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Union Budget 2011-12 Review-280211

Union Budget 2011-12 Review-280211

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February 28, 20111
Union Budget 2011-12 Review
Please refer to important disclosures at the end of this report
IndexIndexIndexIndexIndexPPPPPage No.age No.age No.age No.age No.
Union Budget 2011-12: Exercising restraint
2-5Sectoral ImpactSectoral ImpactSectoral ImpactSectoral ImpactSectoral Impact 6Agriculture 7Automobile 8Banking 9Capital Goods 11Cement 12FMCG 13Hotel 14Infrastructure 15Media 16Metals 17Oil & Gas 18Pharmaceutical 19Power 20Real Estate 21Retail 22Software 23Telecom 24
Table of Contents
 
February 28, 20112
Union Budget 2011-12 Review
Please refer to important disclosures at the end of this report
Source: Budget documents, Angel Research
Union Budget 2011-2012
Exercising restraint
In the Union Budget 2011-12, it was restraint that was requiredon the expenditure side. And, by not having any major populistmeasures, the Finance Minister has managed to bring downthe targeted fiscal deficit to 4.6% - the key positive from theBudget. Even though on some counts, such as subsidy estimates,the targets are likely to be overshot, but because of the absenceof any major populist measures and substantial restraint onmost items of expenditure, any overshooting of the fiscal deficitis likely to be contained to 20-40bp of GDP. In other words, thedeficit is unlikely to exceed the FY2011 levels of 5.1%.
Fiscal target is largely credible
The government managed to contain the fiscal deficit to 5.1%in FY2011, though this was not entirely on account of the 3Gauction revenue. Part of the reason was the sharp 20% increasein nominal GDP in FY2011 and the associated buoyancy in taxrevenue - about
30,000cr more than budgeted. Also, while3G auction revenue was about
70,000cr higher than thatexpected, divestments were lower by about
20,000cr, indicatingonly 
50,000cr of more than budgeted one-time revenue.Although the government collected almost
90,0000cr higherthan the budgeted revenue in FY2011, debt raising remainedhigher than budgeted (even excluding the
15,000cr excessfunds mobilised) due to the huge increase in expenditure overbudget estimates. The main culprit was
48,000cr of excesssubsidy burden, while other items included
10,000cr higherthan budgeted towards pension,
10,000cr towards defenseand police and
22,000cr towards plan expenditure.
Exhibit 2:
… matched by far higher-than-budgeted expenditure in FY2011
The FY2012 fiscal deficit target of 4.6% is also expected to beaided by the buoyancy in tax revenue, with an 18.5% yoy increase expected in gross tax revenue in FY2012 over FY2011revised estimates (RE). In amount terms, the ~
1lakh-cr increasein the centre's share of tax revenue is expected to completely compensate for the absence of over
1lakh-cr received from3G auctions in FY2011, further aided by 
20,000cr higherdivestment proceeds targeted this year.
Source: Budget documents, Angel Research
Exhibit 1:
Far higher-than-budgeted receipts in FY2011…
PPPPParticulars (articulars (articulars (articulars (articulars (
cr)cr)cr)cr)cr)FY2011 BEFY2011 BEFY2011 BEFY2011 BEFY2011 BEFY2011 REFY2011 REFY2011 REFY2011 REFY2011 REarianceariancearianceariancearianceCentre's net tax revenue 534,094 563,685 29,591Non-tax revenue(mainly 3G Auctions) 148,118 220,149 72,031Non-debt capital receipts(mainly divestments) 45,129 31,745 (13,384)727,341727,341727,341727,341727,341815,579815,579815,579815,579815,57988,23888,23888,23888,23888,238Debt receipts 381,409 415,997 34,588- Excess cash balances (15,000)TTTTTotal excess receiptsotal excess receiptsotal excess receiptsotal excess receiptsotal excess receipts107,826107,826107,826107,826107,826PPPPParticulars (articulars (articulars (articulars (articulars (
cr)cr)cr)cr)cr)FY2011 BEFY2011 BEFY2011 BEFY2011 BEFY2011 BEFY2011 REFY2011 REFY2011 REFY2011 REFY2011 REarianceariancearianceariancearianceSubsidies 116,224 164,154 47,930Pensions 42,840 53,262 10,422Defence 147,344 151,582 4,238Police 22,154 27,587 5,433Grants to state governments 45,119 51,756 6,637Other non-plan expenditure 361,976 373,212 11,236Total non-plan expenditure 735,657 821,553 85,896Total plan expenditure 373,092 395,024 21,932Total expenditure 1,108,749 1,216,577 107,828
Exhibit 3:
Variance in budgeted receipts in FY2012 over FY2011
Source: Budget documents, Angel Research
PPPPParticulars (articulars (articulars (articulars (articulars (
cr)cr)cr)cr)cr)FY2011 REFY2011 REFY2011 REFY2011 REFY2011 REFY2012 BEFY2012 BEFY2012 BEFY2012 BEFY2012 BEarianceariancearianceariancearianceCentre's net tax revenue 563,685 664,457 100,772Non-tax revenue(mainly 3G Auctions) 220,149 125,435 (94,714)Non-debt capital receipts(mainly divestments) 31,745 55,020 23,275815,579815,579815,579815,579815,579844,912844,912844,912844,912844,91229,33329,33329,33329,33329,333Debt receipts 415,997 392,817 (23,180)- Cash balances (15,000) 20,000 35,000Total receipts 1,216,576 1,257,729 41,153Fiscal deficit 400,997 412,817 11,820- Market borrowings 335,414 343,000 7,586- Savings schemes 17,781 24,182 6,401- Others (adjusted for cash) 47,802 45,635 (2,167)
On the expenditure side, about
20,000cr is realistically expected to be lower in respect of agri debt waiver andrecapitalisation of PSU banks. The increase in non-planexpenditure is mainly on account of defense, police, pension,

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