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Budget preview: Promises to keep
July, 06th 2009

Finance Minister Pranab Mukherjee is likely to set an aggressive disinvestment target and announce a range of tax breaks when he presents the Union Budget before Parliament on Monday.

Prime Minister Manmohan Singh, after his re-election, said the people of India expect a lot from the United Progressive Alliance government. Mukherjee will have to do a balancing act to meet expectations: he will have to find resources to fund welfare schemes and help the industry too.

CNN-IBN has learnt that the Government is likely to announce major decisions related to disinvestment in public sector units (PSUs) and set a fresh agenda for economic reforms.

Vivian Fernandes, Economic Policy Editor, CNBC-TV18, believes the Government could off load 10 percent to 15 percent of its stake in 61 central PSUs in which it holds 100 pc stake. The disinvestments would be gradual and the money wont flow in immediately but a target for reforms would be set.

The Government may scrap the controversial Fringe Benefit Tax--which earned it Rs 7,400 crore last years but is disliked by the salaried class, reports Fernandes.

The Securities Transaction Tax, which is levied when buying stocks, may not be abolished but will be reduced.

Sources in the Government say a stimulus of 0.5 percent to 1 percent is possible. Steps are likely to be taken to cheer up the business mood and strengthen the weak economic revival.

High fiscal deficit remains a concern, but the Economic Survey on Thursday advised fiscal balance can wait a year and growth be given more importance.

If the Surveys suggestion is followed, the Government will pump in more money into the system irrespective of the fiscal deficit.

Why economy needs a boost

The Government needs to give the economy a stimulus urgently. Manufacturing grew at 2.4 percent last year--less than a third of the previous year's growth rate.

Exports have declined for eight months, but thankfully 11 of 17 industries showed growth in April.

Cement sales grow 11 percent in May and car sales were up four months in a row at 2.5 percent in May. Two-wheeler sales grew 12.5 percent in May and truck sales fell 15 percent in May.

"Extraordinary economic circumstances merit extraordinary measures. Now is the time for such measures," Mukherjee had said when he presented the interim budget in the Lok Sabha on February 16.

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