aaganan budget analysis 2010

AAGANANBUDGET ANALYSIS 2010

Reva Institute of Technology & ManagementReva Institute of Technology & Management

Adhvith Dhuddu

Saturday, 13th March, 2010

Bangalore, India

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WHAT IS THE

QUESTION 1WINNER GETS: THREE BILLION NEW CAPITALISTS

WHAT IS THE

FRBM ACT?

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“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

THE UNION BUDGET

“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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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.

THE BUDGET: WHAT IS A BUDGET?

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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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

THE BUDGET: WHAT IS A BUDGET?

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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Inputs/Proposals from

CII, FICCI, ASSOCHAM,

NASSCOM and other

industry bodies

THE BUDGET: HOW IS IT PREPARED?

Inputs from important

ministries: Agriculture,

The

Economic

Survey

THE FINAL

Ministry of

Finance (Dept. of

Revenue, Taxes,

Expenditure, etc)

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ministries: Agriculture,

telecom, defense, road

transportation, home, etc.

India’s central

bank: Reserve

Bank of India

THE FINAL

BUDGET

Finance Sec, Chief

Economic Advisor,

Planning commission

Trade unions,

economists,

experts, etc.

THE FIVE E’s THAT AFFECT THE INDIAN YOUTH

BUDGET & THE INDIAN YOUTH

EMPLOYMENT

ENERGY

EDUCATION

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EDUCATION

ENTREPRENERUSHIP

ENVIRONMENT

Were they addressed in the Budget? Let’s see as we

run through the presentation.

- 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.

THE BUDGET 2010: MACRO VIEW

- 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.

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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.

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

BUDGET & INFRASTRUCTURE

5. Infra Giants are also going through a learning process

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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)

BUDGET & THE CAPITAL MARKETS

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

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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.

THE US ECONOMY

THE US ECONOMY

THANK YOU!ADHVITH DHUDDU

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ADHVITH DHUDDU

Website: www.AdhvithDhuddu.comwww.AliveNow.in

E-mail: adhvithd@gmail.com or adhvith@alivenow.inPhone: +91-9740247446