Budget 2011-12_ Final

8/7/2019 Budget 2011-12_ Final

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"The budget should be balanced, the

Treasury should be refilled, public debt

should be reduced, the arrogance of

officialdom should be tempered and

controlled, and the assistance to and from

foreign lands should be curtailed, lest Rome

become bankrupt..."

-- Cicero , 55 BC

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HAS BUDGET ADDRESSED IMP ISSSUES

CONTENTSCONTENTS

MACROECONOMIC PARAMETERS

IMPACT ON OUR DAY TO DAY LIFE

IMPACT ON DIFFERENT CLASSES

CHALLENGES

IMPACT ON DIFFERENT SECTORS

WEAKNESS IN THE BUDGET

INVESTMENT DECISIONS TO CHANGE ?

CONCLUSION

OPPORTUNITIES

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MACROECONOMIC PARAMETERSMACROECONOMIC PARAMETERS

Fiscal Indicators - Rolling target as % of GDP (at Current market Price)

Particulars RE 2010-11 BE 2011-12

Target for

2012-13 2013-14

Revenue Deficit 3.4 3.4 2.7 2.1

Fiscal Deficit 5.1 4.6 4.1 3.5

Gross Tax Revenue 10.0 10.4 10.8 11.3

Total Outstanding

Liabilities

45.3 44.2 43.1 41.5

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MACROECONOMIC PARAMETERSMACROECONOMIC PARAMETERS

Comparison of MTFP with 13th FC Fiscal Roadmap (at Current market Price)

Particulars 2010-11 2011-12 2012-13 2013-14

Fiscal Deficit- MTFP

5.1 4.6 4.1 3.5

- 13th FC 5.7 4.8 4.2 3.0

Revenue Deficit

- MTFP 3.4 3.4 2.7 2.1

- 13th FC 3.2 2.3 1.2 0.0

Debt

- MTFP 45.3 44.2 43.1 41.5

- 13th FC 53.9 52.5 50.5 47.5

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CHALLLENGES BEFORE THECHALLLENGES BEFORE THE

FINANCE MINISTER FINANCE MINISTER

CRUDE PRICESCRUDE PRICES

GOVERNMENT BORROWING ANDGOVERNMENT BORROWING AND

EXPENDITUREEXPENDITURE

SUPPLY SIDE PROBLEMSSUPPLY SIDE PROBLEMS

CORRUPTIONCORRUPTION

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OPPORTUNITIESOPPORTUNITIES

Swift and broad based growth in 2010-11 has put the

economy back to its pre-crisis growth trajectory.

Fiscal consolidation has been impressive.

Significant progress in critical institutional reforms that

would set the pace for double-digit growth in the near

future.

Dynamism in the rural economy due to scaled up

flow of resources to the rural areas.

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IMPACT ON DIFFERENT IMPACT ON DIFFERENT

INDIVIDUAL CLASSESINDIVIDUAL CLASSES

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IS IT TRUE? IS IT TRUE? NO MORE F ILING OF TAX RETURNS FOR THE NO MORE F ILING OF TAX RETURNS FOR THE

SALARIED SALARIED

TheThe electronicelectronic filingfiling of of TaxTax

DeductionDeduction atat SourceSource

(TDS)(TDS) statementstatement hashas

stabilizedstabilized..

CategoryCategory of of salariedsalariedtaxpayerstaxpayers whowho willwill notnot bebe

requiredrequired toto filefile aa returnreturn willwill

bebe notifiednotified..

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Tax norms tightened for businessmenTax norms tightened for businessmen

To tax life insurance service providersTo tax life insurance service providers

Legal representation for businesses under Legal representation for businesses under

service taxservice tax

Service Tax on hotel accommodation aboveService Tax on hotel accommodation above

Rs.1,500 per dayRs.1,500 per day

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Senior citizens now a happier lotSenior citizens now a happier lot

³³Very Senior Citizen´ introducedVery Senior Citizen´ introduced: 80 years and above.: 80 years and above.

TaxTax exemptionexemption for income up tofor income up to RsRs 5.05.0 lakhlakh

Reduction of age limit :Reduction of age limit : from 65 years to 60 years.from 65 years to 60 years.

Tax exemptionTax exemption for income up to Rs 2.5 lakh (nowfor income up to Rs 2.5 lakh (now RsRs 2.42.4 l l ))

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Senior citizens now a happier lotSenior citizens now a happier lot

Eligibility under IEligibility under Indirandira GandhiGandhi National Old AgeNational Old AgePension Scheme,Pension Scheme, reducedreduced to 60 years from 65 years.to 60 years from 65 years.

Increase inIncrease in OAP from Rs.200 toOAP from Rs.200 to RsRs. 500. 500 p.mp.m for for

those of 80 years and above.those of 80 years and above.

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Education gets a BoostEducation gets a Boost

Allocation of Allocation of

RsRs..52,05752,057 crorecrore for for

education sector education sector

Increased allocationIncreased allocation

by 24%.by 24%.

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Mixed bag for HomemakersMixed bag for Homemakers

1% interest1% interest subsidy onsubsidy on

lowlow-- cost housing loanscost housing loans((uptoupto Rs 15 lakh for unitsRs 15 lakh for units

costing < Rs 25 lakhs)costing < Rs 25 lakhs)

Raise in service tax on air Raise in service tax on air

travel.travel.

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IMPACT ON DIFFERENT IMPACT ON DIFFERENT

SECTORSSECTORS

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AutomobileAutomobile: :

Positive as the central excise dutyPositive as the central excise duty

has been kept unchanged.has been kept unchanged.

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ITIT

Overall,Overall, thethe budgetbudget waswas NeutralNeutral forfor ITIT sectorsector..

LowLow keykey affair affair for for thethe SoftwareSoftware Sector Sector..

NoNo mentionmention aboutabout extensionextension of of fiscalfiscal benefitsbenefits under under

STPISTPI SchemeScheme for for ExportExport of of SoftwareSoftware Services,Services, whichwhich

isis duedue toto expireexpire inin FYFY20112011..

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InfrastructureInfrastructure

Continued stress on infrastructure developmenContinued stress on infrastructure developmen Allocation increased by 23%Allocation increased by 23% yoyyoy toto RsRs 2,14,0002,14,000 cr cr

which is 48.5% of the planned expenditure.which is 48.5% of the planned expenditure.

The tax benefit for The tax benefit for

investmentinvestment uptoupto

Rs.20,000Rs.20,000

Infrastructure BondsInfrastructure Bonds

has been extended byhas been extended by

one year.one year.

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Metals & MiningMetals & Mining::

ExportExport dutyduty onon exportexport of of ironiron oreore

raisedraised toto adad valoremvalorem 2020%% onon lumpslumps asas wellwell

asas finesfines..

NowNow :: 1515%% onon lumpslumps andand 55%% onon finesfines

³N egative news for iron ore exporters´ ³N egative news for iron ore exporters´

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PharmaPharma

³Neutral for the pharmaceutical sector´.³Neutral for the pharmaceutical sector´.

20% increased allocation to Ministry of Health &20% increased allocation to Ministry of Health &

Family Welfare (Rs.26,760Family Welfare (Rs.26,760 crorecrore from Rs 22,300 cr.)from Rs 22,300 cr.) No extension on weighted deduction on the inNo extension on weighted deduction on the in--househouse

R&D which stands at 200% and available tillR&D which stands at 200% and available till

FY2012 only.FY2012 only. H ighly disappointing H ighly disappointing PharmaPharma Cos. in R &Cos. in R &

D activities.D activities.

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Investors get a leg upInvestors get a leg up

Upped priority home loan limit to Rs 25Upped priority home loan limit to Rs 25

lakhlakh compared to Rs 20compared to Rs 20 lakhlakh..

10% excise duty on branded garments.10% excise duty on branded garments.

Likely to be dampener for this class.Likely to be dampener for this class.

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Capital GoodsCapital Goods::

No significant direct measuresNo significant direct measures

BUT hasBUT has PositivePositive signalsignal

Continued impetus to Infrastructure andContinued impetus to Infrastructure andPower Sector of the country.Power Sector of the country.

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OVERALL RATINGOVERALL RATING

HOMEMAKER HOMEMAKER 6/106/10

INDUSTRIALISTINDUSTRIALIST 8/108/10

SERVICESSERVICES 6/106/10

FARMER FARMER 8/108/10

UNEMPLOYEDUNEMPLOYED 5/105/10

SHOPKEEPER SHOPKEEPER 7/107/10

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IMPACT ON OUR DAY IMPACT ON OUR DAY

TO DAY THINGSTO DAY THINGS

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TVSTVS --SAME COSTSAME COST

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FRIDGE SAME COSTFRIDGE SAME COST

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WASHING MACHINE SAMEWASHING MACHINE SAME

COSTCOST

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CHEAPER PCSCHEAPER PCS

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CHEAPER ACCHEAPER AC

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MICROWAVE NO CHANGEMICROWAVE NO CHANGE

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COSTLIER MOBILE PHONESCOSTLIER MOBILE PHONES

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CHEAPER LAPTOPSCHEAPER LAPTOPS

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CHEAPER PRINTER CHEAPER PRINTER

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FAX MACHINESFAX MACHINES

PHOTOCOPIERS CHEAPER PHOTOCOPIERS CHEAPER

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CAMERA SAME PRICECAMERA SAME PRICE

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PROJECTORS NO CHNAGEPROJECTORS NO CHNAGE

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Cement is set to be dearer across the country byCement is set to be dearer across the country by

Rs 8Rs 8--9 per 50 kg bag9 per 50 kg bag

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SOLAR ENERGY SAME PRICESOLAR ENERGY SAME PRICE

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AIRFARE COSTLIER AIRFARE COSTLIER

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OUR EXPENDITURE OUR EXPENDITURE

OUR REVENUESOUR REVENUES

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Here's how the govt earns andHere's how the govt earns and

spends its rupeespends its rupee

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Govt. BorrowingsGovt. Borrowings

Good SignGood Sign:

:

Less borrowings by Govt. in 2011Less borrowings by Govt. in 2011--12 than FY 201012 than FY 2010--11.11.

Borrowings comprisesBorrowings comprises

GGross borrowings in 2011ross borrowings in 2011--1212

Estimated atEstimated at RsRs 4,17,0004,17,000 crorecrore ( nearly( nearly RsRs 40,00040,000 crorecrore,,

lower than current FY)lower than current FY)

29%

71%

2010-11

Borrowings27%

73%

0% 2011-12

Borrowings

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Why India will be world's No. 1 economy by 2050Why India will be world's No. 1 economy by 2050

As per Citi ReportAs per Citi Report ::

India will be world's largest economy byIndia will be world's largest economy by

2050,2050,

surpassing China and the United States.surpassing China and the United States.

In 2020In 2020 :: China should overtake US China should overtake US

&&

In 2050In 2050 :: India will OvertakeIndia will Overtake

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DOES BUDGET ADDRESSDOES BUDGET ADDRESSIMPORTANT ISSUESIMPORTANT ISSUES

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Budget attempts to address fourBudget attempts to address four

core issuescore issues

Improving fiscalconditions

Growth-relatedmeasures

PromotingEfficiency in

deliverymechanism &

reform measures

Attractingforeign capital

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Budget attempts to address four core issues ..Budget attempts to address four core issues ..

Improving fiscal conditions :Improving fiscal conditions :

IncreaseIncrease serviceservice taxtax revenuesrevenues byby 1818%% inin

FYFY1212 over over FYFY1111.. DueDue toto wideningwidening of of serviceservice taxtax netnet alongalong

withwith robustrobust growthgrowth of of thethe serviceservice sector sector

SignificantSignificant taxtax buoyancybuoyancy areare expectedexpected totogrowgrow grossgross taxtax revenuesrevenues byby aboutabout 2525%%..

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GrowthGrowth--related measuresrelated measures IncreasingIncreasing FIIsFIIs limitlimit inin infrastructureinfrastructure debtdebt

fundsfunds toto $$2525 bnbn,,

AttainingAttaining aboutabout 100100%% growthgrowth (over (over previouspreviousFYP)FYP) inin XIXI FiveFive Year Year PlanPlan outlayoutlay

IncreasingIncreasing infrainfra spendspend byby 2323%% andand

AimingAiming toto increaseincrease farmfarm creditcredit byby 2323%% areare

certainlycertainly propro--growthgrowth measuresmeasures..


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Measures for promoting Productivity, Efficiency inMeasures for promoting Productivity, Efficiency in

delivery mechanism, containing inflation and reformdelivery mechanism, containing inflation and reform

In agricultural In agricultural sector and containing food crop inflationsector and containing food crop inflation

committee to look into expenditure management,committee to look into expenditure management, nutrientnutrient--based urea policy,based urea policy,

55--fold strategy to tap black money,fold strategy to tap black money,

increasing interest subvention for timely repayment of farm loans,increasing interest subvention for timely repayment of farm loans,

ITIT--backbone for the rural areas,backbone for the rural areas,

increased investments for cultivation of edible oil seeds,increased investments for cultivation of edible oil seeds,

direct transfer of subsidy through smart cards anddirect transfer of subsidy through smart cards and

significant investments in cold storage and warehouses for significant investments in cold storage and warehouses for agriagri--cropscrops


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Attracting foreign capitalAttracting foreign capital

Proposal to allow foreign investments in equityProposal to allow foreign investments in equity

schemes of mutual funds,schemes of mutual funds, increasing foreign investment limit in infra debt funds,increasing foreign investment limit in infra debt funds,

firm policy guidelines for new banking licenses byfirm policy guidelines for new banking licenses by

Mar 2012 andMar 2012 and

decision to continue discussion on FDIsdecision to continue discussion on FDIs


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LongLong--term visionary statements:term visionary statements:

Apart from concrete proposals,Apart from concrete proposals,

Certain positive longCertain positive long--termterm plans like accelerating theplans like accelerating the

share of industrial GDP in total GDP to 25% fromshare of industrial GDP in total GDP to 25% from

the current level of 16% in next 10 yearsthe current level of 16% in next 10 years,,

Improving agricultural productivity in the eastern partImproving agricultural productivity in the eastern part

of the country,of the country,

SStrengthening public debt management, etc.trengthening public debt management, etc.

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W EAKNESSES IN THE W EAKNESSES IN THE

BUDGET BUDGET

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WEAK N E SS E S I N T HE BUDG E T WEAK N E SS E S I N T HE BUDG E T

MAT rate should have been brought down to at least 10 per centMAT rate should have been brought down to at least 10 per cent

Given current inflation levels, the increase of personal taxGiven current inflation levels, the increase of personal tax

exemption limit will not even be noticed by many.exemption limit will not even be noticed by many.

At least investment limits for investment in longAt least investment limits for investment in long--term infrastructureterm infrastructure

bonds could have been increased,.bonds could have been increased,.

The missed opportunity relates to the goods and services tax, whichThe missed opportunity relates to the goods and services tax, which

MukherjeeMukherjee feels is being held hostage by politics, since statefeels is being held hostage by politics, since state

governments have to be on board to sign on.governments have to be on board to sign on.

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WEAK N E SS E S I N T HE BUDG E T WEAK N E SS E S I N T HE BUDG E T

ForeignForeign DirectDirect InvestmentInvestment (FDI)(FDI)

NoNo major major announcementannouncement inin further further liberalizingliberalizing

foreignforeign directdirect investmentinvestment (FDI)(FDI) eveneven after after thetheuncharacteristicuncharacteristic declinedecline seenseen inin currentcurrent fiscalfiscal.. InIn

particular,particular, therethere werewere nono announcementsannouncements onon multimulti--

brandbrand retailretail after after havinghaving detaileddetailed itsits potentialpotential

positivepositive impactimpact onon highhigh foodfood inflationinflation inin thetheEconomicEconomic SurveySurvey..

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FINE PRINTFINE PRINT

No Large Changes in Direct TaxesNo Large Changes in Direct Taxes

No Housing Loan Incentives (or disincentives)No Housing Loan Incentives (or disincentives)

Infra bonds to stayInfra bonds to stay

Surcharges reduced to 5%Surcharges reduced to 5%

Foreigners can invest in Equity MFsForeigners can invest in Equity MFs

Service Tax: You'll pay moreService Tax: You'll pay more

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CONCLUSIONCONCLUSION

FINANCE MINISTER HASFINANCE MINISTER HAS

NOT DONE A BAD JOB ATNOT DONE A BAD JOB AT

ALLALL

THE PESSSIMISM IN THETHE PESSSIMISM IN THE

SYSTEM HAS BEENSYSTEM HAS BEEN

SUCKED OUTSUCKED OUT

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CONCLUSIONCONCLUSION

ATAT LEASTLEAST THETHE DIRECTIONDIRECTION ISIS CORRECTCORRECT THETHE JOURNEJOURNE

MIGHTMIGHT TAKETAKE AA LITTLELITTLE LONGER LONGER

SIGNALSSIGNALS AREARE POSITIVEPOSITIVE ININ AA MEDIUMMEDIUM ANDAND LONLON

TERMTERM BASISBASIS THOUGHTHOUGH SUBSIDIESSUBSIDIES AREARE AA BIBI

IMPEDIMENTIMPEDIMENT TOTO GROWTHGROWTH

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W HERE MUST YOUW HERE MUST YOU

INVEST INVEST NOW ?NOW ?

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WHERE MUST YOU INVEST NOWWHERE MUST YOU INVEST NOW

WITHWITH INTERSTINTERST RATESRATES HAVINGHAVING ALMOSTALMOST PEAKEDPEAKED

FDs,FDs, FMPs,FMPs, BONDSBONDS SHOULDSHOULD BEBE CONSIDEREDCONSIDERED

INVESTMENTINVESTMENT ININ QUALITYQUALITY DIVERSIFIEDDIVERSIFIED MUTUALMUTUAL

FUNDSFUNDS

STOCK STOCK MARKETMARKET± ±QUALITYQUALITY STOCKSSTOCKS AREARE

AVAILABLEAVAILABLE CHEAPCHEAP BUTBUT DON¶TDON¶T EXPECTEXPECT MIRACLESMIRACLES

INVESTINVEST ININ PROPERTYPROPERTY BELOWBELOW 2525K K ANDAND GOLDGOLD

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Budget 2011-12_ Final