Indian budget for FY 2009-2010 disappoints markets

Tuesday, 07 July 2009 15:11:52 (GMT+3)   |  
       

According to the Union Budget announced by the Indian government on July 6 for the Indian financial year 2009-2010, the expenditure budget allocated to the Ministry of Steel for the promotion of research and development in the iron and steel sector amounted to Rupees 260 million (approx. US$5.350 million) from Rupees 185 million (approx. US$3.8 million) in FY 2008-09.

On the other hand, the investment in public steel enterprises in FY 2009-10 has been fixed at Rupees 137.3 billion (approx. US$2.82 billion), increasing by 70 percent year on year. The largest portion of this investment, that is Rupees 103.56 billion (approx. US$2.13 billion), with an increase of 121.56 percent year on year, is reserved for India's largest integrated steel plant, Steel Authority of India Ltd. (SAIL). Meanwhile, the second largest investment sum is reserved for Rashtriya Ispat Nigam Ltd. (RINL), totaling Rupees 24.37 billion (approx. US$500 million), down 13.4 percent compared to the revised budget of FY 2008-09.

Moreover, government investment in Coal India Ltd, the world's largest company in terms of coal production, has been set for FY 2009-2010 at a total of Rupees 29 billion (approx. US$596 million), up 5.26 percent from FY 2008-09.

Customs taxes for steel products have remained unchanged according to the announced budget, disappointing steel industry enterprises which had been anticipating the imposition of higher import taxes.

The budget allocated more funds to the country's infrastructure, such as highways, urban and irrigation projects, but the market considers this to be insufficient.

"Except the national highway project, no infrastructure benefits have been announced," B.K. Goenka, chairman of Welspun Group, which owns Welspun Gujarat and Welspun India, said.

Tata Steel managing director B Muthuraman, commenting on the Union Budget 2009-10, said, "The budget has to be seen in the context of the measures already announced and I am sure there will be several other measures that the government will announce progressively, to ensure that the economy returns to the nine percent GDP level at the earliest."


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