|Finance minister Pranab Mukherjee|
New Delhi. Finance minister Pranab Mukherjee seemed determined to please all constituencies with his Budget speech on Monday, but if first impressions are anything to go by he was at best only partially successful. Significantly, on the two issues agitating most people today – inflation and corruption – he had little concrete to offer.
India's middle class has over the last few years got used to the idea that finance ministers must hand out tax sops on Budget day and they weren't entirely disappointed, with hikes in exemption limits that could save individual taxpayers anywhere between Rs 1,030 and Rs 26,780. Senior citizens were the biggest gainers with those over 80 getting the largest tax savings.
Business got an unexpected gift with the rollback of the stimulus package introduced during the global financial crisis being put on hold and the surcharge on domestic firms being pared.
Foreign investors have been given greater access to India's capital markets. Reformers were given enough reason to believe that the process initiated 20 years ago has not been abandoned and would be carried forward, even if there were more promises of action in the future than actual changes introduced.
There were promises too for the aam admi – who was referred to only once in the speech – but a closer look at outlays on social sector programmes suggests that the rhetoric hasn't really been followed up with the moolah needed to make it come true.
The mood of the markets reflected the uncertain nature of the response to the Budget. Up almost 600 points at one stage, the sensex, probably on closer scrutiny of the fine print, ended the day barely 122 points up over the weekend close.
The speech had a whole section dedicated to black money. While there were few details in the speech, a reading of the Finance Bill suggests that some steps are being taken, particularly to check the flow of funds from countries with opaque disclosure norms.
The middle class has reason to have mixed feelings about this Budget. While the tax sops will clearly be welcomed, their impact could be more than wiped out by the extension of service tax to cover healthcare and diagnostic facilities not covered so far and to a host of other services.
Similarly, at first glance, the fact that a one percentage point subsidy on home loan interest rates will now be available on loans up to Rs 15 lakh for houses costing up to Rs 25 lakh rather than on loans up to Rs 10 lakh for houses costing up to Rs 20 lakh may seem like very good news. But how many people who can put down Rs 10 lakh from their pocket would buy a house worth Rs 25 lakh or less?
Some sections of industry too might wonder whether extending the coverage of the minimum alternate tax (MAT) to units in special economic zones and a marginal hike in the MAT rate does not offset the gains from a lower surcharge.
Perhaps the only category to have unambiguously gained is the foreign investor. FIIs have been allowed to invest up to $40 billion in corporate bonds against the $20 billion available to them earlier. That's because they can now put in up to $25 billion cumulatively in long-term bonds of infrastructure companies against the $5 billion they were earlier permitted.
Further, individual foreign investors can now invest directly in Indian mutual funds rather than having to route their money through FIIs.
Reformers might be unsure whether they should celebrate or moan at the fact that parts of the Budget speech read more like the annual Economic Survey the ministry brings out.
On the plus side for them, it's after many years that the Budget speech has given assurances of bold reform – the subsidy regime, at least in kerosene, fertilizers and cooking gas, will be replaced by a mechanism of direct cash transfers to the intended beneficiaries, the FM promised.
He also talked of new banking licences being issued to the private sector and discussion being underway
to "further liberalize the FDI (foreign direct investment) policy". On the flip side,
none of this is to happen immediately.
Disinvestment of public sector shares, Mukherjee said, would remain on course, but was quick to add that the government would retain both a majority stake and management control.
Similarly, tackling inflation is clearly something the FM views as a long-term programme to be dealt with by developing warehousing facilities, cold chains and the like. From a purely budgeting point of view, the FM can claim that he has done a remarkable job by reining in the fiscal deficit to a projected 4.6% of GDP for the
next year, but the numbers show that the achievement banks on unrealistic expenditure projections.
NEW DELHI: Finance minister Pranab Mukherjee on Monday presented to Parliament India's budget for the coming financial year beginning in April.
* 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 ( Read story )
* Direct tax proposals to cause 115 billion rupees in revenue loss
* Service tax rate kept at 10 percent
* Customs and excise proposals to result in net revenue gain of 73 billion rupees
* Iron ore export duty raised to 20 percent
*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.
*Peak rate of customs duty maintained at 10 per cent in view of the global economic situation.
*Basic customs duty on agricultural machinery reduced to 4.5 per cent from 5 per cent.
*Service tax widened to cover hotel accommodation above Rs 1,000 per day, A/C restaurants serving liquor, some category of hospitals, diagnostic tests.
*Service tax on air travel increased by Rs 50 for domestic travel and Rs 250 for international travel in economy class. On higher classes, it will be ten per cent flat.
* Electronic filing of TDS returns at source stabilised; simplified forms to be introduced for small taxpayers.
* Works of art exempt from customs when imported for exhibition in state-run institutions; this now extended to private institutions.
* Subsidy bill in 2011-12 seen at 1.44 trillion rupees
* Food subsidy bill in 2011-12 seen at 605.7 billion rupees
* Revised food subsidy bill for 2010-11 at 606 billion rupees
* Fertiliser subsidy bill in 2011-12 seen at 500 billion rupees
* Revised fertiliser subsidy bill for 2010-11 at 550 billion rupees
* Petroleum subsidy bill in 2011-12 seen at 236.4 billion rupees
* Revised petroleum subsidy bill in 2010-11 at 384 billion rupees
* State-run oil retailers to be provided with 200 billion rupee cash subsidy in 2011-12
* Fiscal deficit seen at 5.1 percent of GDP in 2010-11
* Fiscal deficit seen at 4.6 percent of GDP in 2011-12
* Fiscal deficit seen at 3.5 percent of GDP in 2013-14
* Total expenditure in 2011-12 seen at 12.58 trillion rupees
* Plan expenditure seen at 4.41 trillion rupees in 2011-12, up 18.3 percent
* Gross tax receipts seen at 9.32 trillion rupees in 2011-12
* Non-tax revenue seen at 1.25 trillion rupees in 2011-12
* Corporate tax receipts seen at 3.6 trillion rupees in 2011-12
* Tax-to-GDP ratio seen at 10.4 percent in 2011-12; seen at 10.8 percent in 2012-13
* Customs revenue seen at 1.52 trillion rupees in 2011-12
* Factory gate duties seen at 1.64 trillion rupees in 2011-12
*Service tax receipts seen at 820 billion rupees in 2011-12
* Revenue gain from indirect tax proposals seen at 113 billion rupees in 2011-12
* Service tax proposals to result in net revenue gain of 40 billion rupees in 2011-12
GROWTH, INFLATION EXPECTATIONS
* Economy expected to grow at 9 percent in 2012, plus or minus 0.25 percent
* Inflation seen lower in the financial year 2011-12
* Disinvestment in 2011-12 seen at 400 billion rupees
* Government committed to retaining 51 percent stake in public sector enterprises.
* Net market borrowing for 2011-12 seen at 3.43 trillion rupees, down from 3.45 trillion rupees in 2010-11
* Gross market borrowing for 2011-12 seen at 4.17 trillion rupees
* Revised gross market borrowing for 2010-11 at 4.47 trillion rupees
* To create infrastructure debt funds
* FDI policy being liberalised.
* To boost infrastructure development with tax-free bonds of 300 billion rupees
* Food security bill to be introduced this year
* To permit SEBI registered mutual funds to access subscriptions from foreign investments
* Raised foreign institutional investor limit in 5-year corporate bonds for investment in infrastructure by $20 billion
* Setting up independent debt management office; Public debt bill to be introduced in parliament soon
* Bills on insurance, pension funds, banking to be introduced.
*Constitution Amendment Bill for introduction of GST regime in this session.
*New Companies Bill to be introduced in current session
* To allocate more than 1.64 trillion rupees to defence sector in 2011-12 (Read: 11% hike in defence allocation )
* 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.
* Removal of supply bottlenecks in the food sector will be in focus in 2011-12
* Agriculture growth key to development: Green Revolution waiting to happen in eastern region.
* To raise target of credit flow to agriculture sector to 4.75 trillion rupees
* Gives 3 percent interest subsidy to farmers in 2011-12
* Cold storage chains to be given infrastructure status
* Capitalisation of National Bank for Agriculture and Rural Development (NABARD) of 30 billion rupees in a phased manner
* To provide 3 billion rupees for 60,000 hectares under palm oil plantation
* Actively considering new fertiliser policy for urea
* Food storage capacity to be augmented - 15 more mega food parks to be set up in 2011-12; of 30 sanctioned in previous fiscal, 15 set up.
* Comprehensive policy on further developing PPP (public-private-partnership) model.
* Farmers need access to affordable credit.
* Moving to improve nutritional security.
* Necessary to accelerate production of fodder.
ON THE STATE OF THE ECONOMY
* "Fiscal consolidation has been impressive. This year has also seen significant progress in those critical institutional reforms that will pave the way for double digit growth in the near future."
* "At times the biggest reforms are not the ones that make headlines, but the ones concerned with details of governance which affect the everyday life of aam aadmi (common man). In preparing this year's budget, I have been deeply conscious of this fact."
* Food inflation remains a concern
* Current account deficit situation poses some concern
* Must ensure that private investment is sustained
* "The economy has shown remarkable resilience."
* Setting tone for newer, vibrant economy.
* Economy back to pre-crisis trajectory.
* Development needs to be more inclusive.
* "Certain events in the past few months may have created an impression of drift in governance and a gap in public accountability ... such an impression is misplaced."
* Corruption is a problem, must fight it collectively
*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.