19 February 2011
Key Features of Budget 2010-2011
CHALLENGES
• To quickly revert to the high GDP growth path of 9 per cent and then find the means to cross the ‘double digit growth barrier’.
• To harness economic growth to consolidate the recent gains in making development more inclusive.
• To address the weaknesses in government systems, structures and institutions at different levels of governance.
OVERVIEW OF THE ECONOMY
• India among the first few countries in the world to implement a broad-based counter-cyclic policy package to respond to the negative fallout of the global slowdown.
• The Advance Estimates for Gross Domestic Product (GDP) growth for 2009-10 pegged at 7.2 per cent. The final figure expected to be higher when the third and fourth quarter GDP estimates for 2009-10 become available.
• The growth rate in manufacturing sector in December 2009 was 18.5 per cent – the highest in the past two decades.
• A major concern during the second half of 2009-10 has been the emergence of double digit food inflation. Government has set in motion steps, in consultation with the State Chief Ministers, which should bring down the inflation in the next few months and ensure that there is better management of food security in the country.
CONSOLIDATING GROWTH
Fiscal Consolidation
• With recovery taking root, there is a need to review public spending, mobilize resources and gear them towards building the productivity of the economy.
• Fiscal policy shaped with reference to the recommendations of the Thirteenth Finance Commission, which has recommended a calibrated exit strategy from the expansionary fiscal stance of last two years.
• It would be for the first time that the Government would target an explicit reduction in its domestic public debt-GDP ratio.
Tax reforms
• On the Direct Tax Code (DTC) the wide-ranging discussions with stakeholders have been concluded – Government will be in a position to implement the DTC from April 1, 2011.
• Centre actively engaged with the Empowered Committee of State Finance Ministers to finalize the structure of Goods and Services Tax (GST) as well as the modalities of its expeditious implementation. Endeavour to introduce GST by April, 2011
Fertilizers subsidy
• A Nutrient Based Subsidy policy for the fertilizer sector has been approved by the Government and will become effective from April 1, 2010.
• This will lead to an increase in agricultural productivity and better returns for the farmers and overtime reduce the volatility in demand for fertilizer subsidy and contain the subsidy bill.
Petroleum and Diesel pricing policy
• Expert Group to advise the Government on a viable and sustainable system of pricing of petroleum products has submitted its recommendations.
• Decision on these recommendations will be taken in due course.
Improving Investment Environment
Foreign Direct Investment
• Number of steps taken to simplify the FDI regime.
• Methodology for calculation of indirect foreign investment in Indian companies has been clearly defined.
• Complete liberalization of pricing and payment of technology transfer fee and trademark, brand name and royalty payments.
Banking Licences
• RBI is considering giving some additional banking licenses to private sector players. Non Banking Financial Companies could also be considered, if they meet the RBI’s eligibility criteria.
Public Sector Bank Capitalization
• Rs.16,500 crore provided to ensure that the Public Sector Banks are able to attain a minimum 8 per cent Tier-I capital by March 31, 2011. Recapitalization of Regional Rural Banks (RRB)
• Government to provide further capital to strengthen the RRBs so that they have adequate capital base to support increased lending to the rural economy.
Corporate Governance
• Government has introduced the Companies Bill, 2009 in the Parliament to replace the existing Companies Act, 1956, which will address issues related to regulation in corporate sector in the context of the changing business environment.
Exports
• Extension of existing interest subvention of 2 per cent for one more year for exports covering handicrafts, carpets, handlooms and small and medium enterprises.
Agriculture Growth
• Government will follow a four-pronged strategy, covering
• Rs. 400 crore provided to extend the green revolution to the eastern region of the country comprising Bihar, Chhattisgarh, Jharkhand, Eastern UP, West Bengal and Orissa.
• Rs. 300 crore provided to organize 60,000 “pulses and oil seed villages” in rain-fed areas during 2010-11 and provide an integrated intervention for water harvesting, watershed management and soil health, to enhance the productivity of the dry land farming areas.
• Rs. 200 crore provided for sustaining the gains already made in the green revolution areas through conservation farming, which involves concurrent attention to soil health, water conservation and preservation of biodiversity.
• Government to address the issue of opening up of retail trade. It will help in bringing down the considerable difference between farm gate, wholesale and retail prices.
• Deficit in the storage capacity met through an ongoing scheme for private sector participation – FCI to hire godowns from private parties for a guaranteed period of 7 years.
Infrastructure
• Rs 1,73,552 crore provided for infrastructure development which accounts for over 46 per cent of the total plan allocation.
• Allocation for road transport increased by over 13 per cent from Rs. 17,520 crore to Rs 19,894 crore.
• Rs 16,752 crore provided for Railways, which is about Rs.950 crore more than last year.
India Infrastructure Finance Company Limited (IIFCL)
• IIFCL’s disbursements are expected to touch Rs 9,000 crore by end March 2010 and reach around Rs 20,000 crore by March 2011.
• IIFCL has refinanced bank lending to infrastructure projects of Rs. 3,000 crore during the current year and is expected to more than double that amount in 2010-11.
• The take-out financing scheme announced in the last Budget is expected to initially provide finance for about Rs. 25,000 crore in the next three years.
Energy
• Plan allocation for power sector excluding RGGVY doubled from Rs.2230 crore in 2009-10 to Rs.5,130 crore in 2010-11.
• Government proposes to introduce a competitive bidding process for allocating coal blocks for captive mining to ensure greater transparency and increased participation in production from these blocks.
• A “Coal Regulatory Authority” to create a level playing field in the coal sector proposed to be set up.
• Plan outlay for the Ministry of New and Renewable Energy increased by 61 per cent from Rs.620 crore in 2009-10 to Rs.1,000 crore in 2010-11.
• Solar, small hydro and micro power projects at a cost of about Rs.500 crore to be set up in Ladakh region of Jammu and Kashmir.
INCLUSIVE DEVELOPMENT
• The spending on social sector has been gradually increased to Rs.1,37,674 crore in 2010-11, which is 37% of the total plan outlay in 2010-11.
• Another 25 per cent of the plan allocations are devoted to the development of rural infrastructure.
Education
• Plan allocation for school education increased by 16 per cent from Rs.26,800 crore in 2009-10 to Rs.31,036 crore in 2010-11.
• In addition, States will have access to Rs.3,675 crore for elementary education under the Thirteenth Finance Commission grants for 2010-11.
Health
• An Annual Health Survey to prepare the District Health Profile of all Districts shall be conducted in 2010-11.
• Plan allocation to Ministry of Health & Family Welfare increased from Rs 19,534 crore in 2009-10 to Rs 22,300 crore for 2010-11.
BUDGET ESTIMATES 2010-11
• The Gross Tax Receipts are estimated at Rs. 7,46,651 crore
• The Non Tax Revenue Receipts are estimated at Rs. 1,48,118 crore.
• The net tax revenue to the Centre as well as the expenditure provisions in 2010-11 have been estimated with reference to the recommendations of the Thirteenth Finance Commission.
• The total expenditure proposed in the Budget Estimates is Rs. 11,08,749 crore, which is an increase of 8.6 per cent over last year.
• The Plan and Non Plan expenditures in BE 2010-11 are estimated at Rs. 3,73,092 crore and Rs. 7,35,657 crore respectively. While there is 15 per cent increase in Plan expenditure, the increase in Non Plan expenditure is only 6 per cent over the BE of previous year.
• Fiscal deficit for BE 2010-11 at 5.5 per cent of GDP, which works out to Rs.3,81,408 crore.
• Taking into account the various other financing items for fiscal deficit, the actual net market borrowing of the Government in 2010-11 would be of the order of Rs.3,45,010 crore. This would leave enough space to meet the credit needs of the private sector.
• The rolling targets for fiscal deficit are pegged at 4.8 per cent and 4.1 per cent for 2011-12 and 2012-13, respectively.
• Against a fiscal deficit of 7.8 per cent in 2008-09, inclusive of oil and fertilizer bonds, the comparable fiscal deficit is 6.9 per cent as per the Revised Estimates for 2009-10.
• Conscious effort made to avoid issuing bonds to oil and fertilizer companies. Government would like to continue with this practice of extending Government subsidy in cash, thereby bringing all subsidy related liabilities into Government’s fiscal accounting.
Service Tax
• Rate of tax on services retained at 10 per cent to pave the way forward for GST.
• Certain services, hitherto untaxed, to be brought within the purview of the service tax levy. These to be notified separately.
• Process of refund of accumulated credit to exporters of services, especially in the area of Information Technology and Business Process Outsourcing, made easy by making necessary changes in the definition of export of services and procedures.
• Accredited news agencies which provide news feed online that meet certain criteria, exempted from service tax.
• Proposals relating to service tax are estimated to result in a net revenue gain of Rs 3,000 crore for the year.
• Proposals on direct taxes estimated to result in a revenue loss of Rs. 26,000 crore for the year. Proposals relating to Indirect Taxes estimated to result in a net revenue gain of Rs.46,500 crore for the year. Taking into account the concessions being given in the tax proposals and measures taken to mobilize additional resources, the net revenue gain is estimated to be Rs. 20,500 crore for the year.
And many more points........
• To quickly revert to the high GDP growth path of 9 per cent and then find the means to cross the ‘double digit growth barrier’.
• To harness economic growth to consolidate the recent gains in making development more inclusive.
• To address the weaknesses in government systems, structures and institutions at different levels of governance.
• India among the first few countries in the world to implement a broad-based counter-cyclic policy package to respond to the negative fallout of the global slowdown.
• The Advance Estimates for Gross Domestic Product (GDP) growth for 2009-10 pegged at 7.2 per cent. The final figure expected to be higher when the third and fourth quarter GDP estimates for 2009-10 become available.
• The growth rate in manufacturing sector in December 2009 was 18.5 per cent – the highest in the past two decades.
• A major concern during the second half of 2009-10 has been the emergence of double digit food inflation. Government has set in motion steps, in consultation with the State Chief Ministers, which should bring down the inflation in the next few months and ensure that there is better management of food security in the country.
CONSOLIDATING GROWTH
Fiscal Consolidation
• With recovery taking root, there is a need to review public spending, mobilize resources and gear them towards building the productivity of the economy.
• Fiscal policy shaped with reference to the recommendations of the Thirteenth Finance Commission, which has recommended a calibrated exit strategy from the expansionary fiscal stance of last two years.
• It would be for the first time that the Government would target an explicit reduction in its domestic public debt-GDP ratio.
Tax reforms
• On the Direct Tax Code (DTC) the wide-ranging discussions with stakeholders have been concluded – Government will be in a position to implement the DTC from April 1, 2011.
• Centre actively engaged with the Empowered Committee of State Finance Ministers to finalize the structure of Goods and Services Tax (GST) as well as the modalities of its expeditious implementation. Endeavour to introduce GST by April, 2011
Fertilizers subsidy
• A Nutrient Based Subsidy policy for the fertilizer sector has been approved by the Government and will become effective from April 1, 2010.
• This will lead to an increase in agricultural productivity and better returns for the farmers and overtime reduce the volatility in demand for fertilizer subsidy and contain the subsidy bill.
Petroleum and Diesel pricing policy
• Expert Group to advise the Government on a viable and sustainable system of pricing of petroleum products has submitted its recommendations.
• Decision on these recommendations will be taken in due course.
Improving Investment Environment
Foreign Direct Investment
• Number of steps taken to simplify the FDI regime.
• Methodology for calculation of indirect foreign investment in Indian companies has been clearly defined.
• Complete liberalization of pricing and payment of technology transfer fee and trademark, brand name and royalty payments.
Banking Licences
• RBI is considering giving some additional banking licenses to private sector players. Non Banking Financial Companies could also be considered, if they meet the RBI’s eligibility criteria.
Public Sector Bank Capitalization
• Rs.16,500 crore provided to ensure that the Public Sector Banks are able to attain a minimum 8 per cent Tier-I capital by March 31, 2011. Recapitalization of Regional Rural Banks (RRB)
• Government to provide further capital to strengthen the RRBs so that they have adequate capital base to support increased lending to the rural economy.
Corporate Governance
• Government has introduced the Companies Bill, 2009 in the Parliament to replace the existing Companies Act, 1956, which will address issues related to regulation in corporate sector in the context of the changing business environment.
Exports
• Extension of existing interest subvention of 2 per cent for one more year for exports covering handicrafts, carpets, handlooms and small and medium enterprises.
Agriculture Growth
• Government will follow a four-pronged strategy, covering
• Rs. 400 crore provided to extend the green revolution to the eastern region of the country comprising Bihar, Chhattisgarh, Jharkhand, Eastern UP, West Bengal and Orissa.
• Rs. 300 crore provided to organize 60,000 “pulses and oil seed villages” in rain-fed areas during 2010-11 and provide an integrated intervention for water harvesting, watershed management and soil health, to enhance the productivity of the dry land farming areas.
• Rs. 200 crore provided for sustaining the gains already made in the green revolution areas through conservation farming, which involves concurrent attention to soil health, water conservation and preservation of biodiversity.
• Government to address the issue of opening up of retail trade. It will help in bringing down the considerable difference between farm gate, wholesale and retail prices.
• Deficit in the storage capacity met through an ongoing scheme for private sector participation – FCI to hire godowns from private parties for a guaranteed period of 7 years.
Infrastructure
• Rs 1,73,552 crore provided for infrastructure development which accounts for over 46 per cent of the total plan allocation.
• Allocation for road transport increased by over 13 per cent from Rs. 17,520 crore to Rs 19,894 crore.
• Rs 16,752 crore provided for Railways, which is about Rs.950 crore more than last year.
India Infrastructure Finance Company Limited (IIFCL)
• IIFCL’s disbursements are expected to touch Rs 9,000 crore by end March 2010 and reach around Rs 20,000 crore by March 2011.
• IIFCL has refinanced bank lending to infrastructure projects of Rs. 3,000 crore during the current year and is expected to more than double that amount in 2010-11.
• The take-out financing scheme announced in the last Budget is expected to initially provide finance for about Rs. 25,000 crore in the next three years.
Energy
• Plan allocation for power sector excluding RGGVY doubled from Rs.2230 crore in 2009-10 to Rs.5,130 crore in 2010-11.
• Government proposes to introduce a competitive bidding process for allocating coal blocks for captive mining to ensure greater transparency and increased participation in production from these blocks.
• A “Coal Regulatory Authority” to create a level playing field in the coal sector proposed to be set up.
• Plan outlay for the Ministry of New and Renewable Energy increased by 61 per cent from Rs.620 crore in 2009-10 to Rs.1,000 crore in 2010-11.
• Solar, small hydro and micro power projects at a cost of about Rs.500 crore to be set up in Ladakh region of Jammu and Kashmir.
INCLUSIVE DEVELOPMENT
• The spending on social sector has been gradually increased to Rs.1,37,674 crore in 2010-11, which is 37% of the total plan outlay in 2010-11.
• Another 25 per cent of the plan allocations are devoted to the development of rural infrastructure.
Education
• Plan allocation for school education increased by 16 per cent from Rs.26,800 crore in 2009-10 to Rs.31,036 crore in 2010-11.
• In addition, States will have access to Rs.3,675 crore for elementary education under the Thirteenth Finance Commission grants for 2010-11.
Health
• An Annual Health Survey to prepare the District Health Profile of all Districts shall be conducted in 2010-11.
• Plan allocation to Ministry of Health & Family Welfare increased from Rs 19,534 crore in 2009-10 to Rs 22,300 crore for 2010-11.
BUDGET ESTIMATES 2010-11
• The Gross Tax Receipts are estimated at Rs. 7,46,651 crore
• The Non Tax Revenue Receipts are estimated at Rs. 1,48,118 crore.
• The net tax revenue to the Centre as well as the expenditure provisions in 2010-11 have been estimated with reference to the recommendations of the Thirteenth Finance Commission.
• The total expenditure proposed in the Budget Estimates is Rs. 11,08,749 crore, which is an increase of 8.6 per cent over last year.
• The Plan and Non Plan expenditures in BE 2010-11 are estimated at Rs. 3,73,092 crore and Rs. 7,35,657 crore respectively. While there is 15 per cent increase in Plan expenditure, the increase in Non Plan expenditure is only 6 per cent over the BE of previous year.
• Fiscal deficit for BE 2010-11 at 5.5 per cent of GDP, which works out to Rs.3,81,408 crore.
• Taking into account the various other financing items for fiscal deficit, the actual net market borrowing of the Government in 2010-11 would be of the order of Rs.3,45,010 crore. This would leave enough space to meet the credit needs of the private sector.
• The rolling targets for fiscal deficit are pegged at 4.8 per cent and 4.1 per cent for 2011-12 and 2012-13, respectively.
• Against a fiscal deficit of 7.8 per cent in 2008-09, inclusive of oil and fertilizer bonds, the comparable fiscal deficit is 6.9 per cent as per the Revised Estimates for 2009-10.
• Conscious effort made to avoid issuing bonds to oil and fertilizer companies. Government would like to continue with this practice of extending Government subsidy in cash, thereby bringing all subsidy related liabilities into Government’s fiscal accounting.
Service Tax
• Rate of tax on services retained at 10 per cent to pave the way forward for GST.
• Certain services, hitherto untaxed, to be brought within the purview of the service tax levy. These to be notified separately.
• Process of refund of accumulated credit to exporters of services, especially in the area of Information Technology and Business Process Outsourcing, made easy by making necessary changes in the definition of export of services and procedures.
• Accredited news agencies which provide news feed online that meet certain criteria, exempted from service tax.
• Proposals relating to service tax are estimated to result in a net revenue gain of Rs 3,000 crore for the year.
• Proposals on direct taxes estimated to result in a revenue loss of Rs. 26,000 crore for the year. Proposals relating to Indirect Taxes estimated to result in a net revenue gain of Rs.46,500 crore for the year. Taking into account the concessions being given in the tax proposals and measures taken to mobilize additional resources, the net revenue gain is estimated to be Rs. 20,500 crore for the year.
And many more points........
18 February 2011
Budget Expectations 2011
Strong signals: 3G auction at a big premium to help narrow down fiscal deficit (even though one time revenue). Revenue collections from direct and indirect taxes from 2010-11 so far are buoyant and exceeding expectations. Economic growth vibrant with revised GDP growth at 8%. Domestic demand robust partially insulating us from the global anxieties on various fronts.
Expectations:
Direct taxes:
a) Personal income tax-No new relief/raising of exemption limit expected. This will be done with more changes in next year along with implementation of Direct tax code. Salaried employees may be exempted from filing IT returns.
b) Relief scheme for individuals to promote savings & investment particularly related to Real estate/Infrastructure.
c) Expectation on corporate taxation to be reduced by 5%-(may not materialize) along with removal of surcharge and cess.
d) Amnesty scheme to unearth black money and bring them back to IT net very much likely.
Indirect taxes:
a) Service tax may be amplified to cover new areas.
b) Excise duty net may be widened to cover SME”s who are exempt now. This may have some price impact in daily items used by common man.
c) Review of excise duty or petroleum/petroleum products due to rising crude prices.
Sectoral view:
Public – Private partnership to be encouraged to make the sector more vibrant and to complete the infra projects on time.
Reforms :
a) Increasing the FDI limit to 49% in Insurance sector from the current level could be brought about in this budget.
b) Highlights on the implementation of the GST (Goods and Service Tax) and DTC (Direct Tax Code) will be discussed in this budget.
c) New reforms on Public Distribution system may be announced.
Areas of Concern:
Continuous Uproar on 2G Auction and non functioning of Parliament during the entire winter session. This could blurt the importance on Budget presentation this year.
Crude Oil prices again reaching 100 USD per barrel could put the Government on Severe strain on Subsidies not provided for to that extent.
Higher inflation causing a great concern and regulatory measures of RBI could stagnate Growth.
Rising food and fuel prices are affecting the common man to a great extent and is a big drain on their savings.
Government will be forced to increase expenditure in Education, Healthcare, Food, Infrastructure , etc. There will be other social welfare schemes as well which will increase Government expenditure substantially.
Direct taxes:
a) Personal income tax-No new relief/raising of exemption limit expected. This will be done with more changes in next year along with implementation of Direct tax code. Salaried employees may be exempted from filing IT returns.
b) Relief scheme for individuals to promote savings & investment particularly related to Real estate/Infrastructure.
c) Expectation on corporate taxation to be reduced by 5%-(may not materialize) along with removal of surcharge and cess.
d) Amnesty scheme to unearth black money and bring them back to IT net very much likely.
Indirect taxes:
a) Service tax may be amplified to cover new areas.
b) Excise duty net may be widened to cover SME”s who are exempt now. This may have some price impact in daily items used by common man.
c) Review of excise duty or petroleum/petroleum products due to rising crude prices.
Sectoral view:
- Power Sector will be the priority of the government to enhance capacities. Structured reforms to be introduced to attract investments and increase productivity. Green power sector will be encouraged with subsidies to ensure viability.
- Automobile sector is already under margin pressure. The rise in interest rates on bank lending may have impact on growth negatively. Fresh levies will dampen sentiments.
- PORT Developments at various new locations will be encouraged including public private partnership to handle increased traffic of goods and materials efficiently.
- Infrastructure: Infrastructure is a capital intensive industry. Government spending and support is substantially required to improve the overall infrastructure in the country. The provisions required are to be at least doubled to cater to the development process. Expectation of NBFC and banks being allowed to raise Infrastructure bonds could help the situation.
Public – Private partnership to be encouraged to make the sector more vibrant and to complete the infra projects on time.
- Real Estate Sector – Housing may be considered on PRIORITY and for the first dwelling unit the Government can give relief in Interest rates through Banks (a small percentage) to continue the growth in this sector. More reforms to regulate the real estate sector are also expected.
- Telecom Sector – This sector has already shown phenomenol development in revenue contribution as also technology development. This is likely to continuefor the next few years.
- Agriculture – Could be one of the top priorities of the budget. Supports for various agricultural products and their effective public distribution system are likely to be announced in the budget. This is very critical to contain price of the various food Items and making them available at reasonable prices.
Reforms :
a) Increasing the FDI limit to 49% in Insurance sector from the current level could be brought about in this budget.
b) Highlights on the implementation of the GST (Goods and Service Tax) and DTC (Direct Tax Code) will be discussed in this budget.
c) New reforms on Public Distribution system may be announced.
Areas of Concern:
Continuous Uproar on 2G Auction and non functioning of Parliament during the entire winter session. This could blurt the importance on Budget presentation this year.
Crude Oil prices again reaching 100 USD per barrel could put the Government on Severe strain on Subsidies not provided for to that extent.
Higher inflation causing a great concern and regulatory measures of RBI could stagnate Growth.
Rising food and fuel prices are affecting the common man to a great extent and is a big drain on their savings.
Government will be forced to increase expenditure in Education, Healthcare, Food, Infrastructure , etc. There will be other social welfare schemes as well which will increase Government expenditure substantially.
17 February 2011
Alert
For Cricketer Lovers. Watch Live (Cricket World Cup-2011) on this blog on 19/2/2011 at 2.00 pm onwards.
ADAG Stocks Dip
A day after the CBI questioned ADAG chairman Anil Ambani in connection with the 2G spectrum fiasco, the company's stocks took a beating on the bourses. Although ADAG group issued a statement saying that Anil Ambani was not 'summoned' by the CBI and that it was just part of Delhi visit, the sentiment for ADAG stocks remained subdued in morning trade.
Read more - Anil Ambani at CBI HQ for 2G probe
ADAG stock prices at 9.27 AM
Reliance Infrastructure was quoting at Rs 631.00, down Rs 0.65, or 0.10%.
Reliance Capital was trading at Rs 471, down Rs 5.40, or 1.13%
Reliance Communications dwindled to Rs 99.00, down Rs 0.60, or 0.60%
Reliance Broadcast Network hit Rs 69.50, down Rs 1.00, or 1.42%
Reliance Power was quoting at Rs 120.35, down Rs 1.40, or 1.15%
Reliance MediaWorks slipped to Rs 154.00, down Rs 1.90, or 1.22%.
Read more - Anil Ambani at CBI HQ for 2G probe
Reliance Infrastructure was quoting at Rs 631.00, down Rs 0.65, or 0.10%.
Reliance Capital was trading at Rs 471, down Rs 5.40, or 1.13%
Reliance Communications dwindled to Rs 99.00, down Rs 0.60, or 0.60%
Reliance Broadcast Network hit Rs 69.50, down Rs 1.00, or 1.42%
Reliance Power was quoting at Rs 120.35, down Rs 1.40, or 1.15%
Reliance MediaWorks slipped to Rs 154.00, down Rs 1.90, or 1.22%.
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