Budget Analysis 2011

8/4/2019 Budget Analysis 2011

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Bharatesh Education Trusts

GLOBAL BUSINESS SCHOOL

UNION BUDGET 2011 ANALYSIS

Team Members

Mr. Miboob Dange

Mr. Anand Nandagavi

Mr. Sanju Hajeri

Mr. Mahantesh Patil


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Fiscal deficit at 4.6% of GDP

Net market borrowing Rs3.4 tn

DTC, GST on track

3 focus areas -

Agriculture

Infrastructure

Inclusive development


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PUBLIC FINANCE

FINANCIAL SECTOR LEGISLATIVE INITIATIVES

To take the process offinancial sector reforms further,

various legislations proposed in 2011-12. Amendments proposed to the Banking Regulation Act in

the context ofadditional banking licences to privatesector players.

PUBLIC SECTOR BANK CAPITALISATION

Rs 6,000 crore to be provided during 2011-12 to enablepublic sector banks to maintain a minimum ofTier ICRAR of8 per cent.

RECAPITALISATION OFREGIONAL RURAL BANKS

Rs. 500 crore to be provided to enable Regional RuralBanks to maintain a CRAR ofat least 9 per cent as on

March 31, 2012.


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INVESTMENT ENVIRONMENT

FOREIGN DIRECT INVESTMENT

Discussions underway tofurther liberalise the

FDI policy.FOREIGN INSTITUTIONAL INVESTORS

SEBI registered mutual funds permitted toaccept subscriptionfrom foreigninvestorswho meet KYC requirements for equityschemes.

To enhance flow offunds toinfrastructuresector, the FII limit for investment incorporate bonds issued ininfrastructuresector being raised.


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An allocation of Rs 2,140 billion for infrastructure sector accounting

for 48.50% of planned expenditure

Capital investment in Fertilizer production to be classified as an

infrastructure sub-sector.

Additional deduction of Rs 20,000 for investment in long-terminfrastructure bonds to be continued in FY12.

Permit to issue tax free bonds of Rs 300 billion by various

Government undertakings Levy of Minimum Alternate Tax (MAT) on developers of Special

Economic Zones (SEZs) and units operating in SEZs.


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Roads and Highways:

Allocation of Rs 103.40 billion for National Highways Development

Programmes (NHDP).

Full exemption from basic customs duty for bio-asphalt and specified

machinery.

Urban Infrastructure:

Allocation under JNNURM of Rs 125.20 billion for as against Rs

116.20 billion in FY11.

Allocation of Rs 15.60 billion for towards equity investments for all

Metro Rail Projects.


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An allocation of Rs 520.57 billion in FY12 for education

An allocation of Rs 210 billion for Sarva Shiksha Abhiyan

(Vocationalisation of Secondary Education)

An allocation of Rs 103.80 billion for National Programme of

Mid Day Meals in schools

Additional Rs 5 billion proposed to be provided for National

Skill Development Fund during FY12.

Allocation of Rs 500 million for Aligarh Muslim University

Rs 200 million for IIM, Kolkata, to set up its Financial Research

and Trading Laboratory.

A allocation of Rs 100 million for Mahatma Gandhi

Antarrashtriya Hindi Vishwavidyalaya, Wardha.


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Rural Development:

Total allocation under Bharat Nirman Rs 580 billion

Allocation of Rs 200 billion underPMGSY

Creation of Mortgage Risk Guarantee Fund under Rajiv Awas Yojana

(RAY) to guarantee housing loans taken by EWS and LIG households

and enhance their credit worthiness.

Enhancement of provisions under Rural Housing Fund to Rs 30 billion

from existing Rs 20 billion.

An allocation of Rs.1,60,887 crore for social sector.


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The plan allocation for the Ministry of Health and Family Welfare is

proposed to be increased to Rs 267.60 billion in FY12 from Rs 223

billion forFY11.

An allocation of Rs 178.40 billion for National Rural Health Mission.

The Rashtriya Swasthya BimaYojana extended to cover unorganised

sector workers in hazardous mining and associated industries like slate

and slate pencil, dolomite, mica and asbestos etc.

An allocation of Rs 93.50 billion for National Rural Drinking Water

Programme.

An allocation of Rs 16.50 billion for rural sanitation


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Higher allocation under RKVY Scheme

Bringing Green Revolution to Eastern Region

Integrated Development of 60,000 pulses

villages in rain fed areas.

Promotion of oil palm

Initiative on vegetable clusters

Nutrias- cereals


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Agriculture Credit

Interest Subvention

National Mission for Sustainable Agriculture

Mega

Food Parks

Storage capacity and cold chains


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TaxProposals:

Scope of exemptions from Excise Duty enlarged to

include equipments needed for storage and warehouse

facilities on agricultural produce.

Basic Custom Duty reduced for specified

agricultural machinery from 5 per cent to 2.5 per

cent.

Basic Custom Duty reduced on micro-irrigation

equipment from 7.5 per cent to 5 per cent.

De-oiled rice brancake fully exempted from basic

customs duty. But it attracts 10% export duty.


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Individual exemption limit raised from Rs.1,60,000 to Rs.1,80,000

Exemption limit raised by Rs 10,000 and qualifying age reduced from

65 to 60.

A new category Very Senior Citizens is formed.

Current surcharge of 7.5 per cent on domestic companies proposed to

be reduced to 5 per cent.

Rate of Minimum Alternative Tax 18.5 per cent of book profits

Weighted deduction on payments made to National Laboratories,

Universities and Institutes of Technology to be enhanced to 200 per cent.

Direct Taxes:


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Central Excise Duty to be maintained at standard rate of 10 per cent.

Basic Custom Duty on twocritical raw materials ofcement industry

viz. petcoke and gypsum is proposed to be reduced to 2.5 per cent.

Cash dispensers fully exempt from basic Customs Duty.

Basic Customs Duty on solar lantern reduced from 10 to 5 per cent.

Full exemptionfrom basic Customs Duty to Crude Palm Stearin

used in manufacture of laundry soap.

Proposals relating to Customs and Central Excise estimated toresult in a net revenue gainof Rs 7,300 crore.

Indirect Taxes:


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Hotel accommodation in excess of Rs. 1,000 per day and service

provided by air conditioned restaurants

Tax on all services provided by hospitals with 25 or more beds with

facility ofcentral air conditioning

Service Tax on air travel both domestic and international raised.

Services provided by life insurance companies in the area of

investment and some more legal services proposed to be brought into

tax net.

Proposals relating toService Tax estimated to result innet revenue

gainofRs 4,000 crore.

Service Tax:


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Cement

The existing excise duty rates have been proposed to be replaced

with composite rates having an ad valorem and specific component

with some rationalisation.

The basic customs duty on two critical input materials of this industry

viz. pet coke and gypsum is proposed to be reduced to 2.50% from 5%.

FMCG:

130 consumer goods are attracted 1% central excise duty.

Reductionin basiccustoms duty on bamboofor agarbattifrom 30%

to 10%.


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Metals & Mining

Proposal to enhance the rate of export duty for all types of iron ore

and unify it at 20% ad valorem.

Full exemption from export duty is being proposed on iron ore pellets

to encourage the value addition process for fines.

Allocation of Rs. 20.34 billion towards Restructured Accelerated

Power Development and Reforms Programme (RAPDRP).

Allocation of Rs. 8.13 billion towards the National Hydro Electric

Power Corporation (NHPC).

Allocation of Rs. 10.25 billion towards Bharatiya Nabhikiya Vidyut

Nigam Ltd.

Power:


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Custom Duty

11%

Service Tax and

Others

27%

Direct Taxes

11%

Corporate Taxes24%

Borrowed Loans27%

Rupee Income


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Non lan Grants

to States

5%

Assistance to

States

17%

Planed grants to

States

7%

Planed

Ex enditure

11%

Subsidies

9%

Defence

11%

Central

Ex enditure22%

Interest Payment

18%

Ru ee Ex enses


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Conclusion:

Union Budget 2011-12 stays onfiscal corrective course perhaps

aided by a few optimistic assumptions.

While there is nonew big bang reform, already announced measures

such as DTC and GST remainon track.

Revenue estimates appear reasonable. On

expenditure, infrastructure, agriculture and various inclusive

development programs received renewed attention.

A key risk to all ofthis is a further flare-up inoil prices.


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Documents

Budget Analysis 2011