Union budget analysis

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  • 1. Economic Survey and Union Budget Analysis By Gaurav Tuli

2. Content Introduction Union Budget Analysis Expenditure Comparison Deficits and Policies Compared Budget Impacts Where is The Economy Headed ? Conclusion 3. Introduction Budget :- The most extensive account of theGovernment`s finances, in which revenuesfrom all sources and expenses of all activitiesundertaken are aggregated. It comprises therevenue budget and the capital budget. It alsocontains estimates for the next fiscal yearcalled budgeted estimates. 4. 2010-11 Growth Rate of GDP was slated at 8.6% Agriculture at 5.4% Manufacturing and Services at 8.6% Exports and Imports rose at 29.5% and 19% respectively Food Inflation, Higher Prices and Volatile Global Marketswere of concern Investments and Savings saw a rise in 2009-10 In Comparison to Last Year -Trade Gap Narrowed to US $82.01 bn and BOP Improved in the year therefore FDand PD Survey advised on development of schemes to addresspoverty issues and unemployment 5. 2011-12 Growth Rate of GDP was slated at 6.7% due toslowdown of industrial growth Agriculture at 2.5% estimated Manufacturing and Services at 9.4%(58% to GDP) Exports rose at 40% initially but then decelerated Food Inflation, Higher Prices saw slowdown due totight monetary policy by RBI Investments slowed down, Savings were stable BOP Widened in the year to $32.8 Billion Sustainable development and climate change arebecoming central areas of global concern 6. 2012-13 Growth Rate of GDP was slated at 6.9% but wouldpick up to 7.6% Agriculture at 2.5% estimated yet agai Manufacturing and Services at 9.4%(59% to GDP) Industrial Growth Pegged at 4-5% Exports rose at 40.5% and Imports at 30.5% Inflation definitely slowing down which will improveeconomic growth Central spending on social services goes up to 18.5%this fiscal Sustainable development and climate changeconcerns on high priority 7. Planned YearPlanned Expenditure (in Rs. 00 Crore) Increase % 2010-11 3,73,09215% 2011-12 4,41,36818.30% 2012-13 5,21,02518%2010-2011:- The government sought to increase payloads on R&D, India was having aprogressive outlook as it was striving to enhance itself on terms on new technology2011-2012:- Defense was the main front to improve upon for this year as a major chunkof the budget increase where allocation of funds were Rs. 69,199 crore for Defense interms of capital expenditure2012-2013:- As the budget allocated, was met at almost 99 percent in the 11th Plan, thegovernment has estimated an 18% again. 15 % higher than approach to 12th Plan 8. Non-Planned Year Non-Planned Expenditure (in Rs. 00 Crore) Increase % 2010-117,35,6576% 2011-128,15,84410.90% 2012-139,69,90015.89%2010-2011:- Due to the 34% rise of non-plan expenditure, this year attributed to amarginal increase as the majority of funds were allocated last year2011-2012:- XI Plan expenditure more than 100 per cent in nominal terms thanenvisaged for the Plan period. Also parts of the funds were transferred to State UTs2012-2013:- Estimates are based on agri-extension services and skill development 9. Year 2010-11 2011-122012-2013Gross TaxReceipts 7,46,6519,32,440 10,77,612Non TaxRevenueReceipts 1,48,1181,25,435 1,64,614 3,66,152 (5.1% of 3,95,444(5.9% of 3,66,152(5.1%Fiscal Deficit GDP)GDP) of GDP)Net MarketBorrowing3,45,0103,43,000 4,79,000 10. Fiscal Policy 2010-11 With recovery taking root, there was a need to review public spending, to mobilize resources and geared them towards building the productivity of the economy. 2011-2012 Fiscal consolidation targets at Centre and States have shown positive effect on macroeconomic management of the economy Structural concerns on inflation management were addressed by improving supply response of agriculture to the expanding domestic demand and through stronger fiscal consolidation 2012-2013 Fiscal policy response is better part of past 2 years aimed at taming domestic inflationary pressure. To maintain a healthy fiscal situation proposal to raise service tax rate from 10 per cent to 12 per cent. 11. Expenditure Policy2010-11 The net tax revenue to the Centre as well as the expenditureprovisions were estimated with reference to the recommendationsof the Thirteenth Finance Commission.2011-12 A Committee already set up by Planning Commission to look intothe extent classification of public expenditure between plan, non-plan, revenue and capital.2012-13 Expenditure Policy is optimistic about R&D, Skill Development, andan improved FRBM act. 12. 2010-11 Automobiles: The proposal to extend weighted deduction for a period of 5more years will help auto companies reduce their taxes, whilesimultaneously helping them scale up technologies to global standards.The proposed reduction in customs duty on most chemicals and plasticsfrom 12.5% to 7.5% will help marginally reduce raw materials costs. IT: Companies that benefit from tax exemption under the provisions of theIncome-Tax Act will have to pay an effective minimum alternate tax.Employee stock options will be included for calculating the Fringe Benefittax (FBT). Infrastructure: Construction- Benefits of Section 80IA may not be availableto construction companies. Development of roadways, dedicated freightcorridors and ports to enhance efficiencies and lower costs Pharma: Extension of the 150% weighted average deduction on R&Dexpenditure until FY07 to Be extended by another 5 years. Service taxexemption on clinical trials of new drugs Capital Goods : More Incentives to Rapid Power Expansion 13. 2011-12 Automobile: Positive for the Automobile sector ,central excise duty keptunchanged. Special incentives were announced for companies manufacturinghybrid vehicles in India. IT: It was low key affair for the Software Sector. The Budget did not mentionextension of fiscal benefits under the STPI Scheme for Export of SoftwareServices, which is due to expire in FY2011. Plan allocation for School Educationincreased by 24% this would boost business opportunities for the IT-Educationcompanies Infrastructure: It was continued to lay stress on infrastructure development, as theallocation for the sector has been increased by 23% Metals & Mining: Export duty on export of iron ore has been raised to ad valorem20% on lumps as well as fines. Negative news for iron ore exporters .No impositionof mining tax is a positive for mining companies as well as steel companies withcaptive mines. Pharma: The Budget is neutral for the pharmaceutical sector. Allocation toMinistry of Health & Family Welfare have been increased by 20%only, Disappointment prevailed for the Pharma companies actively involved in R&Dactivities. There were no indications on the extension of the EOU benefit whichwas available only till FY2011. Capital Goods: The Budget 2011-12, though it did not have many significant directmeasures for the Capital Goods sector, it sent a positive signal with regards to thecontinued impetus being provided to the Infrastructure and Power Sector of thecountry. 14. This years budget is more focused on reducingfiscal deficits. (2012-13) Government intends to recovers the demanddriven growth, private investments, and fightingagainst corruption. Government has to make a growth balanceamong Services and Agriculture Industrial Sector. Service sector taxes have as its the majorrevenue contributor. This might cause a slightslowdown in service sector. However, all of these assumptions are dependentto world economy and oil price. In my opinionthis year budget is a fiscal remedy budget ratherthan a real growth stimulating budget. 15. Sector Budget ImpactAgriculturePositiveAutomobile NegativeAviation NeutralBankingPositiveCapital GoodsPositiveCement PositiveFMCG NegativeInfrastructure PositiveIT NeutralMetalNeutralOil and GasNegativePharmaceutical PositivePowerPositiveReal EstateNeutral