Corrected Version of Cbal

7/28/2019 Corrected Version of Cbal

1/36

CONTENTS1.SECURITIES TRANSACTION TAX2.OTCEI3.GST4.DTC5.FISCAL POLICY6.DEFLATION7.FOREX MARKET

9.RAILWAY BUDGET10. NATIONAL & INTERNATIONAL ISSUES11.STATE BUDGET HIGHLIGHTS12. ECONOMIC SURVEY 2010-1113. AND ITS IMPORTANCE


2/36

SECURITIES TRANSACTION TAXPreviously, there was a different way of computing tax on profit

incurred on account of sale of shares, debentures, bonds,

mutual funds units and other securities.The honorable Finance Minister, Mr. P Chidambaram (in the

Finance (No. 2) Bill presented by him in the Union Budget

2004-05 brought significant amendments in the policy for

taxation on financial securities with effect from the assessment

year 2005-06.

Securities Transaction Tax is a neat and efficient way ofcomputing tax on profit incurred from the sale of securities

Securities Transaction Tax is applicable at different rates on thevalue of the taxable securities transaction. Taxable securities

transaction, payable by both the buyer and the seller, refers to

any transaction of securities entered into, in a recognized Stock

Exchange in India

Definition of Securities

As per section 2(h) of the Securities Contracts (Regulation) Act, 1956(SCRA), Securities includes:

Shares, scrips, stocks, bonds, debentures, debenture stock or other

marketable securities of a like nature in or of any incorporated

company or other body corporate; Derivative instruments, Units or any

other instrument issued by any collective investment scheme to the

investors in such schemes;

Security receipt as defined in section 2(zg) of the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security Interest

Act, 2002; Government securities, such other instruments as declared

by the Central Government; and Rights or interest in securities.


3/36

Exemption from Capital Gains

Short-term Capital Gains Long-term Capital Gains

It is taxable at the rate of 10% before levy

of 10% surcharge for individuals and HUF

(having total taxable income of more

than Rs. 8,50,000) and at the rate of

2.50% for others, plus a 2% education cess

for all other taxpayers

Long-Term Capital gains

on all of the above

mentioned securities is

exempt from income tax

under Section 10 (38) of the

Income Tax Act, 1961

Note: Securities (not meeting the above mentioned stipulations) sold

before/after the specified date would be taxable before the levy of

surcharge and education cess.

Definition of 'Over-The-Counter Exchange of India -OTCEI'

An electronic stock exchange based in India that is comprised ofsmall- and medium-sized firms looking to gain access to the

capital markets.

The first electronic OTC stock exchange in India was established in1990 to provide investors and companies with an additional way

to trade and issue securities.

This was the first exchange in India to introduce market makers,which are firms that hold shares in companies and facilitate the

trading of securities by buying and selling from other

participants.


4/36

Features of OTCEI:-1. Introduced Screen Based trading for the first time in

Indian Stock market

2. Trading takes place through a network of computers ofover the counter (OTC) dealers located at several places,

linked to central OTC computers.

3. All the activities of OTC trading process were fullycomputerized.

OTCEI BrokersThere are three types of intermediaries in this exchange called

Members, Dealers & Sponsors.

The above three contribute to the activities of the exchangethrough trading and enabling listing of companies on the

Exchange.

Members and Dealers can carry out activities like trading,underwriting, market making and participation in bought out

deals. Dealers can never sponsor an issue for listing.

Sponsors can perform the function of sponsorship of issues, butthey are not permitted to take part in secondary marketactivities.

OTCEIs Fact

It is the first screen based nationwide stock exchange in India. It is the first exchange to introduce Market Making in India. It is the first exchange to introduce Sponsorship of companies in

India.

It is the only exchange which allows the listing ofcompanies with a paid-up capital below Rs. 3 crore.

It is the only exchange which allows the companies with less than3 year track record to tap capital market.


5/36

It has introduced Weekly Settlement Cycle. It allows the Demat trading through NSDL.

OTCEIs Trading in Unlisted Securities

According to the Dave Committee report in 1996, it was suggested to

allow trading the equity shares of unlisted companies. The exchange

has also designed trading rules and market guidelines in this context

and it has also been submitted to SEBI for approval.

OTCEI Grievance CellsOTC Exchange of India became the first Exchange in the country to

open the Investor Grievance Cells (IGCs) at the four Metros. The cell

was opened in 1993 and it handles complaints/queries from the

investors against the brokers and/or OTCEI listed companies.

Benefits:

1) The OTCEI has set up a national, automated screen based andringless stock market to help companies raise finance from the

capital market in a cost effective manner and provides a

convenient and effective avenue of capital market investment

for investors at large.

2)While the other recognised stock exchanges require that in orderto have its securities listed the company should have an issued

capital of not less than Rs. 3 crore but the minimum issued equity

share capital of a company for eligibility for listing on the OTCEIis Rs 30 lakhs.

3)Listing on OTCEI is advantageous to companies because of thehigh liquidity of these securities, which is a result of compulsory

market making, improved access and speed of transactions


6/36

resulting from the extensive network of electronically interlinked

counters.

4)Companies can obtain a fair price of their securities bynegotiating the same with the sponsors (who are members of the

OTCEI) and save unnecessary issue expenses who will in turn off-

load the securities to the public. This mechanism is now popularly

known as a BOUGHT OUT DEAL.

5)All deals will be entered into through remote terminals which willbe connected to the mainframe computer of the OTCEI. Hence

transactions to be completed quickly and investors can settle the

deals across the counter within a few days.

GOODS AND SERVICE TAX

The introduction of the State GST will comprehensively include all

State level Indirect Taxes and integrate taxes on Goods and Services

for set-off relief, eliminating the burden of all cascading effects

including that of existing State VAT on CENVAT & Service Tax.

Advantages of Implication of GST in India

It will evade the cascading effect in Indirect tax regime.In GST system, both Central and state taxes will be collected at

the point of sale. Both components (the Central and state GST)

will be charged on the manufacturing cost.

It will result in a simple, transparent and easy tax structure;merging all levies on goods and services into one GST.

It will result in a good administration of tax structure.

It will increase tax collections due to wide coverage of goods andservices.

It will result in cost competitiveness of goods and services inGlobal market.


7/36

It will reduce transaction costs for taxpayers through simplifiedtax compliance.

GST System

(a) Invoice System: In this system the GST (Input) can be claimed on

the basis of acknowledgement of invoice, put aside the matter

whether payment is cleared or not. The GST (Output) is accounted for

when invoice is raised. Here the time of receipt of payment keeps no

value. In our country prevailing system of sales tax on goods is an

invoice system of VAT and it bears no value for taxpayer if he follows

the cash basis of accounting or mercantile basis of accounting. This

system has both the advantages & disadvantages. The benefit can be

derived from this system is that the input credit is claimed without

clearing payment. The disadvantage of the invoice system is that the

payment for GST has to be made without receiving the payment.

(b) Payment System: In this system the GST (Input) can be claimed

at the time of making the payment for purchases and the GST

(Output) is accounted for when the payment is cleared. In payment

system, it has no value whether the assessee is preserving the accounts

on cash basis or not. This system has both the advantages &

disadvantages. The advantage is that no sooner the payment for the

goods and/or services is received the Tax (output) should not be

deposited. The disadvantage is that the GST (input) cannot be

acclaimed without releasing the payment. The Taxes on services in

India are based on this payment system.

(c) Hybrid System: In this system GST (Input) can be claimed at the

time of receiving invoice and GST (Output) is accountable on the

ground of payment, if allowed by the law. In some countries the

dealers have to put their option for this system or for a reversal of this

system before adopting the same.


8/36

How GST Will Work

The idea of Goods and Services Tax (GST) also known as Value AddedTax (VAT) is a tax on each financial contribute in the distribution

chain. The taxable event is supply of goods and supply of services.

Any transmit of right to utilize goods will comprise supply of goods,

and, any supply not engaging goods will treat as supply of service. On

the other hand, the tax is exercised on the value-added component of

the supply. This is accomplished by working tax on the full

fundamental value of the goods or service and giving set off/credit of

tax undergo at previous stage, identified as input stage, to keep awayfrom cascading effect. Thus, the entire supply chain up to final

consumer gets taxed with in-built mechanism of input stage credit. In

this system, the final consumer ends up bearing the full

burden of tax without any set off benefit.

The new Direct taxes code has been published by Finance ministry,

which would replace current Income Tax structure from 2011-12.

This draft is put for public opinion and will be presented to parliament

by winter session. If passed, this will be applicable from Financial Year

2011-12. (Starting from 1st Day of April 2011). But transitional

changes will be expected from 2010-11. This means the coming budget

will bring in more measures to streamline the transition procedure.

In General:

Earlier Income Tax Act and Wealth tax Act are abolished andsingle code of Tax, DTC in place.

Concept of Assessment year and previous year is abolished. Onlythe Financial Year terminology exists.


9/36

Only status of Non Resident and Resident of India exits. Theother status of resident but not ordinarilyresident goes away.

Earlier the terminology of assessee was meant for the person whois paying tax and/or, who is liable for proceeding under the Act.

Now it has been added with 2 more definitions namely a person,

whom the amount is refundable, and/or, who voluntarily files tax

return irrespective of tax liability.

No changes in the system of Advance Tax, Self Assessment Taxand also TDS.

Government assessee is covered in Direct Tax Code. Even thoughthey are not liable for Income Tax / Wealth Tax, Government

Assessee are required to comply with provision of TDS and TCS.(Current act was not covered with Government Assessee)

It removes categories of exempted income. Equity mutual fund,ELSS, term deposit, NSC, ULIPs, long term infra bonds, house

loan, principal repayment, stamp duty & registration fees on

purchase of house property will lose tax benefits.

Only half of short-term capital gains are taxableSurcharge and education cess are abolishedIncome arising from HP deductions for rent and maintenance

would be reduced from 30% to 20% of gross rent.

Tax exemption on edu loan to be continuedTax on dividends will attract 5% taxTaxation of capital gains from property sale within 1 yr. is added

to taxable salary

HIGHLIGHTS OF DTC:

1. Tax exemption for Sr. citizen and individual remain in 30%itself without surcharge and cess

2. Invst. for approved funds & ins scheme raised @ 1.5 lakhsagainst 1.2 lakhs


10/36

3. Fringe Benefit tax will be charged to employee not toemployer

Meaning of Fiscal Policy

The fiscal policy is concerned with the raising of government revenue

and incurring of government expenditure. To generate revenue and to

incur expenditure, the government frames a policy called budgetary

policy or fiscal policy. So, the fiscal policy is concerned with government

expenditure and government revenue.

Fiscal policy has to decide on the size and pattern of flow of

expenditure from the government to the economy and from the

economy back to the government. So, in broader term fiscal policy

refers to

"That segment of national economic policy which is primarily

concerned with the receipts and expenditure of central government."

In other words, fiscal policy refers to the policy of the government with

regard to taxation, public expenditure and public borrowings.

Main Objectives of Fiscal Policy in India

1. Development by effective Mobilisation of Resources

The principal objective of fiscal policy is to ensure rapid economic

growth and development. This objective of economic growth and

development can be achieved by Mobilisation of Financial Resources.

The financial resources can be mobilized by:-

Taxation: Through effective fiscal policies, the government aims to

mobilise resources by way of direct taxes as well as indirect taxes

because most important source of resource mobilisation in India is

taxation.


11/36

Public Savings: The resources can be mobilized through public

savings by reducing government expenditure and increasing surpluses

of public sector enterprises.

Private Savings: Through effective fiscal measures such as taxbenefits, the government can raise resources from private sector and

households. Resources can be mobilized through government

borrowings by ways of treasury bills, issue of government bonds, etc.,

loans from domestic and foreign parties and by deficit financing.

2. Efficient allocation of Financial Resources

The central and state governments have tried to make efficientallocation of financial resources. These resources are allocated for

Development Activities which includes expenditure on railways,

infrastructure, etc. While Non-development Activities includes

expenditure on defence, interest payments, subsidies, etc.

3. Reduction in inequalities of Income and Wealth

Fiscal policy aims at achieving equity or social justice by reducing

income inequalities among different sections of the society. The direct

taxes such as income tax are charged more on the rich people as

compared to lower income groups. Indirect taxes are also more in the

case of semi-luxury and luxury items, which are mostly consumed by

the upper middle class and the upper class. The government invests a

significant proportion of its tax revenue in the implementation of

Poverty Alleviation Programmes to improve the conditions of poor

people in society.

4. Price Stability and Control of Inflation

One of the main objectives of fiscal policy is to control inflation and

stabilize price. Therefore, the government always aims to control the


12/36

inflation by reducing fiscal deficits, introducing tax savings schemes,

Productive use of financial resources, etc.

5. Employment Generation

The government is making every possible effort to increase

employment in the country through effective fiscal measure.

Investment in infrastructure has resulted in direct and indirect

employment. Lower taxes and duties on small-scale industrial (SSI)

units encourage more investment and consequently generate more

employment. Various rural employment programmes have beenundertaken by the Government of India to solve problems in rural

areas. Similarly, self employment scheme is taken to provide

employment to technically qualified persons in the urban areas.

6. Balanced Regional Development

Another main objective of the fiscal policy is to bring about a balanced

regional development. There are various incentives from the

government for setting up projects in backward areas such as Cash

subsidy, Concession in taxes and duties in the form of tax holidays,

Finance at concessional interest rates, etc.

7. Reducing the Deficit in the Balance of Payment

Fiscal policy attempts to encourage more exports by way of fiscal

measures like Exemption of income tax on export earnings, Exemption

of central excise duties and customs, Exemption of sales tax and octroi,etc. The foreign exchange is also conserved by providing fiscal benefits

to import substitute industries, imposing customs duties on imports, etc.

The foreign exchange earned by way of exports and saved by way of

import substitutes helps to solve balance of payments problem. In this


13/36

way adverse balance of payment can be corrected either by

imposing duties on imports or by giving subsidies to export.

8. Capital Formation

The objective of fiscal policy in India is also to increase the rate of

capital formation so as to accelerate the rate of economic growth. An

underdeveloped country is trapped in vicious (danger) circle of

poverty mainly on account of capital deficiency. In order to increase

the rate of capital formation, the fiscal policy must be efficiently

designed to encourage savings and discourage and reduce spending.

9. Increasing National Income

The fiscal policy aims to increase the national income of a country. This

is because fiscal policy facilitates the capital formation. This results in

economic growth, which in turn increases the GDP, per capita income

and national income of the country.

10. Development of Infrastructure

Government has placed emphasis on the infrastructure developmentfor the purpose of achieving economic growth. The fiscal policy

measure such as taxation generates revenue to the government. A

part of the government's revenue is invested in the infrastructure

development. Due to this, all sectors of the economy get a boost.

What is deflation?

Deflation is defined as a period when the general price level falls.But deflation can also be caused by an increase in a nationsproductive potential which leads to an excess of aggregate supply overdemand


14/36

Causes of deflation

1. Shift in demand and supply curve of goods and services2. Reduction in money supply3. Rise in productivity and reduction of transport cost4. Risk factor

Possible Economic Costs of Deflation

1. Holding back on spending: Consumers may opt to postponeconsumption if they expect prices to fall further in the future

2. Debts increase: The real value of household, corporate andgovernment debt rises when the price level is falling another

factor that might cause people to cut back on their spending3. The real cost of borrowing increases: Real interest rates will

rise if nominal rates of interest do not fall in line with prices another factor driving spending lower

4. Lower profit margins: Company profit margins come underpressure unless costs fall further than final prices to consumers this can lead to higher unemployment as firms seek to reducetheir costs. Weaker profit margins can also have a negative effect

on stock markets because of a fall in expected profits anddividends to shareholders

5. Confidence and saving: Falling asset prices such as pricedeflation in the housing market hit personal sector financial

wealth and confidence leading to further declines in AD and arise in precautionary savings (the average and marginal

propensity to save will tend to rise)

Foreign exchange market

It is a medium through which individuals, business, governmentsand banks buy and sell foreign currencies.

It is not a single physical place, but a worldwide market whichoperates round the clock.


15/36

It is the largest and the most liquid market in the world & amechanism where various national currencies are purchased and

sold like any other commodity.

~ The foreign exchange rate is determined by the demand for andsupply of foreign exchange.

~ A foreign exchange market can be free or restricted. In India,

restrictions are made on foreign exchange convertibility whereby

full convertibility is allowed only on current account and not on

capital account.

*TYPE OF FOREIGN EXCHANGE MARKET:

~ The foreign exchange market is broadly divided into two

categories:

^ Retail Market

^ Wholesale market.

RETAIL MARKET:

~ The retail foreign exchange market is a secondary price marker

wherein travelers, tourists and people who are in need of foreigncurrency carry out small permitted transactions.

WHOLESALE MARKET:

~ The wholesale foreign exchange market is also called the

interbank marketwherein large transactions of foreign exchange

are carried out. The dealers in this market are highly professionaland are the primary price makers.

*PARTICIPANTS:


16/36

i) RETAIL CLIENTS: Retail clients are the ones who deal through

commercial banks and authorised dealers. These include individuals,

international investors, multi-national corporations and others whoneed foreign exchange.

ii) COMMERCIAL BANKS: Commercial banks deal through other

commercial banks and also through foreign exchange brokers. They

buy and sell foreign exchange for their retail clients and also carryout their own foreign exchange transactions.

iii) FOREIGN EXCHANGE BROKERS: Each foreign exchange

market centre has some authorised brokers who act asintermediaries between buyers and sellers mainly banks.

Commercial banks prefer foreign exchange brokers as banks obtainthe most favourable quotations from them.

iv) CENTRAL BANKS: The above groups generate demand and

supply forces and help to determine the foreign exchange rate. Thebrokers are the middlemen between the price makers and possess

more information and better knowledge of the market. The large

commercial banks and foreign exchange brokers who participate in

foreign exchange market are linked together by telephone, telex

and satellite communications network called Society for

Worldwide International Financial Telecommunications

(SWIFT) and thus makes the foreign exchange market efficient

and conventional.

*INDIAN FOREIGN EXCHANGE MARKET: Indian foreign

exchange market is made up of three tiers:

^ 1st level Deals between RBI and authorised dealers (mainlycommercial banks)

^ 2nd level Deals among authorised dealers.

^ 3rd level Deals between authorised dealers and their corporatecustomers.


17/36

*FUNCTIONS:

1) TRANSFER OF PURCHASING POWER:

Import & export of goods and services

Payment and receipt of Dividend, interest and profit from and toforeign firms.

Unilateral payments & receipts.

Capital outflow in the form of investments abroad, short / longterm lending, etc. & Capital inflow in the form of foreign

investments in India, NRI deposits, borrowings, etc.

2) PROVISION OF CREDIT INSTUMENTS AND CREDIT:

~ The foreign exchange market facilitates provision of credit forforeign trade through credit instruments like telegraphic transfer,

letters of credit, bill of exchange, drafts, etc. Moreover, instrumentswith time period (ex. Bill of foreign exchange of 90 days or more)

can be discounted with commercial banks or authorised agentsbefore due date.

3) COVERGE OF RISK:

~Exports and imports may cover the risk due to future change in

exchange rate through forward exchange market whereby

currencies are exchanged (at a fixed rate) at some specified date.

~ In foreign exchange market, two types of exchange rate

operations take place, spot exchange rate and forward

exchange rate.

*SPOT EXCHANGE RATE: Spot exchange rate is the current

exchange rate. It is determined by market forces (demand for and

supply of foreign exchange)


18/36

~ At the spot rate, immediate delivery of foreign exchange has to

be made. However, in practice, there is a two day time lag between

the transaction and actual delivery for paper work, verification and

clearing of payments. The primary price makers in the foreign

exchange market continuously bid or ask the currencies, hencethe exchange rate also changes continuously in a free market.

~ Since the primary dealers quote two-way prices and are ready to

deal on either side (i.e. to buy and sell) the rate is quoted in thefollowing manner:

*Spot Date: Spot date refers to the delivery date of the currency. Itis the settlement date when actual exchange of currencies takes

place. The delivery of currency of the spot transaction takes placeon the second working day after the date of settlement.

*Spot Transaction: The spot dealings between an individual like atourist and banks are settled on the spot by exchanging thecurrencies immediately.

*FORWARD EXCHANGE RATE:

~ In the foreign exchange forwards market, the purchase/ sale offoreign exchange is done currently for delivery and payment at afixed date in future at a specified exchange rate. This is known as

the foreign exchange rate.

~ These contracts usually have maturities of 30, 60 or 90 days.

Some transactions also have maturities of 180 0r 360days.

~ Forward exchange rate may either be at a premium or discount

in relation to the spot exchange rate.

FACTORS INFLUENCING FORWARD EXCHANGE RATE: Balance of payments position Inflation rate. Interest rate. Degree of speculation in foreign exchange market.


19/36

Economic situation in the country. Political situation in the country. Government policies, etc.

*HEDGING:

~ Hedging covers the risk arising out of changes in the exchange

rate. It is especially essential for firms having large amountsreceivables or commitments to pay in foreign currencies. The

strategy of hedging involves increasing the currency that is likely to

appreciate and decreasing the currency that is likely to depreciate.

*SPECULATION:

~ Speculation involves purchase and sale of foreign exchange in the

forward market with the intention of making profit by takingadvantage of changes in foreign exchange rates. They speculate on

the basis of their own calculation of the difference between the

forward rate and spot rate that may prevail at a future date.Speculators try to minimise their loss by entering in spot and

forward agreements simultaneously. Speculation may havestabilising or destabilising effect.

~ Stabilising speculation refers to purchase of foreign currency when

the domestic price of a foreign currency falls with the expectation ofits increase in the future.

~ Destabilising speculation refers to sale of foreign currency whenthe exchange rate falls with the expectation that it would fall

further.

*ARBITRAGE: Arbitrage refers to purchase of an asset in a lowprice market and its sale in a higher price market. This process leads

to equalisation of price of an asset in all the segments of themarket.


20/36

~ Arbitrageurs take advantage of the different exchange rates

prevailing in various foreign exchange markets due to different

interest rates.

~ They purchase foreign currency from the foreign exchange marketwith lower exchange rate and sell the same in market with a higherexchange rate.

~ Arbitrage is also possible within the country where two banks offertwo different bids and asking rate.

~ When arbitrage involves only two currencies or two countries, it is

called two-point arbitrage. It increases the supply of dearer

currency.

1) To encourage value addition in our manufactured exportsand towards this end, have stipulated a minimum 15%.

2)100% export oriented units for one additional year till 31stMarch 2011.

3)The Government seeks to promote Brand India through six ormore Made in India shows to be organized across the worldevery year.

4)Foreign Trade Policy is to help exporters for technological upgradation export sector infrastructure, Towns of ExportExcellence and units located therein would be grantedadditional focused support and incentives.

5)To encourage production and export of green productsthrough measures such as phased manufacturing programme

for green vehicles, zero duty EPCG scheme and incentives for

exports.6)Incentive available under Focus Market Scheme (FMS) has

been raised from 2.5% to 3%.

7)Incentive available under Focus Product Scheme (FPS) hasbeen raised from 1.25% to 2%.


21/36

8)26 new markets have been added under Focus MarketScheme.

9)Income Tax exemption to 100% EOUs and to STP units.10) In Tea Sector Minimum value addition under advance

authorisation scheme for export of tea has been reduced fromthe existing 100% to 50%.

11)Time limit of 60 days for re-import of exported gems andjewellery items, for participation in exhibitions has beenextended to 90 days in case of USA.

12)Gem & Jewellery units in SEZ and EOUs can receive preciousmetal i.e. Gold/silver/platinum prior to exports or post exports

equivalent to value of jewellery exported. This means that

they can bring export proceeds in kind against the present

provision of bringing in cash only.13)Reduce transaction costs, dispatch of imported goods directly

from the Port to the site has been allowed under Advance

Authorisation scheme for deemed supplies.

EXIM POLICY HIGHLIGHTS

Service Exports

Duty free import facility for service sector having minimum foreignexchange earnings of Rs.10 lakhs.

Agro Exports

a.Corporate sector with proven credential will be encouraged tosponsor Agri Export Zone for boosting agro exports. Thecorporates to provide services such as provision of pre/post

harvest treatment and operations, plant protection, processing,

packaging, storage and related R&D.b.DEPB rate for selected agro products to factor in the cost of pre-

production inputs such as fertiliser, pesticides and seeds.
http://www.eximguru.com/exim/eou/default.aspxhttp://www.eximguru.com/exim/eou/default.aspx


22/36

Hardware/Software

a.To promote growth of exports in embedded software, hardwareshall be admissible for duty free import for testing and

development purposes. Hardware upto a value of US$ 10,000shall be allowed to be disposed off subject to STPI certification.

b.100% depreciation to be available over a period of 3 years tocomputer and computer peripherals for units in

EOU/EHTP/STP/SEZ.

Gem & Jewellery Sector

a.Diamond & Jewellery Dollar Account for exporters dealing inpurchase/sale of diamonds and diamond studded jewellery.

Export Clusters

a.Upgradation of infrastructure in existing clusters/industriallocations under the Department of Industrial Policy & Promotion(DIPP) scheme to increase overall competitiveness of the export

clusters.

Rehabilitation of Sick Units

For revival of sick units, extension of export obligation period to beallowed to such units based on BIFR rehabilitation schemes. This facility

shall also be available to units outside the purview of BIFR butoperating under the State rehabilitation programme.

Removal of Quantitative Restrictions

a. Import of 69 items covering animal products, vegetables andspices, antibiotics and films removed from restricted list.

b.Export of 5 items namely paddy except basmati, cotton linters,rare earth, silk cocoons, family planning devices except condoms

removed from restricted list.


23/36

Special Economic Zones Scheme

EOU Scheme

a.Agriculture/Horticulture processing EOUs will now be allowed toprovide inputs and equipments to contract farmers in DTA topromote production of goods as per the requirement ofimporting countries. This is expected to integrate the production

and processing and help in promoting agro exports.b.Foreign bound passengers will now be allowed to take goods

from EOUs to promote trade, tourism and exports.

EPCG scheme

a.The scheme shall now allow import of capital goods for pre-production and post-production facilities also.b.To facilitate upgradation of existing plant and machinery, import

of spares shall also be allowed under the scheme.c. Capital goods upto 10 years old shall also be allowed under the

scheme.

d.To facilitate diversification into the software sector, existingmanufacturer exporters will be allowed to fulfill export obligationarising out of import of capital goods under the scheme for

setting up of software units through export of manufacturedgoods of the same company.

DFRC Scheme (Duty Free Replenishment Certificate)

Reduction of Transaction Cost

a.High priority being accorded to the EDI implementationprogramme covering all major community partners in order to

minimise transaction cost, time and discretion. We are nowgearing ourselves to provide on line approvals to exporters whereexports have been affected from 23 EDI ports.


24/36

Railway Budget 2012-13 Highlights

Fare Hike:

Passenger fare will be hiked for every rail class after 9 Years as below:

Mail Passenger fare hiked by 2 p/km. Express Train fare hiked by 3 p/km. Sleeper Class fare hiked by 5 p/km AC 3-tier fare hiked by 10 p/km AC 2-tier fare hiked by 15 p/km AC-1 fare hiked by 30 p/km Minimum fare and platform ticket to cost Rs 5 instead of Rs 3

now.

New Train Services in Rail Budget 2012

75 New express trains will be introduced this year including 21new passenger services, 9 DEMU and 8 MEMU services.

75 new local trains for Mumbai, 44 new local trains for Kolkataand 18 new local trains for Chennai are introduced.

39 trains will be extended and frequency of 23 trains will beincreased.

Project to connect Nepal via rail route will be taken up inRailway Budget 2012-13.

Wagon factory to be setup at Sitapali in Ganjham district ofOdhisa.

Rail Coach Factory to be set up at Palakkad with the support ofKerala Government.

The entire meter gauge, narrow gauge sections to be madebroad gauge by the end of 12th Plan.

6,500 km of railway track to be electrified in next 5 years. For the year 2012-13 Rs 60,100 crore railway budget is

proposed.


25/36

Common Man Facilities in New Rail Budget 2012-13

SMS on passenger mobile phone to be accepted as proof of validreservation.

Meals during travel can now be booked through mobile SMS. 2500 coaches will be equipped with green toilets under Pilot

Project 321 escalators will be installed at important railway stations of

the country.

50% discount in AC and AC-chair car will be given to the patientof anemia and sickle-cell disease.

Every Garib Ratha train will now be equipped with a separatecoach for physically challenged people.

Employment and Awards in Railway Budget 2012-13

Railway will hire over 1 lakh employees in 2012-13. New hires can now fill up all vacancies in SC/ST and physically

challenged categories.

Every year Rail Khel Ratna Award will be given to 10 sports-persons.

Railway workers will now get the bonus of 78 days.Rail Budget Highlights

Below are the few rail budget highlights of Railway Budget 2012:

The Rail Budget 2012-13 could lay an action plan for resourcegeneration and increase thrust on PPP projects for capacityaugmentation.

A legislation to make the Railway Protection Force (RPF)responsible for all railway related law and order issues, apartfrom passenger safety, will likely be tabled in March 2012 when

the Budget will be discussed in Parliament. Gujarat MPs are demanding bullet train between Ahmedabad

and Mumbai. They are requesting Mr. Trivedi to announce thebullet train project as a special project in the upcoming Railway

Budget 2012-13.


26/36

Current National and International issues

1.National Counter Terrorism Centre (NCTC)The one-day meeting between Prime Minister Manmohan Singh,Home Minister P Chidambaram and the Chief Ministers, representing

virtually all the major political parties, was held in New Delhi on

May 5.

The meeting that was organized on the setting up of the National

Counter Terrorism Centre (NCTC) remained inconclusive after

steadfast opposition from chief ministers, including those from the

Congress, United Progressive Alliance (UPA) allies, the Bharatiya

Janata Party (BJP) and those of regional parties.

Emerging Key Sticking Issues

Two key sticking issues emerged after the meeting.1. The anti-terror body should not be under the control of IB.2. The counter-terror body - in whatever shape it is formed - should

not carry out independent operations in states. The NCTC, an

anti-terror body proposed by the Union Ministry of Home Affairs

on February 3, is not acceptable to chief ministers in its present

form.

The states which did not agree on the NCTC in its present form include

a couple of Congress-ruled states, all BJP-ruled states and the states


27/36

ruled by regional parties like the Akali Dal in Punjab, the National

Conference (Jammu and Kashmir), the Trinamool Congress (West

Bengal), the Biju Janata Dal (Odisha) and the AIADMK (Tamil Nadu).

Many chief ministers questioned the logic of putting the NCTC under

the IB.

Possible Options

One of the possible options is splitting the work of the NCTC-typebody. A counter- terror body with central command could have

access to IB databases on suspects, informers, friends of suspects

and financiers for analysis.

Operations could be handed over to the National InvestigativeAgency (NIA) formed after the November 2008 Mumbai

attacks. Since the NIA was formed under an act of Parliament,

Chief Ministers would have no objections to it.

2. BRICS SUMMIT

The BRICS (Brazil, Russia, India, China and South Africa) is a grouping

of the worlds emerging economies, representing five continents. The

BRICS countries together account for 40 % of global GDP ($18.49

trillion). Intra-BRICS trade is worth $212 billion, and is growing at 28 %

a year. It has set itself a trade target of $500 billion by 2015.

However, the aim of the BRICS is to enhance cooperation among

member countries and working together at the international forums.

Clearly, it is an opportunity for India to improve and strengthen its

relations with China and strive to get their disputes resolved.


28/36

Delhi Declaration

At the end of the summit, BRICS leaders issued a Delhi Declaration.

The Declaration hinted at backing an alternative candidate for

the World Bank president's post which has always beenappropriated by an American and exhorted the Bank and the

International Monetary Fund (IMF) to quickly realign their priorities

and approach to the needs of the developing world.

The leaders also weighed the consequences of setting up a BRICS

Bank and opted for a more contemplative approach by asking their

Finance Ministers to examine its feasibility and report back at the next

summit in Russia.

They agreed that the bank should in no way emerge as a competitor

to the World Bank and the IMF but provide funds for projects that do

not find favor with these institutions.

Indias Major Points

Addressing the summit, Prime Minister Manmohan Singh also said

that the grouping has agreed to examine in "greater detail" aproposal to set up a South-South Development bank, funded

and managed by BRICS and other developing countries.

He also said in their restricted session, the grouping also discussed the

ongoing turmoil in West Asia and agreed to work together for a

peaceful resolution of the crisis.

Touching upon the issue ofterrorism, Singh said the countries should

enhance cooperation against terrorism and other developing threatssuch as piracy, particularly emanating from Somalia.

3.S&P downgrades IndiaGlobal rating agency Standard & Poor's (S&P) scaled

down India's credit rating outlook from stable' (BBB+)


29/36

to negative' (BBB-) with a warning of a downgrade if there

is no improvement in the fiscal situation and political climate.

Giving reasons for downgrading India's sovereign rating outlook

to the lowest investment grade and just one step away from junk

bond status. The S&P also lowered the rating outlook of

the country's 10 top banks which include the State Bank

of India (SBI), ICICI Bank and HDFC Bank. Other banks

which would also suffer collateral damage are Axis

Bank, Bank of India, IDBI Bank, Indian Overseas Bank,

Indian Bank, Syndicate Bank and Union Bank of India.

4. Next Global Economic crisis in 2014According to Dr. Kaushik Basu, Chief Economic Advisor

of India, 2014 is an important year because numerous European

banks would have to begin to repay 1.3 trillion dollars worth of

loans that they had received from the European Central Bank.

This could precipitate a major global economic crisisa third

round of crisis after 2008 and 2011. I also asserted that despiteIndias current slowdown (growth in 2011-12 was 6.9%), we will see

Indian growth picking up slowly initially. But soon after the

possible European crisis of 2014, we could see India as the worlds

fastest growing economy, faster than even China.

5. Food InflationAccording to data released on 29 December 2011, food inflation

fell to its lowest level in six years at 0.42 % for the week ended 17December with a sharp decline in prices of essential items like

onions and potatoes.


30/36

The fall is likely to prompt the RBI to cut interest rates at itspolicy review in January 2012. Food inflation declined to below 1

%, the lowest since April 2006.Experts attributed the fall to a good kharif harvest as well as a

high base.Food items have a 14 % share in the overall Wholesale Price

Index (WPI) basket.

Overall, vegetables became cheaper by 36.02 %. Inflation in thevegetable and wheat segments eased during the reporting week

but prices of protein-rich items such as eggs, milk and pulsescontinued to remain high. Pulses grew costlier by 14.07 % during

the week under review, while milk grew dearer by 11.30 % andeggs, meat and fish by 11.56 %.

Inflation in the overall primary articles category stood at 2.70 %during the week ended December 17, as against 3.78 % in theprevious week ended 10 December 2011.

Inflation in the non-food segment, which includes fibres andoilseeds, was recorded at 0.28 % during the week under review,as against 1.37 % in the week ended 3 December.

Fuel and power inflation stood at 14.37 % during the week ended17 December as against 15.24 % in the previous week.

The Reserve Bank of India (RBI) ordered banks to set asidemore capital for their investments in financial entities such as

insurance with an objective to strengthen the ring fence around

banks.

The banks are to set aside 25% more capital following the centralbank raise of the risk weight for buying or holding of equity in

financial entities.

Banks investments in paid-up equity of financial entities, even ifthey are exempted from the capital market exposure norms, willthus be assigned a 125 percent risk weight.

RBI deputy governor Subir Gokarn


31/36

AGRICULTURE:

Indias food grain production to grow by 0.6% in 2012-13: Amodest growth in output of rice and wheat along with a

recovery in production of coarse grains and pulses will beresponsible for the overall growth.

Planting the seeds of prosperity : Educated farmers whounderstand agriculture markets are making the most oftheir know-how to offer greater bargaining power to

smallholders

Group farming in Maharashtra : The moves in Pune are partof larger efforts by the state government to shift focus todevelop groups of farmers and channel funds to them

Government frees up cotton exports: Fresh registration ofcotton exports allowed with immediate effect; decision on

exporting sugar likely on 3 May

Solar power project in Maharashtra cleared, says official :The project, which is a part of a larger 150 MW solar power

project at Dhule, is entirely financed by the Maharashtragovernment

Worlds smallest living women, jyoti amge, 18 recorded inGuinness book of world record

Legendry actor devanand passed awayJapan tsunami in the month of aprilIndia won the world cup after 28 years on april 2011Anna hazare protests for introducing jan lokpal bill that

created a sensational news in India- AprilOsama bin laden assassinated in month of mayApple co founder Steve Jobs dies due to cancer on oct 5thTwo economists Thomas Saragent & Christopher Sims

awarded noble prize for economics on oct 10th
http://www.livemint.com/2012/04/30113300/Government-frees-up-cotton-exp.htmlhttp://www.livemint.com/2012/04/30113300/Government-frees-up-cotton-exp.htmlhttp://www.livemint.com/2012/05/08214929/Latest-MGNREGA-version-include.htmlhttp://www.livemint.com/2012/04/30113300/Government-frees-up-cotton-exp.htmlhttp://www.livemint.com/2012/05/16215306/Group-farming-in-Maharashtra.htmlhttp://www.livemint.com/2012/05/17214946/Planting-the-seeds-of-prosperi.html


32/36

Toppled Libyan strongman Muammar Qadhafi is killed bynew regime forces on oct 20

th

Sabarimala piligrims of 106 were killed in stampedeKarnataka State Budget- 2012-13 (March 21st) - HIGHLIGHTS

- Government high school children to get computers

- Rs 50 crore for rejuvenation of lakes- Rs 200 crore for solid waste disposal unit in Bangalore

- Rs 200 crore for road work in BangaloreRs 426 crore for BBMP signal-free corridors

- Rs 500 crore for metro rail

- BBMP and BWSSB to get Rs 1,000 crore eachRs 5,500 crore for Bangalore infrastructure development

- Bangalore in budget: 8 transport complexes to come up- Ready-made garments cheaper

- Duty on diesel reduced- Tax on jewellery reduced- Rs 10,500 allotted for irrigation; Rs 2,921 for agriculture; Rs 301 crore to tackledrought; Rs 1,000 allotted crore to procure fertiliser=14722

- Agriculture, fishery, animal husbandry are priority areas- Farmers to get loans to minimal interest rates- 50% rebate on farm equipments- 20% drop in rainfall despite early monsoons- Cigarettes, tobacco, beer to cost more

- Budget allocation: Sericulture - Rs 293 crore; Rs 200 crore - Organicfarming Women and child development - Rs 2,883 crore; housing - Rs1,439 crore; - Education - Rs 15,071 crore Public works - Rs 5,110 crore;

Water resources - Rs 8,101 crore; health and family - Rs 4,260 crore;

Animal husbandry - Rs 1,206 crore; Home and transport - Rs 4,288

crore; Rural development and panchayats - Rs 6,896 crore


33/36

New Tax Slab for Budget 2012-13 (16 Mar 2012 012:35PM)

Now individual income tax exemption limit raised to Rs 2 lakhs. Income between 2 to 5 lakhs to be taxed 10% Income between 5 to 10 lakhs to be taxed 20% and income Above 10 lakhs to be taxed 30%. No change in tax structure for corporate No advanced tax requirement for senior citizens.

ECONOMIC SURVEY 2010-2011

The Economic Survey to review the economic performance in thecurrent financial year and forecast the economy prospects for the

coming year.

1. Estimated economic growth at 8.75-9.25 % for fiscal year 2012.2. Gross fiscal deficit decreases to 4.8% of GDP.3. Inflation estimated to be higher by 1.5%.4. India on way to become fastest growing economy in the world.5. Calls for new 'Green Revolution' for agricultural sector with

higher investment and introduction of latest technologies.

sericulture

1%

organic farming

0%women and

child

6%housing

3%

education

30%

public works

10%

water

16%

health and family

9%

animal

husbandry

2%

home & trans9%

rural devl.

14%

budget allocation


34/36

6.Government working on regulations to emphasize on capitalmarket.

7. Increase influx of foreign capital by building close associationwith G-20 countries.

8. National Forest Land Bank to improvise the infrastructureprojects.9.Estimated agriculture sector growth at 5.4 % during this fiscal

year.10.Growth of Industrial output by 8.6% where, manufacturing

sector registers 9.1%.11.The export stats; 29.5% in 2010 April-December and Import;

19%.

12.Trade gap minimizes to $82.01 billion.13.Rose both saving and investment rate to 33.7% & 36.5% of

GDP.14.Estimated food grains production at 232.10 million tonnes.15.Forex reserves to reach $297.30 billion.16.Importance given to telecommunication sector.17.Policies supporting accounting, legal, tourism, education,

financial and other services.

18.Taxation of goods and services to be revised.19.Introduction of Financial Schemes to monitor unemployment.20. Reformation necessary in the current education system by

inviting more private participation.

Industries have an important role to play in the economic

development of a country like India.1. Industrialisation helps in raising the per capita income.2. The development of many other sectors in the economy is

affected by the development of industries. Agricultural

development, transport and communication, banking andinsurance etc. are affected by industrial development.


35/36

3. Industrialisation can create jobs for the surplus labour forcein agriculture.

4. The prices of industrial goods fluctuate less as compared tothe prices of agricultural goods in the international market.

Therefore, export earnings from industrial goods are morestable than export earnings from agricultural goods.

5. Urbanisation after industrial development may be betterplanned than urbanisation before industrial development.

The industrial policy refers to such formal declaration by thegovernment through which general policies for industries

adopted by the government are made public. Any

industrial policy may have mainly two parts- first,

the ideology of the government which determines

the nature of industrialisation, and

Second, the government rules and principles which

provide a certain framework behind existing

ideology.

The importance of an industrial policy can be explained through the

following points:

A. Deployment of Natural Resources The industrial policy helps infull deployment of natural resources of the country. It helps in

identifying, collecting and using natural resources properly. Itfacilitates increase in national income of the country.

B. Modernisation The industrial policy encourages modernisationfor increasing industrial output and productivity. It envisages the

use of modern and latest technique of production in industrialsector. It facilitates maximum output at minimum cost ofproduction.

C. Balanced Regional Development The industrial policy helps inbalanced regional development of the country. The industrial

policy may contain provisions regarding providing facilities or


36/36

concessions for rapid development of industrially backward

regions of the country.

D. Coordination between Basic and Consumer Goods Industries The balanced development of basic and consumer goodsindustries is essential for economic growth of a country. The

industrial policy encourages development of basic and keyindustries on the one hand, while attention is paid to the

development of consumer goods industries also on the other.

E. Coordination between small-scale and large-scale industries The industrial policy plays an important role in coordinateddevelopment of small-scale or cottage industries and large scale

industries. These industries can be made mutually helpful to eachother through the provisions of industrial policy.

F. Cordial Industrial Relations A comprehensive industrial policy isneeded to establish cordial relations between workers andmanagement. Cordial industrial relations are essential for rapid

and sustainable industrialisation.

G. Proper Utilisaiton of Foreign Investment An appropriateindustrial policy envisages attracting foreign capital and

entrepreneurs. It helps rapid industrial development of thecountry. A well thought of industrial policy checks the demerits of

foreign investment and assistance.

Chairman of SBI Pratip ChaudhuriChairman of SEBI UK Sinha

Corrected Version of Cbal

Documents

Transcript of Corrected Version of Cbal