Union Budget of India

Union budget of India
From Wikipedia, the free encyclopedia
The Union Budget of India, referred to as the Annual Financial Statement[1] in Article 112 of the Constitution of India, is the annual budget of the Republic of India, presented each year on the last working day of February by the Finance Minister of India in Parliament. The budget, which is presented by means of the Financial Bill and the Appropriation bill has to be passed by the House before it can come into effect on April 1, the start of India's financial year. Former Finance Minister Morarji Desai presented the budget ten times, the most by any.[2]
The Union Budget of India for 2012–2013 was presented by Pranab Mukherjee, the Finance Minister of India on 16 March 2012, this was the 7th budget of his career. These budgetary proposals would be applicable from 1 April 2012 to 31 March 2013.
The Union Budget of India for 2013–2014 was presented by P. Chidambaram on 28 February 2013. (Thursday)
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Chronology [edit]
Pre-liberalisation [edit]
The first Union budget of independent India was presented by R. K. Shanmukham Chetty on November 26, 1949.[3]
The Union budgets for the fiscal years 1959-61 to 1963-64, inclusive of the interim budget for 1962-63, were presented by Morarji Desai.[3] On February 29 in 1964 and 1968, he became the only finance minister to present the Union budget on his birthday.[4] Vyas presented budgets that included five annual budgets, an interim budget during his first stint and one interim budget and three final budgets in his second tenure when he was both the Finance Minister and Deputy Prime Minister of India.[3]
After desai's resignation, Indira Gandhi, the then Prime Minister of India, took over the Ministry of Finance to become the only woman to hold the post of the finance minister.[3]
Pranab Mukherjee, the first Rajya Sabha member to hold the Finance portfolio, presented the annual budgets for 1982-83, 1983–84 and 1984-85.[3]
Rajiv Gandhi presented the budget for 1987-89 after V P Singh quit his government, and in the process became only the third Prime Minister to present a budget after his mother and grandfather.[3]
N. D. Tiwary presented the budget for 1988-89, S B Chavan for 1989-90, while Madhu Dandawate presented the Union budget for 1990-91.[3]
Dr. Manmohan Singh became the Finance Minister but presented the interim budget for 1991-92 as elections were forced.[3]
Due to political developments, early elections were held in May 1991 following which the Indian National Congress returned to political power and Manmohan Singh, the Finance Minister, presented the budget for 1991-92.[3]
Post-liberalisation [edit]
Manmohan Singh, in his next annual budgets from 1992–93, opened the economy,[5] encouraged foreign investments and reduced peak import duty from 300 plus percent to 50 percent.[3]
After elections in 1996, a non-Congress ministry assumed office. Hence the final budget for 1996-97 was presented by P. Chidambaram, who then belonged to Tamil Maanila Congress.[3]
Following a constitutional crisis when the I. K. Gujral Ministry was on its way out, a special session of Parliament was convened just to pass Chidambaram's 1997-98 budget. This budget was passed without a debate.[3]
After the general elections in March 1998 that led to the Bharatiya Janata Party forming the Central Government, Yashwant Sinha, the then Finance Minister in this government, presented the interim and final budgets for 1998-99.[3]
After general elections in 1999, Sinha again became the finance minister and presented four annual budgets from 1999-2000 to 2002-2003.[3] Due to elections in May 2004, an interim budget was presented by Jaswant Singh.[3]
Time of Budget Announcement [edit]
Until the year 2000, the Union Budget was announced at 5 pm on the last working day of the month of February. This practice was inherited from the Colonial Era, when the British Parliament would pass the budget in the noon followed by India in the evening of the day.
It was Mr.Yashwant Sinha, the then Finance Minister of India in the NDA government (led by BJP) of Atal Bihari Vajpayee, who changed the ritual by announcing the 2001 Union Budget at 11 am.
2009 Union budget of India
From Wikipedia, the free encyclopedia
The 2009 Union budget of India was presented by the Finance minister, Pranab Mukherjee on 6 July 2009.

[edit]Background
During 2008–09, the growth rate of GDP of India fell from an average of over 9% in the previous three fiscal years to 6.7%.The wholesale price index of India also witnessed large fluctuations between 13% in August 2008 to 0% in March 2009. The fiscal deficit of Indian government had gone up to 6.1% in March 2009.[1] The budget was preceded by an interim budget by Pranab Mukherjee on 16 Feb 2009.
[edit]Budget Estimates
The total estimated expenditure for 2009–10 was 10,20,838 crore, of which 6,95,689 crore was towards Non Plan and 3,25,149 crore towards Plan expenditure. Total estimated revenue was 6,19,842 crore, including revenue receipts of 6,14,497 and capital receipts of 5345 crores, excluding borrowings. The resulting fiscal deficit was 4,00,996 crore while revenue deficit was 2,82,735 crore.The gross tax receipts were budgeted at 6,41,079 crore and non-tax revenue receipts at 1,40,279.[2]
[edit]Short term economic revival measures
[edit]Infrastructure development
• Allocation of 15,800 crore to National Highways Authority of India.
• Allocation of 12,887 crore to Jawaharlal Nehru National Urban Renewal Mission.
• Allocation of 3,973 crore for housing and provision of basic amenities to urban poor.
• Allocation of 500 crore for Brihan Mumbai Storm Water Drainage Project .
• Allocation of 2,080 crore for Accelerated Power Development and Reform Programme
[edit]Agriculture development
• Allocation of 411 crore for interest subvention for short term crop loans .
• Extension of time given to the farmers to pay their overdues under Debt Waiver and Debt Relief Scheme to 31 December 2009.
• Allocation under Accelerated Irrigation Benefit Programme (AIBP) increased by 75% over B.E. 2008–09.
• Allocation under Rashtriya Krishi Vikas Yojana (RKVY) stepped up by 30% in B.E. 2009–10 over B.E. 2008–09.
[edit]Export growth restoration
• Allocation of 124 crore for Market Development Assistance Scheme
• Extension of deadline for Interest subvention of 2% on pre-shipment credit for employment oriented export sectors to 31 March 2010.
[edit]Medium term economic revival measures
• Setting up of an expert group to advise on pricing petroleum products in sync with global prices.
• Raising of the threshold for non-promoter public shareholding for listed companies.
• Setting up of State Level Bankers Committee for providing banking facilities in under-banked/unbanked areas in the next three years.
[edit]Inclusive development measures
• Allocation of 39,100 crore to National Rural Employment Guarantee Scheme
• National Food Security Act to be brought in to ensure entitlement of 25 kilo of rice or wheat per month at 3 per kilo to every family living below the poverty line in rural or urban areas.
• Allocation of 12,000 crore to Pradhan Mantri Gram Sadak Yojana and 7,000 crore to Rajiv Gandhi Grameen Vidyutikaran Yojana.
• Allocation of 8,800 crore to Indira Awaas Yojana and 2,000 crore to Rural Housing Fund
• Allocation of 100 crore to Pradhan Mantri Adarsh Gram Yojana.
• Interest subsidy to poor households to be provided for loans up to 1 lakh.
• Increase of Corpus of Rashtriya Mahila Kosh from 100 crore to 500
• National Mission for Female Literacy to be launched with the aim to reduce level of female illiteracy by half in three years.
• Full interest subsidy for student loans during the period of moratorium introduced for approved courses of study in technical and professional streams from recoganised institutions in India
• Plan outlay of Ministry of Minority Affairs enhanced to 1,740 crore.
• 75 corers allocated for establishing three campuses for Aligarh Muslim University
• Setting up of handloom mega clusters in West Bengal and Tamil Nadu, powerloom mega cluster in Rajasthan and mega clusters for carpets in Srinagar and Mirzapur
• Allocation of 12,070 crore to National Rural Health Mission
• Launching of eight national missions under National Action Plan on Climate Change.
• Setting up of National Ganga River Basin Authority and allocation of 562 crore for River and Lake Conservation Plans.
• One-time grant of 100 crore for Indian Council of Forestry Research and Education, Dehradun
[edit]Building Accountable Institutions
• Unique Identification Authority of India to set up online data base with identity and biometric details of Indian residents.
• 430 crore provided to modernise police machinery in the States.
• 2,284 crore proposed for construction of fences, roads, flood lights on the international borders.
• 1 lakh dwelling units for housing of Central Para-military Forces personnel to be made.
• Increase of pension for servicemen at a cost of 2,100 crore.
• 495 crore allocated to setting up and upgrading of polytechnics.
• 827 crore allocated for opening one Central University in each uncovered State.
• 50 crore allocated for Punjab University, Chandigarh
• Outlay for Commonwealth games 2010 increased to 3,472 crore.
• 500 crore allocated for rehabilitation of Srilankan Tamils.
• 2,113 crore allocated for IITs and NITs
• 1,000 crore allocated rebuilding the damaged infrastructure caused due to cyclone Aila in West Bengal.
[edit]Taxation
The tax proposals on direct taxes were claimed to be revenue neutral while those on indirect taxes were claimed to yield a net gain of 2,000 crore in a year.
[edit]Direct taxes
• Increase of personal income tax exemption limit from 2.25 lakh to 2.40 lakh for senior citizens, from 1.80 lakh to 1.90 lakh for women tax payers and from 1.50 lakh to 1.60 lakh for all other categories of individual taxpayers.
• Increase of the deduction under section 80-DD to 1 lakh from 75,000.
• Elmination of surcharge of 10% on personal income tax
• Extension of deduction in respect of export profits under sections 10A and 10B of the Income-tax Act till 2010–11.
• Abolition of Fringe Benefit Tax
• Extension of weighted deduction of 150% on in-house R&D expenditure to all manufacturing businesses.
• Increase of Minimum Alternate Tax from 10% of book profits to 15%.
• Exemption of income of the National Pension Scheme Trust from income tax and any dividend paid to this Trust from dividend distribution tax
• Abolition of Commodity Transaction Tax introduced in The Finance Act, 2008 .
• Extension of the tax holiday under section 80-IB(9) to profits derived from the commercial production of mineral oil and natural gas from oil and gas blocks awarded under the New Exploration Licensing Policy-VIII round of bidding.
[edit]Indirect taxes
• Imposition of 5% basic customs duty to imported set top boxes
• Reduction of basic customs duty of LCD panel from 10% to 5%.
• Extension of CVD exemption of 4% for components of mobile phones.
• Reduction of customs duty from 10% to 5% for life saving drugs.
• Reduction of customs duty from 7.5% to 5% for life saving devices used in treatment of heart conditions.
• Increase of customs duty from 100 to 200 per ten grams for gold bars, from 250 to 500 per ten grams for gold jewellery and from 500 to 1000 per kg for silver.
[edit]Central excise duties
• Restoring the ad valorem central excise duty of 4% for cotton textiles beyond the fibre stage.
• Reduction of basic customs duty on wool waste and cotton waste from 15% to 10%.
• Increase of central excise duty rates for items attracting the rate of 4% to a mean rate of 8% with exceptions like food items and drugs.
• Reduction of basic customs duty on bio-diesel from 7.5% to 2.5%
• Full exemption to such goods manufactured at site for construction industry, when used for further construction at site.
• Reduction of ad valorem duty for vehicles of engine capacity above 2000 cc to 15,000 from 20,000.
• Reduction of excise duty for Petrol driven trucks from 20% to 8%.
• Exemption of branded jewellery from excise duty.
[edit]Service tax
• Exemption of service tax on the membership and other fees collected by Federation of Indian Export Organizations.
• Extension of service tax to goods carried by Indian railways and those carried as coastal cargo or through inland waterways
• Extension of service tax on advice, consultancy or technical assistance provided in the field of law.
• Exemption of service tax for private enterprises transporting passengers in vehicles having ‘Contract Carriage Permits’
[edit]Reactions
[edit]Political parties
Bharatiya Janata Party (BJP) president Rajnath Singh criticized the budget, claiming that the government failed to fulfil the people's expectations. BJP leader Venkaiah Naidu described the Budget as "escapist" and alleged that no steps were taken to attract investment or to provide relief for farmers. Communist Party of India (Marxist) (CPM) leader Brinda Karat termed the Budget as s pro-rich and claimed that there were no major allocations in health, education and food subsidy.Communist Party of India (CPI) leaderGurudas Dasgupta criticized the projected economic growth as 'utopian'. RJD chief Lalu Prasad Yadav described the Budget as balanced but criticized it for not providing funds for reconstruction of Bihar following the floods in Kosi.[3]
[edit]Industry
The Confederation of Indian Industry welcomed the budget, claiming that many of their recommendations were implemented.[4]NASSCOM also welcomed the initiatives like modernization of employment exchanges, the UIAD project, and smart cards for healthcare services.[5] Sudip Nandy, CEO of Aricent lauded the one year extension granted to the tax holiday scheme and the abolition of Fringe Benefit Tax and double taxation on the packaged software.[6] D Sucheth Rao of Neuland Laboratories claimed that the government has largely ignored the demands of the Pharma segment.[7]
[edit]Share market
Sensex- the benchmark index of Bombay Stock Exchange reacted adversely to the budget, falling over 869 points, a loss of 6.53%- the biggest fall on any budget day and in 2009.Nifty of National Stock Exchange fell by 258 points. The biggest impact was on banking stocks, with the sectoral index losing 8.17%[8]

2010 Union budget of India
From Wikipedia, the free encyclopedia

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The Union budget of India for 2010-11 was presented by Finance minister Pranab Mukherjee in the Lok Sabha on Friday, February 26, 2010.[1][2]
Highlights [edit]
• The Indian economy was facing grave uncertainty. Growth had started decelerating when the interim and full budget for 2009-10 were presented.
• At home there was added uncertainty because of subnormal southwest monsoon.
• Yet, the economy now in a far better position than it was eight years ago.
• India weathered the economic crisis well and emerged from the global slowdown faster than any other country.
• First challenge before the government is to quickly revert to high GDP growth path of 9%.
• Expects 10% economic growth in the near future.
• Second challenge is to harness economic growth to make it more inclusive and consolidate gains.
• Third challenge is to overcome weakness in government's public delivery mechanism; a long way to go in this.
• Impressive recovery in the past few months. Can witness faster recovery in the coming months.
• Food security has been strengthened. But bottleneck of the public delivery mechanism can hold us back.
• Fiscal year 2009-10 was challenging for the economy.
• Focus shifted to non-governmental actors and an enabling government. Government now concentrates on supporting and delivering services to the poorer sections.
• Economy stabilised in the first quarter of 2009 itself.
• 18.5% manufacturing growth in December was the highest in two decades.
• Figures for merchandise exports for January encouraging after turnaround in November and December last year.
• Double digit food inflation last year due to bad monsoon and drought-like conditions.
• Government conscious of the price rise and taking steps to tackle it.
• Erratic monsoon and drought-like conditions forced supply-side bottleneck that fuelled inflation.
• Need to review stimulus imparted to economy last year to overcome the recession.
• Need to ensure that the demand-supply imbalance is managed.
• Need to make growth more broad-based.
• Need to review public spending and mobilise resources.
• Status paper on public debt within six months.
• Government hopes to implement direct tax code from April 2011.
• Earnest endeavour to implement general sales tax in April 2011.
• Government will raise 25,000 crore from divestment of its stake in state-owned firms.
• Kirit Parekh report on fuel price deregulation will be taken up by petroleum minister Murli Deora in due course.
• Nutrient-based fertiliser subsidy scheme to come into force from April 1 this year.
• Nutrient-based fertiliser subsidy will reduce volatility of subsidy and also reduce it.
• Market capitalisation of five public-sector undertakings listed since October increased by 3.5 times.
• FDI inflows steady during the year. Government has taken series of steps to simplify FDI regime. Intends to make FDI policy user friendly by compling all guidelines into one document.
• Government has decided to set up apex-level Financial
• Stability and Development Council.
• RBI considering issuing banking licences to private companies. Non-banking finance companies will also be considered if they meet the criteria.
• Government to provide 16,500 crore to public-sector banks to maintain tier-I capital.
• Government to continue interest subvention of 2% for one more year for exports covering handicrafts, carpets, handlooms and small and medium enterprises.
• Government to provide 300 crore to organise 60,000 pulse and oilseed villages and provide integrated intervention of watershed and related programmes.
• 200 crore provided for climate-resilient agriculture initiative.
• Government committed to ensuring continued growth ofspecial economic zones
• Need to take firm view on opening up of the retail sector.
• Deficit in foodgrains storage capacity to be met with private-sector participation.
• Period for repayment of loans by farmers extended by six months to June 30, 2010, in view of the drought and floods in some parts of the country.
• Interest subvention for timely repayment of crop loans raised from 1% to 2%, bringing the effective rate of interest to 5%.
• Road transport allocation raised by 13% to 19,894 crore.
• Proposal to maintain thrust of upgrading infrastructure in rural and urban areas. IIFCL authorised to refinance infrastructure projects.
• 1,73,552 crore provided for infrastructure development.
• Allocation for railways fixed at 16,752 crore, an increase of 950 crore over the last financial year.
• Government proposes to set up Coal Development Regulatory Authority.
• Mega power plant policy modified to lower cost of generation; allocation to power sector more than doubled to 5,130 crore in 2010-11.
• Government favours competitive bidding for coal blocks for captive power plants.
• 500 crore allocated for solar and hydro projects for the Ladakh region in Jammu & Kashmir.
• Clean Energy Fund to be created for research in new energy sources.
• Allocation for new and renewable energy ministry increased by 61% to 1,000 crore.
• One-time grant of 200 crore provided to Tirupur textile cluster in Tamil Nadu.
• Allocation for National Ganga River Basin Authority doubled to 500 crore.
• Alternative port to be developed at Sagar Island in West Bengal.
• Draft of Food Security Bill ready, to be placed in the public domain soon.
• Outlay for social sectors pegged at 1,37,674 crore, accounting for 37% of the total plan allocation.
• Plan allocation for school education raised from 26,800 crore to 31,036 crore in 2010-11.
• 25% of plan outlay earmarked for rural infrastructure development.
• Plan allocation for health and family welfare increased to 22,300 crore from 19,534 crore.
• For rural development, 66,100 crore have been allocated.
• Allocation for National Rural Employment Guarantee Authority stepped up to 40,100 crore in 2010-11.
• Indira Awas Yojana's unit cost raised to 45,000 in the plains and 48,500 in hilly areas.
• Allocation for urban development increased by 75% to 5,400 crore in 2010-11.
• 1% interest subvention loan for houses costing up to 20 lakh extended to March 31, 2011; 700 crore provided.
• Allocation for development of micro and small-scale sector raised from 1,794 crore to 2,400 crore.
• 1,270 crore provided for slum development programme, marking an increase of 700%.
• Government to set up National Social Security Fund with initial allocation of 1,000 crore to provide social security to workers in the unorganised sector.
• Government to contribute 1,000 per annum to each account holder under the new pension scheme.
• Exclusive skill development programme to be launched for textile and garment-sector employees.
• Allocation for woman and child development increased by 80%
• Plan outlay for the social justice ministry raised by 80% to 4,500 crore.
• Plan allocation for minority affairs ministry raised from 1,740 crore to 2,600 crore.
• Financial-Sector Legislative Reforms Committee to be set up.
• 1,900 crore allocated for Unique Identification Authority of India.
• A unique identity symbol will be provided to the rupee in line with the US dollar, British pound sterling, euro and Japanese yen.
• Defence allocation pegged at 1,47,344 crore in 2010-11 against 1,41,703 crore in the previous year. Of this, capital expenditure would account for 60,000 crore.
• Planning Commission to prepare integrated action plan for
• Naxal-affected areas to encourage "misguided elements" to eschew violence and join the mainstream.
• Gross tax receipts pegged at 7,46,656 crore for 2010-11, non-tax revenues at 1,48,118 crore.
• Total expenditure pegged at 11.8 lakh crore, an increase of 8.6%.
• Fiscal deficit at 5.5%.
• Fiscal deficit seen at 4.8% and 4.1% in 2011-12 and 2012–13, respectively.
• Non-plan expenditure pegged at 37,392 crore and plan expenditure at 7,35,657 crore in budget estimates. Proposed increase of 15% in plan expenditure and 6% in non-plan expenditure.
• Cash subsidy for fuel and fertiliser instead of previous practice of bonds to continue.
• Fiscal deficit pegged at 6.9% in 2009-10 as against 7.8% in the previous fiscal.
• Government's net borrowing to be 3,45,010 crore for 2010-11.
• Income-tax department ready with two-page Saral-2 returns form for individual salaried assesses.
• Personal income-ax rates pruned:
• Income up to 1.6 lakh — nil
• Income above 1.6 lakh and up to 5 lakh — 10%
• Income above 5 lakh and up to 8 lakh — 20%
• Income above 8 lakh — 30%
• Additional deduction of 20,000 allowed on long-term infrastructure bonds for income-tax payers; this is above 1 lakh on savings instruments allowed already.
• Investment-linked tax deductions to be allowed to two-star hotels anywhere in the country.
• Weighted deduction of 125% for payments to approved associations doing social and statistical research.
• One-time interim relief to housing and real-estate sector.
• Businesses with a turnover of up to 60 lakh and professionals earning up to 15 lakh to be exempted from the obligation to audit their accounts.
• Housing projects allowed to be completed in five years instead of four to avail of tax breaks.
• Revenue loss of 26,000 crore on direct tax proposals.
• Central excise duty on all non-petroleum products raised to 10% from 8%.
• FM increases customs duty on crude oil to 5%, on diesel and petrol to 7.5%, and on other petroleum products to 10%.
• Structural changes in excise duties on cigarettes, cigars, and cigarillos.
• Clean energy cess of 50 per ton to be levied on coal produced in India.
• Concessional excise duty of 4% on solar cycle-rickshaws.
• Balloons exempted from central excise duty.
• Customs and central excise proposals to result in a net revenue gain of 43,500 crore.
• More services to be brought under the service tax net.
• Certain accredited news agencies exempted from payment of service tax.
• Net revenue gain from tax proposals pegged at 20,500 crore.

2011 Union budget of India
From Wikipedia, the free encyclopedia

The Union Budget of India for 2011–2012 was present by Pranab Mukherjee, the Finance Minister of India on 28 February 2011.[1] This budgetary proposals would be applicable from 1 April 2011 to 31 March 2012.
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[edit]Highlights
Some salient features[2][3][4][5][6]
• Individual income tax exempt slab increased from 1.6 lacs to 1.8 lacs.
• Food inflation, corruption still a concern
• Targets: To keep inflation at 5%, fiscal deficit at 4.6% while fiscal deficit for previous year was 5.1%, revenue deficit at 1.8%.Indian economy expected to grow at 9%.
• Overall social sector spending up by 17%, education spending up by 24%.
• Direct transfer of subsidy for BPL people for kerosene and LPG
• Govt provides subsidy on food, electricity to provide for the common man. This to continue
• FDI Policy: All procedures consolidated as a single document
• SEBI-registered mutual funds can accept foreign investors
• FII investment in corporate bonds will be raised to USD 40 billion
• Legislative amendments in Banking Laws soon
• 6000 crore (US$1.1 billion) to Public sector banks to maintain CRAR (Capital to Risk Weighted Assets Ratio)
• Women SHG development fund to be set up
• Rural Infrastructure Development fund to be raised 180 billion (US$3.3 billion)
• 30 billion (US$550 million) to NABARD for textile development
• 15 mega food parks for vegetables
• 900 crores towards pulses, protein production
• 107 cold storage project has been approved to minimise food wastage. Cold storage will be recognised as infrastructure sub-sector
• Tax free bonds of 300 billion (US$5.5 billion) for infrastructure building in roadways, railways
• National Mission for Electric and Hybrid vehicle to be launched
• Self assessment in customs to be introduced
• Seven mega leather clusters will be set up, Jodhpur to have handicraft mega cluster
• Govt put into operation 5-point agenda with legislation to curb black money, 11 tax information exchange treaty signed
• A comprehensive national policy in narcotic drug trafficking in near future
• 1608070 million (US$29 billion) for food security. This forms 36 per cent of budget allocation
• 580 billion (US$11 billion) for various schemes on rural development
• Telecom connectivity to all panchayats
• Anganwadi workers will get higher remuneration of 3000 per month. 1500 for Anganwadi helpers
• 520570 million (US$9.5 billion) allocated for education
• 210 billion (US$3.8 billion) for primary education to implement free and compulsory education for children
• National Knowledge Network will link 1500 institutes by 2012
• 500+ crores to various Universities across the country
• 500 crore for National Skill Development Fund
• Eligibility of old age pension for BPL reduced to 60 years. Pension amount for people aged above 80 years increased to 500
• 10 billion (US$180 million) for Judiciary
• Caste based census will be carried out as a separate exercise in June 2011
• 80 years above will come under very senior citizen – a new category with tax exemption up to 5,00,000
• MAT increased to 18.5%
• Concessional excise duty of 10% for hybrid vehicles
• Customs duty on solar lanterns reduced to 5 per cent
• Nominal one per cent central excise duty on 130 items entering the tax net. Earlier there were 370 items which were under the bracket of state VAT but were exempted from Central Excise. Out of these 130 come under the bracket from now. Rest are expected to be included from the induction of GST
• Defence budget hiked to 1640 billion (US$30 billion)
[edit]Taxation
Main tax-related changes:
1. The basic exemption limit in the case of individuals increased from 1.60 lacs to 1.80 lacs. However, there is no increase in basic exemption limit in the case of Resident Women who is below 60 years at any time during the previous year.
2. The qualifying age limit for senior citizens has been lowered from 60 years to 65 years and increased the current exemption limit under two categories.
3. Category −1 – Age of Individual – 60 years or more but less than 80 years at any time during the previous year. The basic exemption limit is increased from 2.40 lacs to 2.50 lacs.
4. Category – 2 – Age of Individual beyond 80 years or more at any time during the previous year. The basic exemption limit is 5.00 lakhs.
5. No need to file returns if the Income is less than or equal 5.00 Lakhs.
6. In the case of domestic companies the surcharge has been reduced from 7.5% to 5%.
7. In the companies other than domestic companies the surcharge has been reduced from 2.5% to 2%.
8. The definition of charitable purpose u/s 2 (15) includes “the advancement of any other object of general public utility”. The monetary limit in respect of such activities has been enhanced from 10.00 Lakhs to 25.00 Lakhs.
9. The amount paid by an assessee as an employer by way of contribution towards pension scheme, as referred to in sec 80CCD(2) on account of an employee to the extent it doesn’t exceed 10% of the salary of employee in the previous year, shall be allowed as a deduction u/s 36 in computing the income under the head profit and gains of business or profession.
10. The Indian company which receives foreign dividend from foreign subsidiary company such dividend is taxable at the 15% as against 30% plus applicable surcharge.
11. The rate of MAT is increased to 18.5% from the existing rate of 18% of such book profit.
12. Minimum Alternative Tax has been introduced for Limited Liability Partnership (LLP) in line with MAT on companies with effect from the Assessment Year 2012–2013.
13. The Government exempts assesses having no other income other than salary from furnishing the return of income by notification. The proposed amendment shall be effective from 1 June 2011.
14. It is proposed to omit the requirement of quoting of Documentary Identification Number in notices / order / correspondences issued by Income tax department.
15. The SEZ developers are required to pay dividend distribution tax on dividends declared / distributed on or after 1 June 2011.
16. The deduction u/s 80CCF to investment in notified long term infrastructure bonds extended for the A.Y. 2012–13 also.
17. Liaison offices of a company will be required to file Annual Information in the prescribed form within the 60 days from the end of the financial year.
18. The tax holiday for power sector has been extended for further period of one year i.e. up to 31 March 2012.
Service tax
1. The following two new services have been proposed
1. Services by air conditioned restaurants having licence to serve liquor; and
2. short term accommodation hotels / inns / clubs / guest houses etc.
2. The monetary limit for adjustment of excess service tax paid is increased from 1.00 lacs to 2.00 lacs.
3. The penalty for delayed payment of service tax u/s 76 has been reduced from 2% to 1% per month or 100 per day whichever is higher.
4. The maximum penalty reduced to 50% of the tax.
5. The rate of interest is reduced by 3% for assesses with turnover of up to 60 lacs.
6. The maximum penalty for delay in filing of return increased from 2,000 to 20,000.

Budgets India: Flashback. The countdown has begun for the biggest business and economic event of the year, the release of the annual Budget on February 28, and finance minister P Chidambaram has a tough job on his hands. With general elections a year away, he must please voters, boost growth and control deficits. As the economy battles slowing growth, investors will take cues from Chidambaram’s plans to rein in spending and boost growth. Here’s a look at Budgets between 2008 and 2012 — the hits, the misses and how they affected the common man.
2012 : Finance minister: Pranab Mukherjee
Highlights
Projects a decline in the fiscal deficit to 5.1% of GDP in 2012/13. GDP expected to grow at 7.6%.
Controversial proposal to retrospectively tax cross-border transactions in which the underlying assets are located in India. The move amounts to a push to get foreign companies that have invested millions in India to pay more taxes. Or in India’s words, it’s supposed to “counter aggressive tax avoidance schemes”
Service tax rate raised to 12% from 10%, double basic customs duty on gold
No change in corporate tax rates. Personal taxation: minimum threshold of income not chargeable to tax increased to R200,000.
The 30% tax slab applicable on income above R10,00,000.
Market reaction on Budget day
The Sensex fell 210 points (1.2%) to close at 17,466 as the Budget was seen as too modest for a corporate sector looking for more concessions. During trade, the index fell nearly 250 points.
Rating agency reactions
Standard & Poor’s said the Budget was “mildly negative” for India’s credit rating, noting that the timing remained uncertain for long-awaited reforms.
Moody’s said: “mildly negative” for India’s credit rating. India’s Budget lacks new solutions to address its fiscal constraints and is credit negative for the sovereign.
2011 : Finance minister: Pranab Mukherjee
Highlights
Social spending to rise by 17% in 2011-12, helping millions of Indians. Fiscal deficit seen at 4.6% of GDP in 2011-12.
Spending on infrastructure increased by 23%.
Service tax rate kept at 10%, but scope widened. Minimum Alternate Tax (MAT) raised to 18.5% from 18%.
Personal income tax exemption limit raised to R180,000. Surcharge on domestic companies reduced to 5%.
Market reaction on Budget day
The Sensex ended up 0.69% at 17,823.40 points after rising as much as 3.4% after the Budget was unveiled.
Rating agency reactions
Standard & Poor’s said India’s fiscal deficit target for 2011-12 may be bit difficult to attain given upside risks to oil subsidy and wage bill under the social employment programmes.
2010 : Finance minister: Pranab Mukherjee
Highlights
Plans record levels of borrowing for 2010-11 and counts on big growth to help cut fiscal deficit to 5.5% of GDP.
Excise duty raised on petrol, diesel by R1 per litre. Excise duty cuts on cement, cement products and large cars partially rolled back.
Minimum alternate tax rate raised to 18% from 15%. Service tax rate kept unchanged at 10%.
Corporate tax rate unchanged. Personal income tax slabs widened.
Market reaction on Budget day
The Sensex rose as much as 2.6% after the Budget before paring gains. The index ended with gains of 175.35 points (1.08%) at 16,429.55.
Rating agency reactions
Standard
& Poor’s: “We believe the steps announced could signal a turning point that reverses the recent deterioration in India’s fiscal position.”
2009 : Finance minister: Pranab Mukherjee
Highlights
Plans outlined to speed infrastructure development and increase spending for farmers and the poor. Additional spending to push the fiscal deficit to a 16-year high of 6.8% of GDP, the finance minister said.
Minimum Alternate Tax raised to 15% from 10%.
Fringe benefit tax scrapped.
Corporate tax rates unchanged. Personal income tax exemption for senior citizens increased by R15,000; raised by R10,000 for others.
Market reaction on Budget day
After falling more than 950 points during trade, the Sensex ended with an 870-point loss (5.8%) to close at 14,043.40. It was the index’s biggest drop in six months.
Rating agency reactions
Standard & Poor’s said India’s BBB-minus sovereign rating does not face any significant rating pressure despite a sharply higher fiscal deficit unveiled by the government.
Fitch Ratings said that given India’s ever-widening physical and social infrastructure deficit, the expectations that the Budget for fiscal 2010 would provide a boost to the sector were very high.
* (The Budget was presented on July 6. The interim Budget was presented on February 16, ahead of the 2009 elections)
2008 : Finance minister: P chidambaram
Highlights
Fiscal deficit for 2008-09 seen at 2.5% of GDP. Ahead of the 2009 elections, the government proposed to waive R600,000 crore of bank loans to farmers.
The Budget raised the short-term capital gains tax, when an investment is sold for profit before one year, to 15% from 10%.
Excise duty on pharmaceuticals sector cut to
8%; Duty on small and hybrid cars to be cut. 6% duty on petrol and diesel abolished and replaced with specific duty of R1.35 per litre.
Corporate tax rates unchanged. Income tax threshold raised to R150,000.
Market reaction on Budget day
The Sensex ended down 246 points(1.4%) at 17,578.72 after falling as much as 3.2%
Rating agency reactions
Standard & Poor’s said the Budget was largely in line with expectations but more work needed to be done for upgrading ratings.
Fitch Ratings said India needs to do more for fiscal improvement to catch up with its peer group

The countdown has begun for the biggest business and economic event of the year, the release of India’s annual budget at the end of February, and Finance Minister P. Chidambaram has a tough job on his hands. With general elections a year away, he must please voters, boost growth and control deficits.
In the last five years, the finance minister has always relaxed income tax slabs — by either increasing the basic exemption limit or widening the tax slabs. As far as markets go, the 2009 budget day was the worst for stocks as the index fell around 950 points during trade. However, the focus has always been on the government’s fiscal deficit targets, which have hovered around the 5 percent mark in recent years.
As India’s economy battles slowing growth, investors will take cues from Chidambaram’s plans to rein in spending and boost growth. Here’s a look at budgets between 2008 and 2012 — the hits, the misses and how they affected the common man. 2012
FINANCE MINISTER: Pranab Mukherjee
KEY HIGHLIGHTS
• India projects a decline in the fiscal deficit to 5.1 percent of GDP in 2012/13. GDP expected to grow at 7.6 percent.
• Controversial proposal to retrospectively tax cross-border transactions in which the underlying assets are located in India. The move amounts to a push to get foreign companies that have invested millions in India to pay more taxes. Or in India’s words, it’s supposed to fight “counter aggressive tax avoidance schemes”.
• Service tax rate raised to 12 percent from 10 percent, double basic customs duty on gold.
• No change in corporate tax rates. Personal Taxation: minimum threshold of income not chargeable to tax increased to 200,000 rupees. The 30 percent tax slab applicable on income above 10,00,000 rupees.
RATING AGENCY REACTIONS
• Moody’s said: “mildly negative” for India’s credit rating. India’s budget lacks new solutions to address its fiscal constraints and is credit negative for the sovereign.
• Standard & Poor’s said the budget was “mildly negative” for India’s credit rating, noting that the timing remained uncertain for long-awaited reforms.
MARKET REACTION ON BUDGET DAY
• The BSE Sensex fell 210 points (1.2 percent) to close at 17,466 as the budget was seen as too modest for a corporate sector looking for more concessions. During trade, the index fell nearly 250 points. 2011
FINANCE MINISTER: Pranab Mukherjee
KEY HIGHLIGHTS
• Social spending to rise by 17 percent in 2011/12, helping millions of Indians. Fiscal deficit seen at 4.6 percent of GDP in 2011/12.
• Spending on infrastructure increased by 23 percent.
• Service tax rate kept at 10 percent, but scope widened. Minimum Alternate Tax (MAT) raised to 18.5 percent from 18 percent.
• Personal income tax exemption limit raised to 180,000 rupees. Surcharge on domestic companies reduced to 5 percent.
RATING AGENCY REACTIONS
• Standard & Poor’s said India’s fiscal deficit target for 2011/12 may be bit difficult to attain given upside risks to oil subsidy and wage bill under the social employment programmes.
MARKET REACTION ON BUDGET DAY
• The BSE Sensex ended up 0.69 percent at 17,823.40 points after rising as much as 3.4 percent after the budget was unveiled.
2010
FINANCE MINISTER: Pranab Mukherjee KEY HIGHLIGHTS
• India plans record levels of borrowing for 2010/11 and counts on big growth to help cut its fiscal deficit to 5.5 percent of GDP.
• Excise duty raised on petrol, diesel by 1 rupee per litre. Excise duty cuts on cement, cement products and large cars partially rolled back.
• Minimum alternate tax rate raised to 18 percent from 15 percent. Service tax rate kept unchanged at 10 percent.
• Corporate tax rate unchanged. Personal income tax slabs widened. RATING AGENCY REACTIONS
• Standard & Poor’s: “We believe the steps announced could signal a turning point that reverses the recent deterioration in India’s fiscal position.”
MARKET REACTION ON BUDGET DAY
• The BSE Sensex rose as much as 2.6 percent after the budget before paring gains. The index ended with gains of 175.35 points (1.08 percent) at 16,429.55.
2009
FINANCE MINISTER: Pranab Mukherjee
KEY HIGHLIGHTS
• Plans outlined to speed infrastructure development and increase spending for farmers and the poor. Additional spending to push the fiscal deficit to a 16-year high of 6.8 percent of GDP, the finance minister said.
• Minimum Alternate Tax raised to 15 percent from 10 percent. Fringe benefit tax scrapped.
• Corporate tax rates unchanged. Personal income tax exemption for senior citizens increased by 15,000 rupees; raised by 10,000 rupees for others. RATING AGENCY REACTIONS
• Standard & Poor’s said India’s BBB-minus sovereign rating does not face any significant rating pressure despite a sharply higher fiscal deficit unveiled by the government.
• Fitch said that, given India’s ever widening physical and social infrastructure deficit, the expectations that the budget for fiscal 2010 would provide a boost to the sector were very high.
MARKET REACTION ON BUDGET DAY
• After falling more than 950 points during trade, the BSE Sensex ended with an 870-point loss(5.8 percent) to close at 14,043.40. It was the index’s biggest drop in six months.
* (The budget was presented on July 6. The interim budget was presented on Feb. 16, ahead of the 2009 elections)
2008
Finance Minister: P. Chidambaram
KEY HIGHLIGHTS
• Fiscal deficit for 2008-09 seen at 2.5 percent of GDP. Ahead of the 2009 elections, the government proposed to waive 600 billion rupees of bank loans to farmers.
• The budget raised the short-term capital gains tax, when an investment is sold for profit before one year, to 15 percent from 10 percent. o Excise duty on pharmaceuticals sector cut to 8 percent; Duty on small and hybrid cars to be cut. Six percent duty on petrol and diesel abolished and replaced with specific duty of 1.35 rupees per litre. o Corporate tax rates unchanged. Income tax threshold raised to 150,000 rupees.
RATING AGENCY REACTIONS
• Standard & Poor’s said the budget was largely in line with expectations but more work needed to be done for upgrading ratings.
• Fitch Ratings said India needs to do more for fiscal improvement to catch up with its peer group.
MARKET REACTION ON BUDGET DAY
• The BSE Sensex ended down 246 points(1.4 percent) at 17,578.72 after falling as much as 3.2 percent.
(You can follow Aditya on Twitter @adityayk)

Union Budget Trivias
Game Changers
In 1991, Manmohan Singh made it into India's economic history books when he presented his Budget Speech in Parliament. In a move that was as unexpected as it was daring, he opened Indian markets to foreign direct investment (FDI) and effectively put an end to the erstwhile License Raj in the backdrop of a foreign exchange crisis. Over the consecutive four years, he diligently opened up the Indian economy, liberalized trade and encouraged foreign investors to explore Indian opportunities. He is also credited with bringing down the levels of import duties from their then lofty levels of 300 plus percent to 50 per cent, thereby effectively ending monopolies and encouraging a more competitive market economy, benefitting the Indian consumer. He is also credited with first introducing service tax as part of Budgetary reform

In 1997, PalaniappanChidambaram, tabled what the media famously christened as India's "dream budget". Publicized for having brought discipline in government spending and launching an ambitious tax reform, the budget presented an apparent road map for economic reforms in India and included the lowering of income tax rates and the removal of the surcharge on corporate taxes. He also introduced the Voluntary Income Disclosure Scheme, in a bid to curb tax evasion and hawala practices. Remittances into India flourished under his regime and he is crediting with insulating India from in the adverse effects of global recession in his subsequent Budget of 2008

Having been keenly debated over the last couple of years, the Direct Taxes Code is expected to replace the existing Indian Income Tax Act, 1961. It is expected to be approved in this session of parliament and come into force on April 1, 2012, being applicable for all income earned in FY 2012 - 13. The Direct Tax Code is expected to lessen the tax burden in higher tax slabs, make capital gains more investor friendly and gain tax benefits from your home loan. Touted as being extremely investor and tax payer friendly, especially from a long term perspective, it is one agenda that is being keenly awaited to be put into action by policy makers and tax payers alike

The Union Budget Code - What you need to know
The Union Budget is an estimate of revenues and expenditures of the Government during any financial year

Every February, the Budget is presented for the ensuing financial year replete with relevant statistics for the preceding years, the actual figures for the current year and planned estimates for the following year. The Budget is usually preceded by the tabling of the Railway Budget and the Economic Survey every year

The Budget is prepared on a timetable drawn by the Business Advisory Committee (BAC) of the Indian Parliament. Each Ministry involved receives a fixed schedule for discussion, inclusion and review of their spending and revenue estimates that is then finally included into one consolidated Budget document finally presented before the Indian Parliament

The Finance Ministry in general and the Budget Division in specific hold the overall responsibility of preparing the Budget with relevant inputs from every Ministry. The Budget is prepared on the basis of proposals and a recommendation received from various divisions and the availability of the necessary funds and is subject to final approvals from the Office of the Prime Minister

In case that the complete Budget is not presented to the Parliament, the Constitution empowers the LokSabha to grant a Vote-on-Account (Article 116) so that the government can continue functioning with the requisite expenses for at least two months into the next financial year with time to get Budget proposals tabled and approved. An Interim Budget only talks about the expenses that the government is likely to make during the next few months unlike the Budget which also outlines how it proposes to meet these expenses. The Interim Budget is however, followed by the full annual Budget within six months

So far Independent India has seen 63 Budgets with around 11 Interim Budgets being tabled by the respective Indian governments. Moving away from tradition, this year the Union Budget is expected to be presented on March 16, 2012 given that the budget session of Parliament has been delayed by theongoing Assembly elections in five States

First Amongst Them All
The first Union budget of independent India was presented by R. K. Shanmukham Chetty, a Tamilian, on November 26, 1947. This was more of a review of the then Indian economy as the Budget day for 1948-49 was just 95 days away

In 1948-49, Chetty began his Budget speech referring to his earlier presentation as an interim budget. From then onwards, an interim budget began to mean a budget for a short period

The record for the most Budgets presented by any Finance Minister is held by Morarji Desai who presented the Budget ten times - eight annual Budgets and two Interim Budgets. Current Union Minister of Home Affairs, P Chidambaram, comes a close second having presented the Union Budget seven times till date

Indira Gandhi is the only woman to hold the post of the finance minister

Pranab Mukherjee is the first Rajya Sabha member to hold the Finance portfolio and has previously presented the annual budgets for 1982-83, 1983-84 and 1984-85

C.D. Deshmukh was the first Indian Governor of the Reserve Bank of India to present a Budget in parliament

The first Vote-on-Account or Interim Budget was presented in 1952-53 and so far 11 such Budgets have been presented with the last one in 2009. Six times, it has been presented by a new government in power while the rest have been presented by the outgoing governments before pre or forced elections

Shri Yashwant Sinha presented the interim budget for 1991-92, followed by Manmohan Singh who presented the final budget for 1991-92 in July 1991. This was the first occasion when the interim and final budgets were presented by two ministers of two different political parties

Budget papers first began to be prepared in Hindi from 1955-56

In 2001, the Union Budget was announced at 11 am, moving away from its 50-year traditional history of always being announced at 5 pm Indian Standard Time
Snippets on interesting facts and milestones thus far
A Budgeted History –

The Union Budget of India is referred to as the annual Financial Statement in Article 112 of the Constitution of India and is the annual budget of the Republic of India

It is to be presented each year on the last working day of February by the Finance Minister of India in Parliament and has to be passed by the House before it can come into effect on April 1, the start of India's financial year

Morarji Desai holds the record of being the only finance minister to present the Union budget on his birthday - February 29 in 1964 and 1968. He is also the only person to have presented annual and interim budgets whilst being both the Finance Minister and Deputy Prime Minister of India

Rajiv Gandhi presented the budget for 1987-89 and in the process became the third only Prime Minister to present a budget after his mother and grandfather

K.C. Neogy and H.N. Bahuguna, both erstwhile Finance Ministers, held office for such short durations in between two budget days that they had no occasion to present a budget

Jawarharlal Nehru took charge of the Finance portfolio and presented the budget for 1958-59, given the last minute resignation of the then Finance Minster

The shortest ever interim budget speech was just 800 words and delivered by H. M. Patel in 1977

Until the year 2000, the Union Budget was announced at 5 pm on the last working day of the month of February, following a colonial practice of being simultaneously presented around noon in London and in India in the evening. Also since all budgets seemed to simply raise taxes, a presentation in the evening gave producers and tax collecting agencies enough time to work out change in prices

Facts 10 things about history of union budget independent India’s first budget was presented in November 1947 by R. K. Shanmukham Chetty was an Interim Budget
1. Independent India’s first budget was presented in November 1947 by R. K. Shanmukham Chetty was an Interim Budget
(Photo: Wikimedia Commons)
2. India started following the April 1- March 31 financial year from1867. Prior to 1867, the financial year would begin May 1 and end on April 30
3. Budget papers began to be prepared in Hindi from 1955-56
4. The 1957 budget featured the first attempt to distinguish between active income -salaries or business and passive income -interest or rent.
5 The Union Budget of 1965-66 launched India’s first disclosure scheme for black money
6 Rajiv Gandhi in the Budget of 1987 first introduced Corporate tax or Minimum Alternate Tax.
7 Service Tax was introduced in the 1994 Union Budget by Finance Minister Manmohan Singh. The idea was to include the growing services sector in the tax net
8 Until 2000, the Union Budget was announced at 5 pm on the last working day of the month of February. Starting 2001, the Finance Minister presents the Union Budget before Parliament at 11 am.
9 Pranab Mukherjee, P Chidambaram, Yashwant Sinha, Y B Chavan and C D Deshmukh have all presented 7 full budgets.
10 Direct Taxes are the biggest contributor to government’s tax revenues. In the financial year 2012-13, direct taxes constituted 52% of the total tax revenue vs. 36% in 2000-01

PINC Research has come out with its report on sectoral impact of union budget 2012-13.

� Contrary to the expectation, Union Budget 2012 was less severe on the industry despite its focus on revenue mobilisation.

� FY12 performance has been completely off the target with government missing its fiscal targets. For FY13, it has set 5.1% as fiscal deficit target as against estimate of 5.9% for FY12.

� Across the board hike in service tax and excise duty rates is inflationary and is likely to delay the interest rates cut.

� Amendment in The Income Tax Act to widen the definition of Income deemed to accrue from India with retrospective effect is a big setback to foreign investments in the Indian economy.

� Mobilisation from tax-free Infrastructure bonds has been doubled to Rs600bn.

� Increase in customs duty on Gold is a right step to channelise domestic savings in productive assets.

� Success of government in containing the subsidy burden within the targets will be crucial. For FY13, subsidy burden is kept at Rs1,900bn, a decline of 12%.

Agriculture Sector

Total planned outlay has been increased by 18% from Rs171bn in FY12 to Rs202bn in FY13

� Agriculture estimated to grow at 2.5% in FY12.

� Interest subvention scheme for providing short term crop loans to farmers at 7% interest per annum extended to FY13. Additional subvention of 3% to continue for prompt payment.

� To allocate Rs100bn to NABARD for refinance of RRBs enhancing their capacity to disburse short term crop loans.

� The total allocation to Rashtriya Krishi Vikas Yojana (RKVY) is being increased from Rs78.6bn in FY12 to Rs 92.2bn in FY13.

� With the �Bringing Green Revolution to Eastern India� (BGREI) generating positive results, the allocation for this scheme increased from Rs4bn to Rs10bn in FY13.

� It has been proposed to start a new centrally sponsored scheme titled �National Mission on Food Processing� to boost the food processing sector.

� Target of bank credit to agriculture increased to Rs5,750bn from Rs4,750bn.

Banking and Financial Reforms

� Introduction of amendments to the FRBM Act as part of Finance Bill, 2012 � Medium‐term expenditure framework to set forth a three‐year rolling target for expenditure indicators.

� Endeavour to limit central subsidies under 2% of GDP in FY13; to be further brought down to 1.75% of GDP over next 3 years.

� Proposes to provide Rs159bn for capitalisation of Public Sector Banks, Regional Rural Banks and other financial institutions including NABARD.

� Examining the possibility of creating a financial holding company which will raise resources to meet the capital requirements of Public Sector Banks.

� Proposes to move various bills in the Budget Session of the Parliament related to Micro Finance, National Housing Bank, SIDBI, NABARD, Regional Rural Banks, Indian Stamp etc. This attempts to roll forward the process of financial sector legislative reforms.

� Target for agricultural credit raised by Rs1,000bn to Rs5,750bn in FY13.

� Interest subvention scheme for providing short term crop loans to farmers at 7% interest p.a. to be continued in FY13. Additional subvention of 3% available for prompt paying farmers.

� DTC to be enacted at the earliest while GST is still at a discussion stage between state and centre.

2012

Agriculture
• Plan outlay for the Department of Agriculture and Co-operation increased by 18%.
• Outlay for the Rashtriya Krishi Vikas Yojana (RKVY) increased to ` 92.17 bn in FY13.
• Target for agricultural credit raised by ` 1,000 bn to ` 5,750 bn in FY13.
• Interest subvention scheme for providing short term crop loans to farmers at 7% interest per annum to be continued in FY13. Additional subvention of 3% available for prompt paying farmers. • Short term Regional Rural Bank (RRB) credit refinance fund being set up to enhance the capacity of the RRBs to disburse short term crop loans to small and marginal farmers. Kisan Credit Card
(KCC) scheme to be modified to make KCC a smart card which could be used at ATMs.
• The scheme of capitalisation of weak RRBs extended by another 2 years to enable all the states to contribute their share.
• A sum of ` 2 bn set aside for incentivising research with rewards.
• Investment-linked deduction of capital expenditure incurred in cold chain facility and warehouses for storage of food grains is proposed to be provided at the enhanced rate of
150% as against the current rate of 100%.
• Warehouse for storage of sugar to be included for the purpose of investment-linked deduction. • Allocation for Accelerated Irrigation Benefit Programme (AIBP) in FY13 stepped up by 13% to
` 142.42 bn.
• Initiative of bringing Green Revolution to Eastern India (BGREI) has resulted in increased production and productivity of paddy. Allocation for the scheme increased to ` 10 bn in FY13 from ` 4 bn in FY12.
• ` 3 bn allocated to Vidarbha Intensified Irrigation Development Programme under the RKVY.
• ` 5 bn provided to broaden scope of production of fish to coastal aquaculture.
• A new centrally sponsored scheme titled “National Mission on Food Processing” to be started in FY13 in co-operation with state governments.
• Basic customs duty on some water soluble fertilisers and liquid fertilisers, other than urea, reduced from 7.5% to 5% and from 5% to 2.5% respectively.
• Weighted deduction of 150% on expenditure incurred for agri-extension services.
Positive+
The Budget FY13 is positive for agriculture and rural development. Raising the target for agricultural credit is a welcome step as it has played a critical role in supporting agriculture production in India. Moreover, there were several gaps in the present institutional credit delivery

Social Sector
Human Resource Development and Social Justice
• Allocation of ` 158.50 bn for Integrated Child Development Service (ICDS) scheme, representing an increase of 58% over BE FY12.
• Allocation for Scheduled Castes Sub Plan at ` 371.13 bn, representing an increase of 18% over
BE FY12.
• Allocation for Tribal Sub Plan at ` 217.10 bn, representing an increase of 17.6%.
• Allocation of ` 7.50 bn proposed for Rajiv Gandhi Scheme for Empowerment of Adolescent
Girls, SABLA.
• A national information utility for computerisation of PDS is being created; to become operational by December 2012.
• Allocation under National Social Assistance Programme (NSAP) raised by 37% to ` 84.47 bn in
FY13.
• In the ongoing Indira Gandhi National Widow Pension Scheme and Indira Gandhi National
Disability Pension Scheme for BPL beneficiaries, pension amount to be raised from ` 200 to
` 300 per month.
• Lumpsum grant on the death of primary breadwinner of a BPL family, in the age group of
18-64 years, doubled to ` 20,000.
• To enhance access under Swavalamban scheme, LIC appointed as an aggregator and all public sector banks appointed as Points of Presence (PoP) and Aggregators.
• Backward Regions Grant Fund scheme to continue in the Twelfth Plan with enhanced allocation of ` 120.40 bn in FY13, representing an increase of 22% over the BE FY12.
Education
• For FY13, ` 255.55 bn provided for Right to Education - Sarva Shiksha Abhiyan (RTE-SSA), representing an increase of 21.7% over FY12.UNION BUDGET 2012-13: Impact Analysis
7
• 6,000 schools proposed to be set up at block level as model schools in the Twelfth Plan.
• ` 31.24 bn provided for Rashtriya Madhyamik Shiksha Abhiyan (RMSA), representing an increase of 29% over BE FY12.
• To ensure better flow of credit to students, a Credit Guarantee Fund proposed to be set up.
• ` 119.37 bn allocated for National Programme of Mid Day Meals in schools.
• Special grant provided to various universities and academic institutions.
Health & Sanitation
• Existing vaccine units to be modernised and new integrated vaccine unit to be set up in Chennai.
• Scope of Accredited Social Health Activist– ‘ASHA’ is being enlarged. This will also enhance their remuneration.
• Allocation for National Rural Health Mission (NRHM) proposed to be increased from ` 181.15 bn in FY12 to ` 208.22 bn in FY13.
• National Urban Health Mission is being launched.
• Pradhan Mantri Swasthya Suraksha Yojana being expanded to cover upgradation of 7 more
Government medical colleges.
• Budgetary allocation for rural drinking water and sanitation increased from ` 110 bn to ` 140 bn, representing an increase of over 27%.
Employment and Skill Development
• Allocation of ` 39.15 bn made for National Rural Livelihood Mission, representing an increase of 34%.
• To ease access to bank credit, corpus for ‘Women’s SHG’s Development Fund’ enlarged.
• Proposal to establish Bharat Livelihoods Foundation of India through Aajeevika scheme.
• Allocation for Prime Minister’s Employment Generation Programme increased by 23% to
` 12.76 bn in FY13.
• Projects approved by National Skill Development Corporation expected to train 62 mn persons at the end of 10 years.
• ` 10 bn allocated for National Skill Development Fund in FY13.
• To improve the flow of institutional credit for skill development, a separate Credit Guarantee
Fund to be set up.
• “Himayat” scheme introduced in J&K to provide skill training to 100,000 youth in the next
5 years. The entire cost to be borne by the Centre.
• Weighted deduction at the rate of 150% provided on expenditure incurred on skill development in manufacturing.UNION BUDGET 2012-13: Impact Analysis
8
Positive
The Budget has made significant effort to realise the dream of inclusive development despite the constraints being faced on the fiscal front. This time around, the Finance Minister has opted to focus on existing schemes by way of increased allocations. Additional budgetary resources, particularly towards RTE-SSA are likely to address the critical gaps in social infrastructure and could go a long way in meeting the needs of the rural poor. Besides, it is a welcome move that school education has been exempted from service tax. The weaker section has received a special attention in the Budget through proposals such as higher allocation towards National Social
Assistance Programme and doubling of lumpsum grant. The Budget has rightly emphasised on activities related to skill development, which are essential for improving the educational and economic conditions. The launch of credit guarantee fund and exempting vocational training institutions from service tax will make skills training affordable.
Infrastructure
Infrastructure Financing
• Capital market reforms like Qualified Foreign Investors (QFIs) allowed to access the Indian capital bond market, simplifying IPO process, two way fungibility in Indian Depositary Receipts permitted with the objective of encouraging greater foreign participation in the Indian capital market. • Proposal to add sectors such as irrigation (including dams, channels and embankments), terminal markets, common infrastructure in agriculture markets, soil testing laboratories and capital investment in fertiliser sector as eligible sectors for Viability Gap Funding (VGF) under the Scheme for Support to PPP in infrastructure. Oil and gas/LNG storage facilities and oil and gas pipelines, fixed network for telecommunication and telecommunication towers will also be made eligible sectors for VGF.
• Approved guidelines for establishing joint venture companies by defence PSUs in PPP mode.
• Permit to issue tax free bonds of ` 600 bn by various Government undertakings for financing infrastructure projects in FY13 including ` 100 bn for National Highway Authority of India
(NHAI), ` 100 bn for Indian Railway Finance Corporation (IRFC), ` 100 bn for India Infrastructure
Finance Company Limited (IIFCL), ` 50 bn for HUDCO, ` 50 bn for National Housing Bank, ` 50 bn for SIDBI, ` 50 bn for ports and ` 100 bn for the power sector.
• IIFCL has put in place a structure for credit enhancement and take-out finance for easing access of credit to infrastructure projects.
• Creation of a consortium for direct lending and grant of in-principle approval to developers before the submission of bids for PPP projects.
• External Commercial Borrowings (ECB) allowed to part finance rupee debt of existing power projects. • ECBs allowed for low-cost affordable housing projects.UNION BUDGET 2012-13: Impact Analysis
9
• Credit Guarantee Trust Fund set up to ensure better flow of institutional credit for housing loans. • ECBs permitted for working capital requirement of airline industry for a period of one year, subject to a total ceiling of US$ 1 bn.
• To provide low cost funds to stressed infrastructure sectors such as power, airlines, roads and bridges, port and shipyards, affordable housing, fertiliser and dams, rate of withholding tax on interest payment on ECBs reduced from 20% to 5% for 3 years.
• Rationalisation of Dividend Distribution Tax to remove its cascading effect in a multi-tier corporate structure.
Roads and Highways
• Target of covering a length of 8,800 kms under National Highway Development Programme
(NHDP) during FY13.
• Allocation of the Road Transport and Highways Ministry enhanced by 14% to ` 253.6 bn.
• ECB allowed for capital expenditure on the maintenance and operations of toll systems for roads and highways, if they are part of the original project.
Rural Infrastructure
• Budgetary allocation for rural drinking water and sanitation increased from ` 110 bn to ` 140 bn, representing an increase of over 27%.
• Allocation for Pradhan Mantri Gram Sadak Yojna (PMGSY) increased by 20% to ` 240 bn to accelerate connectivity in the states.
• Allocation under the Rural Infrastructure Development Fund (RIDF) enhanced to ` 200 bn.
` 50 bn earmarked exclusively for creating warehousing facilities under the RIDF.
Positive
Government strategy to increase investment in infrastructure through a combination of public investment and public private partnerships indicates an increased thrust on the sector. Over
14% rise in budgetary allocation to the Ministry of Road Transport and Highway is expected to encourage the transportation and logistics sector in India. Also, a 27% increase in budgetary allocation for rural drinking water and sanitation and a 20% increase in PMGSY is expected to improve overall rural infrastructure and connectivity in the states.
To boost infrastructure financing, the Budget provides various financing measures. Proposal to add certain sectors as eligible sectors for Viability Gap Funding is expected to provide support to
PPP in infrastructure. Additionally, allowing for tax free bonds to the tune of ` 600 bn by various
Government undertakings would further support infrastructure financing. Also reduction of withholding tax on interest payments on ECBs is expected to provide low-cost funding to stressed infrastructure sectors.UNION BUDGET 2012-13: Impact Analysis
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Rationalisation of Dividend Distribution Tax to remove its cascading effect is expected to make investment in infrastructure sector more attractive.
Given the increased plan outlay for road transport and highway and for rural infrastructure, combined with increased thrust on plugging the gap in infrastructure financing, the Budget is expected to be positive for the infrastructure sector.
Services
Banking, Financial Services and Insurance (BFSI)
Banking
Agricultural and Rural Finance
• The target for credit flow to farmers has been raised from ` 4,750 bn in FY12 to ` 5,750 bn in FY13.
• The existing interest subvention scheme of providing short term crop loans to farmers at 7% interest has been extended to FY13. An additional subvention of 3% will be available to prompt paying farmers.
• The Government has allocated ` 100 bn to NABARD for refinancing of Regional Rural Banks
(RRBs) to disburse short term crop loans to the small and marginal farmers.
• Kisan Credit Card (KCC) scheme will be modified to make KCC a smart card which could be used at ATMs.
• The Government has proposed to provide interest subvention to Women Self Help Groups
(SHGs) to avail loans up to ` 0.30 mn at 7% per annum. Women SHGs repaying loans in time will get additional 3% subvention, reducing the effective rate to 4% for certain districts.
Financial Inclusion
• In FY13, the Government has extended the “Swabhimaan” campaign to habitations with population of more than 1,000 in north eastern and hilly states and to other habitations which have crossed population of 2,000 as per Census 2011.
Housing Credit
• The existing scheme of interest subvention of 1% on housing loan up to ` 1.5 mn where the cost of the house does not exceed ` 2.5 mn has been extended for FY13.
• The provision under Rural Housing Fund has been enhanced from ` 30 bn to ` 40 bn.
• Credit Guarantee Trust Fund set up to ensure better flow of institutional credit for housing loans.
• The Government has permitted ECBs for low-cost affordable housing projects.
• The limit of indirect finance under priority sector has been enhanced from ` 0.5 mn to ` 1 mn.UNION BUDGET 2012-13: Impact Analysis
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Capital Support and Funding
• A sum of ` 158.80 bn capital has been allocated to all Public Sector Banks (PSBs) and financial institutions for FY13, keeping in view Basel III norms. This is in addition to the infusion of ` 120 bn in PSBs in FY12. The Government is evaluating a possibility of creating a financial holding company to raise resources to meet the capital requirements of PSBs.
• A central Know Your Customer (KYC) depository will be developed in FY13 to avoid multiplicity of registration and data upkeep to bring banking payment structure at par with global standards. • Extension of the scheme of capitalisation of weak RRBs by another two years to enable all states to contribute their share.
• To ease access to bank credit, corpus for ‘Women’s SHG’s Development Fund’ enlarged to ` 3 bn.
• To enhance availability of equity to the MSME sector, the Government has set up a ` 50 bn
India Opportunities Venture Fund with SIDBI.
• Enhanced allocation under the Rural Infrastructure Development Fund (RIDF) to ` 200 bn. An amount of ` 50 bn from the above allocation is exclusively for creating warehousing facilities under the RIDF.
• Tax free bonds of ` 600 bn to be allowed for financing infrastructure projects during FY13. This includes ` 100 bn for NHAI, ` 100 bn for IRFC, ` 100 bn for IIFCL, ` 50 bn for HUDCO, ` 50 bn for National Housing Bank and ` 50 bn for SIDBI, among others.
Others
• A scheme for education loans is being implemented by banks. To ensure better flow of credit to deserving students, a Credit Guarantee Fund is being set up.
• For improvement of the flow of institutional credit for skill development, a separate Credit
Guarantee Fund is being set up to benefit youth in acquiring market oriented skills.
• UID, Aadhar – Adequate funds to be allocated to complete enrolment of another 400 mn persons. Legislative Reforms
• The Micro Finance Institutions (Development and Regulation) Bill, 2012; The National Housing
Bank (Amendment) Bill, 2012; The Small Industries Development Bank of India (Amendment)
Bill, 2012; National Bank for Agriculture and Rural Development (Amendment) Bill, 2012;
Regional Rural Banks (Amendment) Bill, 2012 to be proposed in the Budget session of the
Parliament.
• Official amendment to “The Pension Fund Regulatory and Development Authority Bill, 2011”,
“The Banking Laws (Amendment) Bill, 2011” and “The Insurance Law (Amendment) Bill, 2008” to be moved in this session.UNION BUDGET 2012-13: Impact Analysis
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Positive+
The Budget is expected to have a positive impact on the banking industry. A number of measures have been announced towards enabling better flow of credit to various sectors, including agriculture, housing, education and MSMEs which is expected to encourage overall credit growth in FY13. The guidelines on priority sector lending are expected to be issued in FY13.
In addition, the Budget has emphasised on the financial strengthening of PSBs, RRBs and other financial institutions. The allocations made towards capital infusion in PSBs and RRBs is expected to bring more stability to the sector. The Government aims to keep all the PSBs adequately capitalised so that the growth momentum of the economy is sustained. This will help maintain their minimum tier - I capital. In turn, lenders can expand their asset base maintaining the growth momentum. Banks would be able to manage their asset-liability better on the back of availability of long-term funds for infrastructure lending. Further, credit schemes and interest subvention on loans to small farmers would enhance their ability to pay interest on time thereby helping PSBs to contain their NPAs and helping recovery efforts of banks.
Overall, the Budget is likely to have a positive impact on the banking industry by boosting credit growth and supporting capital base of banks.
Capital Markets
Investment Environment
• Rajiv Gandhi Equity Saving Scheme to allow for income tax deduction of 50% to new retail investors, who invest up to ` 50,000 directly in equities and whose annual income is below
` 1 mn to be introduced. The scheme will have a lock-in period of three years.
Others
• Various steps have been taken for deepening the reforms in the capital markets, including simplifying process of IPOs, allowing QFIs to access the Indian bond market, etc.
• The Government has made it mandatory for companies to issue IPOs of ` 100 mn and above in electronic form through nationwide broker network of stock exchanges.
• The Government provides opportunities for wider shareholder participation through electronic voting facilities which would be mandatory initially for top listed companies.
• Permit for two-way fungibility in Indian Depository Receipts (IDRs), subject to a ceiling.
• Removal of the cascading effect of Dividend Distribution Tax (DDT) in a multi-tier corporate structure. Continuation to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15% up to March 31, 2013.
• Reduction in securities transaction tax by 20% from 0.125% to 0.1% on cash delivery transactions.UNION BUDGET 2012-13: Impact Analysis
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Positive
The measures undertaken by the Government to boost the equity market are positive. The initiatives are for efficient market intermediation between savers and investors. Reduction of STT will reduce transaction cost, revive intra-day trading, promote retail participation. Reduction on taxation of foreign dividends would have a positive impact. Measures have been taken to boost greater foreign participation in the Indian capital market and to encourage flow of savings in financial instruments.
Finance
Fiscal Consolidation
• The Government is to introduce amendments to the FRBM Act as part of Finance Bill, 2012.
Concept of “effective revenue deficit” and “medium term expenditure framework” are two important features of amendment to FRBM Act in the direction of expenditure reforms.
Taxation
• Exemption limit for the general category of individual taxpayers increased from ` 180,000 to
` 200,000 giving tax relief of ` 2,000. Upper limit of 20% tax slab proposed to be raised from
` 0.8 mn to ` 1 mn.
• Proposal to allow individual tax payers a deduction of up to ` 10,000 for interest from savings bank accounts.
• Senior citizens not having income from business proposed to be exempted from payment of advance tax.
• Provision of low cost funds to stressed infrastructure sectors, rate of withholding tax on interest payment on ECBs proposed to be reduced from 20% to 5% for three years for certain sectors.
• Investment-linked deduction of capital expenditure for certain businesses proposed to be provided at the enhanced rate of 150%.
• Proposal to extend the levy of Alternate Minimum Tax to all persons, other than companies, claiming profit-linked deductions.
• Service tax confronts challenges of its share being below its potential, complexity in tax law, and need to bring it closer to Central Excise Law for eventual transition to GST.
• Proposal to tax all services except those in the negative list comprising of 17 heads.
• Service tax law to be shorter by nearly 40%.
• Revision Application Authority and Settlement Commission being introduced in service tax for dispute resolution.
• Study team to examine the possibility of common tax code for central excise and service tax.
• New scheme announced for simplification of refunds.UNION BUDGET 2012-13: Impact Analysis
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• Rules pertaining to point of taxation are being rationalised.
Insurance
• Proposal to move Insurance Laws (Amendment) Bill and LIC Amendment Bill in the current session. • Services provided by life insurance companies in the area of investment are also proposed to be brought into the service tax net on the same lines as ULIPs.
• The Rashtriya Swasthya Bima Yojana (RSBY) to be extended to cover unorganised sector workers in hazardous mining and associated industries like slate and slate pencil, dolomite, mica and asbestos etc.
Black Money
• Proposal to lay a white paper on black money in current session of Parliament.
• Measures proposed to deter the generation and use of unaccounted money.
Others
• Indian Stamp (Amendment) Bill, 2012; and Public Debt Management Agency of India Bill, 2012 to be proposed in the Budget session of the Parliament.
• On the death of the primary breadwinner of a below poverty line family, in the age group of
18 to 64 years, a lumpsum grant of ` 10,000 has been doubled to ` 20,000 with a matching contribution by the State Governments under the National Family Benefit scheme.
• Restriction on Venture Capital Funds to invest only in nine specified sectors proposed to be removed. Marginally Positive
The Budget has few announcements having a marginally positive impact on the finance sector.
Individuals will benefit marginally from increased exemption limit. However, the rise in service tax will result in high service charges.
Hospitality
• Cascading of taxes has been significantly reduced by permitting utilisation of input tax credits in a number of services such as catering, restaurants, hotel accommodation, pandal and shamiana and transport sectors.
Neutral
An announcement was made permitting utilisation of input tax credits in various services such as catering, restaurants, hotel accommodation, pandal and shamiana and transport sectors thereby UNION BUDGET 2012-13: Impact Analysis
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reducing cascading of taxes. This announcement is expected to marginally reduce the total cost of travel operators thereby improving their profit margin. The overall impact of the Budget will be neutral.
IT & ITeS
• Introduction of advance pricing agreement (APA) in the Finance Bill of 2012.
• Central plan outlay by the Department of Information Technology (DIT) increased by 86.7% to
` 53.6 bn.
• ` 391.1 bn to be spent on modernisation of signaling system of railways.
• A National Information Utility (NIU) for the computerisation of Public Distribution System
(PDS) is being created. It is expected to become operational by December 2012.
Marginally Positive
Provision regarding implementation of APAs to be introduced in Finance Bill 2012 will help in addressing concerns over the certainty of transfer pricing arrangements. Proposal to improve service tax refunds process as well as enhance the scope for input credits for service tax will benefit the IT-ITeS sector since substantial amount of cash flow is tied up in refund claims. The central plan outlay for DIT growing by 86.7%, allocation of funds for modernising signaling system of railways and creating a NIU for computerisation of PDS will have a positive impact on the
IT sector. The industry was expecting to see the revival of tax benefits under the STPI scheme.
However, there was no mention in respect of extension of this clause. Thus, the overall Budget has a marginally positive impact on the sector.
Media & Entertainment
• Entertainment and amusement services have been included in the negative list of service tax.
• The industry has been exempted from service tax on copyrights relating to recording of cinematographic films.
Marginally Positive
Exclusion of the entertainment and amusement services from service tax is expected to boost the industry. Also, exemption of copyrights relating to recording of cinematographic films from service tax will impact the industry positively.
Overall, the announcements in the Budget are expected to have a marginally positive impact on the sector.
Real Estate and Construction
• External Commercial Borrowings (ECBs) are allowed for low cost affordable housing projects.
• For affordable housing, the rate of withholding tax on interest payments on ECBs is proposed to reduce from 20% to 5% for three years.UNION BUDGET 2012-13: Impact Analysis
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• Set up Credit Guarantee Trust Fund to ensure better flow of institutional credit for housing loans. • Enhance provisions under Rural Housing Fund from ` 30 bn to ` 40 bn.
• Extend the scheme of interest subvention of 1% on housing loan up to ` 1.5 mn where the cost of the house does not exceed ` 2.5 mn for another year.
• Enhance the limit of indirect finance under priority sector from ` 0.5 mn to ` 1 mn.
• Investment-linked deduction of capital expenditure incurred in affordable housing business is proposed to be provided at the enhanced rate of 150%, as against the current rate of 100%.
• Construction services relating to residential dwelling and low-cost mass housing up to an area of 60 sq. mtr. under the scheme of Affordable Housing in partnership are also included in the exemptions. For people already owning an apartment, there is a rise in exemption for the monthly charges payable by a member to a housing society from ` 3,000 to ` 5,000.
Positive
The Budget’s focus on providing low-cost and affordable housing is laudable. The extension of enhanced limit for interest subvention and increase in the priority sector lending limit are expected to benefit buyers in tier-II, III cities and towns. The accessibility of ECBs and ease in withholding tax on interest payments may encourage private developers to invest in affordable housing projects. The incentives given to the construction sector are likely to have a multiplier effect on the economy via growth in downstream sectors and increase in employment. Overall the
Budget is positive for the sector.
Telecom
• Fixed network for telecommunication and telecom towers to be made eligible for Viability
Gap Funding (VGF).
• Exemption of customs duty on mobile phone and memory cards.
Neutral
The investment scenario for infrastructure development has received a boost through its eligibility for viability gap funding scheme. Under this scheme, projects receive financial support in the form of grants, one time or deferred, through public private partnerships with a view to make them commercially viable. Customs duty exemption on mobile and memory card is also expected to have a positive impact on the mobile handset industry. However, service tax and excise duty hike are expected to offset the gains for the telecom sector in this Budget.UNION BUDGET 2012-13: Impact Analysis
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Manufacturing
Automotive
• Increase in the excise duty on petrol-driven cars with length exceeding 4,000 mm and engine capacity under 1,200 cc from 22% to 24%, and on petrol-driven vehicles having length exceeding
4,000 mm and engine capacity exceeding 1,500 cc from 22% plus ` 15,000 to 27% .
• Increase in the excise duty on diesel-driven cars with length exceeding 4,000 mm and engine capacity under 1,500 cc from 22% to 24%, and on diesel-driven vehicles having length exceeding
4,000 mm and engine capacity exceeding 1,500 cc from 22% plus ` 15,000 to 27%.
• Increase in the excise duty on petrol/LPG/CNG-driven cars, with length not exceeding 4,000 mm and engine capacity not exceeding 1,200 cc from 10% to 12% and on diesel-driven vehicles having length not exceeding 4,000 mm and engine capacity not exceeding 1,500 cc from 10% to 12%.
• Reduction in the excise duty from 10% to 6% on replacement batteries for supply to electric vehicle manufacturers who are registered with IREDA or any State Nodal Agency notified for the purpose by the Ministry of New & Renewable Energy for Central finance assistance till
March 31, 2013.
• Building of commercial vehicle bodies to attract an ad valorem duty of 3% as against the earlier specific rate of ` 10,000 on chassis.
• Reduction in the excise duty from 10% to 6% on specified parts of hybrid vehicles including battery pack, battery charger, AC/DC motor, AC/DC motor controller, engine for HV, transaxle for HV, power control unit, control ECU for HV, generator, brake system for recovering, energy monitor and electric compressor.
• Increase in the basic customs duty from 60% to 75% on completely built units of large cars/
MUVs/SUVs with engine capacity exceeding 3,000 cc for petrol and 2,500 cc for diesel, and whose value exceeds US$ 40,000 per vehicle.
• Lithium ion batteries imported for the manufacture of battery packs for supply to electric or hybrid vehicle manufacturers to enjoy full exemption from basic customs duty and special
CVD with concessional excise duty/CVD of 6%.
Neutral
Vehicle manufacturers are likely to pass on the increased excise duties to the consumers by way of vehicle price hikes. However, this is not expected to have any significant impact on demand in the medium-to-long term. Reduction in the excise duty on parts used in hybrid vehicles is aimed at making these vehicles more affordable.
Hike in the customs duty on large passenger vehicles would increase vehicle prices. However, given the relatively lower price sensitivity of the customers in this segment, this is not expected to have any significant impact on demand. The Government’s increased focus on infrastructure development would benefit manufacturers of commercial vehicles in the medium-to-long term.UNION BUDGET 2012-13: Impact Analysis
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The Budget has proposed to allocate ` 10 bn to the National Skill Development Fund. The increased allocation is expected to address, to some extent, the manpower challenges faced by the automotive industry. Extension of weighted deduction of 200% for in-house R&D expenditure is expected to encourage the Original Equipment Manufacturers (OEM) to increase focus on R&D initiatives. From a short-to-medium term perspective, the Budget announcements would have a neutral impact on the industry.
Capital and Engineering Goods
• Full exemption from basic customs duty on equipment imported for road and highway construction projects.
• Import of equipment for expansion or setting up of fertiliser projects to be fully exempt from basic customs duty of 5% for three years.
• Basic customs duty to be reduced from 10% or 7.5% to 2.5% on machinery and instruments needed for surveying and prospecting for minerals.
• Basic customs duty to be reduced from 10% to 7.5% for equipment required for installation of train protection and warning system and upgradation of track structure for high speed trains.
• Full exemption from import duty on certain categories of specified equipment needed for road construction, tunnel boring machines and parts of their assembly.
• Tax concessions proposed for parts of aircraft and testing equipment for third party maintenance, repair and overhaul of civilian aircraft.
• Basic customs duty to be reduced from 7.5% to 2.5% on plant and machinery imported for setting up or substantial expansion of iron ore pellet plants or iron ore beneficiation plants.
• Full exemption from basic customs duty to automatic silk reeling and processing machinery as well as its parts.
• Plant and equipment required for the initial setting up of solar thermal projects are fully exempted from special CVD.
• Reduction in basic customs duty from 7.5% to 5% on specified coffee plantation and processing machinery. • Reduction in basic customs duty from 7.5% to 2.5% on sugarcane planter, roof or tuber crop harvesting machine and rotary tiller and weeder.
• Concessional import duty available for installation of mechanised handling systems and pallet racking systems in mandis or warehouses for horticultural produce to be extended.
• Full exemption from import duty on tunnel boring machines and parts of their assembly.
Positive
Several positive measures focusing on the agricultural and related sectors were announced, including reduced customs duty on specified agricultural machinery and processing equipment. UNION BUDGET 2012-13: Impact Analysis
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Apart from this, equipment imported for road construction and fertilizer projects also received a whole bunch of duty exemptions. However, increase in standard rate of excise duty from 10% to
12% has partially offset the significant positive impact of reduction or exemption in import and customs duties to some extent on the capital and engineering goods sector.
The Union Budget FY13 also outlines the importance of the infrastructure sector with greater emphasis on capital investment required in construction of national highways and encouraging
PPP projects. Demand for construction equipment is likely to be boosted owing to several positive proposals in the infrastructure sector. Allocation of ` 795.79 bn for capital expenditure made in the defence services will also provide a boost to the capital and engineering goods industry in
FY13.
Overall, the Budget is anticipated to have a positive impact on the capital and engineering goods sector Cement
• Excise duty on the packaged cement rationalised. It is proposed to prescribe a unified rate of
12% plus ` 120 per metric tonne (PMT) for non-mini cement plants and 6% plus ` 120 PMT for mini-cement plants. It is proposed to charge this duty on the retail sale price less abatement of 30%.
• Full exemption from basic customs duty and a concessional countervailing duty of 1% on steam coal for a period of two years till March 31, 2014.
Marginally Positive
Currently packaged cement, whether manufactured by mini-cement plants or others, attracts differential excise duty depending on the retail sale price per bag. The move to prescribe a unified rate is likely to have a positive impact on the industry. Also, removal of customs duty is likely to have a positive impact on cement input prices since the cement industry is heavily dependent on imported coal.
Further, initiatives such as the investments in infrastructure to the tune of ` 50,000 bn in the 12th
Five Year Plan, proposed tax free bonds, development of national highways etc will also boost the demand for cement in the country.
Consumer Goods
• Basic customs duty reduced from 7.5% to 5% on specified coffee plantation and processing machinery. • Full exemption from basic customs duty on waste paper, LCD and LED TV panels and parts of memory card for mobile phones.
• Reduction of basic customs duty on specified raw materials for the manufacture of adult diapers from 10% or 7.5% to 5% with countervailing duty of 6% and nil special countervailing duty.UNION BUDGET 2012-13: Impact Analysis
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• Basic customs duty on bicycles increased from 10% to 30% and on bicycle parts from 10% to
20%.
• Basic customs duty on soya protein concentrate and isolated soya protein reduced from 30% and 15% respectively to 10%. Simultaneously, excise duty on all processed soya food products is being reduced to 6%.
• Concessional basic customs duty of 2.5% along with reduced excise duty of 6% on iodine.
• Basic customs duty on probiotic products reduced from 10% to 5%.
• Coating chemical used for compact fluorescent lamps is proposed to be fully exempt from basic customs duty.
• Excise duty on LED lamps reduced to 6%.
• Increase in basic excise duty on cigarettes of more than 65 mm length by adding an ad valorem component of 10% to the existing specific rates. The ad valorem duty would be chargeable on
50% of the retail sale price declared on the pack.
• Increase in basic excise duty on hand-rolled bidis from ` 8 to ` 10 per thousand and on machinerolled bidis from ` 19 to ` 21 per thousand. The existing exemption available to hand-rolled bidis for clearances up to 2 mn bidis per annum is being retained.
• The rates of duty specified under the compounded levy scheme per packing machine for pan masala, gutkha, chewing tobacco, unmanufactured tobacco and zarda scented tobacco in pouches are being stepped up taking into account improvements in the efficiency of machines used by this industry.
• A new centrally sponsored scheme titled “National Mission on Food Processing” would be started, in cooperation with the State Governments in FY13.
• Investment-linked deduction of capital expenditure incurred on cold chain facility is proposed to be provided at the enhanced rate of 150% as against the current rate of 100%.
• Bee keeping and production of honey and beeswax is proposed to be added for the purposes of investment-linked deduction.
• Weighted deduction at the rate of 150% of expenditure incurred on skill development in the manufacturing sector is proposed to be provided in accordance with specified guidelines.
• Exemption limit for the general category of individual taxpayers enhanced from ` 0.18 mn to
` 0.20 mn. Also, the upper limit of 20% tax slab raised from ` 0.80 mn to ` 1.00 mn.
Positive
Enhancement of the exemption limit for the general category of individual taxpayers is expected to leave the consumers with a higher disposable income adding to the demand for consumer goods. The reduction in central excise duty on processed soya food products, iodine and LED lamps is likely to result in a fall in prices of these and related products.UNION BUDGET 2012-13: Impact Analysis
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Reduction/exemption in customs duty on coffee plantation and processing machinery, LCD and
LED TV panels, parts of memory card for mobile phones, raw materials for the manufacture of adult diapers, soya protein concentrate and isolated soya protein, probiotic products, iodine and coating chemical used for compact fluorescent lamps is likely to boost domestic production of the final products manufactured using the above raw materials/machinery, thereby providing a boost to the domestic industry.
Increase in the basic customs duty on bicycles and bicycle parts will discourage imports of such products, thereby protecting the domestic manufacturers.
Increased thrust on measures to incentivise food processing by launching the ‘National Mission on Food Processing’ and by increasing the investment-linked deduction on cold chain facilities is likely to have a positive impact on the processed food category of the consumer goods sector in the medium to long term period.
Deduction on the expenditure incurred on skill development in the manufacturing sector is likely to impact the sector positively.
In the medium term, the consumer goods sector is expected to remain buoyant on the backdrop of positive announcements in the FY13 Budget coupled with strong domestic consumption.
Negative announcements of an increase in basic excise duty on cigarettes and hand-rolled bidis and increase in the rates of duty specified under the compounded levy scheme on pan masala, gutkha, chewing tobacco, unmanufactured tobacco and zarda scented tobacco in pouches are likely to have a marginally negative impact on the sector. However, on the overall basis, FY13
Budget is positive for the consumer goods sector.
Gems & Jewellery
• Increase basic customs duty from 2% to 4% on standard gold bars, gold coins of purity exceeding
99.5% and platinum.
• Increase basic customs duty from 5% to 10% on non-standard gold.
• Increase basic customs duty from 1% to 2% on gold ores and concentrates for use in the manufacture of gold for refining.
• Increase excise duty from 1.5% to 3% on refined gold.
• Imposition of basic customs duty of 2% on cut and polished colored gem stones.
• Full exemption from excise duty on branded silver jewellery.
• Excise duty of 1% on branded precious metal jewellery to be extended to include unbranded jewellery. Negative
Driven by the high spending on gold consumption, the customs duty on standard and non-standard gold has been doubled in order to curb imports of gold and other precious metals. To minimise its impact on small artisans and goldsmiths and simplify operations, certain measures are proposed UNION BUDGET 2012-13: Impact Analysis
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to be taken. The overall additional tax burden is expected to have a negative impact on the gems and jewellery sector, as it will make gold and jewellery more expensive. However, exempting silver jewellery from the levy of excise duty is a positive move.
Leather
• Proposal to set up ` 50 bn India Opportunities Venture Fund with SIDBI to aid Micro, Small and
Medium Enterprises (MSMEs).
• Government has introduced Public Procurement Policy for Micro and Small Enterprises (MSEs) under which ministries and CPSEs are required to make a minimum of 20% of their annual purchase from MSEs. Also, 4% of this purchase will be earmarked for procurement from MSEs owned by SC/ST entrepreneurs.
• The Government has proposed to provide assistance in setting up of dormitories for women workers in the 5 mega clusters relating to handloom, power loom and leather sectors.
Marginally Positive
Since the leather sector occupies a prominent place among MSMEs, the creation of ` 50 bn Venture
Fund with SIDBI and an introduction of Public Procurement Policy for Micro and Small Enterprises are expected to have a marginally positive impact on the leather sector as it will enhance the availability of equity funding and provide greater market access to the industry players.
The assistance announced towards setting up of dormitories is a step towards providing a higher level of social infrastructure facilities which is a positive for the leather industry viewed from the perspective of organising the leather industry in a structured manner.
The announcements made in the Budget would have a marginally positive impact on the leather sector, particularly in the medium term.
Metals & Mining
• Coal India Limited (CIL) has been advised to sign fuel supply agreements with power plants which have entered into long-term Power Purchase Agreements with distribution companies
(DISCOM) and would get commissioned on or before March 31, 2015. Further, an interministerial group has been set up to undertake periodic review of the allocated coal mines and shall make recommendations on de-allocations, if required.
• Full exemption of basic customs duty and a 1% concessional Counter Vailing Duty (CVD) to steam coal for a period of two years i.e. till March 31, 2014.
• Full exemption of basic customs duty on coal mining projects.
• Reduction in the basic customs duty from 10% or 7.5% to 2.5% on machinery and instruments used in the mining sector for surveying and prospecting of minerals.
• Reduction in the basic customs duty from 7.5% to 2.5% on plant and machinery imported for setting up or substantial expansion of iron ore pellet plants or iron ore beneficiation plants.UNION BUDGET 2012-13: Impact Analysis
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• Reduction in the basic customs duty from 7.5% to 5% on coating material used to manufacture electrctrical steel.
• Reduction in the basic customs duty from 2.5% or 7.5% to nil on nickel ore and concentrate nickel oxide/ hydroxide.
• Increase in the export duty from ` 3,000 per tonne to 30% ad valorem on chromium ore.
• Increase in the basic customs duty from 5% to 7.5% on non-alloy, flat-rolled steel.
• Introduction of TDS on trading in coal, lignite and iron ore.
Positive
A higher budgetary allocation for the infrastructure sector would have positive implications for the mining as well as the metal sector driven by demand for core metals and minerals like steel, iron ore, coal, etc. Through the proposals, such as power companies signing an agreement with CIL, reducing the duty on steam coal, and exemption of basic customs duty on coal mining projects is expected to increase domestic supply of coal in tandem with the rising coal demand.
This announcement is considered as positive for the coal mining companies.
Further, reducing the basic customs duty on surveying and prospecting used for the survey of minerals is expected to have a positive impact on the mining sector as it would improve the process and quality of extracting and refining of minerals and further encourage more players to enter this market. Reduction of import duty on plants and machinery for iron ore, basic customs duty on coating material as well as nickel ore will encourage more players to enter the metal and mining sector and consequently decrease the raw material cost.
Increase in the export duty on chromium ore will encourage companies to increase its domestic supply. Further, introduction of TDS in coal, lignite and iron ore trading will help the companies to track the unaccounted money. Overall, the Budget is anticipated to have a positive impact on the metals and mining sector.
MSMEs
• To set up a ` 50 bn India Opportunities Fund with Small Industries Development Bank of India
(SIDBI).
• Allocation for the Prime Minister’s Employment Generation Programme increased by 23% from ` 10.37 bn to ` 12.76 bn.
• Under the Public Procurement Policy for Micro and Small Enterprises (MSEs), Ministries and
Central Public Sector Enterprises (CPSEs) are required to make a minimum of 20% of their annual purchase from MSEs. Of this purchase, 4% to be earmarked for procurement from
MSEs owned by SC/ST entrepreneurs.
• Increase in the turnover limit from ` 6 mn to ` 10 mn for SMEs for compulsory tax audit of accounts and for presumptive taxation.UNION BUDGET 2012-13: Impact Analysis
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• Exemption of capital gains tax on sale of a residential property, if the sale consideration is used for subscription in equity of a manufacturing SME company for purchase of new plant and machinery.
• Reduction in the basic customs duty to 2.5% with concessional CVD of 6% on specified parts, components and raw materials for the manufacture of medical devices such as disposables and instruments.
• Full exemption from basic customs duty and CVD to specified raw materials for the manufacture of coronary stents and heart valves.
• Reduction in the excise duty from 10% to 6% on matches manufactured by semi-mechanised units. Positive
The biggest announcement for the SME sector has been an allocation of ` 50 bn to SIDBI for venture fund. This is expected to enhance availability of equity to MSMEs, as credit crunch continues to remain a major challenge for SMEs. The hike in turnover limit for compulsory tax audit of accounts would also bring some relief to the SMEs. To a small extent, the announcement of exemption of capital gains tax on sale of residential property could also enhance credit availability to the SMEs.
Measures announced for SME-centric sectors such as leather, handloom, powerloom, matches, food processing, textiles etc are beneficial for the SME sector’s prospects.
Oil & Gas
• Cess on crude petroleum oil produced in India increased to ` 4,500/MT from ` 2,500/MT.
• Full exemption from basic duty on natural gas and Liquified Natural Gas (LNG).
• Oil & Gas / LNG storage facilities and Oil & Gas pipelines to be included in the eligible sectors for Viability Gap Funding (VGF).
Marginally Positive
The Indian oil & gas sector is one of the core industries in the country. The increase in petroleum cess on crude petroleum oil produced in India is likely to adversely impact the bottom-line of oil producing companies.
The full exemption of basic duty on natural gas and LNG is likely to reduce the cost of imported fuel for core sectors such as fertilizers and power plants. The core sectors are expected to benefit from this exemption.
Introduction of VGF for oil & gas/LNG storage facilities and oil & gas pipelines is likely to fuel the sectoral growth as many projects with high economic returns but low financial returns can possibly be executed in the coming period.
The oil & gas companies had built expectations from the Budget for a 10-year tax holiday alongwith inclusion of crude oil and petroleum products under the recommended Goods and Service Tax UNION BUDGET 2012-13: Impact Analysis
25
(GST) regime. In the absence of announcement of tax holiday and low clarity on proposed GST structure, the Budget will have a marginally positive impact on the oil & gas sector.
Pharmaceuticals & Healthcare
Pharmaceuticals
• The concessional basic customs duty of 5% with full exemption from excise duty/CVD has been extended to six specified life-saving drugs/ vaccines.
• List of drugs & medical devices eligible for lower import duty and excise duty exemption expanded to include additional life science drugs.
• Advance pricing agreement proposed to be implemented in Finance Bill, 2012.
Marginally positive
Research and development (R&D) in the pharmaceutical sector received significant impetus through the extension of 200% weighted deduction on in-house R & D expenditure. Capital expenditure on R & D for an industry such as pharmaceutical is critical for the growth of the industry and the proposal is expected to boost the active pharmaceutical ingredient (API) market in India. Implementation of advance pricing agreement is also expected to help the pharmaceutical industry to reduce its tax litigation cases. On the other hand, excise duty hike is expected to increase raw material prices for the industry.
Healthcare
• The outlay for the National Rural Health Mission (NRHM) hiked by nearly 15% to ` 208.2 bn for FY13. National Urban Health Mission (NUHM) will be launched, which is expected to encompass primary healthcare needs of people in the urban areas.
• The Pradhan Mantri Swasthya Suraksha Yojana (PMSSY) aimed at setting up of All India Institute of Medical Sciences (AIIMS)-like institutions and upgradation of existing Government medical colleges is being expanded to cover upgradation of 7 more Government medical colleges.
• The rate of investment-linked deduction of capital expenditure enhanced to 150% from the existing 100% for hospitals.
Marginally Positive
The Budget has focused towards improving healthcare services at the rural as well as urban region. The increased NRHM outlay is expected to further improve access to healthcare in the rural areas. Under the PMSSY scheme, the Government aims at setting up eight AIIMS-like institutions and upgradation of existing Government medical colleges. The healthcare service in the urban region is also expected to increase with the launch of NUHM. Enhanced rate of deduction linked to capital expenditure is expected to increase investments in hospitals in the coming years. These measures are expected to have a marginally positive impact on the healthcare sector. UNION BUDGET 2012-13: Impact Analysis
26
Power
• Allocation of tax-free bonds amounting to ` 100 bn towards the power sector, out of the
` 600 bn tax free bonds for financing infrastructure projects during FY13.
• Permitting External Commercial Borrowings (ECBs) to part finance rupee debt of existing power projects.
• Coal India Limited (CIL) has been advised to sign fuel supply agreements with power plants which have entered into long-term Power Purchase Agreements with distribution companies
(DISCOM) and would get commissioned on or before March 31, 2015. Further, an inter ministerial group has been set up to undertake periodic review of the allocated coal mines and shall make recommendations on de-allocations, if required.
• Extension of the sunset date by one year i.e. on or before March 31, 2013 to claim 100% deduction of profits for 10 years.
• Reduction in the rate of withholding tax on interest payments on external commercial borrowings from 20% to 5% for three years to provide low cost funds to the sector.
• Additional 20% depreciation in the initial year to be extended to new assets acquired by power generation companies.
• 100% Counter Vailing Duty (CVD) or excise duty exemption in plants, equipment etc used in the initial set up of solar energy and solar thermal projects.
• Full exemption of basic customs duty and a 1% concessional CVD to steam coal used in thermal power projects for a period of two years i.e. till March 31, 2014.
Positive
The overall focus of the Government has been towards increasing investments through the allocation of ` 100 bn tax free bonds as well as increasing the financing options in the sector through the introduction of ECBs as well as reducing their interest rates. This is expected to improve the working capital requirements of the companies in this sector. The Government also focuses on reducing the raw material cost through the agreement with CIL and reducing the duties imposed on the steam coal used as an input in the thermal power plants. This measure will help the power generation companies to stabilise the volatile prices of raw materials.
Proposals such as extension of the sunset date, providing additional 20% depreciation during the initial years etc are expected to encourage more companies to enter the power sector or the existing companies to expand operations. Reducing the CVD by 100% in the initial set up of solar power plants is expected to have a positive impact as it is expected to promote the renewable energy generation and usage in India. This will further encourage new players or existing players to enter into the renewable segment of the power sector. These measures are expected to have a positive impact on the power sector.UNION BUDGET 2012-13: Impact Analysis
27
Textiles
• Automated shuttle-less looms exempted from basic customs duty of 5%.
• Full exemption from basic customs duty to automatic silk reeling and processing machinery as well as its parts.
• Currently excise duty of 10% is applicable to branded readymade garments with abatement of
55% from the retail sale price. Now with the proposed increase in duty to 12%, the abatement has been enhanced to 70%. As a result, the incidence of duty as a percentage of the retail sale price would come down from 4.5% to 3.6%.
• Reduction in the basic customs duty from 15% to 5% on wool waste and wool tops.
• Reduction in the customs duty from 10% to 7.5% on titanium dioxide.
• Financial package of ` 38,840 mn for waiver of loans to handloom weavers and their co-operative societies.
• New handloom cluster in Prakasam and Guntur districts of Andhra Pradesh and leather cluster in Jharkhand.
• Weaver Service Center in Mizoram, Nagaland and Jharkhand.
• Powerloom mega cluster in Maharashtra with a budget allocation of ` 700 mn.
• ` 5,000 mn pilot scheme in the 12th Five Year Plan for promotion and application of geo-textiles in the North-Eastern region.
Marginally Positive
Reduction of excise duty on readymade garments would result in decline in the cost burden of the manufacturers. It is expected that manufacturers may pass on the reduced burden to the consumers by way of reduction in prices. Further, a reduction in customs duty on titanium dioxide would make imports of titanium dioxide cheaper.
Two more mega handloom clusters were announced in addition to four mega handloom clusters already operational. These clusters will help the weavers in technology upgradation and product diversification. Besides that, a power loom mega cluster is also proposed to be set up in Maharashtra. It is expected that the power loom cluster will have modern machinery, testing services and have a computer-aided design studio to address the need of the local artisans and weavers. In addition to this, a pilot scheme has also been proposed for promotion of geotextiles. These proposed initiatives to open clusters will have a marginally positive impact on the industry. 2008
Resource Mobilisation
There has been a steady growth in the tax collections in the economy. In the year 2008-09, the tax collections are expected to increase to around 13 percent of GDP.
In a regime of increasing tax collections and rapid growth in GDP, the government failed to make investment in the social sectors. Whatever has been done by the government for the social sectors is just not enough to meet the needs of the sector. Infact, the
Finance Minister has religiously practiced the Fiscal
Responsibility and Budget Management Act principles of deficit management and achieved the targets to a satisfactory level by reducing expenditure in almost all critical sectors.
The Plan Expenditure as percent of GDP is on the rise from 3.93 percent in 2005-06 to 4.59 percent in 2008-
09 BE. The total expenditure as percent of GDP has declined from 17 percent in 2003-04 to 14.2 percent in 2008-09 BE along with a steady decline in capital expenditure. Huge amount of resources are foregone every year on account of various tax exemptions in the central tax system only. The total revenue estimated to be foregone in the central tax system alone for the year 2007-08 is around 7.2 percent of GDP. Such an amount is more than sufficient to pay for total budgetary support for Plan expenditure and more than half of the gross tax collections.
Education
Union Budget outlay on education has been proposed to increase by 20 percent (over previous year) in 2008-
09 – which is less in comparison to the increase in
Union Budget outlay on Education between 2006-07 and 2007-08. The NCMP promise of 6 percent of GDP as public resources for education remains unfulfilled - with the combined outlay for the Education Depts. of
Centre and States remaining at a meager 2.84 percent of GDP in 2007-08. Mid Day Meal Scheme has been extended to upper primary classes in Government and
Government aided schools in all blocks — this is a welcome step from the UPA Government. Outlay forSarva Shiksha Abhiyan (excluding the NER component) decreased from Rs. 12,020 crore in 2007-
08 (RE) to Rs. 11,940 crore in 2008- 09 (BE).
Contribution of the common people (through
Education Cess) to universalize elementary education amounts to over 60 percent of the total Union Budget outlay on school education and literacy in 2008-09 while the Union Government’s share has progressively declined from 64 percent in 2002-03 to 37 percent in
2008-09.
Health
The Finance Minister has proposed to increase allocation on health by 15 percent (over allocations in 2007-08) to Rs.16,534 crore in 2008-09. Since
2005-06, health expenditure of States and Union
Government taken together has remained stagnant at around 0.99 percent of GDP. This is not even one third of the promised 3 percent of GDP on health.
The proposed allocation for NRHM is Rs. 12,050 crore which is a mere 11.4 percent increase over 2007-08
RE. This is a clear departure from UPA’s commitment to increase NRHM allocation by 30 percent every year.
The FM has introduced Rashtriya Swasthya Bima
Yojana that will provide a health cover of Rs. 30,000 for every worker in the unorganised sector falling under the BPL category and their family and has allocated
Rs. 205 crore as Centre’s share. This is clearly a meager amount, and it seems the Union Government is proposing to shift the major burden of the scheme to
States. A welcome step in this Budget is the proposed reduction of the customs duty on certain specified life saving drugs and on the bulk drugs used for the manufacture of such drugs, from 10 percent to 5 percent as well as to totally exempt them from excise duty or countervailing duty. This should have positive influence on price of essential drugs and thus their accessibility. Also, the proposal to set up a separate
Department for Research in Health with an initial allocation of Rs. 531.75 crore. can be a very significant step in augmenting public expenditure on health research, if substantial increase in allocation is done over the years.
Women
Total allocations for women show a very marginal increase from 3.3 to 3.6 percent of the total government expenditure (as per the Gender Budgeting
Statement), a mere 0.3 percent increase. The numberof ministries and departments reporting in the Gender
Budgeting Statement remains constant (with 33
Demand for Grants), which is a disappointment.
Significant increase has been proposed in the allocations for Ministry of Minority Affairs from
Rs. 362.83 crore to Rs. 1,013.83 crore, but still there are no schemes to address the specific vulnerabilities of Muslim women. Women specific allocations in agriculture as a percentage of total allocations in agriculture have increased while in higher education, priority for women has gone down. Allocations for
RCH have gone up from Rs. 1,629.17 crore last year to Rs. 2,504.75 crore, which is welcome. However, allocations for women when compared to the total allocations in health remain stagnant at 53 percent.
Considering the fact that one-third of women are engaged in the unorganized sector, it is disappointing to note that in the Union Budget 2008-09, the multifarious issues which social security entails have been largely neglected.
Children
The Union Government has introduced a Statement on child specific schemes in Budget 2008-09, which is a welcome step. The total outlay for child specific schemes accounts for 5.35 percent of total outlay from the Union Budget in 2008-09. However, prioritisation of total outlay earmarked for children in the Union
Budget is still very skewed, with interventions meant for protection of children in difficult circumstances getting very low magnitude of funds. Union Budget outlays for ICDS, RCH and IPCS schemes have increased noticeably (over 2007-08 Revised Estimates) in 2008-09 (BE). However, in comparison to 2007-
08 (RE), the outlay for SSA has fallen in 2008-09 (BE).
In comparison to 2007-08 (BE), the outlay for NCLP scheme has fallen in 2008-09 (BE).Overall there is no visible stepping up of priority for children in Union
Budget 2008-09.
Dalits and Adivasis
In the Union Budget 2008-09, there are some new interventions for the Scheduled Castes (SCs) and
Scheduled Tribes (STs), some of which include Special focus on SC/ST women in NREGS, Rs. 130 crore allocation to make Jawahar Navodaya Vidyalayas accessible to SC/ST students in 20 districts that have large concentration of Scheduled Castes and
Scheduled Tribes population, Rs. 750 crore has been allocated for National Means-cum-Merit Scholarship
Scheme for the award of 1 lakh scholarships beginning
2008-09 and Rs.75 crore in 2008-09 for the Rajiv
Gandhi National Fellowship Programme, which in fact is less by Rs. 13 crore compared to the previousBudget. An analysis of Union Budget 2008-09 shows that the total Plan Outlay earmarked for Scheduled
Castes as percentage of total Government Expenditure
(excluding Central Assistance for State & UT Plans) has declined from 7.90 percent in 2007-08 (BE) to
7.51percent in 2008-09 (BE). The total Plan outlay earmarked for Scheduled Tribes as percentage of total government expenditure (excluding Central Assistance to State & UT Plans) has declined from 4.77 percent in 2007-08 (BE) to 4.45 percent in 2008-09 (BE). Out of more than hundred Demands for Grants in Union
Budget, less than 30 Demands for Grants had some allocations earmarked for SCs/STs.
Rural Development
Agricultural sector has achieved the dubious distinction of registering negative growth. Public investment in agriculture as a proportion of GDP has declined from
0.36 percent to 0.21 percent. The proportion of people living below the benchmark consumption level, which already is an abysmally low standard of Rs. 12 per day is a staggering 30 percent. On average, prices of essential commodities have risen by more than one third over the period between 2004 and 2007.
Retardation in the growth of agricultural sector, and hence, the consequential decline in the share of agriculture in GDP, is the result of gross neglect of this sector as reflected in the decelerating pace of capital formation in agrarian sector, in general, and stagnancy of public investment, in particular. Spending on subsidies as proportion of GDP has decreased from
1.37 percent to 1.26 percent. Provision of cheap inputs through raising subsidy bill of fertilisers and ensuring better remuneration for agricultural products is the bare minimum that Government owes to farming community. Although, the Government has not allocated substantial funds to address pressing concerns of the agricultural sector to eliminate the root cause of agrarian crisis that the country right now is witnessing, the Union Budget, 2008-09 does endeavour to assuage the crisis afflicted farmers by offering them a loan waiver package.
The Central Government’s expenditure on rural employment as proportion of both total expenditure as well as GDP, has been retreating in the recent years.
Rural employment as a proportion of total expenditure has declined from 2.56 percent in 2005-06 to 1.92 percent in 2008-09 BE. The coverage of NREGS has been extended to all the 596 districts (excluding the urban districts) in the country in 2008-09. But the large increase in coverage does not reflect a proportionate increase in allocation for 2008-09 – a mere Rs. 4,000 crore increase from Rs. 12,000 crore in 2007-08 (RE) to Rs. 16,000 crore in 2008-09.

2010
Agriculture
ÿ The total plan outlay for agriculture & allied sector is to be increased by 15.80% to Rs 123.08 bn. ÿ The target for agriculture credit is proposed to be raised to Rs 3,750.00 bn for FY11 from Rs
3,250.00 bn in FY10. ÿ The proposal to provide Rs 4.00 bn for the extension of the green revolution to the eastern region of the country comprising Bihar, Chattisgarh, Jharkhand, Eastern Uttar Pradesh, West
Bengal and Orissa, with the active involvement of Gram Sabhas and the farming families. ÿ The proposal to provide Rs 3.00 bn to organise 60,000 “pulses and oil seed villages” in rainfed areas during FY11 and provide an integrated intervention for water harvesting, watershed management and soil health, to enhance the productivity of the dry land farming areas. ÿ In view of the drought in some states and the severe floods in some other parts of the country, the period for repayment of the loan amount by farmers extended by 6 months from December 31, 2009 to June 30, 2010 under the Debt Waiver and Debt Relief Scheme for Farmers. ÿ The proposal to increase the interest subvention for timely repayment of crop loans to 2% for
FY11 as against 1% in FY10. ÿ An allocation of Rs 10.62 bn for National Horticulture Mission. ÿ An allocation of Rs 13.50 bn for National Food Security Mission. ÿ An allocation of Rs 10.00 bn for Macro Management in Agriculture. ÿ An allocation of Rs 10.00 bn Micro Irrigation. ÿ An allocation of Rs 9.50 bn for National Agricultural Insurance Scheme. ÿ An allocation of Rs 5.00 bn for integrated oilseeds, oil palms, pulses and maize development. ÿ As a part of the farm to market initiative, External Commercial Borrowings to be available for cold storage or cold room facility, including for farm level pre-cooling, for preservation or storage of agricultural and allied produce, marine products and meat. ÿ The deficit in the storage capacity is met through an ongoing scheme for private sector participation where the Food Corporation of India (FCI) has been hiring godowns from private parties for a guaranteed period of 5 years. This period is proposed to be extended to 7 years. ÿ The proposal to provide project import status with a concessional import duty of 5% for the setting up of mechanised handling systems and pallet racking systems in ‘mandis’ or warehouses for food grains and sugar as well as full exemption from service tax for the installation and commissioning of such equipment.UNION BUDGET 2010-11: Impact Analysis
6
ÿ The proposal to provide project import status at a concessional customs duty of 5% with full exemption from service tax to the initial setting up and expansion of cold storage, cold room including farm pre-coolers for preservation or storage of agriculture and related sectors produce and processing units for such produce. ÿ The proposal to provide full exemption from customs duty to refrigeration units required for the manufacture of refrigerated vans or trucks. ÿ The proposal to provide concessional customs duty of 5% to specified agricultural machinery not manufactured in India. ÿ The proposal to provide central excise duty exemption to specified equipment for preservation, storage and processing of agriculture and related sectors and exemption from service tax to the storage and warehousing of their produce. ÿ The proposal to provide full exemption from excise duty to trailers and semi-trailers used in agriculture. ÿ The transportation by road of cereals and pulses is proposed to be exempted from service tax. ÿ The concessional import duty on specified machinery for use in the plantation sector is proposed to be extended up to March 31, 2011 along with a countervailing duty exemption. ÿ The testing and certification of agricultural seeds is proposed to be exempted from service tax. ÿ An allocation of Rs 20.06 bn for agricultural research & education, including an allocation of
Rs 2.00 bn for launching of climate resilient agriculture initiatives such as soil health, water conservation and preservation of biodiversity. ÿ An allocation of Rs 2.94 bn for World Bank aided National Agricultural Innovation Project.
Positive+
The significant hike in the plan outlay for the agriculture and allied sector as compared to the previous fiscal is indicative of the Government’s thrust towards increasing the production & productivity of the agricultural sector. Moreover, a slew of announcements to facilitate storage, transportation & processing of agricultural produce assume significance given the fact that a shortfall in post-harvesting facilities & cold storage facilities results into huge wastage of agricultural produce every year. The reduction in wastage of farm output would help in improving the supply of agricultural produce and containing the inflationary pressures in the food articles.
Further, the proposal to allow external commercial borrowing for set up of preservation or storage facilities for agricultural & allied products is expected to increase private investment in these facilities. The proposal for extension of green revolution to the eastern region of the country is commendable as this will not only help in increasing the agricultural production but also lead to increase in income & employment opportunities in this region. Apart from this, allocation for research & UNION BUDGET 2010-11: Impact Analysis
7
development activities, including launching of climate resilient agriculture initiatives such as soil health, water conservation and preservation of biodiversity are some of the key measures intended to provide impetus to the sector. The allocation of micro irrigation projects also augurs well for the overall agricultural growth going forward as this would help in reducing its dependence on monsoons. Social Sector ÿ The social sector expenditure is proposed to be increased to Rs 1,376.74 bn, which stands at
37% of the total plan outlay in FY11.
Human Resource Development and Social Justice ÿ An allocation of Rs 87.00 bn for Integrated Child Development Services. ÿ An allocation for Mahatma Gandhi National Rural Employment Guarantee Scheme is proposed to be increased from Rs 391.00 bn in FY10 to Rs 401.00 bn in FY11. ÿ An allocation of Rs 29.84 bn under the ‘Swaranjayanti Gram Swarozgar Yojana’ for establishing micro-enterprises in rural areas through activity clusters and group approach. At least 50% of the Swarozgaries will be SCs/STs, 40% women and 3% disabled. This also includes Rs 1.00 bn for
Mahila Kisan Sashaktikaran Pariyojana, a Sub-Component of National Rural Livelihood Mission. ÿ The fund corpus for the ‘Micro-Finance Development and Equity Fund’ is proposed to be increased to Rs 4.00 bn in FY11. ÿ The proposal to set up a ‘National Social Security Fund’ for unorganised sector workers with an initial allocation of Rs 10.00 bn. This fund will support schemes for weavers, toddy tappers, rickshaw pullers and bidi workers etc. ÿ A new initiative, “Swavalamban” is proposed to be available for persons who join New Pension
Scheme (NPS), with a minimum contribution of Rs 1,000 and a maximum contribution of Rs
12,000 per annum during FY11, wherein the Government is proposed to contribute Rs 1,000 per year to each NPS account opened in FY11. An allocation of Rs 1.00 bn is proposed to be provided for this scheme. ÿ The 1% interest subvention on housing loans up to Rs 1.00 mn scheme is proposed to be extended up to March 31, 2011. The allocation of Rs 7.00 bn is proposed to be provided for this scheme for FY11. ÿ An allocation of Rs 3.90 bn for Indira Gandhi Matritva Sahyog Yojana. ÿ The plan outlay for Women and Child Development is proposed to be increased by almost
50% in FY11. ÿ An allocation of Rs 10.00 bn for Rajiv Gandhi Scheme for Empowerment of Adolescent Girls.UNION BUDGET 2010-11: Impact Analysis
8
ÿ The plan outlay of the Ministry of Social Justice and Empowerment is proposed to be enhanced to Rs 45.00 bn in FY11, marking an increase of 80% as compared to FY10. ÿ The plan allocation for the Ministry of Minority Affairs is proposed to be increased from Rs
17.40 bn in FY10 to Rs 26.00 bn for the year FY11. ÿ An allocation of Rs 6.00 bn towards Special Central Assistance for Scheduled Castes Component
Plan to benefit about 0.75 mn beneficiaries. ÿ An allocation of Rs 17.00 bn for Post Matric Scholarships for SC students; Rs 3.50 bn for
Post Matric Scholarships for OBC students and Rs 5.58 bn for Post Matric Scholarships for
Scheduled Tribes (ST) students.
Education
ÿ An allocation of Rs 150.00 bn for Sarva Shiksha Abhiyan. ÿ An allocation of Rs 94.40 bn for National Programme of Mid Day Meals in schools. ÿ The proposal to increase the plan allocation for school education from Rs 268.00 bn in FY10 to
Rs 310.36 bn in FY11. In addition, there is a proposal to provide States Governments Rs 36.75 bn for elementary education under the Thirteenth Finance Commission grants for FY11. ÿ An allocation of Rs 11.67 bn for adult education and skill development. ÿ An allocation of Rs 43.90 bn for University Grants Commission; Rs 47.06 for technical education and Rs 9.00 bn for National Mission in Education through information & communication technology. Health & Sanitation ÿ The plan allocation for the Ministry of Health and Family Welfare is proposed to be increased from Rs 195.34 bn in FY10 to Rs 223.00 bn for FY11. ÿ An allocation of Rs 154.40 bn for National Rural Health Mission. ÿ An Annual Health Survey to prepare the District Health Profile of all districts is proposed to be conducted in FY11. ÿ The benefits under Rashtriya Swasthya Bima Yojana are proposed to be extended to all
Mahatma Gandhi NREGA beneficiaries who have worked for more than 15 days during the preceding financial year. ÿ The contributions to the Central Government Health Scheme are proposed to be eligible for a deduction under the Income-tax Act. ÿ An allocation of Rs 90 bn for National Rural Drinking Water Programme. ÿ An allocation of Rs 15.80 bn Total Sanitation Campaign.UNION BUDGET 2010-11: Impact Analysis
9
Regional Development ÿ An allocation of Rs 600.00 mn for North Eastern Development Finance Corporation Limited. ÿ The additional central assistance of Rs 12.00 bn is proposed to be provided for drought mitigation in Bundelkhand region. ÿ The allocation to Backward Region Grant Fund is proposed to be enhanced by 26% from Rs
58.00 bn in FY10 to Rs 73.00 bn in FY11.
Impact Analysis
Positive+
The Union Budget for FY11 has laid special emphasis on the social sector, accounting for as much as 37% of the total plan outlay in FY11 as against 25% of the total plan outlay in FY10. The implementation of schemes such as ‘Sarva Shiksha Abhiyan (SSA)’ and ‘National Programme of Mid
Day Meals in schools’ have made significant contribution in improving enrolment for elementary education. The strengthening of these existing schemes for school education is expected to provide further impetus to the sector. Further, the allocation of funds for post matric scholarships for SC,
ST and OBC students would enhance the spread of education amongst the weaker and neglected sections of the society. The allocation for technical education would provide much-needed skilled manpower for the industry.
The weaker section has received a special attention in the budget through the proposals such as social security fund for workers in unorganised sector and pension schemes for low income people. The New Pension Scheme is expected to encourage people to save voluntarily for their retirement. Further, the new pension scheme does not require agent or guarantee, which in turn reduces operational costs. Besides, due attention to drinking water, health and sanitation is another positive aspect for the social sector in this Budget.
Infrastructure
ÿ An allocation of Rs 1,735.52 bn provided for infrastructure development, which accounts for over 46% of the total plan allocation. ÿ An allocation of Rs 167.52 bn provided for Railways, which is about Rs 9.50 bn more than last year. ÿ Mono Rail Projects for urban transport are being granted project imports status under Heading
No. 98 01 and would accordingly attract concessional rate of 5% basic customs duty. ÿ Deduction of an additional amount of Rs 20,000 allowed, over and above the existing limit of
Rs 0.1 mn on tax savings, for investment in long-term infrastructure bonds as notified by the
Central Government. UNION BUDGET 2010-11: Impact Analysis
10
Roads and Highways ÿ Allocation for road transport increased by over 13% from Rs 175.20 bn to Rs 198.94 bn. ÿ An allocation of Rs 7 bn for development of National Highways under Border Roads Organisation. ÿ Specified road construction machinery items are presently fully exempt from customs duty subject to specified conditions. Sale or disposal of such machinery items at depreciated value is being allowed on payment of customs duties on depreciated value at the rates applicable at the time of import subject to specified conditions. ÿ An allocation of Rs 17.50 bn for Special Accelerated Road Development Project in the North
Eastern Region. ÿ An allocation of Rs 94.72 bn for National Highway Authority of India. ÿ An allocation of Rs 2.30 bn for Inter-State and Economically Important Roads in different
States and UTs. ÿ An allocation of Rs 45.75 bn for Development of National Highways.
Rural Infrastructure ÿ Rs 661 bn provided for Rural Development. ÿ An amount of Rs 480 bn allocated for rural infrastructure programmes under Bharat Nirman. ÿ Unit cost under Indira Awas Yojana increased to Rs 45,000 in the plain areas and to Rs 48,500 in the hilly areas. Allocation for this scheme increased to Rs 100 bn. ÿ An allocation of Rs 100 bn for providing assistance to rural BPL households for construction of houses (and upgradation of Kutcha houses) under Indira Awaas Yojana. ÿ An allocation of Rs 120 bn for providing connectivity to eligible unconnected rural habitations through good all-weather roads.
Urban Infrastructure ÿ Allocation for urban development increased by more than 75% from Rs 30.60 bn to Rs 54 bn in 2010-11. ÿ Allocation for Housing and Urban Poverty Alleviation raised from Rs 8.50 bn to Rs 10 bn in
2010-11.
ÿ Allocation of Rs 12.70 bn for Rajiv Awas Yojana as compared to Rs 1.50 bn last year. ÿ An allocation of Rs 9.95 bn for Equity Investment towards Infrastructure development of
‘Mass Rapid Transit System’. ÿ An allocation of Rs 2 bn for development of Satellite Cities/Counter Magnet Cities.UNION BUDGET 2010-11: Impact Analysis
11
Positive+
The plan allocation for the infrastructure sector of around 46% of the total plan allocation points toward a continued thrust on the infrastructure sector provided by the Union budget FY11. The increased allocation for NHDP programme and railways along with granting the project imports status to Mono Rail Projects for urban transport and allowing the resale of certain road construction machinery is expected to provide an impetus to the transportation sector. Tax deduction provided for investment in long-term infrastructure bonds notified by the Central Government is likely to promote savings and direct resources towards infrastructure development. The substantial increase in allocation for Rajiv Awas Yojana (RAY), which aims to create a slum free India at the earliest, is likely to play a pivotal role in urban infrastructure development. The infrastructure sector is likely to benefit from the substantial increase in budgetary allocation for infrastructure both rural and urban. Increase in MAT from 15% to 18% could be a dampener.
Manufacturing
Capital and Engineering Goods ÿ Concessional customs duty of 5% will be applicable for the imports of agricultural machineries. ÿ Concessional customs duty of 5% and full exemption from service tax for setting up and expansion of Cold storage, cold room including farm pre-coolers used for preservation and storage and Processing of agriculture products. ÿ Full exemption of excise duty on trailers and semi-trailers used in agriculture. ÿ Customs duty on imports of refrigeration units required for the manufacture of refrigerated vans or trucks will be fully exempted. ÿ Concessional customs duty of 5% will be provided for importing machineries, instruments, equipments and appliances required for setting up of photovoltaic and solar thermal power generating units. Government has also proposed to exempt excise duty on these items. ÿ Full exemption from customs duty for importing machinery used in road construction projects.
Positive
Government announced reduction in customs duty on imports of specified machineries used in processing, storing and preservation of agriculture products. Further, this budget has also increased allocation on various infrastructure and rural development projects which will benefit manufacturers of capital goods and engineering products used in infrastructure, construction and agriculture industry. However, decrease in customs duty on imports of machineries and equipments used in infrastructure, construction and power generation is expected to increase competition for domestic manufacturers from foreign imports. UNION BUDGET 2010-11: Impact Analysis
12
Cement ÿ The specific rates of duty applicable to Portland cement and cement clinker to be adjusted upwards proportionate to the across-the-board increase in the excise duty from 8% to 10%. ÿ Levy of Rs 50 per ton cess on imported coal. ÿ Consequent to enhancement in the standard rate of duty from 8% to 10%, the specific rates of duty on cement and cement clinker is also being revised upwards as follows:
Negative
The increase in rates of duty applicable to Portland cement and cement clinker will result in increase in cement prices. The cess on imported coal is likely to increase input costs of cement companies using imported coal.
Power
ÿ Plan allocation for power sector excluding Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) doubled from Rs 22.30 bn in FY10 to Rs 51.30 bn in FY11. ÿ 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. ÿ A “Coal Regulatory Authority” is proposed to be set up to create a level playing field in the coal sector. This would facilitate resolution of issues like economic pricing of coal and benchmarking of standards of performance. ÿ Plan outlay for the Ministry of New and Renewable Energy increased by 61% from Rs 6.20 bn in FY10 to Rs 10.00 bn in FY11. ÿ Solar, small hydro and micro power projects at a cost of about Rs 5.00 bn to be set up in the
Ladakh region of Jammu and Kashmir. ÿ National Clean Energy Fund for funding research and innovative projects in clean energy technologies to be established. To build the corpus of the National Clean Energy Fund, clean energy cess on coal produced in India at a nominal rate of Rs 50 per tonne to be levied. This cess will also apply to imported coal. ÿ Provide a concessional customs duty of 5% on machinery, instruments, equipment and appliances etc. required for the initial setting up of photovoltaic and solar thermal power generating units and also exempt them from central excise duty. Ground source heat pumps used to tap geo-thermal energy to be exempted from basic customs duty and special additional duty. ÿ Exempt a few more specified inputs required for the manufacture of rotor blades for wind energy generators from central excise duty.UNION BUDGET 2010-11: Impact Analysis
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Positive +
The two fold hike in the plan allocation for the power sector is likely to result in increased capacity addition in the power sector and address the power shortage faced in different parts of the country.
Similarly, enhanced allocation for new and renewable energy sector, establishment of National
Clean Energy Fund coupled with concessions in machineries required for the initial setting up of photovoltaic and solar thermal power generating units reiterates the government’s effort to augment the alternative source of energy and achieve its target of establishing 20,000 MW of solar power by the year 2022 under the Jawaharlal Nehru National Solar Mission. Nonetheless, the increase in the Minimum Alternative Tax (MAT) from 15% to 18% would affect the profitability of the power generation and distribution companies.
The government has directed its efforts to ensure that bottlenecks for acquiring coal for thermal power generation is mitigated (as 75% of the power generation is currently coal based) by introducing a competitive bidding process for allocating coal blocks for captive mining. Further, setting up of a Coal Regulatory Authority would further aid in creating a transparent and competitive environment in the coal sector which would lead to economic pricing of coal and establish a benchmark for standard of performance.
Pharmaceuticals & Healthcare ÿ Plan allocation to the Ministry of Health & Family Welfare increased to Rs 223 bn for FY11 from Rs 195.34 bn in FY10. ÿ Increase in weighted deduction on expenditure incurred on in-house R&D raised from 150% to 200%. Also, weighted deduction on payments made to National Laboratories, research associations, colleges, universities and other institutions, for scientific research enhanced from 125% to 175%. ÿ Basic customs duty on all medical, surgical, dental and veterinary equipments etc reduced from
7.5% to 5%. Also the customs duty on all parts and accessories of these equipments reduced from 7.5% to 5%. These goods are also being exempted from special additional duty. ÿ Excise duty on bulk drugs increased by 2 percentage points to 10%. ÿ Full exemption from customs duty on refrigeration units required for the manufacture of refrigerated vans or trucks.
Marginally Positive
Increase in weighted deduction on R&D from 150% to 200% is expected to promote the R&D activities of pharmaceutical companies.
The Union Budget has increased the excise duty on bulk drugs from 8% to 10%. This would make raw materials for the medicines slightly expensive. However, the impact may be limited as a number of companies have shifted production to excise-free zones.UNION BUDGET 2010-11: Impact Analysis
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The reduction in the customs duty on imports of medical equipments and accessories and parts thereof, from 7.5% to 5% coupled with the exemptions from special additional duty to help in reduction of capital cost for the hospitals and healthcare centres.
The exemption of customs duty on refrigeration units required for the manufacture of refrigerated vans or trucks to be positive for logistics of pharmaceutical products specifically vaccines and for biotechnology companies.
Oil and Gas ÿ Customs duty at the rate of 5% is proposed to be levied on crude petroleum, as compared to nil earlier. ÿ Customs duty on motor spirit (petrol) and HSD (diesel) is proposed to be increased from 2.5% to 7.5%. ÿ Customs duty on some other specified petroleum products is proposed to be increased from
5% to 10%. ÿ Central excise duty on petrol and diesel is proposed to be enhanced by Re 1 per litre each. ÿ Dementholised oil, Deterpenated Mentha oil, Spearmint/ Mentha Piperita oils and all intermediates and by-products of Menthol fully exempted from excise duty. ÿ Conscious effort made to avoid issuing bonds to oil and fertiliser 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.
Neutral
In recognition of the fact that the average price of Indian basket of crude oil has come down from the increased levels experienced during 2008, the Government has only restored back the basic customs duty of 5% on crude petroleum and 7.5% on motor spirit (petrol) and HSD (diesel) and also hiked the excise duty. Nonetheless, it is going to put pressure on the profit margins of the oil and gas companies unless the Government allows the companies to hike the prices of petrol and diesel. On the other hand, continuance of extending the Government subsidy in cash instead of issuing bonds would help in faster realisation of subsidy for the companies.UNION BUDGET 2010-11: Impact Analysis
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MSME
Micro, Small & Medium Enterprises ÿ Allocation for Micro, Small & Medium Enterprises sector to be increased from Rs 17.94 bn to
Rs 24.00 bn for the year FY11. ÿ Allocation of Rs 2.23 bn for Credit Support Programme to provide guarantee cover to banks for extending loans to small/tiny units without collateral. ÿ Allocation of Rs 9.06 bn for Prime Minister’s Employment Generation Programme. ÿ Allocation of Rs 3.36 bn for Quality of Technology Support Institution and Programmes. ÿ Extension of existing interest subvention of 2% for one more year for exports covering handicrafts, carpets, handlooms and small and medium enterprises. ÿ Limit of turnover for the purpose of presumptive taxation of small businesses enhanced to
Rs 6.0 mn.
Positive
The extension of existing interest subvention of 2% to the small and medium enterprises is a positive development for the sector which is recovering from the aftermath of the global financial crisis. Further, the increase in allocation of around 33.78% (y-o-y) for the Micro, Small & Medium
Enterprises sector also augurs well for the overall development of this sector. The increased allocation for Credit Support Programme to provide guarantee cover to banks for extending loans to small/tiny units without collateral is likely to help increase the flow of credit to this sector.
Consumer Goods ÿ Some structural changes in the excise duty on cigarettes, cigars and cigarillos to be made coupled with some increase in rates. Excise duty on all non-smoking tobacco such as scented tobacco, snuff, chewing tobacco etc to be enhanced. Compounded levy scheme for chewing tobacco and branded unmanufactured tobacco based on the capacity of pouch packing machines to be introduced. ÿ Domestic manufacture of mobile phones accessories, exemptions from basic, CVD and special additional duties are now being extended to parts of battery chargers and hands-free headphones. The validity of the exemption from special additional duty is being extended till
March 31, 2011. ÿ Basic customs duty on magnetrons, one of the key components in production of microwave ovens, reduced from 10% to 5%. ÿ Reduction in central excise duty on replaceable kits for household type water filters other than those based on RO technology to 4%.UNION BUDGET 2010-11: Impact Analysis
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Neutral
The across–the-board increase in central excise duty from 8% to 10% is likely to result in overall increase in the prices of consumer goods. The increase in the central excise duty is likely to result in increased prices of cigarettes. However, the rise in disposable income because of the relaxation in personal tax rates will boost demand for consumer goods.
The exemption of mobile phone accessories from special additional duty has been extended till
March 31, 2011 which is likely to result in stability of prices of the product. The reduction in central excise duty on replaceable kits for household type water filters other than those based on
RO technology is likely to result in a fall in prices of the product.
Real Estate and Construction ÿ Interest subvention of 1% on housing loans up to Rs 1 mn extended up to March 31, 2011 with allocation of Rs 7 bn for FY11. ÿ Pending projects of real estate companies allowed to be completed in five years instead of four years for claiming deduction on their profits. ÿ Allocation for Housing and Urban Poverty Alleviation for FY11 raised to Rs 10 bn from Rs 8.5 bn in last fiscal. ÿ Norms for built-up area of shops and other commercial establishments in housing projects to be relaxed to enable basic facilities for their residents.
Positive
The continuation of interest subvention scheme on housing loans coupled with reduction in personal income tax rates would drive the demand for residential housing, especially from the lower and middle income groups. Several projects of real estate companies were delayed and halted on account of the economic slowdown last year; extension in the period of completion of pending projects by one year for claiming tax deductions would provide substantial relief to such real estate players. The budget speech indicated continued thrust on growth of SEZs in the next fiscal; approval of more SEZ projects in the next fiscal would provide a great impetus to the growth of the real estate sector.
Automotive
ÿ A 2 percentage points increase in the ad valorem component of excise duty on large cars, multi-utility vehicles and sports-utility vehicles to 22%. ÿ Imposition of central excise duty at 4% on electrically operated vehicles. ÿ Exemption from basic customs duty and special additional duty for some critical parts/subassemblies of electric vehicles. These parts to also enjoy a concessional counter veiling duty of
4%.UNION BUDGET 2010-11: Impact Analysis
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Marginally Positive
Vehicle manufacturers are likely to undertake a price hike following the increase in the central excise duty from 8% to 10%. However, we do not expect this to have any significant impact on demand. In fact, the focus on infrastructure development is expected to indirectly give a boost to demand for commercial goods carriers, while the focus on rural development is likely to push up demand for two-wheelers in the rural markets. Also, the proposal to enhance the weighted deduction on expenditure incurred on in-house research & development (R&D) from 150% to
200% is expected to encourage auto companies to invest in R&D activities.
The increase in excise duty will result in passenger vehicle manufacturers passing the increased burden to consumers by way of increased vehicle prices. While this may result in postponement in purchase decisions among customers of small cars in the immediate future, we do not expect this to have any adverse impact on demand in the medium or long term. In the case of large cars, multi-utility vehicles and sports-utility vehicles, the likely price increase is not expected to have any major impact on demand for these vehicles, as unlike small cars, customers in these categories of vehicles are comparatively less price-conscious. The allocations made for road infrastructure development and defence is expected to benefit commercial vehicle demand.
The exemption from basic customs duty and special additional duty for some critical parts/ sub-assemblies of electric vehicles is expected to bring down production costs for the vehicle manufacturers. The interest subvention of 2% on pre-shipment export credit is expected to benefit auto component manufacturers in the SME segment.
Textiles
ÿ Interest subvention of 2% of pre-shipment export credit extended by one year for handicrafts, carpets, handlooms and SMEs. ÿ Extensive skill development programme to be launched; 3 mn persons targeted to be trained over 5 years under the programme. ÿ One time grant of Rs 2 bn to Tamil Nadu Government for installation of zero liquid discharge system at Tirupur knitwear cluster. ÿ Excise duty exemption on baby and clinical diapers, and sanitary napkins withdrawn and duty levied at 10%. ÿ Excise duty exemption on mosquito nets impregnated with insecticide withdrawn and duty levied at 4%. ÿ Excise duty exemption on umbrella panels withdrawn and duty levied at 4%. UNION BUDGET 2010-11: Impact Analysis
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Negative
The increase in standard rate of excise duty to 10% from 8% would have an adverse impact on the textiles sector as it is expected to affect the margins of textile companies. The players’ capacity expansion and modernisation plans are also expected to be affected by the higher textile machinery prices on account of increase in excise duties. The negative impact of excise duty increase would only be marginally mitigated by the positive announcements, such as the extension of interest subvention for export credit by one year. The proposed Skills Development Programme for textiles and garments sector would provide long-term benefit to the textile industry, which has been facing shortage of skilled labour since the last few years. The installation of effluent treatment plant in Tirupur cluster would not only contribute towards greener environment, but could also provide a greater thrust to exports, by improving the global brand image of Tirupur products and by mitigating any environmental non-trade barriers levied in the international markets.
Withdrawal of excise exemptions on certain technical textiles products (baby diapers, sanitary napkins, etc) would encourage indigenous production of these items as earlier the imports of these products were much cheaper (due to zero CVD) due to which players preferred importing the final product than manufacturing the same domestically.
Gems & Jewellery ÿ Customs duty raised from Rs 200 per 10 grams to Rs 300 per 10 grams on gold and platinum, and from Rs 1, 000 per kg to Rs 1,500 per kg on silver. ÿ Basic customs duty on rhodium - a precious metal used for polishing jewellery reduced from
10% to 2%. ÿ Basic customs duty on gold ore and concentrates reduced from 2% ad valorem to a specific duty of Rs 140 per 10 grams of gold content with full exemption from special additional duty.
Further, the excise duty on refined gold made from such ore or concentrate reduced from 8% to a specific duty of Rs 280 per 10 grams.
Negative
Budget announcements have not met the expectations of the Indian gems and jewellery sector.
Increase in customs duty on gold, platinum and silver is expected to have an adverse effect on the cost of manufacturing jewellery. Further, the hike in excise duty as part of a partial roll back of stimulus measures is also expected to make gold and silver costly. However, the reduction on basic customs duty on gold ore will encourage domestic refining capacity for gold. UNION BUDGET 2010-11: Impact Analysis
19
Services
Banking and Insurance
Banking
Agricultural and Rural Finance ÿ Regional Rural Banks (RRBs) would be provided with additional capital, so as to provide them with adequate capital base to support increased lending to the rural economy. ÿ For FY11, the target for agricultural credit was raised to Rs 3,750 bn from Rs 3,250 bn in the current year. ÿ The period for repayment of the loan amount under the Debt Waiver and Debt Relief Scheme by farmers has been extended by six months, from December 31, 2009 to June 30, 2010. ÿ An additional 1% interest subvention, which was provided in the last Budget as an incentive to those farmers who repay their short-term crop loans as per schedule has been raised from
1% to 2% for FY11. Thus, the effective rate of interest for such farmers will now be 5% per annum. ÿ To give momentum to the pace of financial inclusion, an augmentation of Rs 1 bn each has been made for the Financial Inclusion Fund and the Financial Inclusion Technology Fund in
National Bank for Agriculture and Rural Development (NABARD), which shall be contributed by the Government of India, the Reserve Bank of India (RBI) and the NABARD.
Financial Inclusion ÿ Aimed at increasing the geographical spread of banks, the RBI is considering granting some additional banking licenses to private sector players. Non-Banking Financial Companies could also be considered for the licenses, if they meet the eligibility criteria of the RBI. ÿ The fund corpus for the Micro-Finance Development and Equity Fund has been doubled from
Rs 2 bn to Rs 4 bn in FY11.
Interest Subvention for Exports and Low-Cost Housing ÿ Interest subvention of 2% on pre-shipment export credit that was available up to March
31, 2010, has been extended for one more year for exports including handicrafts, carpets, handlooms and small and medium enterprises. ÿ The scheme of 1% interest subvention on housing loans up to Rs 1 mn, where the cost of the house does not exceed Rs 2 mn has been extended up to March 31, 2011. Accordingly, a sum of Rs 7 bn has been provided for this scheme for FY11.UNION BUDGET 2010-11: Impact Analysis
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Capital Support ÿ In addition to the Rs 19 bn infused as Tier-I capital in four public sector banks in FY09, an additional sum of Rs 12 bn is being infused now. It has been proposed to provide a sum of
Rs165 bn to ensure that public sector banks are able to attain a minimum 8% Tier-I capital by
March 31, 2011.
Insurance
ÿ In view of the success of the Rashtriya Swasthya Bima Yojana (RSBY), its benefits were extended to all Mahatma Gandhi National Rural Employment Guarantee Act (NREGA) beneficiaries who have worked for more than 15 days during the preceding financial year.
Positive
These Budget announcements are expected to have a positive impact on the Banking and Insurance sector. A number of measures have been announced, including extension of interest subvention schemes, which are expected to translate into a higher credit off take for banks, while ensuring affordable credit to thrust areas like microfinance, agricultural credit and export credit.
Also, the Budget placed significant emphasis on financial inclusion, with measures being announced towards granting more banking licenses, strengthening the RRBs and the MicroFinance Development and Equity Fund. The announcement towards the capitalisation of public sector banks would also provide some stability to the sector.
Finance
ÿ It has been decided by the Government, to set up an apex-level Financial Stability and
Development Council, to monitor the macro prudential supervision of the economy, including the functioning of large financial conglomerates, and address inter-regulatory coordination issues. The Council would also focus on financial literacy and financial inclusion initiatives without interfering with the purview of the regulatory bodies. ÿ The Government has proposed to set up a Financial Sector Legislative Reforms Commission to make the required changes to the financial sector laws, to bring them in line with the requirements of the sector. ÿ The Direct Tax Code, along with the goods and services tax (GST) is expected to be implemented from April 1, 2011. ÿ In order to look into various technological and systemic issues in the tax administration and financial governance system, a Technology Advisory Group for Unique Projects has been proposed to be set up. ÿ Surcharge on domestic companies reduced from 10% to 7.5%.UNION BUDGET 2010-11: Impact Analysis
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ÿ Minimum alternate tax (MAT) raised from 15% to 18% of book profits. ÿ Excise duty raised from 8% to 10%. ÿ In order to encourage people from the unorganised sector to voluntarily save for their retirement and to lower the cost of operations of the New Pension Scheme (NPS) for such subscribers, the Government will contribute Rs 1,000 per year to each NPS account opened in
FY11. This initiative will be available to persons who join NPS, with a minimum contribution of
Rs 1,000 and a maximum contribution of Rs 12,000 per annum during FY11. An allocation of
Rs 1 bn for FY11 has been made towards this scheme, which shall be available for three years and will be managed by the interim Pension Fund Regulatory and Development Authority.
Positive
Announcements have been made in the Budget which were indicative of the movement towards reforms in the financial sector, including areas like tax structure, IT infrastructure and legislative issues. The announcement of setting up of an apex-level Financial Stability and Development
Council would also have a positive impact on the financial sector.
Overall, the announcements made in the Budget would have a positive impact on the financial sector, particularly in the medium term.
Information Technology ÿ Minimum Alternative Tax (MAT) to be increased from 15% to 18%. ÿ Refund of accumulated credit to exporters of services to be made easy with necessary changes proposed in the definition of export of services. ÿ Allocation of Rs 19 bn for Unique Identification Authority of India (UIDAI) for FY11. ÿ The Budget 2010-11 does not mention about the extension of sunset clauses for deduction in respect of export profits under sections 10A and 10B of the Income Tax Act beyond FY11.
Negative
The Budget failed to address the critical issue of Software Technology Park of India (STPI) Act.
The non-extension of the sunset clause under the STPI Act beyond FY11 will significantly increase the tax burden of IT/ITeS companies which have tax exemption under the Act till FY11. Moreover, the tax liability of many of these companies will increase during FY10 due to 3% rise in MAT. The hike in excise duty is likely to have a negative impact on the revenues of computer hardware manufacturers if they decide to pass on this hike to the end customer.
The IT industry is expected to indirectly benefit from Government projects such as UIDAI, which will create an online database with biometric and identity details of Indian residents, and UNION BUDGET 2010-11: Impact Analysis
22
computerisation of commercial taxes in states The clarity on the definition of export of services and procedures is expected to ease the process of refund available for credit to exporters, which are mainly from the IT/ITeS industry.
Hospitality and Tourism ÿ In order to give a boost to investment in the employment-intensive tourism sector, the benefit of investment-linked deduction, as against profit-linked deduction, has been extended to new hotels of two-star category and above, anywhere in India. ÿ Rs 2 bn has been provided as a Special Golden Jubilee package for Goa to preserve the natural resources of the State, including sea beaches and forest cover.
Marginally Positive
An announcement was made extending investment-linked deduction to new hotels of two-star category and above. This is expected to have a marginally positive impact on the sector, by boosting investment in the smaller hotels. This is expected to incentivise hotel projects by smaller players, and in many smaller tourist destinations.
The special allocation made for preservation of natural resources for Goa would also be helpful in boosting tourism in the state in the long run.
Media & Entertainment ÿ Customs duty to be charged only on the value of the carrier medium as opposed to digital masters of films for duplication or distribution loaded on electronic medium. The same dispensation would apply to music and gaming software imported for duplication. However, in all such cases the value representing the transfer of intellectual rights would be subjected to service tax. ÿ Project import status at a concessional customs duty of 5% with full exemption from special additional duty provided on initial setting up of “Digital Head End” equipment by the multiservice operators. ÿ Accredited news agencies which fulfill certain criteria are exempted from service tax.
Positive
The customs duty on value of carrier medium as oppose to digital masters will facilitate imports of masters to India, and manufacture of (legal) CDs/DVDs within the country. Project import status at a concessional customs duty on “Digital Head End” equipment will help to give an impetus to the digitisation in the countryUNION BUDGET 2010-11: Impact Analysis
23
Telecom ÿ Exemptions from basic, CVD and special additional duties are now being extended to parts of battery chargers and hands-free headphones. Also, the validity of the exemption from special additional duty is being extended till March 31, 2011. ÿ Outright exemption from special additional duty on goods imported in a pre-packaged form for retail sale which would also cover mobile phones even when they are not imported in pre-packaged form.
Marginally Positive
Budget announcements have not met the expectations of the Indian telecom industry particularly the service providers. However, the mobile equipment manufacturers will benefit from the announcements made in the Budget 2010-11.
The exemption on parts of battery chargers and hands-free headphones from basic, CVD and special additional duties will make the production of these accessories cheaper. The exemption on special additional duty will enhance cash flows for the handset importers.

2011
Opportunities
• Swift and broad based growth in 2010-11 has put the economy back to its pre crisis growth trajectory. • Significant progress in critical institutional reforms that would set the pace for double-digit growth in the near future.
• Dynamism in the rural economy due to scaled up flow of resources to the rural areas.
Challenges
• Structural concerns on inflation management to be addressed by improving supply response of agriculture to the expanding domestic demand and through stronger fiscal consolidation.
• Implementation gaps, leakages from public programmes and the quality of outcomes pose a serious challenge.
• Impression of drift in governance and gap in public accountability is misplaced. Corruption as a problem to be fought collectively. Government to improve the regulatory standards and administrative practices.
• Inputs from both sides of House are important in the wider national interest.
• Budget 2011-12 to serve as a transition towards a more transparent and result oriented economic management system in India.
Overview of the Economy
• The economy showed remarkable resilience and Gross Domestic Product (GDP) is estimated to have grown at 8.6 percent in 2011-11 in real terms.
• Principal concern is continued high food prices.
• Another major concern was shortcomings in distribution and marketing systems – this led to consumers being denied the benefit of seasonal fall in prices despite improved availability of food items.
• Monetary Policy measures taken are expected to address the issue of further moderation of inflation in coming months.
• Exports have grown by 29.4 percent while imports recorded a growth of 17.6 percent during
April to January 2010-11 over the corresponding period last year.
• Indian economy expected to grow at 9 percent with an outside band of +/- 0.25 percent in
2011-12.
• Average inflation expected lower, smaller current account deficit expected. © Confederation of Indian Industry 2
Sustaining Growth
Fiscal consolidation
• Fiscal consolidation targets at Centre and States have shown positive effect on macro economic management of the economy.
• Amendment to Centre’s FRBM Act, 2003 laying down the fiscal road map for the next five years to be introduced in the course of the year.
• Proposal to introduce the Public Debt Management Agency of India Bill in the next financial year. Tax Reforms
• Direct Taxes Code (DTC) to be finalised for enactment during 2011-12. DTC proposed to be effective from April 1, 2012.
• Areas of divergence with States on proposed Goods and Services Tax (GST) have been narrowed. As a step towards roll out of GST, Constitution Amendment Bill proposed to be introduced in this session of Parliament. Significant progress in establishing GST Network
(GSTN), which will serve as IT infrastructure for introduction of GST.
Expenditure Reforms
A Committee already set up by Planning Commission to look into the extant classification of public expenditure between plan, non-plan, revenue and capital.
Subsidies
• Nutrient Based Subsidy (NBS) has improved the availability of fertiliser; Government actively considering extension of the NBS regime to cover urea.
• Government to move towards direct transfer of cash subsidy to people living below poverty line in a phased manner for better delivery of kerosene, LPG and fertilisers. Task force set up to work out the modalities for the proposed system.
People’s ownership of PSUs
• Overwhelming response to public issues of Central Public Sector Undertakings during current year leading to a higher than anticipated non-tax revenue.
Investment Environment
Foreign Direct Investment
• Discussions underway to further liberalise the FDI policy.
Foreign Institutional Investors
• SEBI registered mutual funds permitted to accept subscription from foreign investors who meet KYC requirements for equity schemes.
• To enhance flow of funds to infrastructure sector, the FII limit for investment in corporate bonds issued in infrastructure sector being raised.
Financial Sector Legislative Initiatives
• In order to take the process of financial sector reforms further, various legislations proposed in 2011-12. © Confederation of Indian Industry 3
• Amendments proposed to the Banking Regulation Act in the context of additional banking licences to private sector players.
Public Sector Bank Capitalisation
• 6,000 crore to be provided during 2011-12 to enable public sector banks to maintain a minimum of Tier I CRAR of 8 per cent.
Recapitalisation of Regional Rural Banks
• 500 crore to be provided to enable Regional Rural Banks to maintain a CRAR of at least 9 per cent as on March 31, 2012.
Micro Finance Institutions
• “India Microfinance Equity Fund” of 100 crore to be created with SIDBI. Government considering putting in place appropriate regulatory framework to protect the interest of small borrowers. • “Women’s SHG’s Development Fund” to be created with a corpus of 500 crore.
Rural Infrastructure Development Fund
• Corpus of RIDF XVII to be raised from 16,000 crore to 18,000 crore.
Micro Small and Medium Enterprises
• 5,000 crore to be provided to SIDBI for refinancing incremental lending by banks to these enterprises. • 3,000 crore to be provided to NABARD to provide support to handloom weaver co-operative societies which have become financially unviable due to non-repayment of debt by handloom weavers facing economic stress.
• Public sector banks to achieve a target of 15 per cent as outstanding loans to minority communities under priority sector lending at the earliest.
Housing Sector Finance
• Existing scheme of interest subvention of 1 per cent on housing loan further liberalised.
• Existing housing loan limit enhanced to 25 lakh for dwelling units under priority sector lending.
• Provision under Rural Housing Fund enhanced to ` 3,000 crore.
• To enhance credit worthiness of economically weaker sections and LIG households, a
Mortgage Risk Guarantee Fund to be created under Rajiv Awas Yojana.
• Central Electronic Registry to prevent frauds involving multiple lending on the same immovable property to become operational by March 31, 2011.
Financial Sector Legislative Reforms Commission
• Financial Sector Legislative Reforms Commission set up to rewrite and streamline the financial sector laws, rules and regulations.
• Companies Bill to be introduced in the Lok Sabha during current session. © Confederation of Indian Industry 4
Agriculture
• Removal of production and distribution bottlenecks for items like fruits and vegetables, milk, meat, poultry and fish to be the focus of attention this year.
• Allocation under Rashtriya Krishi Vikas Yojana (RKVY) increased from 6,755 crore to 7,860 crore, a growth of 16.4 percent.
Bringing Green Revolution to Eastern Region
• To improve rice based cropping system in this region, allocation of 400 crore has been made.
Integrated Development of 60,000 pulses villages in rainfed areas
• Allocation of 300 crore to promote 60,000 pulses villages in rainfed areas.
Promotion of Oil Palm
• Allocation of 300 crore to bring 60,000 hectares under oil palm plantations.
• Initiative to yield about 3 lakh Metric tonnes of palm oil annually in five years.
Initiative on Vegetable Clusters
• Allocation of 300 crore for implementation of vegetable initiative to provide quality vegetable at competitive prices.
Nutri-cereals
• Allocation of 300 crore to promote higher production of Bajra, Jowar, Ragi and other millets, which are highly nutritious and have several medicinal properties.
National Mission for Protein Supplement
• Allocation of 300 crore to promote animal based protein production through livestock development, dairy farming, piggery, goat rearing and fisheries.
Accelerated Fodder Development Programme
• Allocation of ` 300 crore for Accelerated Fodder Development Programme to benefit farmers in 25,000 villages.
National Mission for Sustainable Agriculture
• Government to promote organic farming methods, combining modern technology with traditional farming practices.
Agriculture Credit
• Credit flow for farmers raised from 3,75,000 crore to 4,75,000 crore in 2011-12, a growth of
26.7 percent.
• Interest subvention proposed to be enhanced from 2 per cent to 3 per cent for providing shortterm crop loans to farmers who repay their crop loan on time.
• In view of enhanced target for flow of agriculture credit, capital base of NABARD to be strengthened by 3,000 crore in phased manner.
• 10,000 crore to be contributed to NABARD’s Short-term Rural Credit fund for 2011-12. © Confederation of Indian Industry 5
Mega Food Parks
• Approval being given to set up 15 more Mega Food Parks during 2011-12.
Storage Capacity and Cold Chains
• Augmentation of storage capacity through private entrepreneurs and warehousing corporations to be fast tracked.
• Capital investment in creation of modern storage capacity will be eligible for viability gap funding of the Finance Ministry.
Agriculture Produce Marketing Act
• In view of recent episode of inflation, need for State Governments to review and enforce a reformed Agriculture Produce Marketing Act.
Infrastructure and Industry
• Allocation of 2,14,000 crore for infrastructure in 2011-12. This is an increase of 23.3 per cent over 2010-11. This also amounts to 48.5 per cent of total plan allocation.
• Government to come up with a comprehensive policy for further developing PPP projects.
• IIFCL to achieve cummulative disbursement target of 20,000 crore by March 31, 2011 and
25,000 crore by March 31, 2012.
• Under take out financing scheme, seven projects sanctioned with debt of 1,500 crore. Another
5,000 crore will be sanctioned during 2011-12.
• To boost infrastructure development, tax free bonds of ` 30,000 crore proposed to be issued by Government undertakings during 2011-12.
National Manufacturing Policy
• Share of manufacturing in GDP expected to grow from about 16 per cent to 25 per cent over a period of 10 years. Government will come out with a manufacturing policy.
• Two Committees set up for greater transparency and accountability in procurement policy; and for allocation, pricing and utilisation of natural resources.
• Issues relating to reconciliation of environmental concern from various departmental activities including those related to infrastructure and mining to be considered by a Group of Ministers.
• National Mission for hybrid and electric vehicle to be launched.
• Financial Assistance to be made available for metro projects in Delhi, Mumbai, Bengaluru,
Kolkata and Chennai.
• Capital investment in fertilizer production proposed to be included as an infrastructure subsector.
Exports
• Of 23 suggestions made by Task Force on Transaction Cost, constituted by the Department of Commerce, 21 suggestions already implemented. Action to be taken on the remaining two suggestions. Transaction Cost of 2,100 crore will thus be mitigated.
• Self assessment to be introduced in Customs to modernize the Customs administration.
• Proposal to introduce scheme for refund of taxes paid on services used for export of goods. © Confederation of Indian Industry 6
• Mega Cluster Scheme to be extended for leather products. Seven mega leather clusters to be set up during 2011-12.
• Jodhpur to be included for the development of a handicraft mega cluster.
Black Money
• Five fold strategy to be put into operation to deal with the problem of generation and circulation of black money.
• Membership of various international fora engaged in anti money laundering,
• Financial integrity and Economic development, Exchange of information for tax purposes and transparency, secured.
• Various Tax Information Exchange Agreements (TIEA) and Double Taxation Avoidance
Agreements (DTAA) concluded. Foreign Tax Division of CBDT has been strengthened to effectively handle increase in tax information exchange and transfer pricing issues.
• Enforcement Directorate strengthened three fold to handle increased number of cases registered under amended Money Laundering Legislation.
• Finance Ministry has commissioned study on unaccounted income and wealth held within and outside the country.
• Comprehensive national policy to be announced in near future to strengthen controls over prevention of trafficking on narcotic drugs.
Strengthening Inclusion
• National Food Security Bill (NFSB) to be introduced in the Parliament during the course of this year. • Allocation for social sector in 2011-12 (` 1,60,887 crore) increased by 17 percent over current year. It amounts to 36.4 per cent of total plan allocation.
Bharat Nirman
• Proposed allocation for Bharat Nirman to be increased by Rs 10,000 crore from the current year to Rs 58,000 crore in 2011-12
• Aims to provide Rural Broadbrand Connectivity to all 2,50,000 Panchayats in the country in the next three years
MGNREGA
• The Government has decided to index the wage rate notified under the MGNERGA to the
Consumer Price Index for Agricultural Labour.
• From April 1, 2011, remuneration of Anganwadi workers increased from Rs 1,500 per month to Rs 3,000 per month and for Anganwadi helpers from Rs 750 per month to Rs 1,500 per month. Scheduled Castes and Tribal Sub-Plan
• Specific Allocation earmarked towards Scheduled Castes Sub-Plan and Tribal Sub-Plan in the Budget.
• Allocation for Primitive Tribal groups increased from Rs 185 crore in 2010-11 to Rs 244 crore in 2011-12 © Confederation of Indian Industry 7
Education
• Allocation for education increased by 24 percent over current year.
Sarva Shiksha Abhiyan
• Rs 21,000 crore allocated, which is 40 percent higher than Budget for 2010-11
• Pre-metric scholarship scheme to be introduced for needy SC/ST students studying in class
IX and X
National Knowledge Network
• Connectivity to all 1,500 institutions of Higher Learning and Research through optical fibre backbone to be provided by March, 2012
Innovations
• National Innovation Council set up to prepare road map for innovations in India
• Special grant provided to various universities and academic institutions to recognize execellence Skill Development
• Additional Rs 500 crore proposed to be provided for National Skill Development Fund during the next year
• An international award with prize money of Rs 1 crore being instituted for promoting values of universal brotherhood as part of National celebrations of 150th Bith Anniversary of Gurudev
Rabindranath Tagore
Health
• 20 percent increase in planned allocation for Health
• Scope of Rashtriya Swasthya Bima Yojna to be expanded to widen the coverage
Financial Inclusion
• Target of providing banking facilities to all 73,000 habitations having a population of over
2,000 to be completed during 2011-2012
Unorganized Sector
• Exit norms under co-contributory pension scheme “Swavalamban” to be relaxed. Benefit of
Government contribution to be extended from three to five years for all subscribers who enroll during 2010-11 and 2011-2012
• Eligibility for pension under Indira Gandhi National Old Age Pension Scheme for BPL beneficiaries reduced from 65 years of age to 60 years. Those above 80 years of age will get pension of Rs 500 per month instead of Rs 200 at present.
Environment and Climate Change
Forests
• Rs 200 crore proposed to be allocated for Green India Mission from National Clean Energy
Fund © Confederation of Indian Industry 8
Environmental Management
• Rs 200 crore proposed to be allocated for launching Environmental Remediation Programmes from National Clean Energy Fund
Cleaning of Rivers and Lakes
• Special allocation of Rs 200 crore proposed to be provided for clean-up of some more important lakes and rivers other than Ganga.
Some Other Initiative
• To boost development in North Eastern Region and Special category States, allocation for
Special Assistance doubled.
• Rs 8,000 crore provided in current year for development needs of Jammu and Kashmir.
• Allocation made in 2011-12 to meet the infrastructure needs for Ladakh (Rs 100 crore) and
Jammu region (Rs 150 crore).
• Allocation under Backward Regions Grant Fund increased by over 35 per cent.
• Funds allocated under Integrated Action Plan (IAP) for addressing problems related to Left
Wing extremism affected districts. 60 selected Tribal and backward districts provided with 100 per cent block grant of Rs 25 crore and Rs 30 crore per district during 2010-11 and 2011-12 respectively. • A lump-sum ex-gratia compensation of Rs9 lakh for 100 per cent disability to be granted for personnel of Defence and Para Military forces discharged from service on medical ground on account of disability attributable to government service.
• Provision of Rs 1,64,415 crore, including Rs 69,199 crore for capital expenditure to be made for Defence Services in 2011-12.
• To build judicial infrastructure, plan provision for Department of Justice increased by three fold to Rs 1,000 crore.
Census 2011
• To enumerate castes other than Schedule Castes and Schedule Tribes in Census 2011,
‘caste’ to be canvassed as a separate time bound exercise.
Improving Governance
UID Mission From October 1, 2011 ten lakh Aadhaar numbers will be generated per day.
IT Initiatives.
• Various IT initiatives taken for efficient tax administration. These include e-filing and epayment of taxes, adoption of ‘Sevottam’ concept by CBEC and CBDT, web based facility for tax payers to track the resolution of refunds and credit for pre-paid taxes and augmentation of processing capacity.
• Under Mission mode projects, funds released to 31 projects received from States/ UTs for computerisation of Commercial taxes. This will allow States to align with roll out of GST.
• Bill to amend the Indian Stamp Act proposed to be introduced shortly.
• A new scheme with an outlay of Rs 300 crore to be launched to provide assistance to States to modernise their stamp and registration administration and roll out e-stamping in all the districts in the next three years. © Confederation of Indian Industry 9
• A new simplified form ‘Sugam’ to be introduced to reduce the compliance burden of small tax payers falling within presumptive taxation.
• Three more benches of Settlement Commission to be set up to fast track the disposal of cases. • Steps initiated to reduce litigation and focus attention on high revenue cases.
• Group of Ministers constituted to consider measures for tackling corruption.
Recommendations to be made in a time bound manner.
Performance Monitoring and Evaluation System
• In pursuance of recommendations of Second Administrative Reforms Commission, 62 departments covered under Performance Monitoring and Evaluation System (PMES) to assess their effectiveness.
TAGUP
• Recommendations of Technology Advisory Group for Unique Projects (TAGUP) submitted and accepted in principle.

2013

Agriculture
• ` 270.49 bn allocated to the Ministry of Agriculture, an increase of 22% over the RE of current fiscal year.
• Allocation of ` 34.15 bn for agricultural research.
• For FY14, target of agricultural credit kept at ` 7,000 bn.
• Interest subvention scheme for short-term crop loans to be continued. Scheme extended for crop loans borrowed from private sector scheduled commercial banks.
• ` 10 bn allocated for bringing Green Revolution to eastern India.
• ` 5 bn allocated to start a programme of crop diversification that would promote technological innovation and encourage farmers to choose crop alternatives.
• Rashtriya Krishi Vikas Yojana and National Food Security Mission provided ` 99.54 bn and
` 22.50 bn respectively.
• Allocation for Integrated watershed programme increased from ` 30.50 bn in FY13 (BE) to
` 53.87 bn in FY14.
• Allocation made for pilot programme on Nutri-Farms for introducing new crop varieties that are rich in micro-nutrients.
• National Institute of Biotic Stress Management for addressing plant protection issues will be established at Raipur, Chhattisgarh.
• The Indian Institute of Agricultural Bio-technology will be established at Ranchi, Jharkhand.
• Pilot scheme to replant and rejuvenate coconut gardens implemented in some districts of
Kerala and the Andaman & Nicobar Islands extended to the entire state of Kerala.
• Matching equity grants to registered Farmer Producer Organization (FPO) upto a maximum of
` 1 mn per FPO to enable them to leverage working capital from financial institutions.
• A Credit Guarantee Fund to be created in the Small Farmers’ Agri Business Corporation with an initial corpus of ` 1 bn.
• National Livestock Mission to be set up and a provision of ` 3.07 bn made for the Mission.
• Additional provision of ` 100 bn for National Food Security Act.
Positive+
In view of the sharp increase in prices of food articles, especially proteins, fruits and vegetables and the growing foodgrains stocks in public sector, the Government has maintained its focus on the agriculture sector through increased allocations and introducing initiatives for creating efficient agricultural market. The hike in farm credit limit and creation of a credit guarantee fund for Farmer Producer Organisations (FPOs) would provide some respite to small and marginal UNION BUDGET 2013-14: Impact Analysis
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farmers. The programme of crop diversification would be an effective measure to alleviate rural poverty and generate rural employment.
While the measures announced in the Budget for the agriculture sector are positive, legal impediments restricting the entry of big private players to marketing, storage and processing facilities of agricultural commodities also need to be modified.
Social Sector
Human Resource Development and Social Justice
• ` 658.67 bn allocated to the Ministry of Human Resource Development, an increase of 17% over the RE of the current fiscal year.
• Allocations for Scheduled Caste Sub Plan and Tribal Sub Plan increased to ` 415.61 bn and
` 245.98 bn respectively. The total represents an increase of 12.5% over the BE and 31% over the RE of the current fiscal year. Funds allocated to these Sub Plans cannot be diverted.
• ` 971.34 bn allocated for programmes relating to women and ` 772.36 bn allocated for programmes relating to children.
• Ministry of Women and Child Development to design schemes that will address the concerns of women belonging to the most vulnerable groups, including single women and widows. An additional sum of ` 2 bn proposed to be provided to the Ministry to begin work.
• An allocation of ` 35.11 bn to the Ministry of Minority Affairs, an increase of 12% over the BE and 60% over the RE of FY13.
• Allocation of ` 1.6 bn to the corpus of Maulana Azad Education Foundation to raise its corpus to ` 15 bn during the 12th Five Year Plan period.
• A sum of ` 1.10 bn to the Department of Disability Affairs for Assistance to Disabled Persons for Purchase/Fitting of Aids and Appliances (ADIP) scheme in FY14 as against RE FY13 of
` 0.75 bn.
Education
• ` 16.5 bn allocated for six All India Institute of Medical Sciences (AIIMS) - like institutions.
• ` 272.58 bn allocated for Sarva Shiksha Abhiyaan (SSA).
• An increase of 25.6% over RE of the current fiscal year for investments in Rashtriya Madhyamik
Shiksha Abhiyan (RMSA).
• ` 52.84 bn allocated to Ministries/Departments in FY14 for scholarships to students belonging to SC, ST, OBC, Minorities and girl children.
• Allocation of ` 132.15 bn for Mid-Day Meal Scheme (MDM).UNION BUDGET 2013-14: Impact Analysis
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Health & Sanitation
• ` 373.30 bn allocated to the Ministry of Health & Family Welfare. Of this, the new National
Health Mission that combines the rural mission and the proposed urban mission will get
` 212.39 bn, an increase of 24.3% over the RE of current fiscal year.
• ` 47.27 bn allocated for medical education, training and research.
• ` 1.5 bn provided for National Programme for the Health Care of Elderly.
• Allocation of ` 10.69 bn to Department of AYUSH.
• ` 177 bn allocated for Integrated Child Development Scheme (ICDS) in FY14, representing an increase of 11.7% over FY13.
• Allocation of ` 3 bn in FY14 for a multi-sectoral programme aimed at overcoming maternal and child malnutrition. Programme to be implemented in 100 districts during FY14 to be scaled to cover 200 districts the year after.
• ` 152.60 bn allocated to Ministry of Drinking Water and Sanitation.
• ` 14 bn provided for setting up of water purification plants in 2,000 arsenic - and 12,000 fluoride-affected rural habitations.
Employment and Skill Development
• National Skill Development Corporation to set the curriculum and standards for training in different skills; ` 10 bn set apart for this scheme.
• 5% of the Border Area Development Programme Fund, 10% of the Special Central Assistance to the Scheduled Caste sub plan and the Tribal sub plan, and some other funds will also be used for skill development.
Rural Development
• Allocation of ` 801.94 bn in FY14 for Ministry of Rural Development, marking an increase of
46% over FY13 (RE).
• Proposal to carve out Pradhan Mantri Gram Sadak Yojana (PMGSY) II and allocate a portion of the funds to the new programme that will benefit states such as Andhra Pradesh, Haryana,
Karnataka, Maharashtra, Punjab and Rajasthan.
• ` 148.73 bn allocated for Jawaharlal Nehru National Urban Renewal Mission (JNNURM) in
FY14 as against RE of ` 73.83 bn. Out of this, a significant portion will be used to support the purchase of upto 10,000 buses.UNION BUDGET 2013-14: Impact Analysis
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Positive+
Despite the constraints being faced on the fiscal front, the Government continued to increase the magnitude of budgetary support for social sectors. And rightly so, as “social sectors” include those sectors where Government interventions are expected to have a direct influence on human development. The Budget 2013-14 has allocated ` 2,067 bn to the “social services” sector, accounting for 30.4% of the total plan outlay. Among the various heads under the social sector, the Budget provides a significant boost for the health sector, with the allocations for “Health and
Family Welfare” having increased by 31.5% in Budget 2013-14 over RE of FY14. Even as the 24.3% increase in allocation for the National Health Mission is a welcome move, the progress on health infrastructure remains far from satisfactory. The higher outlay for education is encouraging, given the significant challenges of achieving higher enrollment and enhancing the quality of education.
The Budget also has several announcements that promote inclusive growth.
However, a prime concern that persists across social sector programmes and schemes and which remains unaddressed in the Budget is that of under-utilisation of available budgetary resources.
It is therefore imperative to improve the quality of spending on social sector schemes so as to get better outcomes for the money spent. However, the measures announced during the Budget have significant positive impact on social sector.
Infrastructure
Infrastructure Financing
• Infrastructure Debt Fund (IDF) to be encouraged. These funds will raise resources and provide long-term low-cost debt to infrastructure projects through take-out finance, credit enhancement and other innovative means.
• India Infrastructure Finance Corporation Ltd (IIFCL) in partnership with the Asian Development
Bank (ADB) will provide access to the bond markets for long term funds through credit enhancements to infrastructure companies.
• Allowed some institutions to issue tax free bonds up to ` 500 bn in FY14 strictly on capacity to raise funds from the market.
• With assistance from World Bank and the ADB, to build roads in the Northern Eastern states and connect them to Myanmar.
• Increased corpus of the Rural Infrastructure Development Fund (RIDF) operated by NABARD to ` 200 bn in FY14.
• Allocation of ` 50 bn to NABARD to finance construction of warehouses, godowns, silos and cold storage units designed to store agricultural produce. UNION BUDGET 2013-14: Impact Analysis
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• Reduced the rate of tax on interest paid to non-resident investors from 20% to 5% on long term infrastructure bonds in foreign currency and extended the same benefit to investments made through a designated bank account in rupee-denominated long term infrastructure bonds. Roads and Highways
• A regulatory authority for the road sector is proposed to be constituted to address the unattended challenges including financial stress, enhanced construction risk and contract management issues.
• 3,000 kms of road projects will be awarded in the first six months of FY14.
Rural Infrastructure
• Budgetary allocation of ` 801.94 bn for rural development schemes in FY14, representing an increase of 46% over FY13 (RE). Allocation of ` 330 bn to Mahatma Gandhi National Rural
Employment Guarantee Scheme (MGNREGS), ` 217 bn to Pradhan Mantri Gram Sadak Yojana
(PMGSY) and ` 151.84 bn to Indira Awaas Yojana (IAY).
• Allocation of a portion of funds to new programme PMGSY-II which will benefit states which have completed PMGSY; other states will continue with PMGSY.
Urban Infrastructure
• Allocation of ` 148.73 bn for the Jawaharlal Nehru National Urban Renewal Mission (JNNURM).
A significant portion of this will be used to support the purchase of upto 10,000 buses.
Industrial Corridors
• Plans for seven new cities finalised and work for two smart industrial cities at Dholera and
Shendra Bidkin will start in FY14.
• Delhi Mumbai Industrial Corridor (DMIC) to be provided additional funds, if required.
• A comprehensive plan for the Chennai Bengaluru Industrial Corridor is being prepared by the
DIPP and JICA.
• Preparatory work for the Bengaluru Mumbai Industrial Corridor has started. UNION BUDGET 2013-14: Impact Analysis
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Ports
• Two new major ports will be established in Sagar, West Bengal and in Andhra Pradesh which will add 100 mn tonnes of capacity.
• A new outer harbour will be developed at Thoothukkudi, Tamil Nadu at an estimated cost of
` 75 bn.
Positive
The Government has taken a number of measures such as encouragement to IDF, credit enhancement for long term funds, increased corpus of RIDF etc to mobilise funds in the infrastructure sector through innovative instruments. The Budget has also allowed some institutions to issue tax free bonds up to ` 500 bn in FY14. These measures are likely to provide some support to infrastructure financing going forward.
The proposal to constitute a regulatory authority for the road sector to address some of the challenges faced by the sector is a good move. Also, awarding of 3,000 kms of road projects in the first six months of FY14 is expected to enhance road connectivity in India. Further, a 46% increase in budgetary allocation for rural development schemes is expected to improve overall rural infrastructure. Further, the new proposals for industrial corridors are welcome initiatives as they are expected to ease congestion and aid in the rapid development of the industry.
Given the increased focus to revive growth in the infrastructure sector by boosting infrastructure financing coupled with the measures to increase thrust on rural infrastructure and urban infrastructure, the Budget is expected to have a positive impact on the infrastructure sector.
Services
Banking, Financial Services and Insurance (BFSI)
Banking
Agricultural and Rural Finance
• The target for credit flow to farmers raised from ` 5,750 bn in FY13 to ` 7,000 bn in FY14.
• The interest subvention scheme for short term crop loans to continue and farm loans repaid on time to get credit at 4% p.a. Scheme extended to crop loans borrowed from private sector
Scheduled Commercial Banks (SCBs).UNION BUDGET 2013-14: Impact Analysis
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Financial Inclusion
• SCBs and all Regional Rural Banks (RRBs) are on core banking solution (CBS) and electronic payment systems (NEFT and RTGS). All other banks including some co-operative banks are to be on CBS and e-payment systems by December 31, 2013. All branches of Public Sector Banks
(PSBs) to have ATMs by March 31, 2014.
• An IT-based project to modernise the postal network at an expenditure of ` 49.09 bn has been initiated. Post offices will be on CBS and offer real-time banking services. Provision of ` 5.32 bn for the project in FY14 is proposed.
Housing Credit
• The provision under Rural Housing Fund enhanced from ` 40 bn to ` 60 bn.
• Additional deduction of interest up to ` 0.1 mn for a person taking first home loan up to ` 2.5 mn during the period April 1, 2013 to March 31, 2014.
Capital Support and Funding
• A sum of ` 140 bn capital allocated to PSBs for FY14, keeping in view compliance of PSBs with
Basel III norms.
• Setting up of India’s first Women’s Bank as a PSB with a provision of ` 10 bn as initial capital is proposed. Necessary approvals and the banking license expected by October 2013.
• National Housing Bank to set up Urban Housing Fund with a provision of ` 20 bn to the fund.
• Infrastructure Debt Funds (IDF) to be encouraged.
• The corpus of the Rural Infrastructure Development Fund (RIDF) will be raised to ` 200 bn.
• ` 50 bn will be made available to NABARD to finance construction of warehouses and godowns. • Issuance of infrastructure tax-free bonds up to ` 500 bn to be allowed during FY14.
• Enhancing the refinancing capability of SIDBI from the current level of ` 50 bn to ` 100 bn per year. • Additional sum of ` 1 bn to be provided to India Microfinance Equity Fund.
• A corpus of ` 5 bn to SIDBI to set up a Credit Guarantee Fund for factoring.
Positive+
The Budget is expected to have a positive impact on the banking industry. Some of the growth drivers of the Indian banking sector include financial inclusion and enhanced payment systems which will help the banking sector to achieve its aim of expansion and growth. A number of UNION BUDGET 2013-14: Impact Analysis
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measures have been announced towards enabling inclusive growth such as other banks including some co-operative banks adopting CBS and e-payment systems, all branches of PSBs having ATMs, post offices becoming a part of the core banking solution and offering real-time banking services and setting up of India’s first Women’s Bank as a PSB. Measures have also been announced to enable better flow of credit to various sectors, including agriculture, housing, infrastructure and MSMEs which is expected to encourage overall credit growth. In addition, the Budget has emphasised on the financial strengthening of PSBs. The allocations made towards capital infusion in PSBs are expected to bring more stability to the sector. The Government aims to keep all the
PSBs adequately capitalised for compliance with Basel III regulation.
Overall, the Budget is likely to have a significant positive impact on the banking industry by focusing on financial inclusion, boosting credit growth and supporting capital base of banks.
Finance
• A standing Council of Experts will be established in the Ministry of Finance to understand the international competitiveness of the Indian financial sector.
• In cases of dividend distribution tax or tax on distributed income, current surcharge increased from 5% to 10%.
• Permissible premium rate to be raised from 10% to 15% of the sum assured by relaxing eligibility conditions of life insurance policies for persons suffering from disability and certain ailments. • Concessional 15% tax rate on dividend received by an Indian company from its foreign subsidiary is proposed during FY14.
• To increase investment in long term infrastructure bonds in foreign currency, tax rate on interest paid to non-resident investors declined in the prior year from 20% to 5%. Extending this same benefit to investment made through a designated bank account in rupee denominated long term infrastructure bonds is proposed.
• Exempt of Securitisation Trust from income tax. Levy of tax at certain rates during distribution of income for companies, individual or HUF etc. No additional tax on income received by investors from the Trust.
• Investor Protection Fund of depositories to be exempted from income tax in some situations.
• Parity in taxation between IDF-Mutual Fund and IDF-NBFC when the payment is made to a non-resident. • A Category I Alternative Investment Funds (AIF) set up as Venture capital fund permitted pass through status as part of Income-tax Act.UNION BUDGET 2013-14: Impact Analysis
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• A final withholding tax at 20% on profits distributed by unlisted companies to shareholders through buyback of shares.
• Modification of provisions of General Anti Avoidance Rules (GAAR) will be in effect from April
1, 2016.
• Administrative measures such as extension of refund banker system to refund more than
` 50,000; technology based processing, extension of e-payment through more banks and expansion in the scope of annual information returns by Income-tax Department.
Marginally Positive
The Budget has few announcements having a marginally positive impact on the financial sector.
On the financial front, increased surcharge on the dividend distribution tax will impact earnings of corporates as well as investors. However, corporates are expected to marginally benefit by the reduced taxation on foreign dividends. Reducing tax rates on investments made through a designated bank account in rupee denominated long term infrastructure bonds will be benefitting.
Securitisation Trust to be exempted from income tax will also benefit investors.
Capital Markets
• Rajiv Gandhi Equity Savings Scheme (RGESS) to be liberalised. Income limit for RGESS eligibility to be raised from ` 1 mn to ` 1.2 mn.
• Inflation indexed instruments such as Inflation Indexed Bonds or Inflation Indexed National
Security Certificates to be introduced.
• Proposal to amend the SEBI Act, to strengthen the regulator, being considered.
• Designated depository participants, authorised by SEBI, will be free to register different classes of portfolio investors, subject to compliance with KYC guidelines.
• SEBI to simplify the procedures for entry of foreign portfolio investors. SEBI will converge the different KYC norms making it easy for foreign investors to invest in India.
• Proposal to follow international practice to differentiate between FII and FDI. An investor with a stake of 10% or less in a company, will be treated as FII and, where an investor with a stake of more than 10%, will be treated as FDI.
• FIIs will be allowed to participate in exchange traded currency derivative segment.
• FIIs will also be allowed to use their investment in corporate bonds and Government securities as collateral to meet their margin requirements.
• SEBI to prescribe requirements for angel investor pools to be recognised as Category I AIF venture capital funds.UNION BUDGET 2013-14: Impact Analysis
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• Small and medium enterprises, to be permitted to list on the SME exchange without making an initial public offer (IPO). This is in addition to the existing SME platform in which listing can be done through an IPO.
• Stock exchanges to be allowed to introduce a dedicated debt segment. Insurance companies, provident funds and pension funds will be permitted to trade directly in the debt segment.
• Mutual fund distributors will be allowed to become members in the mutual fund segment of stock exchanges.
• The list of eligible securities in which Pension Funds and Provident Funds may invest will be enhanced to include exchange traded funds, debt mutual funds and asset backed securities.
• Reductions in Securities Transaction Tax on equity futures from 0.017% to 0.01%, on MF/ETF redemptions at fund counters from 0.25% to 0.001% and on MF/ETF purchase/sale from 0.1% to 0.001% but only on the seller.
• Levy Commodity Transaction Tax (CTT) on non-agricultural commodities futures contracts at the same rate as on equity futures, at 0.01% of the price of the trade. Agricultural commodities will be exempted.
Positive
The measures undertaken by the Government to boost the capital market are positive as they aim to enhance activity in the market. Reduction of STT will reduce transaction cost, revive intra-day trading, promote retail participation and boost the equity market. Further, levy of CTT on nonagricultural commodities to bring derivative trading in the securities market at par with derivative trading in the commodities market will further boost the equity market.
To develop the debt market, stock exchanges will be allowed to introduce a dedicated debt segment on the exchange. Insurance companies, provident funds and pension funds will be permitted to trade directly in the debt segment. ETFs will be eligible for pension and insurance investment.
Measures have been taken to boost greater foreign investments in the Indian capital market such as SEBI simplifying procedures for FIIs and unifying FII categories, allowing FIIs to participate in exchange traded currency derivative segment and to use their investment in corporate bonds and Government securities as collateral to meet their margin requirements. As part of efforts to attract more investments into the capital market, SEBI would prescribe requirements for angel investor pools by which they can be recognised as category I venture funds.
Permission to list on the SME exchange without making an initial public offer will boost entrepreneurs and start-ups. The mutual fund industry will be benefitted by the liberalisation of RGESS. Mutual fund distributors will be allowed to become members in the Mutual Fund segment of stock exchanges so that they can leverage the stock exchange network to improve their reach and distribution.UNION BUDGET 2013-14: Impact Analysis
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Insurance
• Insurance companies will be able to open branches in Tier II cities and below without prior approval of the IRDA.
• All towns in the country with a population of 10,000 or more will have an LIC office and an office of at least one public sector general insurance company by March 31, 2014.
• KYC of banks will suffice to acquire insurance policies.
• Banks will be allowed to act as insurance brokers for the entire network of bank branches to be utilised to enhance penetration.
• Banking correspondents will be allowed to sell micro-insurance products.
• Group insurance products to be offered to similar groups such as SHGs, domestic workers associations, anganwadi workers, teachers in schools, nurses in hospitals etc.
• Rashtriya Swasthya Bima Yojana to be extended to other categories such as rickshaw, autorickshaw and taxi drivers, sanitation workers, rag pickers and mine workers.
• A comprehensive social security package to be developed for the unorganised sector by facilitating convergence among different schemes.
• Proposal to pass Insurance Laws (Amendment) Bill and the PFRDA Bill in the current session.
Positive
The announcements made in the Budget would have a positive impact on the insurance sector as measures have been initiated to increase penetration, thereby boosting investments and growth. Insurance companies opening branches in Tier II cities and below without IRDA approval,
KYC of banks sufficient to acquire insurance policies, banks to act as insurance brokers and bank correspondents selling micro finance products are all efforts to increase penetration and distribution. Hospitality
• Levy of service tax on all air conditioned restaurants.
• Allocation of ` 12.98 bn for the Ministry of Tourism, an increase of 34.6% over the RE of the current fiscal year.
Neutral
The levy of service tax on all air conditioned restaurants would increase the overall cost incurred by restaurant operators who will pass it on to customers. Consequently the cost of dining out for a customer would go up. Although there has been an increased allocation for the tourism sector, the quantum of allocation is expected to benefit the overall tourism sector only to a limited extent.
Hence, the overall Budget announcements have a neutral impact on the hospitality sector.
IT & ITeS
• Zero customs duty for equipment required for setting up semi-conductor (electronic chips) plants. • Rangachary Committee has been formed to provide clarity on taxation matters related to research and development activities in the IT sector and for safe harbour.
Marginally Positive
The removal of customs duty on electronic chips would boost manufacturing of high tech electronic products in India. Moreover, the formation of the Rangachary Committee would help to solve issues pertaining to taxation of development centres, tax treatment of onsite services of domestic software firms and those related to finalising safe harbour. The initiatives taken in the Budget, thus, will have a marginal impact on the sector.
Media & Entertainment
• Service tax exemption granted to films exhibited in cinema halls.
• Cities with population of more than one lakh will be covered by private FM channel providers. • About 839 new FM radio channels to be auctioned in FY14.
• Hike in import duty on set-top boxes from 5% to 10%.UNION BUDGET 2013-14: Impact Analysis
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Marginally Positive
Exemption of films exhibited in cinema halls from service tax is expected to help the industry.
Also, the Governments initiative to expand private FM radio services to 294 more cities will provide more opportunities to the private FM radio operators and thereby impacting the industry positively. However, hike in import duty on set-top boxes to 10% is a negative announcement for the existing
DTH players. This announcement is expected to safeguard the interest of domestic set-top box manufacturers; promoting production in home market.
Real Estate and Construction
• National Housing Bank (NHB) to set up ` 20 bn Urban Housing Fund in FY14.
• Proposal to provide ` 60 bn to the Rural Housing Fund in 2013-14 through National Housing
Bank for rural housing.
• First housing loan up to ` 2.5 mn would get additional deduction of interest up to ` 0.1 mn which will enhance the total deduction to ` 0.25 mn in FY14.
• Excise duty on marble slabs increased from ` 30 per sq. mtr to ` 60 per sq. mtr.
• Reduction in abatement rate on home and flat having a carpet area of more than 2,000 sq. ft. or costing more than ` 10 mn from 75% to 70%.
• TDS at the rate of 1% to be charged on the transfer of immovable property (which exclude agriculture property) where the consideration exceeds ` 5 mn.
Marginally Positive
With the NHB setting up an Urban Housing Fund and enhancing the fund allocation to Rural
Housing Fund from ` 40 bn in FY13 to ` 60 bn in FY14, the Government is trying to focus on mitigating acute housing shortage by providing low cost affordable houses. Further, the extension of enhanced interest deduction granted on housing loan is expected to promote home ownership in tier-II and III cities and towns on one hand and encourage the growth in various other sectors like steel, cement, brick, wood, paint, glass etc. The increased fund allocation for the construction of urban and rural housing units is likely to have a multiplier effect on the economy via growth in downstream sectors and increase in employment.
However, the reduction in abatement rate would result in increased service tax outflow and making the luxury house more expensive. Also, the hike in excise duty on marble would increase the development cost of the developer which may be passed on to the end customer. The introduction of TDS on transfer of high value immovable property which is generally charged on gross value of UNION BUDGET 2013-14: Impact Analysis
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the property is likely to have an unfavorable impact on the cash flow of the seller in a situation of distress property sales or on property sale making minimal gain.
The various announcements by the Government during the Budget will have direct and indirect impact on the construction and real estate sector. Overall the Budget is marginally positive for the construction and real estate sector.
Retail
• Reduction in customs duty on dehulled oat grains from 30% to 15%.
• ` 50 bn to be made available to the National Bank for Agriculture and Rural Development
(NABARD) to finance construction of warehouses, godowns, silos and cold storage units.
• Fund allocation of ` 200 bn to the Rural Infrastructure Development Fund (RIDF) operated by NABARD in FY14. Proposal to increase budgetary allocation by 46% for rural development schemes. Marginally Positive
Reduction in the customs duty on dehulled oats is likely to have a favorable impact on the
FMCG players. The Government’s increased focus to finance the construction of warehouses, cold storage units etc and road infrastructure will help in improving the overall supply chain infrastructure on the one hand, and removing the supply side bottleneck on the other hand.
This will further enable the reduction in overall wastage of foodgrains, vegetables and fruits which in turn willhelp to control the food inflation. Further, increased fund allocation towards rural infrastructure development will encourage the retail players to expand their reach to the under-penetrated rural segment in the country.
Allocation to the MGNREGS would fuel the rural income growth and thereby creating more demand for various products among rural segment. Thus, the announcements in the Budget are expected to have a marginally positive impact on the sector.UNION BUDGET 2013-14: Impact Analysis
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Telecom
• Excise duty on mobile handsets costing more than ` 2,000 increased from 1% to 6%.
Negative
The telecom sector has been facing issues like high debt, pressurised margins and huge spectrum costs. The sector expected revisions in taxes and levies from this Budget. However, the consistent tax structure is a disappointment for the sector and is expected to have a negative impact.
Moreover, increase in excise duty on high-end mobile handsets to 6% will negatively impact the mobile handset industry.
Manufacturing
Automotive
• Increase in the basic customs duty from 75% to 100% on new passenger cars and other motor vehicles (high-end cars) with cost, insurance and freight (CIF) value more than US$ 40,000 and/or engine capacity exceeding 3,000cc for petrol-run vehicles and exceeding 2,500cc for diesel-run vehicles.
• Increase in the basic customs duty on motorcycles with engine capacity of 800cc or more from
60% to 75%.
• Increase in the excise duty on sports utility vehicles (SUVs) from 27% to 30%.
• Reduction in the excise duty on truck chassis from 14% to 13%.
• Proposal to purchase up to 10,000 buses under the Jawaharlal Nehru National Urban Renewal
Mission (JNNURM).
• Extension of the time period of exemption (Nil basic customs duty, countervailing duty of 6% and Nil special additional duty) for the specified parts of electric and hybrid vehicles by two more years up to March 31, 2015.
• Full exemption from basic customs duty to lithium ion automotive battery for manufacture of lithium ion battery packs for supply to the manufacturers of hybrid and electric vehicles.
Marginally Positive
A hike in the customs duty on high-end cars and motorcycles would lead to an increase in the prices of these vehicles. Further, increase in excise duty on sports utility vehicles would also be passed on to the consumers by way of increased vehicle prices. However, these announcements are not likely to have any adverse impact on demand as the price sensitivity in these segments is low. UNION BUDGET 2013-14: Impact Analysis
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An extended time period of exemption for certain specified parts of electric and hybrid vehicles and full exemption from customs duty to lithium ion automotive battery are positive developments, in line with the Government’s increased thrust on promoting green vehicles. However, from a shortto-medium term perspective, these announcements would have negligible impact on the overall automotive industry, given the meagre market share of such vehicles.
Increased allocation to the infrastructure and defence sectors could indirectly benefit manufacturers of commercial vehicles such as Tata Motors and Ashok Leyland, among others.
Similarly, an allocation of ` 148.7 bn under the JNNURM would boost demand and sale of buses.
The Government’s continued focus on rural development would have a positive impact on boosting demand for two-wheelers in the rural and semi-urban areas. Thus, the overall Budget announcements would have a marginally positive impact on the automotive industry.
Capital and Engineering Goods
• A deduction of 15% will be allowed as investment allowance for companies investing ` 1 bn or more in plant and machinery during the period Apr’ 2013-Mar’ 2015. This will be in addition to the current rates of depreciation.
• Incentives to semiconductor wafer fab manufacturing facilities, including zero customs duty for plant and machinery.
• Basic customs duty to be reduced from 7.5% to 5.0% on specified machinery for manufacture of leather and leather goods including footwear.
• Full exemption from excise duty on ships and vessels. Consequently, there will be no countervailing duty on imported ships and vessels.
Positive
Investment allowance deduction for investment in plant and machinery over and above depreciation is likely to increase the capital expenditure especially by small and medium enterprises. This is likely to facilitate growth of the capital & engineering goods industry. Further, reduction of customs duty on plant and machinery for leather goods and water fab manufacturing should have positive impact on the capital & engineering goods industry.
The Union Budget FY14 also outlines the importance of the infrastructure sector with emphasis on investment required in construction of roads. It is anticipated that 3,000 kms of road project will be awarded in H1FY14 which is likely to boost demand for construction equipment. Further, allocation of ` 867.41 bn for capital expenditure made in the defence services will also provide boost to the capital & engineering goods industry in FY14. Overall, the Budget is anticipated to have a positive impact on the capital & engineering goods sector.UNION BUDGET 2013-14: Impact Analysis
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Cement
• Approximately 3,000 kms of road projects in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh to be awarded in the first half of FY14.
• Proposal to provide ` 60 bn to the Rural Housing Fund in 2013-14 through National Housing
Bank for rural housing.
• Proposal to start a fund for urban housing by providing ` 20 bn to set up a Urban Housing Fund through National Housing Bank.
• ` 50 bn to be made available to National Bank for Agriculture and Rural Development (NABARD) to finance construction of warehouses, godowns, silos and cold storage units.
Marginally Positive
The Budget has no announcements having a direct impact on the cement sector. But the
Government’s increased focus on infrastructure development and construction is expected to drive the demand for cement and thereby impacting the sector indirectly. The continued thrust on infrastructure is likely to provide support to the cement industry going forward. Overall, the announcements in the Budget are expected to have a marginally positive impact on the sector.
Consumer Goods
• Increase in excise duty to 18% on cigarettes exceeding length of 65 mm. Duty on cigars and cigarillos also raised to 18%.
• Reduction in customs duty on dehulled oat grains to 15% from 30%.
• Customs duty on imported hazel nuts reduced to 10% from 30%.
• Excise duty on mobile phones of retail sale price exceeding ` 2,000 increased from 1% to 6%.
• Withdrawal of export duty on de-oiled rice bran oil cake.
• Withdrawal of exemption of education cess and secondary & higher education cess on soyabean oil, olive oil, etc.
• Full exemption from excise duty provided to intermediate goods manufactured and consumed captively by exempted units under Area-Based Exemption Scheme in Himachal Pradesh and
Uttarakhand.
Marginally Positive
Withdrawal of exemption of education cess and secondary & higher education cess on soyabean products, soya oil and olive oil is likely to increase domestic production of these products. Moreover, reduction in both imported hazel nuts and dehulled oat grains is expected to boost domestic UNION BUDGET 2013-14: Impact Analysis
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production of the final products manufactured using these raw materials, thereby providing a boost to the domestic industry.
Increase in excise duty on mobile phones will lead to increase in prices for the end customers.
Further, the increase in excise duty on cigarettes will hit companies in the short-term as volumes are likely to get impacted.
The consumer goods sector is expected to remain resilient on the backdrop of positive announcements in the Budget combined with strong domestic consumption. Increase in basic excise duty on cigarettes and cigars is likely to have a marginally negative impact on the sector.
However, reduction/withdrawal of customs duty on soya product and hazel nut is likely to boost the FMCG sector. On the overall basis, the Budget is marginally positive for the consumer goods sector. Gems & Jewellery
• Reduction in the rate of customs duty on pre-forms of precious and semi-precious stones from
10% to 2%.
• Levy of 4% excise duty on silver manufactured from smelting zinc or lead, thereby bringing it at par with the excise duty applicable to silver obtained from copper ores and concentrates.
Marginally Positive
The Budget announcement to reduce the customs duty on precious and semi-precious stones is expected to boost exports and in turn benefit the diamond and gemstone industry. In addition, no further increase in the rate of import duty and excise duty has reduced the burden on the industry. The levy of 4% excise duty on silver manufactured from smelting zinc or lead might have a marginal negative impact on the sector. Overall, by not adding to the tax burden of the sector, the Union Budget 2013-2014 has a marginally positive impact on the gems & jewellery sector.
Leather
• Reduction in customs duty on plant and machinery used in the leather sector and footwear industry from 7.5% to 5%.
• Refinancing capability of SIDBI doubled from ` 50 bn to ` 100 bn in a year.
• Non-tax benefits to be made available to the MSME units for a period of three years after they graduate to a higher category. UNION BUDGET 2013-14: Impact Analysis
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Marginally Positive
Reduction in the customs duty on plant and machinery used in manufacturing leather and leather products is likely to facilitate the import of traditional as well as new technology in the sector at a lower cost and result in process innovation. Further, the doubling of the refinancing capabilities of SIDBI to ` 100 bn will enhance the availability of funds for the MSME players. Also, provision of non-tax benefits to MSME units for a period of three years after graduating to a higher level would attract the interest of many MSME players to scale up their operation and move up the value chain as against continuing to stay small in order to enjoy the various benefits applicable to MSMEs. As the leather sector occupies a prominent place among MSMEs, the above measures announced for the MSMEs are likely to have a favorable implication on the players in the leather industry as well. Overall, the announcements made in the Budget would have a marginally positive impact on the leather sector, particularly in the medium term.
Metals & Mining
• Levy of export duty at the rate of 10% on bauxite.
• Levy of export duty at the rate of 10% on unprocessed ilmenite and at 5% on upgraded ilmenite. • Levy of excise duty at the rate of 4% on silver manufactured from smelting zinc or lead.
• Compounded levy on stainless steel “Patta Patti” increased from ` 30,000 to ` 40,000 per machine per month.
• Reduction of basic customs duty from 10% to 5% on stainless steel wire cloth stripe and from
7.5% to 5% on wash coat for use in the manufacture of catalytic convertors and their parts.
• Full exemption from export duty to galvanized steel sheets falling under certain sub-headings, retrospectively with effect from March 1, 2011.
Neutral
The levy of export duty at the rate of 10% on bauxite is aimed at improving domestic availability and benefitting the domestic aluminium industry, which uses bauxite as a key raw material.
However, it will have only a negligible impact since exports account for a small proportion of domestic production of bauxite. Further, the other Budget announcements made for the metals
& mining industry are not likely to have any significant impact on the industry, mainly as there have been no major announcements for the key sectors such as steel or aluminium. Nevertheless, announcements pertaining to the infrastructure and housing sectors are expected to provide some fillip to the metals industry, particularly the steel industry. Hence, the overall impact of the
Budget announcements on the metals and mining sector is neutral. UNION BUDGET 2013-14: Impact Analysis
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MSMEs
• Proposal to enhance the refinancing capability of SIDBI from the current level of ` 50 bn to
` 100 bn per year.
• Provide a corpus of ` 5 bn to SIDBI to set up a Credit Guarantee Fund for factoring.
• Provide an additional sum of ` 1 bn to the India Microfinance Equity Fund that was set up by
SIDBI in 2011-12.
• Provide a sum of ` 22 bn during the 12th Five Year Plan period for the setting up of 15 additional
Tool Room and Technology Development Centres.
• Funds provided to technology incubators located within academic institutions and approved by the Ministry of Science and Technology or the Ministry of MSME will qualify as Corporate
Social Responsibility (CSR) expenditure.
• The non-tax benefits to be made available to an MSME unit for three years after it graduates to a higher category.
Marginally Positive
The various Budget announcements mentioned above are aimed at enhancing the availability of funds to the MSMEs. These are positive moves for this sector, which has been struggling to raise funds at competitive rates. Apart from finance, technology upgradation is another major challenge faced by the MSME sector. An allocation of ` 22 bn for setting up Tool Room and
Technology Development Centres could encourage technology adoption/upgradation among the
MSMEs.
In terms of specific sectors, the proposal to reduce duty on specified machinery for manufacture of leather and leather goods would encourage greater investment in plant & machinery, which is necessary to boost both quality and scale of production, and thereby increase exports. The proposal to provide working capital and term loans to handloom weavers at a concessional rate of 6% is aimed at improving the financial status of sector. Thus, the overall Budget announcements have marginally positive impact on the MSMEs.UNION BUDGET 2013-14: Impact Analysis
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Oil & Gas
• Oil and gas exploration policy will be reviewed and new contracts will be moved from profit sharing to revenue sharing model.
• Natural gas pricing policy will be reviewed.
• Policy to encourage the exploration and production of shale gas will be announced.
• Revenue sharing policy on shale gas exploration would be announced.
• Oil and gas blocks awarded under the New Exploration Licensing Policy (NELP), but which are stalled will be cleared.
• Petroleum subsidy for FY14 is expected to be at ` 650 bn down from ` 960 bn incurred during
FY13.
• 5 million tonne Dhabol LNG terminal will be operational in FY14.
Marginally Positive
Announcements outlined in the Budget are positive for the oil and gas sector as they are aimed at removing the prevailing ambiguity surrounding cost recovery during exploration and natural gas pricing. Further, the policy announcement surrounding NELP blocks and shale gas exploration is aimed at safeguarding the energy security of the country by increasing domestic production.
The existing profit sharing model has delayed approvals in the oil and gas sector due to the involvement of the Government in day-to-day operations so as to monitor the cost of exploration.
Shift from profit sharing to revenue sharing model would reduce the involvement of the Government in the day-to-day operations and is expected to remove delays in approvals.
Proposed review of natural gas pricing would help to address the prevailing uncertainty regarding natural gas pricing. A liberal pricing policy would help in attracting fresh investments into oil and gas exploration from both private and overseas players. Further, clearing of blocks awarded under New Exploration Licensing policy (NELP) would encourage better participation in the coming rounds of auctions of oil and gas blocks. Focus on shale gas exploration and production is in line with the growing interest in shale gas exploration around the world. This type of policy would help improve the domestic energy productionUNION BUDGET 2013-14: Impact Analysis
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Pharmaceuticals & Healthcare
• Proposal to allocate ` 373.3 bn to the Ministry of Health and Family Welfare (MoHFW).
Out of this, ` 212.39 bn will be allotted to the new National Health Mission (NHM), including the rural mission and the proposed urban mission.
• To provide ` 47.27 bn for medical education, training and research.
• Proposal to provide ` 1.5 bn to the national programme for the healthcare of elderly, which is being implemented in 100 selected districts across 21 Indian states.
• Proposal to allocate ` 10.69 bn to the department of AYUSH (Ayurveda, Unani, Siddha and
Homoeopathy).
• Proposal to earmark ` 3,000 mn in FY14 for a multi-sectoral programme for maternal care and address child malnutrition problem. This programme will be executed across 100 districts in
FY14 and is aimed to be scaled up to include 200 districts in the subsequent year.
• Provision to offer MRP based assessment in respect of branded medicaments of AYUSH and bio-chemic systems of medicine with a reduction of 35%.
• Allocation of ` 177 bn in FY14 to Integrated Child Development Services (ICDS) scheme.
Marginally Positive
The Budget has focused towards improving the welfare and health of family. Allocation of ` 373.3 bn towards MoHFW and ` 177 bn towards ICDS scheme is expected to have a positive impact on the sector. Further, to integrate the department of AYUSH into the healthcare delivery system,
` 10.69 bn has been allocated to the same through the National Health Mission (NHM). The measures announced in the Budget are expected to have a marginally positive impact on the sector. UNION BUDGET 2013-14: Impact Analysis
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Power
• Proposal to construct a transmission system from Srinagar to Leh region in the state of Jammu and Kashmir at a cost of ` 18.4 bn, out of which ` 2.26 bn will be allocated for the project in
2013-14.
• A public-private partnership (PPP) policy framework with Coal India Limited (CIL) as one of the partners, to be devised to increase coal production.
• State Governments are asked to prepare financial restructuring plan for power distribution companies and sign the Memorandum of Understanding (MOU) at the earliest and take benefit of the approved financial restructuring scheme for DISCOMS (Distribution Company
(India).
• Benefit for projects in the power sector under section 80-IA of the Income-tax Act is extended by an additional one year, from March 31, 2013 to March 31, 2014.
• Customs duty and countervailing duty (CVD) on imports of steam and bituminous coal is made uniform at 2% each.
• To provide low-cost interest bearing funds, over a life span of five years, from National Clean
Energy Fund (NCEF) to Indian Renewable Energy Development Agency (IREDA) to on-lend to viable renewable energy projects.
• To reintroduce ‘generation-based incentive’ for wind energy projects and offer ` 8,000 mn to the Ministry of Non Renewable Energy (MNRE).
• Proposed to encourage cities and municipalities to take up waste-energy projects through
PPPs mode.
Positive
The proposed PPP policy framework along with CIL is expected to increase the domestic production of coal and reduce the country’s dependence on imported coal. The Government has continued to encourage and help companies generating power through renewable energy sources such as wind. With an aim to offer financial aid towards feasible renewable energy projects, the
Government proposes to offer low-cost interest bearing funds through IREDA. This move is expected to encourage players to enter into renewable energy generation. Further, extension of tax benefits U/S 80-IA by another year is anticipated to encourage investments in power projects.
These measures are expected to have a positive impact on the sector. UNION BUDGET 2013-14: Impact Analysis
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Textile and Garments
• The ‘Zero excise duty route’, as existed prior to Budget FY12, is being re-established with respect to branded readymade garments and made-ups. Going by this, in the case of cotton, there will be zero duty at the fibre stage also and in the case of spun yarn, there will be a duty of 12% at the fibre stage. The ‘zero excise duty route’ will be in addition to the CENVAT route now available.
• Allocation of ` 0.5 bn to the Ministry of Textiles for establishing apparel parks within the
Scheme for Integrated Textile Parks (SITP).
• Allocation of ` 0.96 bn to the Ministry of Textiles to provide working capital and term loans at a concessional interest rate of 6%.
• The existing Technology Upgradation Fund Scheme (TUFS) for the textiles sector to continue.
Allocation of ` 24 bn for modernisation of the powerloom sector.
• The Integrated Processing Development Scheme with plan disbursement of ` 5 bn would be implemented in the 12th Five Year Plan for addressing environmental issues faced by the textiles industry. It is proposed to provide ` 0.5 bn in FY14 for the scheme.
• Full exemption is provided from excise duty on handmade carpets and textile floor coverings of coir or jute whether or not handmade.
• In order to give a measure of protection to domestic sericulture, the rate of customs duty is increased on raw silk (not thrown) of all grades from existing 5% to 15%.
• Reduction of basic customs duty on textile machinery & parts from 7.5% to 5%.
• Leverage aid from Multilateral Development Banks to extend the ‘Scheme of Fund for
Regeneration of Traditional Industries’ (SFURTI) in the 12th Five Year Plan covering 800 clusters including khadi, village and coir industry.
Positive
The restoration of ‘zero excise duty route’ in addition to the present CENVAT route is one of the significant announcements for the textiles and readymade garments industry. The zero excise duty is going to moderate the cost pressure borne by the readymade garments sector amid sluggish demand. The move is expected to revive demand in the garment sector and improve the industry’s performance in terms of higher revenue and improve profits. Another major incentive to the readymade garments industry is to house apparel manufacturing units in SITP. The home furnishing and décor segment of the textile industry is also likely to benefit from excise duty exemption of handmade carpets and textile floor coverings of coir or jute. The proposed interest subvention scheme in the handloom sector is likely to benefit 150,000 individual weavers and
1,800 primary cooperative societies in FY14. Steps are also taken to protect the interest of domestic sericulture. Another positive incentive for the sector includes continuation of the TUFS and reduction of customs duty on textile machinery and parts for promoting technology upgradation. UNION BUDGET 2013-14: Impact Analysis
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Thus, the measures announced covering every aspect of the textiles industry is going to revive the prospects of the textiles and readymade garments sector.