UNION BUDGET

In India, the Budget is presented in

Parliament on a date fixed by the
President.
Part A of Budget deals with general
economic survey of the country while
Part B relates to taxation proposals.
• The finance minister is required to submit the
Budget in Parliament usually on the last day of
February so that the Lok Sabha has one month
to review and modify the Budget proposals.

• If by April 1, the beginning of the country's

fiscal year, the parliamentary discussion on the
Budget is completed, then only the Budget as
proposed by the finance minister comes into
effect.
 Budget Division
• The Chief Economic Advisor assists the concerned
departmental officer in this process.
• Works under Department of economic affairs
• Under the supervision of Joint Secretary/Addl.
Secretary (Budget)
• Supplementary and Excess Demands of State and
Union Territories under the President’s Rule
• All issues relating to Public Debt, market loans of the
Central Government and the fixation of terms &
conditions of lending by the Central Government,
fixing the administered interest rates
• matters relating to National Savings
Organisation and Small Savings Schemes,
Duties, Powers and Condition of Service
of the Comptroller and Auditor General
of India, Accounting procedures and
Classification, dealing with issues relating
to National Defence Fund, Railways
Convention Committee and Central Road
Fund.
 I. Account Section
• II. Coordination Section
• III. Demands Section
• IV. FRBM Cell
• V. National Savings- I
• VI. National Savings – II
• VII. Public Debt Section
• VIII. Reports Section
• IX. States Section
• X. Supplementary Demands
Section
• XI. Way and Means Section
• XII. Budget Press
• XIII. Hindi Section I to IV
 The two sides of Budget
• Internal and External Budgetary Resources(IEBR) :
• Assessing the revenues from different Central Taxes
is the primary function of the Department of
Revenue
• Estimate of tax receipts by CBDT&CBEC in mid Jan
based on collection figure up to 31st Dec
• Estimate of dividends paid by the PSUs on the
government shareholdings
• capital receipts on account of the disinvestment
• External receipts on account borrowing from
international agencies like World Bank, ADB etc
to various ministries.
• Resources of the PSU including their operating
surplus and the borrowings by them also
constitutes an important component of the
gross budgetary resources.
• Estimate of earnings of PSUs done with
chairman of PSUs and Joint secretary, MoF in
August-September
 Expenditure Side
• Based on the inputs of different ministries
Revised Estimate (RE) and additional fund
for non plan expenditure is prepared
because of over spending and under
spending. (Finance adviser of each
ministry+ MoF),
• Estimate of Planned expenditure for next
year (Review meeting, Planning commission
+ ministries ->MoF) September-October
Suggestions of stakeholders
• DoEA + Trade Unions + Industry
Chambers + Economists +
Parliamentary committee
 FM and his team
• Finance Minister with his team
decides whether some new taxes
should be levied to collect more tax,
how to widen tax net in order to earn
more revenue.
 GDP assessment
• Department of Expenditure and the
Department of Economic Affairs sit to
decide GDP assessment for next
year. Generally a nominal growth in
GDP is projected.
The Budget speech of FM
• Around 15th of February, some of the
budget documents are almost ready
and goes for printing to a press
located in North Block itself. Security
Agencies cordons off the press and
entry is almost prohibited.
 The D Day : FM delivers
Budget Speech in
Parliament
• On 28th of February, the Finance
Minister delivers Budget speech in Lok
Sabha. After which Budget documents
are made available. These are also put
on the website www.finmin.nic.in.
• In 2008 being a leap year, this time
Budget was presented to Parliament
on 29th February.
 Information from budget
and announcements
• Growth in Per capita Income in real term &
savings rate, investment rate & their absolute
figure
• Growth in bank credit,M3 expansion rate and
inflation figure
• Report card of govt. flagship program
• Five year plan performance-
• Increase in GBS and central plan
 Sectoral allocation
• Infrastructure
• Education SSA, Mid day Meal,scholorship
• Health sector
– Polio, ICDS, HIV/AIDS,
– NHRM (Drinking water & Sanitation)
• Employment-NREGS,SGSY,
• Urbanisation-JNNURM
• NER specific fund/region specific fund/policy
 Agriculture
• Farm credit
– expansion rate & provision for interest rate
• Special grant
– Waiver for agriculture indebtedness
• Provision for Particular crop
• Plantation
• Accelerated Irrigation Benefits Programme
• Watershed scheme

•
 Agriculture cont.
• Water resource management
• Ground water recharge
• Training for farmer
• Fertilizer subsidy
• Agriculture insurance
• Grants and guarantees to Nabard
 Rural infrastructure
development fund(RIDF)
• Rural road
• Rural houses
• Village electrification
• Telecommunication
 Social Security
• Health/debilty/death insurance to
BPL families
• Jobs and income avenues
 Capital formation
• Increase/decrease in GDCF,FDI,FII etc
• CPSEs investment
 Infrastructure
• Power
• Genration increase/decrease and proposed expansion
• Coal –policy major/direction and report card
• National Highways development and maintainence
• Road cum rail Bridges
• Funding for such development such PPP or etc
•
 Industry
• Petroleum & Natural Gas
• Policy and progress
• Textiles-Grant for handlooms, textile parks
• Bank credit to SMEs
• Service sector- Policy and support to
Foreign trade, Tourism
• Financial sector
• Banking – Policy, disinvetment, dilution of
equity
• Regianonal Rural Banks(RRBs)
• Housing loans- Policy, support
• Insurance- policy, support
• Capital Market-Policy, Guideline
 Tax proposal
• Growth in tax revenue, direct tax, indirect tax
• Indirect Tax proposals-custom duties rate
hike/reduction/unchaged on various products
• Excise duty hike/reduction/unchaged on prodcuts
• Service Tax-Exemption limit
• Inclusion of services-
 Direct Tax
• Exemption limit, deduction, and rate
• Corporate income tax rate,
exemption, deduction etc.
• new taxes, estimated yield from new
direct tax proposals
• Proposal regarding the cess on taxes
 Indirect tax
• Reduction or increase in custom
duties(export/import)
• Reduction or increase in Excise
duties
• Exemption limit for excise duty
• Service tax: exemption limit for small
service provider, extension of service
tax to various services
• ANNUAL FINANCIAL STATEMENT

• CONSOLIDATED FUND

• CONTINGENCY FUND

• PUBLIC ACCOUNTS

• REVENUE RECEIPT/EXPENDITURE

• CAPITAL RECEIPT / EXPENDITURE

 CENTRAL PLAN
•

PLAN EXPENDITURE
•

NON PLAN EXPENDITURE

•
FINANCE BILL
•

TAX REVENUE
•

DIRECT/ INDIRECT TAX

•

NON TAX REVENUE

•
• DEFICIT(REVENUE/FISCAL/PRIMARY)
 IMPLICATIONS FOR THE
MARKET
 CHAIN OF EVENTS

• Pre budget jitters

• At 11 AM Sensex up

• At 11.30 AM loses

• At 12.40 PM Sensex loses further

• At 1.00 pm SENSEX recovers a bit

• HOTELS

• INFRASTRUCTURE

• HEALTHCARE

• PHARMACEUTICALS

• FMCG/HOUSE

• IT/HOUSEHOLD APPLIANCES

• MEDIA AND ENTERTAINMENT

• PAPER

• TEXTILES

• SUGAR
• GEMS AND JEWELLERY

• AUTO AND AUTO ANCILLARY

• OIL AND GAS

• POWER AND POWER EQUIPMENT

• REAL ESTATE

• BANKING

• CEMENT
• CAPITAL GOODS

• METAL
 Auto (Positive)
• Customs duty on steel melting and aluminum melting scrap
reduced from 5% to 0%
• Reduction in excise duties in select segments of
automobiles
• Excise duty has been reduced on: Small cars from 16% to
12%, Hybrid cars from 24% to 14%, Electric cars from 8%
to nil
• Buses and other vehicle for transport of more than 13
persons from 16% to 12%
• Two-wheelers and passenger three-wheelers (upto 7
persons) from 16% to 12%
Auto Sector
 Banking (Neutral)
• PSU banks and regional rural banks (RRBs) to offer debt waiver on
all agricultural loans disbursed upto March 2007 and due until the
end of December 2007. The total value of relief to be offered to
farmers is estimated at Rs 60,000 crore
• Advise commercial banks including RRBs, to add at least 250 rural
household accounts every year at each of their rural and semi-
urban branches
• Allow individuals such as retired bank officers, ex-servicemen etc
to be appointed as business facilitator or business correspondent
or credit counselor
• BCTT being withdrawn with effect from April 1, 2009
• The cost of adding more rural households in their rural branches
may increase the operating cost for the PSU banks
Banking Sector
 Metal (Neutral)
• Custom duty on iron or steel melting
scrap cut from 5% to Nil
• Reduction in customs duty of
aluminium scrap has been reduced
from 5% to Nil
Metal Index
 Oil & Gas (Negative)
• Ad valorem part of the excise duty on unbranded petrol and
unbranded diesel being abolished and replaced by an equivalent
specific duty of Rs.1.35 per litre. There will be only a specific duty
of Rs.14.35 per litre on unbranded petrol and Rs.4.60 per litre on
unbranded diesel; there will be no impact on retail prices
• Customs duty on crude and unrefined sulphur has been reduced
from 5% to 2%
• Customs duty on phosphoric acid has been unified at 5%
irrespective of its use
• Customs duty exemption presently available on naphtha for
manufacture of specified polymers has been withdrawn
• Polymer industry will be negatively impacted
• Polymer is used in a host of downstream sectors such as plastics
and paints which will face margin pressures
Oil & Gas sector
 Power (Positive)
• Exemption from additional duty of customs of 4% levied has been
withdrawn from power generation projects (other than mega
power projects), transmission, sub-transmission, distribution
projects and goods for high voltage transmission projects
• Fourth UMPP at Tilaiya to be awarded shortly; Chhattisgarh,
Karnataka, Maharashtra, Orissa and Tamilnadu urged to bring five
more UMPPs to the bidding stage by extending the required
support
• Rajiv Gandhi Grameen Vidyutikaran Yojana to be continued during
the Eleventh Plan period with a capital subsidy of Rs.28,000 crore;
allocation of Rs.5,500 crore for 2008-09
• Only negative factor- Removal of exemption of additional duty of
customs of 4% from power generation projects
Power Sector
 Real Estate (Neutral)
• Proposal to enhance the subsidy for new houses
under Indira Awas Yojana from Rs.25,000 to
Rs.35,000
• 5-year tax holiday for 2/3/4 star hotels in UNESCO
declared 'World Heritage Sites‘
• Extending 5-year tax holiday for setting up
hospitals in non-urban cities
• No relief on service tax on rentals will continue to
increase pricing pressure
Real Estate Sector
 Capital/Engineering Goods
(Positive)
• Growth in capital goods is still very high at
20.2 %, indicating that industry continues
to make huge capital investments and has
a positive outlook about the future
• Rs.800 cr allocated for the Accelerated
Power Development and Reforms Project in
2008-09
• Thrust on power reforms augurs well for
the sector
Capital Goods Index
 Cement (Negative)
• Excise Duty on clinker increased to
Rs 450/MT from Rs 350/MT
• Excise Duty on bulk cement at Rs
400/MT or 14% in proportion to the
estimated value of the cement,
whichever is higher
 Telecom Sector (Positive)
• General rate of excise duty (CENVAT) has been
reduced from 16% to 14%
• Excise duty has been fully exempted on Wireless data
modem cards. CVD shall also be exempted on
imported cards
• Customs duty on specified parts of set-top boxes has
been reduced from 7.5% to Nil
• Reduction in the customs duty on convergence
products from 10% to 5%
• Excise duty has been reduced from 16% to 8% on
specified convergence products
 Gem & Jewellery (Neutral)
• Reduction of duty of rough cubic
zirconia and of polished cubic
zirconia from 10% to 5%. Similar is
the case of rough coral