an increase of Rs 40,000 crore compared with the Interim Budget of 2009-10 or Rs 82,000 crore more than the Gross Budgetary Support in 2008-09. The UPA’s showpiece flagship National Rural Employment Guarantee Scheme will get Rs 10,000 crore compared with the allocation during the Interim Budget, taking its total outlay to Rs 40,000 crore.

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