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AAGANAN

BUDGET ANALYSIS 2010


Reva Institute of Technology & Management

Adhvith Dhuddu
Saturday, 13th March, 2010
Bangalore, India

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QUESTION 1
WINNER GETS: THREE BILLION NEW CAPITALISTS

WHAT IS THE
FRBM ACT?
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THE UNION BUDGET
“A budget is judged – wrongly in my view – on the
day it is presented. It should be marked only after
the financial year is over.”

“We still make unfunded budget promises; we still


borrow too much; and many ministries cannot
spend the money given to them, yet ask for
more!”
- P. Chidambaram, Former Finance Minister & current Home Minister.

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THE BUDGET: WHAT IS A BUDGET?
NO EXACT OR CORRECT DEFINITION.
Perceived and analyzed differently by various stakeholders
1. For many, personal tax policy is the most important factor.
2. How fiscally prudent and well balanced the budget is matters
to another set of budget-watchers.
3. How well agriculture and social spending schemes are handled
are important for the rural masses.
4. How well infrastructure, growth and inflation is tackled is
important for the urban masses.
5. Industry watchers are more inclined to keep their eyes and ears
open for policy changes in their sector.

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THE BUDGET: WHAT IS A BUDGET?
A SIMPLE & UNCLUTTERED DEFINITION OF THE BUDGET
Statement of accounts of the Govt. of India (MACRO VIEW)
GOVT. OF INDIA: REVENUES
1. Taxes and Duties (ALL TYPES OF TAXES)
2. Income from PSU’s (Dividends and profits)
3. Interest receipts
GOVT. OF INDIA: EXPENDITURE (Planned + Non-Planned)
1. Social Sector spending
2. Defense spending
3. Urban and Rural development in general
4. ALL SUBSIDIES: Agriculture, Fuel, etc.

Results in a DEFECIT or SURPLUS.


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THE BUDGET: HOW IS IT PREPARED?
Inputs/Proposals from The Ministry of
CII, FICCI, ASSOCHAM, Economic Finance (Dept. of
NASSCOM and other Survey Revenue, Taxes,
industry bodies Expenditure, etc)
Inputs from important
ministries: Agriculture,
telecom, defense, road
THE FINAL
transportation, home, etc. BUDGET

Trade unions, India’s central


Finance Sec, Chief economists, bank: Reserve
Economic Advisor, experts, etc.
Planning commission Bank of India
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BUDGET & THE INDIAN YOUTH
THE FIVE E’s THAT AFFECT THE INDIAN YOUTH
EMPLOYMENT
ENERGY
EDUCATION
ENTREPRENERUSHIP
ENVIRONMENT
Were they addressed in the Budget? Let’s see as we
run through the presentation.
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THE BUDGET 2010: MACRO VIEW
- Overall a good budget, well balanced.
- Something in there for everyone.
- Social sector spending continues.
- Focus on urban and rural infrastructure development.
- NO fillip to ENTREPRENUERSHIP.
- Green energy and ENVIRONMENT issues addressed well.
- EMPLOYMENT issues ignored. Ties in with GROWTH.
- Fuel price hike, price rise, etc…
- Tax slab changes for personal income.
- CONTROLLING FISCAL DEFECIT, some adherence to Fiscal Responsibility and
Budget Management (FRBM) Bill
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FUEL PRICE HIKE: GOOD MOVE!
REACTIONS ABOUT THE FUEL PRICE HIKE ARE MIXED.
I ENDORSE IT AND I THINK IT’S A GREAT MORE!
WHY THIS HAD TO BE DONE
1. Current structure incentivizes wastage and inefficiency.
2. No incentive or motivation for innovation in the energy sector.
3. A huge drain on India’s finances.
4. Price of fuel is NOT going down in the future, it’s only going up.
5. The Kirit Parekh report - Free float price: MUST BE DONE ASAP!

FEW NEGATIVES
1. Fuel prices up marginally in the short term.
2. It’ll be hard to accept the truth but more price increases are
needed and is inevitable.
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BUDGET & INFRASTRUCTURE
IMPORTANT ISSUES.
1. Long term financing, long gestation periods for infra projects
2. Land and environment clearance
3. Implementation and Execution: VERY IMPORTANT
4. The PPP Model
5. Infra Giants are also going through a learning process

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BUDGET & THE CAPITAL MARKETS
The Budget was pretty well received by the stock markets.
POSITIVES
1. Capital Gains tax remained unchanged
2. No change in STT or Securities Transaction Tax
3. Many PSU disinvestments lined up, and the outlook appears
sanguine. (This in turn bridges the fiscal deficit)
4. Higher disposable income (due to changes in tax slabs). Some of
these excess funds could find their way into the capital markets.

NEGATIVES
1. Changes in transaction costs may be introduced
as new Direct Tax Code gets implemented in April 2011.
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BUDGET & BANKING SECTOR
The Budget was extremely well received
by the banking and finance sector.
MANY POSITIVES!!
1. RBI considering giving banking license's to private players and
to Non-Banking Finance Companies (NBFC’s)
2. Extremely good move….more players in banking, more
competition, customer will benefit with more choices.
1993: ICICI Bank, HDFC Bank, UTI Bank (now AXIS Bank), IndusInd
Bank, etc.
2004: YES Bank, Kotak Mahindra Finance
2010: Potential entrants – Reliance Capital, Aditya Birla Financial
Sercives, IndiaBulls Financial Services, Tata Capital, IDFC,
L&T Finance, Bajaj Auto Finance, etc.
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THE US ECONOMY
THE US ECONOMY
THANK YOU!
ADHVITH DHUDDU
Website: www.AdhvithDhuddu.com
www.AliveNow.in

E-mail: adhvithd@gmail.com or adhvith@alivenow.in


Phone: +91-9740247446

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