Budget Analysis ( 2011-12)

-Present Status of the Economy

-Expectation From the Budget
-Impact Analysis of Budget(2011-120
 Present Status

GDP Growth

12

10

6 Series1
9.7 9.2
4 8 8.6
6.7
2

0
2006-07 2007-08 2008-9 2009-10 2010-11
Inflation Rate Scenario

Inflation Rate

9
8
7
6
5
Series1
4 8 8.2
3 6.5

2 4.5
3.6
1
0
2006-07 2007-08 2008-9 2009-10 2010-11
Growth In Manufacturing Sector

% Growth in Manufacturung Sector

16
14
12
10
8 14.9 Series2
6
10.3
4 8 8.1
2 3.2
0
2006-07 2007-08 2008-9 2009-10 2010-11
Growth in Exports

% Growth in Exports

35
30
25
20
15
Series2
10
5
0
-5 22.6 29 13.6 -3.5 29.5

-10 2006-07 2007-08 2008-9 2009-10 2010-11

Growth in Tax Revenue

% Growth in Tax Revenue

35

30

25

20
Series2
15 30
25.6
10
16.2
5
3.6
0 0.1
2006-07 2007-08 2008-9 2009-10 2010-11
Growth in Indian INC sales

% Growth Indian INC Sales

35

30

25

20
Series1
15 29.3
26.8
10 21.1 20.6

5
4.2
0
2006-07 2007-08 2008-9 2009-10 2010-11
Growth in Indian INC Profit

% Growth in India INC Profit

60
50
40
30
49.4
20 36.2
27.4 26.6 Series1
10
0
-10 2006-07 2007-08 2008-9 2009-10 2010-11
-25.9
-20
-30
% Change in Central Govt.
Borrowings

% Change in Central Govt. Borrowings

14

12

10

8
Series2
6 12.3 11.8 12.1
11.3 11.3
4

0
2006-07 2007-08 2008-9 2009-10 2010-11
 Main Features
• Growth is now Approaching Pre-Crisis Level( 8.6% in 2010-11) ( 9%
target set for 2011-12). It is based on High Saving rate ( 33% ) and
investment rate (36%), and demographic dividends.
• Inflation is Also Approaching Double Digit, especially food inflation
• Export is increasing currently as a result of low base factor and
recovery in developed countries
• However, Trade /current a/c deficit is increasing .
• It is being financed by foreign capital inflow, especially portfolio
investment.( A cause of Concern)
• Government Borrowing is increasing ( A cause of concern)
• Manufacturing sector is also showing sign of recovery.
 Expectation of the Budget
• Attempt to Maintain High Growth rate and low
inflation rate, which is a challenge
• Investment in Agriculture and Infrastructure
Development

• Consolidation of Fiscal deficit

• Continuing with Inclusive growth approach
• Rationalization of Import duties and Reducing
them to East-Asian countries
• Starting of Target Based Subsidies
 Budget Proposals( 2011-12)
• Based on Hypothesis of High Growth rate
• Tried to strike balance between low inflation rate and
high growth rate.
• Fiscal deficit has been proposed to be reduced to 4.6
percent from 5.1 percent this year.( If 3 G and
broadband bonanza is excluded, it is 6.3 %).
• So reducing by such big margin is challenge.
• Total govt. expenditure has been increased by only 3%,
which is lower than projected inflation rate of 4.6%.
• Govt. Borrowing marginally increased to Rs. 3.43trillion
from Rs. 3.35 trillion . It real term it has shrunk. It will
leave more liquidity in market to be lent to private sector.
•
 Cont:
• No change in services and excise tax.
• Service tax ambit widened
• Increase in spending on education and literacy.
• Proposed target subsidies for kerosene and LPG.
* Peak Import duty unchanged
• Tax limit increased by Rs. 20,000.
• Corporate Surcharge tax reduced to 10%
• Foreign dividend tax rate cut to 15 %
• Scholarship for SC/ST students in class 9 and 10th.
• NREGA wages to be indexed to inflation.
• Increased outlay on social sector
• Increase in target credit flow to farmers.
• 3% interest subsidy to farmers
•
•
 Conclusion
• This budget is anti-inflationary
• Growth-oriented
• More Inclusive

• However, Downside risk is Increasing Petrol and

Agriculture Price Word-over
• A fear of Double-dip slowdown in Europe and America
• Corruption

Thank You