The Hon'ble Finance Minister, Shri Yashwant Sinha, presented in the Parliament on 28.2.2001 the Union Budget for 2001-02, which targeted 6.5% growth in GDP and a fiscal deficit of 4.7% of GDP against 5.1% estimated for this year. Shri Sinha announced a series of steps to boost the agricultural and industrial sectors which are expected to grow by 0.9% and 6.6% respectively during the current year. Stating that the budget for 2001-02 was a further step towards achieving second generation financial reforms, the Finance Minister proposed large doses of investment in infrastructure - the core sector to spur growth in the economy. The budget envisaged several innovative measures including strengthening of capital markets, changes in labour laws, dismantling of administrative price regime, removing distribution controls and right-sizing of government.  

The Union Budget proposed total receipts both under revenue and capital of Rs. 375223 crore for 2001-02 against the revised revenue estimate for 2000-01 placed at Rs. 335523 crore.The Revenue Deficit has been placed at Rs.78,821 crore (Rs.77,425 last year). 

The table below gives estimates and revised figures of revenue and expenditure for the last year, i.e. 2000-01, and the figures proposed for the next year 2001-02 and deficits of revenue, fiscal and primary as percentage of GDP.  

(Rs. in Crore) 
S. No.
2000-2001 (BE)
2000-2001 (RE)
2001-2002 (BE)
1. Receipts 
a) Revenue Receipts 
i) Tax Revenue (Net to Centre) 
ii) Non Tax Revenue 
b) Capital Receipts 
i) Recoveries of loans 
ii) Other Receipts 
iii) Borrowings and other liabilities 
            Total (a+b)




2. Expenditure 
  a) Revenue 
  b) Capital
3. Revenue Deficit 
   % of GDP
4. Fiscal Deficit 
   % of GDP
5. Primary Deficit 
   % of GDP
The break up of estimated receipts and expenditure both under the revenue and capital heads in terms of percentage is given under :  
A. Tax Receipts 51 Revenue Expenditure 77
Excise Duties 19 Interest Payments 26
Customs Duties 12 Defence 14
Corporate Tax 10 Subsidies 7
Income Tax 9 State share of taxes and duties 14
Other Taxes 1 Non-Plan assistance to States & UTs 4
Other Non-plan expenditure 12
B. Non-Tax Receipts 49 Capital Expenditure 23
Borrowings and other liabilities 27 Central Plan 14
Non-debt Capital Receipts 6 States UTs Plan assistance 9
Non-Tax Revenue 16
TOTAL 100 100
Highlights of the Budget 

Small Scale Industry  

  • To give a fillip to expansion and technology upgradation in some of the key export-oriented sectors 14 items under SSI sector related to leather goods, shoes and toys dereserved. 
  • Loans to the tune of Rs.5,000 crore would be made available to SSIs over the next 5 years through a credit linked capital subsidy scheme for technology upgradation launched in October 2000 which envisaged a 12% capital subsidy.
  • Excise duty exemption of up to Rs.1 crore given to the SSIs for items, viz., cotton yarn, ball bearings and arms and ammunition, withdrawn. 
Textiles :  
  • Scheme for setting up Integrated Apparel Parks with a budget provision of Rs.10 crore to enable readymade garment industry to set up modern units.
  • Budget provision under TUFS raised from Rs.50 crore to Rs.200 crore to provide for new shuttleless looms and modernisation of plain looms to automatic looms.
  • Provision for Cotton Technology Mission increased from Rs.15 crore to Rs. 25 crore.
Industrial Restructuring :  
  • Proposal to repeal SICA and amend the Companies Act. A National Company Law Tribunal to be set up.
Labour Market :  
  • Industrial establishments employing less than 1,000 workers (it was 100 earlier) not to obtain prior approval of the government for effective lay-off, retrenchment and closure. Compensation package to be increased from 15 days to 45 days for every completed year of service.
  • Measures to amend Industrial Disputes Act and Contract Labour Act to be introduced.
  • New scheme of group insurance viz., `Ashraya Bima Yojana' introduced to extend security to workers affected by the above changes.
Banking/Financial Sector & Capital Markets : 
  • 7 more Debt Recovery Tribunals to be established in 2001-02 in addition to the 22 already existing. 
  • Greater autonomy to be provided to bank management. 
  • Banking Services Recruitment Boards to be abolished. Greater independence to the bank managements in framing their recruitment strategy and its implementation.
  • Limit of FIIs stake in Indian companies raised to 49%. 
  • To develop the debt market, the following measures proposed : 
    • A Clearing Corporation for settlement of forex transactions under RBI with SBI as chief promoter to be set up by June, 2001 
    • Electronic Negotiated Dealing System to be set up by RBI by June 2001 for transparent electronic bidding in auction. 
    • To ensure quick movement of funds, the Electronic Fund Transfer and Real Time Gross Settlement Systems are being put in place by RBI. 
    • The old Public Debt Act to be replaced by Government Securities Act. 
    • Legislation to be introduced on securitisation. 
  • ADRs / GDRs allowed two-way fungibility i.e. converted local shares may be reconverted to ADRs / GDRs subject to sectoral limits on foreign investments.
Agriculture & Rural Development : 
  • Interest rate charged by NABARD under RIDF (Rural Infrastructure Development Fund) reduced from 11.5% to 10.5% 
  • Corpus of RIDF to be increased from Rs. 4,500 crore to Rs. 5,000 crore. 
  • Scheme for setting up Agriclinics and Agribusiness Centres for Agricultural graduates to be launched with the support of NABARD. These centres will strengthen transfer of technology and extension services. 
  • Rs. 61 crore provided for the centrally sponsored scheme on `On-Farm Water Management for increasing crop production in Eastern India' 
  • Rs. 38 crore provided for Integrated Development of Horticulture in the North-Eastern States. 
  • Rs. 2,500 crore allocated for `Pradhan Mantri Gram Sudhar Yojana' in 2001-02. 
  • Many of the restrictions under the EssentialCommodities Act, 1955, that have been imposed on free interstate movement of foodgrains and agriculture produce to be removed. 
Infrastructure : 
  • Plan outlay for Central sector power utilities raised from Rs. 9,194 crore in 2000-01 to Rs. 10,030 crore for 2001-02. 
  • Electricity Bill 2001 to accelerate the reform process in the power sector to be introduced. 
  • Rs. 962 crore from cess fund to be made available to States for the state roads. Total plan outlay for roads enhanced by 93% to Rs. 8,727 crore in 2001-02. 
  • Convergence Bill covering telecommunications, information technology and information and broadcasting sectors to be introduced. 
Human Development & Social Security :  
  • 'Khetihar Mazdoor Bima Yojana' launched to provide benefits of insurance cover to landless agricultural labourers.
  • Shiksha Sahyog Yojana to provide an education allowance of Rs.100 per month to children of parents living below poverty line. 
  • Insurance Regulatory Development Authority to look into the social security coverage in the unorganised sector and provide a road map for pension reforms by October 1, 2001. 
State Fiscal Reforms : 
  • Rs.4,243 crore marked towards the `Incentive Fund' in 2001-02, which has been launched to encourage States to implement monitorable fiscal reforms 
Interest Rates : 
  • Interest rates reduced by 1 - 1.5% w.e.f. March 1, 2001 on Small Savings Deposits, Provident Fund and general provident fund.
Some of the proposals under direct and indirect taxes are summarised below : 

Direct Taxes : 

  • No change in rate structure.
  • Cooperative societies to pay 30% tax instead of 35%.
  • Surcharge on corporate and non-corporate tax removed. However, surcharge of 2% for relief to quakehit areas retained.
  • 100% tax deduction on donations to the National Trust for welfare of persons with autism, cerebral palsy, mental retardation and multiple disabilities.
  • To widen the tax base, one-by-six scheme now extended to all urban areas.
  • All companies to file tax returns even if they incur a loss .
  • Income tax at source now deductible at the rate of 10% on income by way of commission or brokerage exceeding Rs.2,500/-
  • Winnings from lotteries, crossword puzzles, television game shows to be taxed at 30% now instead of 40% as done previously. 
  • TDS to be deducted on income from interest above Rs.2,500/- as against Rs.10,000/- earlier in respect of time deposits and deposits with a Bank and Housing Finance Company. 
  • Limit of deduction under section 80L reduced to maximum of Rs.9,000/- as against Rs.12,000/- previously.
  • Tax rebate increased to 30% as against 20% in respect of the eligible investments u/s 88 of the I.T. Act for income up to Rs.1 lakh. 
  • Limit of income from Government securities, which is deductible u/s 80L, to be raised to Rs.9,000.00 from Rs.2,000.00 
  • Total income from sale in domestic markets for units located in EPZ, FTZ & STP & EOU to be taxed. 
  • To encourage IT sector to perform well, units located in STPs and outside will be eligible for deduction for the profits derived from the export of `on site' services. 
  • Tax exemption on income of NABARD & SIDBI to be withdrawn. 
  • Tax exemption on interest payable on ECBs to be withdrawn from June 1, 2001. 
  • Dividend tax reduced to 10% from 20%. 
  • To boost core sectors of infrastructure, viz., roads, highways, rail system, irrigation, etc. ten year tax holiday to be availed of during the initial twenty years. In case of airports, ports, industrial parks and generation and distribution of power and developers of special economic zones as well as incomes of investors investing in the development of SEZs, the tax holiday of 10 years can be availed of during the initial 15 years. Period of commencement of business for power and industrial parks extended to 31.3.2006. 
  • Five-year tax holiday and the 30% deduction available to the telecommunications sector till 31.3.2000 now extended to 31.3.2003. Tax concessions will also be extended to internet service providers and broadband networks. 
  • Weighted deduction of 150% of the expenditure on in-house research and development extended to biotechnological sector now. 
  • To facilitate proper storage of foodgrains and their transportation, 5-year tax holiday and 30% deduction of profits available for the next 5 years to enterprises engaged in the integrated business of handling, transportation and storage of foodgrains. 
  • To encourage investments in weaving, processing and garment sectors of textile industry, accelerated depreciation @ 50% on plants and machinery purchased under Technology Upgradation Fund Scheme. 
  • 50% accelerated depreciation also allowed on new commercial vehicles for one year. 
  • Limit of deduction available for interest payable on housing loans for self-occupied houses raised from rupees one lakh to rupees one and a half lakhs. 
  • Tax incentives allowed by way of deduction or rebate on payments of LIC premium extended to all insurance companies approved by IRDA.
Indirect Tax : 

a) Excise Duty : 

Three rates of special Excise Duty reduced to a single rate of 16%. Consequently, excise duty of 8% abolished on glazed tiles, mattresses and articles of bedding, carpets and floor coverings, painted canvas, studio back cloth, etc, linoleum and textile wall coverings etc., scooters and motorcycles, and taxis. These items will now be charged to CENVAT only at the rate of 16%. 

  • Except sewing thread, cotton yarn, LPG, kerosene and diesel engines, all other items presently charged at the rate of 8% will now be charged the normal CENVAT rate of 16%.
  • Food preparations based on fruits and vegetables exempted completely from excise duty.
  • For replenishment of the National Calamity Contingency Fund surcharge of 15% levied on cigarettes, duty on biris increased from Rs.6 to Rs.7 per thousand biris, duty on pan masala increased from 55% to 60%. Other tobacco products also to be charged duty of 60%.
  • Excise duty of 8% to be charged on Compressed Natural Gas.
  • Products of SSI units, viz., cotton yarn, ball bearings and roller bearings and arms and ammunition for private use will now attract excise duty. 
  • The net service tax to be expanded to include specified banking and financial services, Scientific and Technical Consulting services, Telex services, Telegraph services, Services auxiliary to insurance, etc..
b) Customs Duty: 
  • Surcharge of 10% on custom duty rate withdrawn. With this peak level of customs duty declined from 38.5% to 35%
Duty increased : 
  • Crude edible oils from 35% to 55%.
  • Import of second-hand cars to 105%. 
  • Tea, coffee, copra, coconut and dessicated coconut from 35% to 70%.
Duty decreased :  
  • On soyabean oil 45% would apply on account of WTO binding. 
  • On IT and telecom products and their inputs and components _ 15%. 
  • On specified textiles machines including shuttle-less looms _ 5% and on silk waste, cotton waste and flax fibre - 15%. 
  • Polished coloured gem stones from 35% to 15%.
  • CNG kits and their parts - 5%.