The Hon’ble Finance
Minister, Shri Yashwant Sinha while presenting the Union Budget for 2002-2003
in the Parliament on February 28, 2002 said in his speech that the Year
2001 was a year of many tragic events. It started with the Gujarat earthquake
on January 26 and ended with the terrorist attack on the Indian Parliament
on December 13, 2001, punctuated by the September 11, 2001 incident in
the United States and the October 1, 2001 outrage in Srinagar.
World economic growth has slowed down to 2.4%. However, despite the
hostile economic and security environment the basic fundamentals of the
economy remained strong with inflation falling to 1.1%, foreign exchange
reserves crossing US$ 50b and food stocks rising to almost 60m tonnes.
The economic growth has, therefore, been targetted at about 5.4 percent.
The budget for 2002-2003 is aimed at devising a strategy to consolidate
and implement the second generation reforms to meet the above objectives.
The table below
gives estimates and revised figures of revenue and expenditure for the
last year, i.e. 2001-2002, and the figures proposed for the next year 2002-2003
and deficits of revenue, fiscal and primary as percentage of GDP.
Revenue (Net to Centre)
and Other liabilities
% of GDP
% of GDP
% of GDP
The break-up. of estimated receipts and expenditure both under the revenue
and capital heads in terms of percentage is given as under :
of taxes and duties
to States & UTs
and other liabilities
of the Budget Small Scale Industry
flow of credit to the Small Scale Industry sector :
for composite loans has been raised from Rs.2 lakh to Rs.5 lakh.
limit for collateral security has been increased from Rs.20,000 to Rs.5
lakh. The project cost limit under the National Equity Fund
has been increased from Rs.25 lakh to Rs.50 lakh.
Credit Card (LUCC) Scheme to be introduced by public sector banks for providing
simplified and borrower friendly credit facilities to small businessmen,
retail traders, artisans and small entrepreneurs, professionals and other
self employed persons including those in the tiny sector.
of knitwear, certain agricultural implements, auto components, some chemicals
and drugs and others to be dereserved.
/ Financial Sectors & Capital Markets:
now allowed to deduct upto 7.5% instead of 5% of their total income against
provision made by them for the bad and doubtful debts. The budget
for 1999-2000 had granted an option to banks to deduct upto 5% of their
NPAs falling in the category of loss or doubtful assets as on the last
day of the accounting year. Now both banks and public financial
institutions can avail of optional deduction of 10%.
A new bill
on Banking Sector Reforms is to be introduced.
Asset Reconstruction Company to be set up by June 30, 2002 with the participation
of public and private sector banks, financial institutions and multilateral
Insurance Credit and Guarantee Corporation (DICGC) to be converted into
the Bank Deposits Insurance Corporation (BDIC).
changes to corporatise IDBI.
Directors of public financial institutions and banks to be exempted from
incurring disqualification for election in case of certain defaults by
and Rural Development :
Housing Bank (NHB) to launch a Mortgage Credit Guarantee Scheme, which
would be provided to all housing loans thereby fully protecting lenders
lakh units to be financed under Golden Jubilee Rural Housing Finance Scheme
of Rs.1,725 crore in 2002-2003 to the Indira Awas Yojana.
.deregulation of agriculture proposed on the following lines : -
of SSIs reservations related to various agricultural equipment items.
essential commodities Act, 1955, to remove restrictions on storage, selling
and movement of food and agricultural products. This will include
amendment of the Milk and Milk Products Control Order (MMPO).
of export of agricultural commodities and expansion of forward trading
to cover all agricultural commodities.
Minister to propose legislative and other changes for preparing a modern
integrated food law and related regulations.
of Rs.70 crores each to the Credit Linked Subsidy Scheme for
construction of Cold Storages and to Rural Godown Scheme for the year 2002-03.
The funds for
RIDF to increase from Rs.5,000 crore to Rs.5,500 crore and the rate of
interest to be reduced from 10.5% to 8.5%.
Corpus of agriculture
research to increase from Rs.684 crore to Rs.775 crore.
crore allocated to Pradhan Mantri Gram Sadak Yojana (PMGSY) in 2002-03
to provide connectivity through all weather roads to the villages.
allocated to introduce a new scheme called the Accelerated Rural Electrification
Equity Fund of Rs.1,000 crore to be set up to help in providing equity
investment for infrastructure projects. Contributions to the Funds
to be managed by the Infrastucture Development Finance Company Limited
(IDFC) and would initially be made by public sector insurance companies,
financial institutions and some banks.
Price Mechanism (APM) for Petroleum
of Administered Price Mechanism in the Petroleum Sector w.e.f. April 01,
incentives to State Governments for export promotion through the creation
of new export promotion industrial parks and associated facilities.
package for establishment of Special Economic Zones.
The plan allocation
to the Deptt. of Elementary Education and Literacy is being enhanced
from Rs.4,000 crore this year to Rs.4,900 crore for 2002-03.
of the North Eastern Region
scheme to be launched to provide an adequate social security coverage in
the unorganised sector.
insurance scheme - “Janaraksha” - to provide indoor treatment (upto Rs.30,000)
and outpatient treatment (upto Rs.20,000) on payment of a nominal rupee
one per day.
for expenditure in North Eastern States out of the Central Plan increased
from Rs.3,457 to Rs.5,016 crore.
to be provided to tourism sector. The following measures were proposed
in rate structure.
imposed on all taxpayers except individuals earning upto Rs.60,000 per
tax surcharge imposed due to the Gujarat earthquake abolished.
under section 88 only for those with income below Rs.1,50,000/-.
between Rs.1,50,000/- and Rs.5,00,000/- will get a rebate of only 10% of
the amount invested.
3% rebate for people earning less than Rs.1,00,000/- to continue.
tax of 10% on the dividends of companies and mutual funds abolished; recipients
will now have to pay this tax.
quoting a false Permanent Account Number (PAN) to face a penalty of
impetus to fresh investments in the industrial sector, additional depreciation
@ 15% on new plant and machinery acquired on or after April 01, 2002 for
setting up a new industrial unit or for expanding the installed capacity
of existing units by atleast 25% proposed.
applicable to foreign companies reduced from 48% to 40%.
exemption under section 54EC of the Income-Tax Act allowed to amounts invested
in bonds issued by SIDBI.
from tax granted to the income of Credit Guarantee Fund Trust.
exemption provided in section 54EC of Income-Tax Act allowed to bonds issued
by the National Housing Bank (NHB).
Tax on hotels to apply only to room charges of above Rs.3,000/-.
available u/s 80HHD of the Income-Tax Act in respect of foreign exchange
earnings of hotels or tour operators to be enhanced.
of 50% of profits earned by units setting up and operating large convention
centres will be allowed for 5 years u/s 80-1B.
of 50% of the profits earned by units constructing and operating multiplex
theatres allowed in non-metropolitan towns.
Excise Duty :
excise duty structure further rationalised with more items added in the
category of 16% CENVAT and number of items removed from the Special Excise
Duty (SED) list.
auto CNG, kerosene and diesel engines upto 10 HP increased from 8% to 16%.
applicable to motor spirits reduced from 90% to 32%. A surcharge
of Rs.6/- per ltr. imposed on motor spirit.
to indigenous crude oil increased from Rs.900 per metric tonne to Rs.1800
per metric tonne w.e.f. March 01, 2002.
excise duty on fabrics, made ups and garments would be 12%.
Industrial fabrics would howver, continue at 16%.
on air travel within the North East states now extended to air travel to
and from North East States.
on tea reduced from Rs.2 per kg to Re.1 per kg.
anti-AIDS drugs exempted from excise duty.
tax extended to the followings services : LIC; Inland Cargo handling; Storage
and warehousing services; Event management; Rail travel agents; Health
clubs and Fitness Centres; Beauty parlours; Fashion designers; Cable operators
and Dry cleaning services;
of Basic Customs Duty reduced from 35% to 30%.
rates of customs duties proposed by the year 2004-05 namely 10% covering
generally raw materials, intermediates and components and 20% covering
generally final products.
Economic Zones would be entitled to procure duty free equipment, raw materials,
components, etc. whether imported or purchased locally. The
benefits of such exemption shall be applicable to both the developers of
Special Economic Zones as well as the units located therein.
phones and pagers from 5% to 10%.
coffee from 70% to 100%.
rubber, poppy seeds, pepper, cloves and cardamom from 35% to 70%.
5% to 10%.
imported for supply under PDS scheme from 5% to 10%.
88 drugs - Nil to 5%.
zinc and lead from 35% to 25%.
and tin from 25% to 15%.
equipment for Ports and Airports from 25% to 10%.
reduced from 10% or 5% as per WTO binding.
agricultural machinery and equipment from 25% to 15%.
on Glucometers and test strips reduced from 25% to 10% to give relief diabetic
other than that imported for supply under the PDS scheme from 35% to 20%.
clinkers from 25% to 20%.
28 textile processing machinery, automatic shuttle looms and specified
jute machineries - CENVAT exemption extended.