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.
i) Tax Revenue
(Net to Centre)
ii) Non Tax
and other liabilities
% of GDP
% of GDP
% of GDP
up of estimated receipts and expenditure both under the revenue and capital
heads in terms of percentage is given under :
of taxes and duties
to States & UTs
and other liabilities
of the Budget
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
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bearings and arms and ammunition, withdrawn.
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.
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.
Cotton Technology Mission increased from Rs.15 crore to Rs. 25 crore.
Proposal to repeal
SICA and amend the Companies Act. A National Company Law Tribunal to be
Sector & Capital Markets :
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.
& Rural Development :
7 more Debt Recovery
Tribunals to be established in 2001-02 in addition to the 22 already existing.
to be provided to bank management.
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
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.
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.
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.
& Social Security :
Plan outlay for
Central sector power utilities raised from Rs. 9,194 crore in 2000-01 to
Rs. 10,030 crore for 2001-02.
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.
covering telecommunications, information technology and information and
broadcasting sectors to be introduced.
Bima Yojana' launched to provide benefits of insurance cover to landless
Yojana to provide an education allowance of Rs.100 per month to children
of parents living below poverty line.
Development Authority to look into the social security coverage in the
unorganised sector and provide a road map for pension reforms by October
marked towards the `Incentive Fund' in 2001-02, which has been launched
to encourage States to implement monitorable fiscal reforms
Some of the proposals
under direct and indirect taxes are summarised below :
reduced by 1 - 1.5% w.e.f. March 1, 2001 on Small Savings Deposits, Provident
Fund and general provident fund.
No change in rate
to pay 30% tax instead of 35%.
Surcharge on corporate
and non-corporate tax removed. However, surcharge of 2% for relief to quakehit
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.
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/-
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
Limit of deduction
under section 80L reduced to maximum of Rs.9,000/- as against Rs.12,000/-
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.
on income of NABARD & SIDBI to be withdrawn.
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.
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.
of 150% of the expenditure on in-house research and development extended
to biotechnological sector now.
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
To encourage investments
in weaving, processing and garment sectors of textile industry, accelerated
depreciation @ 50% on plants and machinery purchased under Technology Upgradation
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.
allowed by way of deduction or rebate on payments of LIC premium extended
to all insurance companies approved by IRDA.
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%.
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%.
based on fruits and vegetables exempted completely from excise duty.
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..
Surcharge of 10%
on custom duty rate withdrawn. With this peak level of customs duty declined
from 38.5% to 35%
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%.
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%.
gem stones from 35% to 15%.
CNG kits and their
parts - 5%.