Presented by:

Vineet Jain
Shweta Gupta
Monika Dubey
WHAT IS A BUDGET?
 The dictionary meaning of budget is a systematic plan for the
expenditure of a usually fixed resource during a given period.
 A plan for a person or company's expenditures. Making a
budget involves looking at one's revenue or income and
matching that to expenses such that the person or company
pays for all necessary expenses. A budget is in balance if
revenues equal expenditures, in deficit if the person or
company must resort to borrowing to meet expenses, and in
surplus if money is left over to be used for savings or
expansion.
NEED FOR BUDGET
 The answer – B.U.D.G.E.T.
 It is a Beacon: Budget is the roadmap to our financial success and
independence. Budget tells us where are we heading financially.
 Checks Unnecessary spending: A budget shifts the power from money to
you. You become the master and manage the money rather than money
managing you.
 Helps manage Debt
 A budget warns us if we are living beyond our means. With easy availability
of finance – by way of credit card, personal loans, EMI-based purchases etc.
– we tend to overspend and end-up straining our finances, even before we
realise. Suitably aligning our spending pattern can free up a lot of cash,
which can be used to rationalise one’s debt and work towards becoming
debt-free in due course of time.
 Promotes Goal setting: A clear view of our financial position
assists in defining our possibilities. It helps to prioritize and
focus on important goals. The financial milestones get defined.
More importantly, it sets a direction for our saving and
investment pattern. It helps in proper asset allocation.
 Prepares for Emergencies: If we are in control of our
finances, we can deal with any crisis situation more effectively.
 Taste financial success: And last but not the least, a budget
helps us to stop worrying and start ‘enjoying’ our money.As we
keep achieving our desired goals as planned, there is a sense of
satisfaction, a sense of achievement.
TYPES OF BUDGET

National budget

Company budget

Personal budget
UNION BUDGET
 Union Budget, which is a yearly affair, is a comprehensive display of the
Government’s finances. It is the most significant economic and financial
event in India.
 The Union budget is preceded by an Economic Survey which outlines the
broad direction of the budget and the economic performance of the
country.
 The Budget is the most extensive account of the Government`s finances, in
which revenues from all sources and expenses of all activities undertaken
are aggregated. It comprises the revenue budget and the capital budget. It
also contains estimates for the next fiscal year called budgeted estimates.
 Finance Minister presents the annual Union Budget in the Parliament
usually on the last working day of February. The budget has to be passed
by the Lok Sabha before it can come into effect on April 01.
BUDGET TRIVIA
 The word Budget was derived from the Middle English
bowgette, which came from Middle French bougette,
which means a leather bag.
 The Budget process has its roots in the Bombay Plan of
1944. Bombay Plan was authored by John Mathai, GD
Birla & JRD Tata.
 On November 26, 1947 R.K.S Chetty had presented the
first budget of Independent India. But actually it was a
review of the economy and no new taxes were proposed
as the budget day for 1948-49 was just 95 days away.
WHAT IS REVENUE BUDGET?
 The revenue budget consists of revenue receipts of the
government (revenues from tax and other sources) and
the expenditure met from these revenues.
 Revenue receipts are divided into tax and non-tax
revenue.
 Revenue expenditure is the payment incurred for the
normal day-to-day running of government departments
and various services that it offers to its citizens. The
government also has other expenditure like interest on its
borrowings, subsidies, etc.
 WHAT IS CAPITAL BUDGET?
 It consists of capital receipts and payments.
 The main items of capital receipts are loans raised by Government
from public which are called Market Loans, borrowings by
Government from Reserve Bank and other parties through sale of
Treasury Bills, loans received from foreign Governments and
bodies and recoveries of loans granted by Central Government to
State and Union Territory Governments and other parties.
 Capital payments consist of capital expenditure on acquisition of
assets like land, buildings, machinery, equipment, as also
investments in shares, etc., and loans and advances granted by
Central Government to State and Union Territory Governments,
Government companies, Corporations and other parties.
THE BUDGET PROCESS

Estimates: expenditures and revenues

First estimate of deficit

Narrowing of deficit

The budget
KEY BUDGET DOCUMENTS
The Budget documents presented to Parliament comprise, besides the
Finance Minister’s Budget Speech, the following:
 A Annual Financial Statement (AFS)
 B. Demands for Grants (DG)
 C. Appropriation Bill
 D. Finance Bill
 E. Memorandum Explaining the Provisions in the Finance Bill, 2011
 F. Macro-economic framework for the relevant financial year

G. Fiscal Policy Strategy Statement for the financial year.
KEY BUDGET DOCUMENTS(CONT.)
 H. Medium Term Fiscal Policy Statement
 I. Expenditure Budget Volume-1
 J. Expenditure Budget Volume-2
 K. Receipts Budget
 L. Budget at a glance
 M. Highlights of Budget
 N. Status of Implementation of Announcements made in Finance
Minister’s Budget Speech of the previous financial year.
 O. Outcome Budget
 P. Revenue Reports
 Q. Economic Survey
H
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OVERVIEW OF THE ECONOMY
 Gross Domestic Product (GDP) estimated to have
grown at 8.6 per cent in 2010-11 in real terms.
Economy has shown remarkable resilience.
 Continued high food prices have been principal
concern this year.
 Exports have grown by 29.4 per cent, while imports
have recorded a growth of 17.6 per cent during April
to January 2010-11 over the corresponding period
last year.
 Indian economy expected to grow at 9 per cent with
an outside band of +/- 0.25 per cent in 2011-12.
 Average inflation expected lower next year and
current account deficit smaller.
SUSTAINING GROWTH
 Tax Reforms
 Direct Taxes Code (DTC) to be finalised for
enactment during 2011-12. DTC proposed to be
effective from April 1, 2012.
 Areas of divergence with States on proposed Goods
and Services Tax (GST) have been narrowed. As a
step towards roll out of GST, Constitution Amendment
 Bill proposed to be introduced in this session of
Parliament.
 Significant progress in establishing GST Network
(GSTN), which will serve as IT infrastructure for
introduction of GST.
TAXES
 TAXES
* Standard rate of excise duty held at 10 percent; no change in CENVAT rates
* Personal income tax exemption limit raised to Rs 180,000 from Rs 160,000
for individual tax payers
*For senior citizens, the qualifying age reduced to 60 years and exemption limit
raised to Rs 2.50 lakh.
*Citizens over 80 years to have exemption limit of Rs 5 lakh.
* To reduce surcharge on domestic companies to 5 percent from 7.5 percent.
* A new revised income tax return form 'Sugam' to be introduced for small tax
papers.
* To raise minimum alternate tax to 18.5 percent from 18 percent
* Direct tax proposals to cause 115 billion rupees in revenue loss
* Service tax rate kept at 10 percent
SECTOR SPENDING
* To allocate more than 1.64 trillion rupees to defence sector in 2011-12
* Corpus of rural infrastructure development fund raised to 180 billion rupees in
2011-12
* To provide 201.5 billion rupees capital infusion in state-run banks in 2011-12
* To allocate 520.5 billion rupees for the education sector. Rs.21,000 crore for
Sarva Shiksha Abhiyan.
* To raise health sector allocation to 267.6 billion rupees.
* Rs.500 crore more for national skill development fund.
* Rs.54 crore each for AMU (Aligarh Muslim University) centres at
Murshidabad and Mallapuram.
* Rs.58,000 crore for Bharat Nirman; increase of Rs.10,000 crore.
* Mahatma Gandhi National Rural Employment Guarantee Scheme wage rates
linked to consumer price index; will rise from existing Rs.100 per day.
* Increased outlay on social sector schemes.
* Infrastructure critical for development; 23 percent higher allocation in 2011-
12.
INVESTMENT ENVIRONMENT
Foreign Direct Investment
 Discussions underway to further liberalise the FDI policy.

Foreign Institutional Investors

 SEBI registered mutual funds permitted to accept

subscription from foreign investors who meet KYC

requirements for equity schemes.
 To enhance flow of funds to infrastructure sector, the FII

limit for investment in corporate bonds issued in

infrastructure sector being raised.
CONTD.
Financial Sector Legislative Initiatives
 To take the process of financial sector reforms further, various

legislations proposed in 2011-12.

 Amendments proposed to the Banking Regulation Act in the

context of additional banking licences to private sector players.

Micro Finance Institutions

 “India Microfinance Equity Fund” of 100 crore to be created

with SIDBI.
 Government considering putting in place appropriate

regulatory framework to protect the interest of small borrowers.

 Women’s SHG’s Development Fund to be created with a

corpus of 500 crore.

AGRICULTURE
 Removal of production and distribution bottlenecks for items like
fruits and vegetables, milk, meat, poultry and fish to be the focus of
attention this year.

 Bringing Green Revolution to Eastern Region

 Integrated Development of 60,000 pulses villages in rainfed areas
 Promotion of Oil Palm
 Allocation of 300 crore for implementation of vegetable initiative
to provide quality vegetable at competitive prices.
 Nutri-cereals National Mission for Protein Supplement
 Accelerated Fodder Development Programme
AGRICULTURE(CONTD.)
 National Mission for Sustainable Agriculture

 Credit flow for farmers raised from ` 3,75,000 crore to ` 4,75,000 crore in 2011-12.
 Interest subvention proposed to be enhanced from 2 per cent to 3 per cent for providing
short-term crop loans to farmers who repay their crop loan on time.

× 10,000 crore to be contributed to NABARD’s Short-term Rural Credit fund for 2011-12.
 Approval being given to set up 15 more Mega Food Parks during 2011-12.
 Augmentation of storage capacity through private entrepreneurs and warehousing
 corporations has been fast tracked.
 Capital investment in creation of modern storage capacity will be eligible for
 viability gap funding of the Finance Ministry.
 In view of recent episode of inflation, need for State Governments to review and
 enforce a reformed Agriculture Produce Marketing Act.
INFRASTRUCTURE
 Infrastructure allocation increased by 23% to Rs2.14tn
 FII limit for investment in corporate bonds (with residual maturity of over
5 years) issued by infra companies raised by US$20bn
 FIIs also permitted to invest in unlisted bonds of Infra SPVs with a
minimum lock-in period of 3 years
 Government undertakings such as Railway Finance Corporation, NHAI,
HUDCO, etc allowed to issue tax-free bonds of Rs300bn.
 The additional deduction of Rs20,000 for investment in long term
infrastructure bonds extended for one more year Positive for the sector
 To attract foreign funds for infra financing, Govt to create notified
infrastructure debt funds; interest payment on the borrowings of these
funds to be subjected to lower withholding tax of 5%
 Excise duty on Cement increased Negative for the sector
OIL & GAS
 No cut in customs duty on crude oil; Positive for
ONGC, Oil India, Cairn
 No reduction in excise duty on petrol/diesel;
Negative for OMCs, ONGC, Oil India and Gail
 Tax benefits not extended for NELP IX; Negative for
E&P players bidding for NELP IX
 Proposed a system of direct transfer of Kerosene &
LPG; Better utilization of subsidies
 MAT levied on SEZ units
 BANKING
 FY12 fiscal deficit targeted at 4.6% of GDP with net market borrowing of
Rs3.43tn;Positive for the banking space, limited impact on bond yields.
Further, the front loading of borrowing programme should ensure smooth
credit growth in H2 FY12.
 FII investment in equity schemes of registered mutual fund subject to KYC
requirement Positive for mutual fund industry.
 Recapitalizations to the tune of Rs60bn by GoI in PSU banks enabling them
maintain minimum Tier I CAR at 8%.Positive for small PSU banks.
 Creation of notified infrastructure debt fund Positive for infrastructure
financing companies like IDFC
 New banking licenses for few private players and NBFC The issue continues
to lack clarity. RBI, however, shall issue a note by March 2011.
 Services provided by life insurance companies in the area of investment to be
brought into tax net on the same lines as ULIPs.Negative for life insurance
companies
BLACK MONEY
 Five fold strategy to be put into operation to deal with the problem
of generation and circulation of black money.
 Various Tax Information Exchange Agreements (TIEA) and Double
Taxation Avoidance Agreements (DTAA) concluded. Foreign Tax
Division of CBDT has been strengthened to effectively handle
increase in tax information exchange and transfer pricing issues.
 Enforcement Directorate strengthened three fold to handle increased
number of cases registered under amended Money Laundering
Legislation.
 Finance Ministry has commissioned study on unaccounted income
and wealth held within and outside the country.
 Comprehensive national policy to be announced in near future to
strengthen controls over prevention of trafficking on narcotic drugs.
MORE…
*Govt to move towards direct transfer of cash subsidy for kerosene, LPG
and fertilisers.
*Financial Sector Legislative Reforms Commission, to be headed by former
Supreme Court judge B Srikrishna, to complete its work in 24 months; to
overhaul financial regulations.
* Five-fold strategy against black money; 13 new double taxation avoidance
agreements; foreign tax division of CTBT strengthened; strength of
Enforcement Directorate increased three-fold.
* Bill to be introduced to review Indian Stamp Act.
* New coins carrying new rupee symbol to be issued.
* Anganwadi workers salary raised from Rs.1,500 to Rs.3,000.
* Mortgage risk guarantee fund to be created for economically weaker
sections.
* Housing loan limit for priority sector lending raised to Rs.25 lakh.
SWOT ANALYSIS OF UNION BUDGET
Strengths
 Investment linked deduction for businesses that develop
affordable housing has been proposed. This would help
generate higher investment in affordable housing projects.

 The increase in the income tax exemption limit for general

category tax payers to Rs 1.8 lakh is expected to reduce the
tax liability by Rs.2000 and result in higher disposable
income for the salaried class. This is expected to have a
marginally positive impact on the industry.

 Increase in interest rates subvention for agriculture loans to

3% will increase availability of funds at cheaper rates.
CONT.
Weaknesses
 Duty on gold reimposed; customs duty hike on gold

and silver. Gold prices are likely to go up.

 No proper measures to tackle inflation.

Threats
 Inflation
 Due to hike in custom and excise duties, consumer

goods price will go up.

CONT.

Opportunities
 Investment in mutual funds by foreign investors

will attract new investors and provide a boost to

the economy.
CONCLUSION
 The Union Budget 2011-12 can be described as a mildly positive one at best,
given the constraints on the fiscal front. The focus was, as expected, largely
on containing inflation, fiscal consolidation and inclusive growth. Populist
measures like raising personal income tax slabs and interest subsidy to
farmers were announced, keeping in mind the upcoming state elections.
Agricultural and infrastructure bottlenecks were also addressed.
 The stock market, which was extremely pessimistic in the run up to the
budget, reacted positively as fears of excise and service duty hikes and a
bigger government borrowing figure were allayed. Allowing foreign
investors to directly invest in equity mutual fund schemes is a big positive
from the stock market perspective. The MAT impact on cash flow and lack
of action in improving the slowing FDI were let downs in this budget. With
subsidies and expenditure appearing understated, meeting the fiscal deficit
target of 4.6% for FY12 will be a major challenge.