budget analysis 2011
TRANSCRIPT
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Bharatesh Education Trusts
GLOBAL BUSINESS SCHOOL
UNION BUDGET 2011 ANALYSIS
Team Members
Mr. Miboob Dange
Mr. Anand Nandagavi
Mr. Sanju Hajeri
Mr. Mahantesh Patil
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Fiscal deficit at 4.6% of GDP
Net market borrowing Rs3.4 tn
DTC, GST on track
3 focus areas -
Agriculture
Infrastructure
Inclusive development
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PUBLIC FINANCE
FINANCIAL SECTOR LEGISLATIVE INITIATIVES
To take the process offinancial sector reforms further,
various legislations proposed in 2011-12. Amendments proposed to the Banking Regulation Act in
the context ofadditional banking licences to privatesector players.
PUBLIC SECTOR BANK CAPITALISATION
Rs 6,000 crore to be provided during 2011-12 to enablepublic sector banks to maintain a minimum ofTier ICRAR of8 per cent.
RECAPITALISATION OFREGIONAL RURAL BANKS
Rs. 500 crore to be provided to enable Regional RuralBanks to maintain a CRAR ofat least 9 per cent as on
March 31, 2012.
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INVESTMENT ENVIRONMENT
FOREIGN DIRECT INVESTMENT
Discussions underway tofurther liberalise the
FDI policy.FOREIGN INSTITUTIONAL INVESTORS
SEBI registered mutual funds permitted toaccept subscriptionfrom foreigninvestorswho meet KYC requirements for equityschemes.
To enhance flow offunds toinfrastructuresector, the FII limit for investment incorporate bonds issued ininfrastructuresector being raised.
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An allocation of Rs 2,140 billion for infrastructure sector accounting
for 48.50% of planned expenditure
Capital investment in Fertilizer production to be classified as an
infrastructure sub-sector.
Additional deduction of Rs 20,000 for investment in long-terminfrastructure bonds to be continued in FY12.
Permit to issue tax free bonds of Rs 300 billion by various
Government undertakings Levy of Minimum Alternate Tax (MAT) on developers of Special
Economic Zones (SEZs) and units operating in SEZs.
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Roads and Highways:
Allocation of Rs 103.40 billion for National Highways Development
Programmes (NHDP).
Full exemption from basic customs duty for bio-asphalt and specified
machinery.
Urban Infrastructure:
Allocation under JNNURM of Rs 125.20 billion for as against Rs
116.20 billion in FY11.
Allocation of Rs 15.60 billion for towards equity investments for all
Metro Rail Projects.
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An allocation of Rs 520.57 billion in FY12 for education
An allocation of Rs 210 billion for Sarva Shiksha Abhiyan
(Vocationalisation of Secondary Education)
An allocation of Rs 103.80 billion for National Programme of
Mid Day Meals in schools
Additional Rs 5 billion proposed to be provided for National
Skill Development Fund during FY12.
Allocation of Rs 500 million for Aligarh Muslim University
Rs 200 million for IIM, Kolkata, to set up its Financial Research
and Trading Laboratory.
A allocation of Rs 100 million for Mahatma Gandhi
Antarrashtriya Hindi Vishwavidyalaya, Wardha.
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Rural Development:
Total allocation under Bharat Nirman Rs 580 billion
Allocation of Rs 200 billion underPMGSY
Creation of Mortgage Risk Guarantee Fund under Rajiv Awas Yojana
(RAY) to guarantee housing loans taken by EWS and LIG households
and enhance their credit worthiness.
Enhancement of provisions under Rural Housing Fund to Rs 30 billion
from existing Rs 20 billion.
An allocation of Rs.1,60,887 crore for social sector.
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The plan allocation for the Ministry of Health and Family Welfare is
proposed to be increased to Rs 267.60 billion in FY12 from Rs 223
billion forFY11.
An allocation of Rs 178.40 billion for National Rural Health Mission.
The Rashtriya Swasthya BimaYojana extended to cover unorganised
sector workers in hazardous mining and associated industries like slate
and slate pencil, dolomite, mica and asbestos etc.
An allocation of Rs 93.50 billion for National Rural Drinking Water
Programme.
An allocation of Rs 16.50 billion for rural sanitation
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Higher allocation under RKVY Scheme
Bringing Green Revolution to Eastern Region
Integrated Development of 60,000 pulses
villages in rain fed areas.
Promotion of oil palm
Initiative on vegetable clusters
Nutrias- cereals
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Agriculture Credit
Interest Subvention
National Mission for Sustainable Agriculture
Mega
Food Parks
Storage capacity and cold chains
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TaxProposals:
Scope of exemptions from Excise Duty enlarged to
include equipments needed for storage and warehouse
facilities on agricultural produce.
Basic Custom Duty reduced for specified
agricultural machinery from 5 per cent to 2.5 per
cent.
Basic Custom Duty reduced on micro-irrigation
equipment from 7.5 per cent to 5 per cent.
De-oiled rice brancake fully exempted from basic
customs duty. But it attracts 10% export duty.
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Individual exemption limit raised from Rs.1,60,000 to Rs.1,80,000
Exemption limit raised by Rs 10,000 and qualifying age reduced from
65 to 60.
A new category Very Senior Citizens is formed.
Current surcharge of 7.5 per cent on domestic companies proposed to
be reduced to 5 per cent.
Rate of Minimum Alternative Tax 18.5 per cent of book profits
Weighted deduction on payments made to National Laboratories,
Universities and Institutes of Technology to be enhanced to 200 per cent.
Direct Taxes:
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Central Excise Duty to be maintained at standard rate of 10 per cent.
Basic Custom Duty on twocritical raw materials ofcement industry
viz. petcoke and gypsum is proposed to be reduced to 2.5 per cent.
Cash dispensers fully exempt from basic Customs Duty.
Basic Customs Duty on solar lantern reduced from 10 to 5 per cent.
Full exemptionfrom basic Customs Duty to Crude Palm Stearin
used in manufacture of laundry soap.
Proposals relating to Customs and Central Excise estimated toresult in a net revenue gainof Rs 7,300 crore.
Indirect Taxes:
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Hotel accommodation in excess of Rs. 1,000 per day and service
provided by air conditioned restaurants
Tax on all services provided by hospitals with 25 or more beds with
facility ofcentral air conditioning
Service Tax on air travel both domestic and international raised.
Services provided by life insurance companies in the area of
investment and some more legal services proposed to be brought into
tax net.
Proposals relating toService Tax estimated to result innet revenue
gainofRs 4,000 crore.
Service Tax:
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Cement
The existing excise duty rates have been proposed to be replaced
with composite rates having an ad valorem and specific component
with some rationalisation.
The basic customs duty on two critical input materials of this industry
viz. pet coke and gypsum is proposed to be reduced to 2.50% from 5%.
FMCG:
130 consumer goods are attracted 1% central excise duty.
Reductionin basiccustoms duty on bamboofor agarbattifrom 30%
to 10%.
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Metals & Mining
Proposal to enhance the rate of export duty for all types of iron ore
and unify it at 20% ad valorem.
Full exemption from export duty is being proposed on iron ore pellets
to encourage the value addition process for fines.
Allocation of Rs. 20.34 billion towards Restructured Accelerated
Power Development and Reforms Programme (RAPDRP).
Allocation of Rs. 8.13 billion towards the National Hydro Electric
Power Corporation (NHPC).
Allocation of Rs. 10.25 billion towards Bharatiya Nabhikiya Vidyut
Nigam Ltd.
Power:
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Custom Duty
11%
Service Tax and
Others
27%
Direct Taxes
11%
Corporate Taxes24%
Borrowed Loans27%
Rupee Income
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Non lan Grants
to States
5%
Assistance to
States
17%
Planed grants to
States
7%
Planed
Ex enditure
11%
Subsidies
9%
Defence
11%
Central
Ex enditure22%
Interest Payment
18%
Ru ee Ex enses
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Conclusion:
Union Budget 2011-12 stays onfiscal corrective course perhaps
aided by a few optimistic assumptions.
While there is nonew big bang reform, already announced measures
such as DTC and GST remainon track.
Revenue estimates appear reasonable. On
expenditure, infrastructure, agriculture and various inclusive
development programs received renewed attention.
A key risk to all ofthis is a further flare-up inoil prices.
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