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Tag Archives: Union Budget 2011

Salient Features of Indian Union Budget 2011 – 2012

  1. IncomeTax exemption limit raised to Rs. 1.80 lakh from Rs. 1.60 lakh .
  2. Exemption for senior citizens raised to Rs. 2.5 lakh.
  3. Tax under women slab unchanged.
  4. Tax exemption raised to Rs. 5 lakh for senior citizens of 80 years.
  5. To increase service tax on air travel.
  6. Excise and customs duty proposals to result in the net gain of Rs. 7,300 crore.
  7. Export duty rates on iron ore unified and kept at 20% ad valorem.
  8. Basic customs duty on agricultural machinery reduced to 4.5% from 5%.
  9. Basic customs duty on raw silk reduced from 30 to 5 per cent.
  10. Excise and customs duty proposals to result in the net gain of Rs. 7,300 crore.
  11. Nominal one per cent central excise duty on 130 items entering the tax net. Basic food and fuel and precious stones, gold and silver jewellery will be exempted.
  12. Peak rate of customs duty maintained at 10% in view of the global economic situation.
  13. Customs duty exemptions for hybrid auto parts.
  14. Nominal one per cent central excise duty on 130 items entering the tax net. Basic food and fuel and precious stones, gold and silver jewellery will be exempted.
  15. Standard rate of central exercise duty maintained at 10%.
  16. Central government debt in proportion to GDP will be 44.2% in 2011-12.
  17. 20% export duty on all grades of iron ore.
  18. Basic customs duty reduced on certain textile products
  19. No change in service tax rate of 10%.
  20. No change in central excise duty.
  21. Plan to levy 1% on 130 consumer items.
  22. Revenue deficit fixed at 2.3 per cent in revised estimates of 2010—11 and 1.8 per cent in 2011—12.
  23. Total plan expenditure will go up 100 per cent in nominal terms in the next year.
  24. 15% tax on dividend for Indian cos from foreign unit.
  25. Direct Tax proposals result in expenditure of Rs. 11,500 cr.
  26. To reduce surcharge on domestic companies to 5% from 7.5%
  27. MAT rate hiked to 18.5% from 18%.
  28. MAT on developers in SEZs to be levied.
  29. Fiscal deficit revised to 5.1% from 5.5% for FY’11.
  30. Total expenditure raised by 13.4% at Rs. 12.57 lakh cr over budget estimates.
  31. Gross tax receipts estimated at 9.32 lakh cr for FY 2011-12.
  32. Bill to amend India Stamp Act soon.
  33. Budget allocation of Rs. 100 cr for Ladakh and Rs. 150 cr for Jammu for implementation of projects identified by taskforce.
  34. Old age pension to persons of over the age of 80 raised from Rs. 200 to Rs. 500
  35. Health allocation up by 20% to R 27,600 cr.
  36. Rs. 9- lakh ex-gratia for defence personnel for 100% disability fighting Left-wing extremism.
  37. To set up 15 more mega food parks.
  38. Remuneration of anganwadi workers raised from Rs. 1,500 to Rs. 3,000 per month, Helpers to get Rs. 1,500 from Rs. 750.
  39. Tax free bonds of Rs. 30,000 cr to be issued for infrastructure development. This will cover Warehousing Corporation, NHAI, IRFC and Hudco.
  40. Allocation under Rashtriya Krishi Vikas Yojana to be raised from Rs. 6,755 crore in the current year to Rs. 7,860 crore.
  41. Rs. 50 cr grant to Aligarh Muslim University centres in Murshidabad in West Bengal and Malappuram in Kerala.
  42. Rs. 200 cr for environmental remediation programme.
  43. Age for pension eligibility reduced from 65 years to 60 years under Indira Gandhi Yojana scheme.
  44. To move insurance, pension and banking bills in Parliament.
  45. Rs. 500-cr for National Development Fund.
  46. Rs. 400-cr as one-time grant for IIT-Kharagpur.
  47. Move to set up State Innovation Councils underway.
  48. Allocation to education sector raised to Rs. 52,000 cr.
  49. Scholarship scheme for SC/ST students in classes iX, X.
  50. Increase in allocation to higher education.
  51. Plan 17% increase in social sector spending.
  52. To introduce Food Security Bill.
  53. Tax free bonds of Rs. 30,000 cr to be issued for infrastructure development. This will cover Warehousing Corporation, NHAI, IRFC and Hudco.
  54. Fertiliser industry to be included under infrastructure category.
  55. New companies bill to be introduced.
  56. GoM to be set up to deal with corruption.
  57. Five-fold strategy to deal with black money.
  58. Mega cluster for leather products to be introduced.
  59. Existing interest subvention scheme on short term farm loans at 7 % interest to continue.
  60. Self-assessment in customs to be introduced.
  61. Credit flows to farmers raised from Rs. 3.75 lakh crore to Rs. 4.75 lakh crore.
  62. Constitution Amendment Bill for introduction of GST in this session.
  63. Goods and Services Tax Bill this year.
  64. Direct Taxes Code Bill likely to be passed by Parliament next financial year after getting Standing Committee report.
  65. Public Debt Management Agency Bill in the next fiscal.
  66. Indian mutual funds to get direct access to foreign markets; FIIs to be allowed to invest in MFs.
  67. To liberalise FDI policy further.
  68. To extend infra tax breaks to fertiliser sector.
  69. To set up microfinance equity fund.
  70. Government to move towards direct cash transfer of cash subsidy as regards kerosene, LPG and fertilisers from March 2012 for BPL in view of large diversion.
  71. 3% interest subvention to farmers who repay in time.
  72. Nabard capital base to be increased by infusing Rs. 10,000 cr.
  73. Rural housing fund increased to Rs. 3,000 cr.
  74. Banks asked to step up lending to agriculture.
  75. Allocation under Rashtriya Krishi Vikas Yojana to be raised from Rs. 6,755 crore in the current year to Rs. 7,860 crore.
  76. Budget proposes to raise housing loan limit from Rs. 20 lakh to Rs. 25 lakh for priority sector lending.
  77. Allocation for farm development hiked to Rs. 7,860 cr.
  78. Rs. 300 cr proposed to promote production of cereals.
  79. Indian micro-finance equity with SIDBI to be formed at Rs. 100 crore.
  80. Rs. 6,000 cr to be given to public sector banks to maintain capital-to-risk assets ratio norms.
  81. RBI to bring in new guidelines for banking licences.
  82. Aiming Fiscal deficit of 3% by fiscal 2014.
  83. Central electronic registry to reduce fraud cases.
  84. FII investment limit for infra corporate bonds hiked to $40 billion.
  85. Discussions on to further liberalise FDI policy.
  86. Preparation of GST rollout in final stages.
  87. Microfinance equity fund of Rs. 100 cr proposed.
  88. Govt committed to hold 51% in PSUs.
  89. Rs. 3,000 cr to Nabard for handloom societies.
  90. Women self-help group development fund to be set up.
  91. Direct transfer of subsidy for kerosene.
  92. Goods and Services Tax Bill to be introduced in Parliament this year.
  93. Direct Tax Code Bill likely to be passed by Parliament next financial year after getting Standing Committee report.
  94. Disinvestment target at Rs. 40,000 cr.
  95. Direct Tax Code from April 2012.
  96. SEBI-registered MFs to be allowed direct access to foreign funds.
  97. Expect RBI to moderate inflation.
  98. Public Debt Management Agency Bill to be introduced next financial year.
  99. Current account deficit and average inflation in 2011-12 likely to be less than current year.
  100. FDI policy review done in Sept 2010.
  101. Economic growth in 2011-12 likely to be 9 per cent.
  102. Admits large-scale diversion of kerosene.
  103. Introduction of DTC will be a watershed moment.
  104. Debt managment bill to be introduced.
  105. Constitutional Amendment Bill on GST to be introduced.
  106. Expect agri sector to grow at 5.4% in 2011.
  107. Growth in 2010-11 broad-based.
  108. Economy resilient to shocks.
  109. RBI measures will further moderate inflation.
  110. GDP estimated growth at 8.6% in real terms.
  111. New dynamism in rural economy.
  112. Core inflation in check.
  113. Current account deficit is at 2009-10 levels, and is a matter of concern.
  114. Huge difference in wholesale and retail prices not acceptable.
  115. Total food inflation down from 20.2 per cent last year to 9.3 per cent in Jan
  116. Revival in private investment should be sustainable.
  117. Service growing in double digits.
  118. Need to reconcile legitimate environmental concerns with developmental needs.
  119. Food Inflation has declined by half, but still a matter of concern.

Agribusiness

 

 

 

 

Always Yours — As Usual–Saurabh Singh

Union Budget 2011: The Wish List

Budget-2011-12Pranab Mukherjee ready to Present BudgetGovernments come and go. But their visions outlined in the annual fiscal planning (the Union Budget) have a long lasting impact on the economy. The Budget of 1992 was one such document. It was a threshold that set India on a superior economic growth path. The first Union Budget of the current decade also comes to meet several challenges. It should not just counter risks within and outside the economy. But it needs to also fortify India’s position amongst global heavyweights.

Consequently in the Budget 2011-12, emphasis should be on maintaining and even accelerating the pace of growth and employment. The ensuing budget is expected to take note of the current scenario and announce policies and reforms to support and form a suitable base for the economy to continue to grow at 8%+ levels. In general one can feel that the budget would be skewed towards investment rather than consumption. Agriculture & related activities would continue to be the focus area as inflation and food Agricultural-Sectorsecurity is high on the government agenda. Government would allocate higher amounts towards infrastructure (logistics, rural infrastructure and water management), education and technology to give a multiplier effect to the economy to sustain high GDP growth in the coming years.

The Union Budget 2011-12 might be a key from a policy stand point and may provide incremental direction to markets. There is an inherent value in India economy given the growth story and favorable demographics, but catalysts are required at macro level to deleverage the underlying value.

India was among the few countries in the world to implement a broad-based counter-cyclic policy package to respond to the negative fallout of the global slowdown. These policy actions has helped Indian Economy to clock a growth of 8.6% in FY11 (advance estimates). While rising strongly in the world economic order, India faces the most critical challenge of crossing the ‘double digit growth barrier’. Current macroeconomic challenges are manifold

1. Controlling inflation, including that for essential commodities,

2. Maintaining fiscal deficit amongst rising oil prices,

3. Absence of one-time revenues such as 3G, WiMax license fees,

4. Allocation & channelising investment in Infrastructure,

5. Domestic financial sector liquidity management with large government borrowing can potentially be a dampener for private investments,

6. Reducing current account deficit from current elevated levels,

7. Over and above, handling corruption issues.

The upcoming elections in some of the major states may prompt the government to continue to take some populist measures

Normal Expectations, on few Specific Fronts, from Upcoming Budget  are Deliberated Here Under

Higher short term capital gains tax for FIIs:

The volatility in Indian stock markets over the past six to nine months can to a large extent be attributed to fickle mindedness of the FIIs. Loose monetary policies in developed markets have not helped either. Hence, a stricter policy to curb short term capital gains earned with the hot money is in order. While the DTC has proposed to tax all FIIs, the current budget should lay a foundation for the same by hiking the taxes on short term gains.

Incentivise low income housing: Housing Sector

The construction sector is unlikely to have a very peaceful fiscal ahead. Low bank funding and high interest rates could stall projects and build up inventory in the sector. Allowing higher fiscal incentives on low income housing loans could address the problem of high cost for the houses as well as offer a solution to builders to increase sales.

Incentivise long term investment in equities:

Institutional investors such as insurance companies, PFs and mutual funds should be offered fiscal incentives on their schemes wherein investments are locked in domestic equities for 5 years and above. This could help draw more retail savings into equities for a longer term.

Money INR

Pool in private sector funds for infrastructure investments:

Floating SPVs that can pool in private funds for meeting the 12th and 13th Five year plan targets may be an ideal way to meet the funding gap. Especially given that the contribution from the private sector is seen going up from 30% in the Eleventh 5-Year Plan to 50% in the Twelfth Plan.

Decontrol of Urea Prices:

Where as Government seems to be planning to raise Urea Prices by 2 to 5 per cent in 2011 – 2012. De-canalization of Urea imports is also expected once it comes under Neutrient Based Scheme Regime. Perhaps the fertilizer industry expects Rs 50000 Crore in cash for Financial Year 2012 by way of subsidies. It would not be a great surprise if import and export restriction on Urea trade are lifted.

Deepen India’s corporate debt market:

Developing a vibrant corporate debt market is paramount to serving the long term funding needs of corporates. The Budget should initiate policies in this direction so that retail participation in corporate debt issuances becomes easier and more transparent . The debt papers also need to be rated to suit investors’ risk profiles.

Rejig subsidies and off balance sheet items:

An increase of 245%! This is exactly how much the cost of major subsidies has gone up in India in the last five years. And mind you, this does not even include oil. In CAGR terms, it amounts to a huge 28%. When one considers India’s nominal GDP growth rate of 14%-15%,Pair of the Budget Scissors it quickly becomes clear that such a growth in subsidy is not sustainable at all. Fortunately, the Government seems to have woken up to this fact. Hence, rather than trying to increase subsidies further, it is now looking to reduce pilferage in the system. As a big step towards the same, it has set up a task force to create a way to directly transfer cash to the ultimate beneficiaries of various subsidy schemes. We believe in addition to reducing indirect subsidies, investing more in warehouses and logistics could help keep the food prices in India under control to an extent.

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Always Yours — As Usual — Saurabh Singh

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