Overview of Union Budget 2012-13

Click to edit Master subtitle style Ashish Chadha Namit Chugh Namit.arien@gmail.com

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The presentation contains facts published by the Ministry of finance on website indiabudgte.nic.in

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Economy Overview

For the Indian economy, this was a year of recovery interrupted GDP growth at 6.9% in real terms in 2011-12 Slowdown in comparison to previous years due to:

Slow industrial growth Low investment in the private sector cost CRISIL CERTIFIED of credit
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Rising 3/18/12

Objectives

Objectives for the next fiscal:

Demand driven growth recovery Growth in private investment Rectify supply bottlenecks in agriculture, energy and transport Address problem of malnutrition Coordinate implementation of decisions and better governance
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Growth recovery
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GROWTH (1/2)

Account deficit stands at 3.6% of GDP Reasons for slow growth:

Higher interest rates and material costs Lower profit margins Lower corporate taxes Higher subsidy for petroleum companies (the average price of crude oil was US$ 90 per barrel at the time of last budget which exceeded US$ 115)
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GROWTH (2/2)

FRMB Act

Expenditure reforms Food Fertilizers Petroleum products

Subsidies

Disinvestment policy Strengthening Investment 3/18/12 CRISIL CERTIFIED environment

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FRMB (Fiscal Responsibility and Budget Management Act)

Objectives:

Reduce fiscal deficit Long term macro-economic stability Debt management Greater transparency in fiscal operations

Target was to eliminate revenue deficit to 3% of GDP by 2008

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Content of FRMB Act

Medium-term Fiscal Policy Statement

Revenue deficit Use of capital receipts of the Government for generating productive assets

Fiscal Policy Strategy Statement

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Strategic fiscal priorities

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Expenditure Reforms

Effective revenue deficit = Revenue deficit grants Focusing on this will help in reducing the consumptive component of revenue deficit and create space for increased capital spending. Medium term Expenditure Framework Statement
Allocating resources for prioritized 3/18/12 1010 schemes CRISIL CERTIFIED

Subsidies - Food

Major subsidies: food, fertilisers and petroleum products Subsidies related to food (Food Security Act) will be provided for All other subsidies would be funded to the extent possible Expenditure on subsidies to be under 2% of GDP in 2012-13
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To be brought down to 1.75% CRISIL CERTIFIED 1111

Subsidies - Fertilizers

Mobile-based Fertilizer Management System has been designed to provide end-to-end information on movement of fertilisers and subsidies

Direct transfer of subsidy to retailer and farmer Expected to reduce expenditure by reducing misuse of fertilizers
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Subsidies Petroleum products

Pilot project in Mysore:

selling LPG at market price reimbursement of subsidy directly into the beneficiarys bank account direct transfer of subsidy for kerosene into the bank accounts of beneficiaries

Pilot project in Alwar:

Use of Aadhar platform for validating PDS ration cards 3/18/12 CRISIL CERTIFIED 1313

Disinvestment Policy

For 2012-13, 30,000 crore to be raised through disinvestment of Central Public Sector Enterprises At least 51% ownership and management control to remain with Government

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Foreign Direct Investment

Allowed in single brand retail to the extent of 100% Efforts to arrive at a consensus in consultation with the State Governments to allow FDI in multibrand retail up to 51% Benefits:

Cost reduction due to economies of scale Improved supply chain

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Advance Pricing Agreement

Taxpayers and the Tax Department sit together and decide in advance what the transfer pricing shall be.

Bring down tax litigation Provide certainty to foreign investors

To be included in the Finance Bill, 2012

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Financial Sector

Rajiv Gandhi Equity Savings Scheme

income tax deduction of 50 per cent to new retail investors investment up to 50,000 directly in equity annual income is below 10 lakh lock-in period of three years

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Capital Markets

Allowing Qualified Foreign Investors (QFIs) to access Indian Corporate Bond market Simplifying the process of issuing Initial Public Offers (IPOs) Permitting two way exchangeability of IDRs subject to a ceiling Providing opportunities for wider shareholder participation in 3/18/12 CRISIL CERTIFIED 1818 important decisions of the companies

Legislative Reforms

The Micro Finance Institutions (Development and Regulation) Bill, 2012 The National Housing Bank (Amendment) Bill, 2012 The Small Industries Development Bank of India (Amendment) Bill, 2012 National Bank for Agriculture and Rural Development (Amendment) 3/18/12 CRISIL CERTIFIED 1919 Bill, 2012

Capitalisation of Banks and Financial Holding Company

15,888 crore for capitalisation of Public Sector Banks, Regional Rural Banks and NABARD Possibility of creating a financial holding company to raise capital requirements of Public Sector Banks Know Your Customer depository to be developed in 2012-13 to avoid multiplicity of registration and data 3/18/12 CRISIL CERTIFIED 2020 upkeep.

Financial Inclusion

Swabhimaan campaign(2010-11): Extend banking facilities through Business Correspondents to habitations having population in excess of 2000 Out of 73,000 identified habitations that were to be covered under Swabhimaan campaign by March, 2012, about 70,000 habitations have been covered. CERTIFIED 3/18/12 CRISIL 2121

Regional Rural Banks

Out of 82 RRBs in India, 81 have successfully migrated to Core Banking Solutions Also joined the National Electronic Fund Transfer system Proposal to extend the scheme of capitalisation of weak RRBs by another 2 years
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Priority Sector Lending

Revised guidelines on priority sector lending to be issued after stakeholder consultation

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Infrastructure and industrial development

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INFRASTRUCTURE (1/4)

Power and Coal Roads and Highways Aviation Housing

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INFRASTRUCTURE (2/4)

Master list of infrastructure sector has been approved by the Government to remove ambiguity in the policy and regulatory domain Infrastructure investment will go up to 50 lakh crore during the 12th five year plan About half of this is expected to come from private sector
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New sectors included under Viability

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INFRASTRUCTURE (3/4)

Government has approved guidelines for establishing joint venture companies by defence PSUs in PPP mode Infrastructure Debt Fund with an initial size of 8,000 crore Tax free bonds of 60,000 crore to be allowed for financing infrastructure projects in 2012-13.
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INFRASTRUCTURE (4/4)
Organisation
NHAI IRFC IIFCL HUDCO National Housing Bank SIDBI Ports Power Sector

Funds to be raised
10,000 crore 10,000 crore 10,000 crore 5,000 crore 5,000 crore 5,000 crore 5,000 crore 10,000 crore

IIFCL has put in place a structure for credit enhancement and take-out 3/18/12 CRISIL CERTIFIED 2828

Power and Coal

Fuel supply constraints Coal India Limited (CIL) has been advised to sign fuel supply agreements, with power plants that have entered into long term Power Purchase Agreements Periodic review of the allocated coal mines for recommendations on deallocations(if needed)
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External Commercial Borrowings

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Roads and Highways

Target of covering a length of 8,800 kilometre under NHDP Allocation of the Road Transport and Highways Ministry enhanced by 14% to 25,360 crore ECB proposed to be allowed for capital expenditure on the maintenance and operations of toll systems for roads and highways
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Aviation

Direct import of Aviation Turbine Fuel permitted for Indian Carriers as actual users ECB to be permitted for:

working capital requirement for a period of one year total ceiling of US $ 1 billion

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Housing

Allow ECB for low cost affordable housing projects Set up Credit Guarantee Trust Fund to ensure better flow of institutional credit for housing loans Enhance provisions under Rural Housing Fund from 3000 crore to 4000 crore Enhance the limit of indirect finance 3/18/12 CRISIL CERTIFIED 3232 under priority sector from 5 lakh to

Rural Infrastructure

24,000 crore provided for Pradhan Mantri Gram Sadak Yojana (PMGSY) Allocation enhanced to 20,000 crore for Rural Infrastructure Development Fund (RIDF)

5,000 crore marked for warehousing facilities

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INDUSTRIAL DEVELOPMENT(1/2)

Fertilizers: pricing and investment policies for urea to reduce import dependece Textiles:

financial package of 3,884 crore for waiver of loans Two more mega handloom clusters

Weavers Service Centres for providing technical support to poor handloom 3/18/12 3434 weavers CRISIL CERTIFIED

INDUSTRIAL DEVELOPMENT(2/2)

MSME:

5,000 crore India Opportunities Venture Fund to be set up with SIDBI SME exchanges launched recently Policy requiring Ministries and CPSEs to make a minimum of 20% of annual purchases from MSEs

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AGRICULTURE
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Challenges

Supply constraints Gaps in distribution, storage and marketing systems Weak supply chain management All these factors causing food inflation

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OUTLAY

Increase in total outlay

to 20,208 Crore.

Increase in outlay of RKVY(to 9,217 Cr)

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Initiative of Bringing Green Revolution to Eastern India (BGREI) has resulted in increased production and productivity of paddy. Allocation for the scheme increased to 1,000 crore in 2012-13 from 400 crore in 2011-12.
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Missions to address the needs of agriculture development in the 12th FYP(Contd.)

National Mission on Oil Seeds and Oil Palm National Mission on Agricultural Extension and Technology National Horticulture Mission

National Mission for Protein Supplement

2,242 crore project launched with World Bank assistance to improve productivity in the dairy sector. 3/18/12 CRISIL CERTIFIED 3939

AGRICULTURE CREDIT

Target for agricultural credit raised by 1,00,000 crore to 5,75,000 crore in 2012-13. Interest subvention scheme for providing short term crop loans to farmers at 7 per cent interest per annum to be continued in 2012-13. Additional subvention of 3 per cent available for prompt paying farmers.
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Agriculture Research

A sum of 200 crore set aside for incentivising research with rewards. Structural changes in Accelerated Irrigation Benefit Programme (AIBP)being made to maximise flow of benefit from investments in irrigation projects. for AIBP in 2012-13 4141 stepped CRISIL CERTIFIED

Irrigation

Allocation 3/18/12

National Mission on Food Processing

National Mission on Food Processing

to be started in 2012-13 in co-operation with State Governments. Steps taken to create additional food grain storage capacity in the country

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INCLUSION

Scheduled Castes and Tribal Sub Plans

Allocation for Scheduled Castes Sub Plan at 37,113 crore in BE 2012-13 represents an increase of 18 per cent over BE 2011-12. Allocation for Tribal Sub Plan at 21,710 crore in BE 2012-13 represents an increase of 17.6 per cent.
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Food Security

inclusion
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INCLUSION(Contd)

Multi-sectoral Nutrition Augmentation Programme

A multi-sectoral programme to address maternal and child malnutrition in selected 200 high burden districts is being rolled out during 2012-13.

Allocation of 15,850 crore made for Integrated Child Development Service(ICDS) Scheme, representing an increase of 58 per cent over BE 201112. 3/18/12 CRISIL CERTIFIED 4545

INCLUSION(Contd)

Rural Development and Panchayati Raj

Budgetary allocation for rural drinking water and sanitation increased from 11,000 crore to 14,000 crore representing an increase of over 27 per cent Allocation for PMGSY increased by 20 per cent to Rs.24,000 crore to improve connectivity.
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HEALTH

No new case of polio reported in the last one year NRHM: allocation increased from 18,115 crore in 2011-12 to 20,822 crore in 2012-13 National Urban Health Mission is being launched to encompass the primary healthcare needs of people in the urban areas
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Pradhan Mantri Swasthya Suraksha

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EDUCATION

For 2012-13, 25,555 crore provided for RTE-SSA representing an increase of 21.7 per cent over 2011-12. 6,000 schools proposed to be set up at block level as model schools in Twelfth Plan. 3,124 crore provided for Rashtriya Madhyamik Shiksha Abhiyan (RMSA) representing an increase of 29 per 3/18/12 CRISIL CERTIFIED 4848 cent over BE 2011-12.

EMPLOYMENT

MGNREGS has had a positive impact on livelihood security. Need to bring about greater synergy between MGNREGA and agriculture and allied rural livelihoods. Allocation of 3915 crore made for National Rural Livelihood Mission representing an increase of 34 per cent.
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To ease access to bank credit, corpus

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SKILL DEVELOPMENT

Projects approved by National Skill Development Corporation expected to train 6.2 crore persons at the end of 10 years. 1,000 crore allocated for National Skill Development Fund in 2012-13. To improve the flow of institutional credit for skill development, a separate Credit Guarantee Fund to 3/18/12 set up. CRISIL CERTIFIED 5050 be

WEAKER SECTIONS

Allocation under NSAP raised by 37 per cent to 8,447 crore in 2012-13. In the ongoing Indira Gandhi National Widow Pension Scheme and Indira Gandhi National Disability Pension Scheme for BPL beneficiaries, pension amount to be raised from 200 to 300 per month. Lump sum grant on the death of 3/18/12 CRISIL CERTIFIED 5151 primary breadwinner of a BPL family,

SECURITY

A provision of 1,93,407 crore made for Defence services including 79,579 crore for capital expenditure. Any further requirement to be met. 1,185 crore proposed to be allocated for construction of nearly 4,000 residential quarters for Central Armed Police Forces.
CRISIL CERTIFIED 3,280 crore proposed to be5252

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GOVERNANCE

UID-Aadhaar

Enrolment of 20 crore persons completed under UID mission. Adequate funds to be allocated to complete enrolment of another 40 crore persons. Proposal to lay a White Paper on Black Money in current session of Parliament.
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Black Money

Public Procurement Legislation

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BUDGET ESTIMATES 201213

Gross Tax Receipts estimated at 0,77,612 crore. Net Tax to Centre estimated at 7,71,071 crore. Non-tax Revenue Receipts estimated at 1,64,614 crore. Non-debt Capital Receipts estimated at 41,650 crore.
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Temporary arrangement to use CRISIL CERTIFIED 5454

TAX PROPOSALS
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DIRECT TAXES

Tax proposals for 2012-13 mark progress in the direction of movement towards DTC and GST. DTC rates proposed to be introduced for personal income tax. Exemption limit for the general category of individual taxpayers proposed to be enhanced from 1,80,000 to 2,00,000 giving tax 3/18/12 CRISIL CERTIFIED 5656 relief of 2,000.

DIRECT TAXES(Contd.)

Proposal to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15 per cent upto 31.3.2013. Investment link deduction of capital expenditure for certain businesses proposed to be provided at the enhanced rate of 150 per cent.
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DIRECT TAXES(Contd.)

Reduction in securities transaction tax by 20 per cent on cash delivery transactions. Proposal to extend the levy of Alternate Minimum Tax to all persons, other than companies, claiming profit linked deductions. Proposal to introduce General Anti Avoidance Rule to counter aggressive 3/18/12 avoidance scheme. CRISIL CERTIFIED 5858 tax

INDIRECT TAXES Service Tax

Proposal to tax all services except those in the negative list comprising of 17 heads(education, railways, waterways) Exemption from service tax is proposed for some sectors(healthcare, performing arts) Service tax law shorter be means of 3/18/12 CRISIL CERTIFIED 5959 reducing taxable items

Other proposals for Indirect Taxes (1/4)

Standard rate of excise duty to be raised from 10% to 12% Excise duty on large cars also proposed to be enhanced Agriculture:

Basic customs duty reduced for certain agricultural equipment and their parts

Full exemption from basic customs duty for import of equipment for expansion or 3/18/12 CRISIL CERTIFIED setting up of fertiliser projects6060 upto

Other proposals for Indirect Taxes (2/4)

Infrastructure:

Proposal for full exemption from basic customs duty for coal till 31st March, 2014 Full exemption from basic duty provided to certain fuels for power generation Full exemption from basic customs duty to coal mining project imports
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Mining:

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Other proposals for Indirect Taxes (3/4)

Railways:

Basic custom duty proposed to be reduced for equipments required for installation of train protection and warning system Full exemption from import duty on certain categories of specified equipment
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Roads:

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Aviation:

Other proposals for Indirect Taxes (4/4)

Manufacturing: relief proposed for the following sectors:

Steel Textiles branded readymade garments low-cost medical devices labour-intensive sectors
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ADDITIONAL RESOURCE MOBILISATION

Proposals to increase excise duty on demerit goods such as certain cigarettes,hand-rolled bidis, pan masala, gutkha, chewing tobacco, unmanufactured tobacco and zarda scented tobacco. Cess on crude petroleum oil produced in India revised to 4,500 per metric tonne.
CRISIL CERTIFIED 6464 Basic customs duty proposed to be

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RATIONALIZATION MEASURES

Excise duty rationalised for packaged cement, whether manufactured by mini-cement plants or others. Levy of excise duty of 1 per cent on branded precious metal jewellery to be extended to include unbranded jewellery. Operations simplified and measures taken to minimise impact on small artisans and goldsmiths.
CRISIL CERTIFIED 6565 Branded Silver jewellery exempted

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Pragmatic Budget

No significant benefit or burden

Sector Overall Impact +ve -ve Neutral +ve +ve +ve -ve +ve Neutral Neutral -ve +ve +ve Neutral Neutral Agriculture Automobile Aviation Banking Capital Goods Cement FMCG Infrastructure IT Metals Oil and gas Pharmaceutical Power Real Estate Telecom

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Thank you !
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