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Ventura india budget 2012 13
 

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Analysis of the Indian Budget for the year 2012-2013. Speculating on the fiscal discipline

Analysis of the Indian Budget for the year 2012-2013. Speculating on the fiscal discipline

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    Ventura india budget 2012 13 Ventura india budget 2012 13 Presentation Transcript

    • Union Budget 2012-13Speculating on theFiscal Deficit Friday, 16th Mar, 2012
    • Union Budget 2012-13 Tall fiscal deficit projections; implementation is the key Keeping the increasingly complex political landscape in mind, the Finance Minister, Mr Pranab Mukherjee has presented a compromise budget (in which the specifics of fiscal discipline were not dealt with) with the intent to get it passed in the Parliament. The intent to keep subsidies capped to less than 2% of GDP is encouraging and implies that policy measures to be introduced in due course would help reign in the subsidy escalation. While the subsidy cap is a step in the right direction, it seems a bit unrealistic given the firm oil prices and the embargo on Iran which threatens us with run away oil prices. In which case the fiscal discipline would be out of control leading to higher market borrowings. A case in point is the budgetary allocation of Rs 53,640 crore to petroleum subsidy of FY12 which was way behind the actual subsidy of Rs 68,481 crore and that too when the average oil prices were much lower than the current Brent crude price of $125 per barrel. Already the government’s borrowing at Rs 4,79,000 for FY13 is higher than that of last year. This is an uncomfortably large number and will ensure that the interest rates will remain elevated, at least in the immediate future. Further if strict fiscal discipline is not adhered to then we risk the danger of higher borrowings leading to fuelling of inflation and crowding out the private sector from the credit markets hampering growth and make the projection of GDP growth of 7.35 - 7.85 look ambitious. 2 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Real GDP and its growth rate 9.0% 8.60% 8.4% 8.4% 8.5% 8.0% 7.6% 7.5% 6.9% 7.0% 6.7% 6.5% 6.0% 5.5% 5.0% 2008-09 2009-10 2011-12 2011-12E 2012-13E 2013-14E 3 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Fiscal Deficit 7.0% 6.4% 5.9% 6.0% 5.1% 5.0% 4.7% 4.5% As % of GDP 4.0% 3.0% 2.0% 1.0% 0.0% 2009-10 2010-11 2011-12 RE 2012-13 2013-14 4 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Subsidy targets continue to be ambitious 250000 Rs. in Crore To be capped at 2% 3.0% 200000 2.5% 2.0% 150000 1.5% 100000 1.0% 50000 0.5% 0 0.0% 2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE Food Fertilizers Petroleum Interest and Others Subsidies as a %of GDP (RHS) 5 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Market Borrowings galloping away 550,000 Rs. in Crore 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE 6 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Budgetary Measures The government has taken several initiatives to boost revenues, scale down expenditure, resolve mechanisms to curtail subsidy outflow and provide a boost to investment, savings and development of capital markets. These are enumerated below :- Revenue measures along expected lines 1200000 Rs. in Crore 1000000 800000 600000 400000 200000 0 2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE Corporation tax Income tax Wealth Tax Customs Union Excise Duties Service Tax Taxes of the Union Direct Indirect 7 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Revenue Measures- Indirect tax The excise duty and service tax have been increased to 12% from 10% while a large number of services have been bought under the service tax net (by clearly defining 17 services on the negative list). Merit rate from 5 per cent to 6 per cent and the lower merit rate from 1 per cent to 2 per cent with few exemptions. No change proposed in the peak rate of customs duty of 10 per cent on non-agricultural goods. Basic customs duty reduced for certain agricultural equipments and their parts. Customs duties: Reduced for agri, thermal power producers, LNG, coal mining, railway equipment, textiles inputs, while duties on cigarettes and tobacco were raised. Full exemption from basic customs duty for import of equipment for expansion or setting up of fertiliser projects upto March 31, 2015. Levy of excise duty of 1 per cent on branded precious metal jewellery to be extended to include unbranded jewellery. Branded Silver jewellery exempted from excise duty. Film industry exempted from service tax on copyright relating to recording of cinematographic films. Proposals relating to service tax are estimated to result in a net revenue gain of Rs 18,660 crore for the year. 8 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Revenue measures - Direct Taxes Exemption limit for the general category of individual taxpayers proposed to be enhanced from Rs 1,80,000 to Rs 2,00,000 giving tax relief of Rs 2,000 Slabs have been relaxed further as under: – 10% of tax on income from Rs 2 lacs to Rs 5 lacs – 20% of tax on income from Rs 5 lacs to Rs 10 lacs – 30% of tax on income from Rs 10 lacs and above Rajiv Gandhi Equity Saving Scheme to allow for income tax deduction of 50% to new retail investors, who invest upto Rs 50,000 directly in equities and whose annual income is below Rs 10 lakh to be introduced. The scheme will have a lock-in period of 3 years Deduction of upto Rs 10,000 on interest from savings bank accounts. Allow deduction of upto Rs 5,000 for preventive health check up Senior citizens not earing income from business operations to be exempt from advance tax payments MAT introduced to 18.5% for individuals STT reduced by 20% on delivery transactions to 0.1%. 9 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Direct Tax Proposals and their impact The direct tax proposals of the Union budget will lead to a revenue loss of ~ Rs 4,500 crore to the exchequer. Added benefits include relaxation in deduction of up to Rs 10000 for interest from savings bank accounts to help small tax payers of income up to Rs 5,00,000 and Rs 5000 for preventive health check Old Slab Tax Rate (%) New Slab Up to Rs1,80,000 0% Up to Rs 2,00,000 Rs 1,80,001-Rs 5,00,000 10% Rs 2,00,001 - Rs 5,00,000 Rs5,00,001-Rs 8,00,000 20% Rs 5,00,000 - Rs 10,00,000 Above Rs. 8,00,000 30% Above Rs 10,00,001 Taxable Income Pre-Budget tax Post Budget tax Saving 2,00,000 2,000 0 2,000 5,60,000 44,000 42,000 2,000 11,00,000 1,82,000 1,60,000 22,000 10 Friday, 16th Mar, 2012
    • Union Budget 2012-13 General Anti Avoidance Rule Significant General Anti Avoidance Rule (GAAR) measures, including empowering the Income tax department to open cases dating 16 years back in cases of assets held abroad should also help to bolster the kitty. Further it has also been made mandatory to report assets held abroad by assessees. To deter the generation and use of unaccounted money • Tax collection at source on purchase in cash of bullion or jewellery in excess of Rs 2 lakhs • Tax collection at source on trading in coal, lignite and iron ore • Increasing the onus of proof on closely held companies for funds received from shareholders as well as taxing share premium in excess of fair market value • Taxation on unexplained money, credits, investments, expenditures etc., at the highest rate of 30 per cent irrespective of the slab of income • Tax deduction at source on transfer of immovable property (other than agricultural land) above a specified threshold. Extension of Alternate Minimum Tax (AMT) on all persons other than companies i.e. where the regular income-tax payable by a person (other than a company) is less than the alternate minimum tax payable for such previous year, the adjusted total income (if greater than Rs 20 lakhs) shall be deemed to be the total income and he shall be liable to pay income-tax on such total income @ 18.5%. 11 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Moderate growth in expenditure forecasted On the expenditure front, the government is emphasising on the Effective Revenue Deficit (to address the structural imbalances in the revenue account) and the Medium term Expenditure Framework (which would help set forth a rolling target for expenditure indicators). The former would help in reducing the consumptive component of the revenue deficit and create space for increased capital spending, while the latter would help in allocating resources for prioritised schemes and weeding out others that have outlived utility. While interest payments, defence and subsidies are expected to go up sharply, other non plan expenditure items are to be maintained at more or less last years levels. However the worrying factor is the increase in interest payments to 3.2% of GDP On plan expenditure the encouraging news is that the government has not gone overboard in its allocation, however the allocations to energy sector which has been kept at last years levels is slightly disappointing. 12 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Non Plan Expenditure (Rs. in Crore) 2010-11 2011-12BE 2011-12RE 2012-13BE Chg BE 13/12 Interest Payments and Debt 234022.1 267986.2 275617.7 319759.4 Servicing 19% Defence 154116.7 164415.5 170936.8 193407.3 18% Subsidies 173419.6 143569.7 216296.7 190015.1 32% Assistance to States from 4179.3 4525.0 4525.0 4620.0 NCCF/NDRF 2% General Elections 49.8 84.5 84.5 91.5 8% Payment against Debt Waiver and 11340.5 6000.0 1500.0 0.0 Debt Relief Scheme for Farmers -100% Postal Deficit 6161.7 5017.7 5573.1 5727.1 14% Reimbursement of losses to 634.4 657.9 652.0 600.0 Railways -9% Subsidy to Railways towards 2013.3 3022.6 2598.3 3003.9 dividend reliefs and concessions -1% General Services 101611.3 103225.9 108802.3 120086.1 16% Social Services 35014.2 20861.1 19708.5 20784.1 0% Economic Services 24685.4 21694.2 20294.8 20479.2 -6% Other Non-Plan Exp 86290.9 85646.8 71550.9 95946.5 12% Amt met from Famers Debt relief -15240.5 -10525.0 -6025.0 -4620.0 fund and NCCF/NDRF -56% Total 818298.6 816182.1 892115.6 969900.3 19% 13 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Non Plan Expenditure Rs. in Crore 1200000 1000000 800000 600000 400000 200000 0 2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE RE - Int Payment & Debt Servicing RE- Defence RE- Subsidies RE Others CE- Loan and Advances to State, UT CE- Defence CE- Others Capital Expenditure (CE) Revenue Expenditure (RE) 14 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Interest Payments Rs. in Crore 350,000 3.3% 3.3% 300,000 3.2% 3.2% 250,000 3.1% 200,000 3.1% 3.0% 150,000 3.0% 2.9% 100,000 2.9% 50,000 2.8% 2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE Int. Payment and Debt Servicing (LHS) Interest Payment as a %of GDP (RHS) 15 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Plan Expenditure (Rs. in Crore) 2010-11 2011-12BE 2011-12RE 2012-13BE Chg BE 13/12 Agriculture and Allied Activities 15715.7 14744.1 14854.8 17692.4 20% Rural Development 42059.9 46292.1 39132.2 40763.5 -12% Irrigation and Flood Control 476.5 565.3 489.3 1275.0 126% Energy 110977.1 155495.2 147189.5 154841.9 0% Industry and Minerals 35951.3 45213.8 40580.9 57226.8 27% Transport 94205.3 116860.9 109205.5 125357.1 7% Communications 10335.7 20255.5 11994.4 15411.4 -24% Science Technology & Environment 11921.2 16186.3 12712.7 16591.7 3% General Economic Services 13680.8 15802.1 19420.4 24777.3 57% Social Services 127633.0 153812.2 157056.2 188871.7 23% General Services 1359.8 7229.7 5536.2 8700.7 20% Total 464316.1 592457.0 558172.0 651509.3 10% 16 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Plan Expenditure Rs. in Crore 600000 500000 400000 300000 200000 100000 0 2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE RE- State Plan RE- Central Plan CE- State Plan CE- Central Plan Capital Expenditure (CE) Revenue Expenditure (RE) 17 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Measures to control subsidy spending seem to be ambitious On the issue of subsidies, while the food subsidies including the Food Security Act have been completely provided for, the balance subsidies would be provided to the extent possible keeping in mind the cap of 2%. The roll out of the mobile- based Fertiliser Management System (mFMS) will not only help in curtailing misuse of fertilizer subsidy, but also provide direct transfer of subsidy to the retailer (and eventually to the farmer) while providing information on end to end movement of fertilizers and subsidies. Pilot project for selling LPG at market price and reimbursement of subsidy directly into the beneficiary’s bank account is being conducted in Mysore. Similarly, a pilot project on direct transfer of subsidy for kerosene into the bank accounts of beneficiaries has been initiated in Alwar district of Rajasthan and eventually it will be rolled out in at least 50 selected districts within the next six months. 18 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Measures to augment savings / investments and boost capital markets To promote investments and improve depth of the capital markets, a number of measures are being introduced like – Allowing Qualified Foreign Investors (QFIs) to access Indian Corporate Bond market – Simplifying the process of issuing Initial Public Offers (IPOs) – Two-way fungibility in Indian Depository Receipts – Providing electronic voting facilities for wider share holder participation in the important decisions of the companies. In addition a new scheme called Rajiv Gandhi Equity Savings Scheme is being introduced. The scheme would allow for income tax deduction of 50 per cent to new retail investors, who invest up to Rs 50,000 directly in equities and whose annual income is below Rs 10 lakh. The scheme will have a lock-in period of 3 years. The details will be announced in due course. Further funds deployed in gold purchases (which have grown by 50% and has been one of the primary drivers of the current account) have been competing with other sources of investments. In order to discourage investments in gold, the basic customs duty has been increased from 2% to 4% on standard gold bars and on non standard gold from 5% to 10%. In sync with this , the basic duty on gold ore, concentrate and ore bars for refining is being enhanced from 1% to 2%. On the excise side, duty on refined gold is being increased in the same proportion from 1.5% to 3%. 19 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Measures to augment savings / investments and boost capital markets (contd) Further relaxation in ECB limits particularly to part finance rupee debt of existing power projects and allow ECB for capital expenditure on the maintenance and operations of toll systems for roads and highways (so long as they are a part of the original project) are investment boosters for the Infrastructure sector. Further, permit to ECB for working capital requirements of the airline industry for a period of one year, subject to a total ceiling of $1 billion would help the ailing aviation sector significantly. The restriction on venture capital funds to invest only in nine specified sectors (under SEBI regulations of 1996) is proposed to be removed which is likely to enhance capital flow into the high growth sectors that have substantial capital requirements. So far, venture funds could only invest in information technology, software, nanotechnology, biotechnology, basic drugs and seed development and research, bio-fuels, hotels, dairy and poultry projects in India. 20 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Legislative Reforms to be undertaken in the current budget session 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 Indian Stamp (Amendment) Bill, 2012 Public Debt Management Agency of India Bill, 2012 21 Friday, 16th Mar, 2012
    • Union Budget 2012-13 FRBM Act Introduction of amendments to the FRBM Act as part of Finance Bill, 2012. Concept of “Effective Revenue Deficit” and “Medium Term Expenditure Framework” statement are two important features of amendment to FRBM Act in the direction of expenditure reforms. Effective Revenue Deficit is the difference between revenue deficit and grants for creation of capital assets. This will help in reducing consumptive component of revenue deficit and create space for increased capital spending. Medium-term Expenditure Framework statement will set forth a three-year rolling target for expenditure indicators. Recommendations of the Expert Committees to streamline and reduce the number of centrally sponsored schemes and to address plan & non-plan classification to be kept in view while implementing Twelfth Plan. 22 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Budget Summary (Rs. in Crore) 2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE Chg 12 BE/RE Chg BE 13/12 Revenue Receipts 572,811 788,471 789,892 766,990 935,684 -3% 18% Net Tax Revenue 456,536 569,869 664,457 642,252 771,070 -3% 16% Non tax Revenue 116,275 218,602 125,435 124,738 164,614 -1% 31% Capital Receipts 453,062 402,427 447,837 576,396 555,241 29% 24% Recoveries of receipts 8,613 12,420 15,020 14,258 11,650 -5% -22% Other Reciepts (Disinvestments) 24,581 22,846 40,000 15,493 30,000 -61% -25% Debt Reciepts 419,868 367,161 392,817 546,645 513,591 39% 31% Draw Down Balance of Cash (1,386) 6,430 20,000 (24,664) - Total Receipts 1,024,487 1,197,328 1,257,729 1,318,722 1,490,925 5% 19% Non Plan Expenditure 721,096 818,299 816,182 892,117 969,900 9% 19% Non Plan Revenue 657,925 726,491 733,558 815,741 865,596 11% 18% Interest Payments 213,093 234,022 267,986 275,618 319,759 3% 19% Non Plan Capital 63,172 91,808 82,624 76,376 104,304 -8% 26% Plan Expenditure 303,391 379,029 441,547 426,605 521,025 -3% 18% Plan Revenue 253,884 314,232 363,604 346,201 420,513 -5% 16% Plan Capital 49,507 64,797 77,943 80,404 100,512 3% 29% Total Expenditure 1,024,488 1,197,328 1,257,729 1,318,722 1,490,925 10% 19% GDP Nominal 6,550,271 7,877,947 8,986,860 8,912,179 10,159,884 -1% 13% Gross Fiscal Deficit 418,483 373,591 412,817 521,981 513,591 26% 24% Fiscal deficit as a % of GDP 6.4% 4.7% 4.6% 5.9% 5.1% 28% 10% Revenue Deficit 338,998 252,252 307,270 394,952 350,425 29% 14% Revenue deficit as a % of GDP 5.2% 3.2% 3.4% 4.4% 3.4% 30% 1% Primary Deficit 205,389 139,569 144,831 246,363 193,832 70% 34% Primary deficit as a % of GDP 3.1% 1.8% 1.6% 2.8% 1.9% 72% 18% 23 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Sectoral Measures and Impact 24 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Sector Summary Sector Budget Impact Key Highlights No additional excise duties on diesel cars & Automobiles Neutral increase in excise duty from 10% to 12% Aviation Neutral Slight increase in duties Banking / Financial Re-capitalization of PSU banks & Reduction of Neutral Services STT Capital Goods Negative No import duty imposed on power equipments. Infrastructure spending to boost demand, cost Cement Neutral pressures to persist FMCG / Consumer Neutral Increase in excise duty from 10% to 12% Durables Abolition of import duty; Increase in Export & Fertilizers Positive Ad valorem Duty Tax exemptions for in-house R&D extended Healthcare / Pharma Neutral further by 5 years Change in duty structure and reduction in duty Infrastructure Positive of critical raw material 25 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Sector Summary Sector Budget Impact Key Highlights Rs. 14,232 crore allocated to complete IT / BPO’s Neutral enrolment of 40 crore persons under UID mission Media Neutral No declaration on raising FDI limits Import duty on flat-rolled steel enhanced from Metals & Mining Neutral 5% to 7.5% Cess on crude petroleum oil produced in India Oil & Gas Negative revised to Rs 4,500 per metric tonne. Coal India advised to sign FSA with power Power / Utilities Positive plants and full exemption from basic customs duty on fuel 26 Friday, 16th Mar, 2012
    • Union Budget 2012-13Autos and Autos AncillariesNo imposition of excise duty on diesel vehicles a major positiveBudget Expectations Budget Declaration ImpactIncrease in excise duty from Excise duty raised to 12% and duty on large cars Negativecurrent 10% to 12%. raised from 22% to 24%.No additional excise on No additional excise duty on diesel cars Positivediesel cars imposed. Custom duty to be increased on completely builtHigher allocation to rural large cars/SUV’s/MUV’s of value exceeding Positivesector $40,000 to 75% from 50% Exemption of import duty on specific parts N/A Positive required for manufacturing of hybrid vehiclesImpact CompaniesGainers Mahindra & Mahindra, Maruti Suzuki India Ltd, Tata MotorsLosers 27 Friday, 16th Mar, 2012
    • Union Budget 2012-13AviationNo timeline on enhancement of FDI limitBudget Expectations Budget Declaration Impact Direct import of Aviation Turbine Fuel permittedDirect Import of ATF for Indian Carriers. However infrastructure Neutral development would take 2-3 years.Proposal to allow foreignairlines to participate up to Under active discussion. Positive49% of the total equity. N/A ECB to be permitted for WC requirement (up to Positive $1bn) for a period of one year. N/A Basic custom duty exemption on import of Marginally Positive aircraft parts.Impact CompaniesGainersLosers 28 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Banking and Financial ServicesMFI Bill a major positiveBudget Expectations Budget Declaration ImpactInterest subvention for loans No Declaration Negativeto SEBs. Reduction of STT by 20% to 0.1% on cash Positive for Motilal Oswal, delivery transactions Edelweiss and IIFLClarity on Private Sector Negative for L&T Finance, No DeclarationBank Licenses Shriram Transport Allocated Rs 15,888 crore for Capitalization of Negative for PSB`s Public sector banks and financial institutionsPermission to raise funds by Positive for IFCI, ICICI and Permission granted for long term infra bondsissuing long-term infra bonds IDFC , PFC and REC Double the limit of tax-free infrastructure bonds Positive for ICICI, IFCI, to raise Rs 60,000 crore in this year REC and IDFCReduction in FD lock-in No Declaration Neutral for all Banksperiod to 3 years from 5 years 29 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Banking and Financial ServicesBudget Expectations Budget Declaration Impact Agricultural credit is targeted to increase to Neutral for All Banks Rs5.75 lakh crore (21% yoy basis) Microfinance institutions(development and Positive for SKS regulation) bill to be passed in this year Micro finance Interest subvention of 1% on housing finance Positive for Banks and loans up to 15lakh HF`s National Housing banks Bill to be passed this Positive for NBFC- HF`s year Int. subvention up to Rs 10,000 from savings bank account holders (salary income upto Rs 5 Neutral Lacs)Impact CompaniesGainersLosers 30 Friday, 16th Mar, 2012
    • Union Budget 2012-13Capital GoodsNo declaration on levy of import duties on power equipmentsBudget Expectations Budget Declaration ImpactImposition of 19% importduties (currently nil) on No declaration Negativepower generation equipmentExpect 10% hike in capital Defense capital outlay up by 14% to Rs 79500 Marginally positiveoutlay for defense sector croreIncrease in depreciation rate No declaration Negative Allocation to R-ARDRP up by 53.0% to Rs 3114Higher allocation to R-ARDRP Positive crore.Impact CompaniesGainers BEL, SiemensLosers BHEL, BGR Energy, L&T 31 Friday, 16th Mar, 2012
    • Union Budget 2012-13CementGovernment spending to boost demandBudget Expectations Budget Declaration ImpactHigher infrastructure Government to spend Rs 25 lakh crore in the Positivespending 12th Five year planReview of the duty structureon imports of Coke, Pet Coke No declaration Negative(current 2.5%) and GypsumImpact CompaniesGainersLosers 32 Friday, 16th Mar, 2012
    • Union Budget 2012-13FMCG/Consumer DurablesHike in excise dutyBudget Expectations Budget Declaration Impact •Increase in basic excise duty on cigarettes of more than 65mm length by 10% advaloremIncrease in excise duty by •Increase in basic excise duty on hand-rolled Positive for ITC and VST10‐12% for cigarettes. bidis from Rs 8 to Rs 10 per thousand and on Industries machine-rolled bidis from Rs 19 to Rs 21 per thousandIncrease in excise duty from Excise duty increased to 12% from 10% Neutral for the sectorcurrent 10% to 12%. Efforts being put for consensus on FDI in multi-Clarity on FDI in retail sector Neutral for retail sector brand retailHigher allocation to rural Allocation of Rs 73,175 crore as against Negative for the sectorspending Rs 74,100 crore Full exemption from basic customs duty on LCD Positive for the sector and LED TV panelsImpact CompaniesGainersLosers 33 Friday, 16th Mar, 2012
    • Union Budget 2012-13FertilizersPolicies on urea to be the decision makerBudget Expectations Budget Declaration ImpactUrea will be brought under Mobile-based Fertilizer Management System on Positivethe NBS regime movement of fertilizer and subsidiesPer unit subsidy to be cutunder the Nutrient Based Government to finalize pricing and investment PositiveSubsidy (NBS) system for policies for ureanon-urea fertilizers Viable Gap Funding for capital investment Positive Full exemption from basic customs duty for import of equipment for expansion or setting up Positive of fertilizer projects Reduction of customs duty on some water soluble & liquid fertilizers other than urea, from Positive 7.5 per cent to 5 per cent and from 5 per cent to 2.5 per cent;Impact CompaniesGainers Nagarjuna Fertilizer, Chambal FertilizerLosers 34 Friday, 16th Mar, 2012
    • Union Budget 2012-13Healthcare / PharmaIn line with expectationsBudget Expectations Budget Declaration Impact Weighted deduction remains unchanged,Higher Weighted Deduction however tax exemptions for in-house R&D Positivefor R&D (From 150% to 200%) extended further by 5 yearsTax holiday on healthcare inTier‐II and III towns should be No declarationextended from 5 years to 10yearsIncreased spending on Rs. 20,822 crore earmarked for National Rural Positivehealthcare Health Mission against Rs. 18,115 crore in FY11.Impact CompaniesGainers Sun Pharmaceuticals, Cadilla Healthcare (impacted negatively due to domesticLosers formulations partnerships bought under perview of MAT) 35 Friday, 16th Mar, 2012
    • Union Budget 2012-13InfrastructureIncreased spending to boost growthBudget Expectations Budget Declaration ImpactHigher infrastructure Infrastructure spending in Twelfth Plan period to Positivespending go up to Rs. 50 lakh crore. Rate of withholding tax for interest payment onIncreased spending on ECBs proposed to be reduced from 2% to 5% for PositiveBharat Nirman 3 years for certain sectors.Higher allocation to road Allocation to road transport enhanced by 14% to Positivetransportation Rs. 25,360 crore.Increase in limit for Exemption from import duty on certain Positiveinfrastructure bonds equipment needed for road constructionHigher spending on rural Plan outlay for rural development is Rs. 73,175 Neutraldevelopment croreHigher investment limits forFII in corporate bondsImpact CompaniesGainersLosers 36 Friday, 16th Mar, 2012
    • Union Budget 2012-13IT / BPO’sBudget – A non event for the sectorBudget Expectations Budget Declaration ImpactRevival of these benefitsunder section 10A/B of the No DeclarationIncome tax Act for STP/EOUunitsFinancial incentives for IT- Rs. 14,232 crore allocated to complete enrolmentBPO vendors who take up Neutral. of 40 crore persons under UID missioneGovernance projectsAbolishing MAT levy on theSEZ developers/ units andcarry forward of MAT credit No Declarationentitlement for an indefiniteperiodImpact CompaniesGainersLosers 37 Friday, 16th Mar, 2012
    • Union Budget 2012-13MediaLack of steps on FDI limit, weakens investor sentimentsBudget Expectations Budget Declaration ImpactRaising of FDI limit forbroadcast carriage services No Declarationto 74% (Current Radio 26%,DTH -49% and Cable 49%)Reduction of customs dutyon digital head‐ends and set No Declaration Negativetop boxes (current 5%)Relief from levy andcollection of service tax on Service tax rate increased from 10% to 12%. Negativesubscription chargesAmortization rules for Film industry will get tax exemption onintangibles like license fees copyright relating to recording of Positivepaid by radio broadcasters cinematographic filmsImpact CompaniesGainersLosers 38 Friday, 16th Mar, 2012
    • Union Budget 2012-13Metals & MiningPositive policies to improve investment scenarioBudget Expectations Budget Declaration ImpactRise in import duty on Hot Import duty on flat-rolled steel enhanced from Positive for the domesticRolled Coils (steel) from 5% to 7.5% steel companiesprevailing 5% to 10%. Basic customs duty on machinery for surveyingReduction or removal of 5% and prospecting minerals reduced from 10% orimport duty on coke / coking Neutral for mining sector 7.5% to 2.5%. Full exemption from basiccoal customs duty to coal mining projectsExport duty on Iron Ore fines Reduced basic customs duty on plant &and lumps (low grade fines) machinery imported for setting up/ expansion of Positive for the iron oremay be reduced to 20% from iron ore pellet plants or iron ore beneficiation pelletisation industrythe current level of 30% plants from 7.5% to 2.5%Increase in import duty onmanganese ore from 2% to No declaration5%.Impact CompaniesGainersLosers 39 Friday, 16th Mar, 2012
    • Union Budget 2012-13Oil & GasIncrease in cess – a major disappointmentBudget Expectations Budget Declaration Impact Cess on crude petroleum oil produced in India Negative revised to Rs 4,500 per metric tonne.Removal of current 5% import Only for Power Generation Neutralduty on LNG & natural gas. Oil and Gas, LNG storage facilities, oil & gas pipelines eligible for VGF (Viability Gap Neutral Funding)Declaring Goods Status tonatural gas & LNG to limit No declaration No Impactsales tax to less than 5%.Reduction in excise duty of No declaration Negative for OMCsbranded dieselImpact CompaniesGainersLosers Cairn India, ONGC 40 Friday, 16th Mar, 2012
    • Union Budget 2012-13Power / UtilitiesBag full of positivesBudget Expectations Budget Declaration Impact •Coal India advised to sign FSA with power plantsReduction/removal of duties •Full exemption from basic customs duty and a Positive for the poweron imported coal but no concessional CVD of 1% for a period of two sectorchanges in cess for coal years till March 31, 2014 for steam coal •Full exemption from basic duty to natural gas and LNG Tax-free bonds of Rs 10,000 crore allocated to Positive for the power power sector sector To allow External Commercial Borrowings (ECB) Positive for the power to part finance rupee debt of existing power sector projects Withholding tax on interest payments on ECBs Positive for the power to be reduced to 5% from 20% sectorImpact CompaniesGainersLosers 41 Friday, 16th Mar, 2012
    • Union Budget 2012-13MiscellaneousBudget Declaration ImpactCoal India to sign FSAs with power projects commissioning Negative impact for Coal Indiacompanies before 31st March’15Cascading impact of dividend distribution tax to be eliminated All companiesNo excise duty on branded silver jewellery whereas non branded Branded Jewellery Playersgold jewellery to attract 1% excise dutyIncrease in excise duty from 1.5% to 3% on import of refined goldExemption of basic custom duty for waste paper NR Agarwal, Rainbow Paper, TNPLAbatement on excise duty for branded retail business enhanced to70% from 55% earlier, reducing the incident of duty from 4.5% to Shoppers Stop, Pantaloon, Provogue3.6% 42 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Appendix 43 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Receipts (Rs. in Crore) 2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE Chg BE 13/12 Chg 12 BE/RE Total Receipts 1,024,487 1,197,328 1,257,729 1,318,722 1,490,925 19% 5% Revenue Receipt 572,811 788,471 789,892 766,990 935,684 18% -3% Tax revenue (Gross) 624,527 793,072 932,440 901,664 1,077,611 16% -3% Corporation tax 244,725 298688 359990 327680 373227 4% -9% Income tax 132,315 146587 172026 171879 195786 14% 0% Wealth Tax 507 687 635 1092 1244 96% 72% Customs 83,324 135813 151700 153000 186694 23% 1% Union Excise Duties 103,621 138299 164116 150696 194350 18% -8% Service Tax 58,422 71016 82000 95000 124000 51% 16% Taxes of the Union 1,614 1982 1973 2317 2310 17% 17% Less: Share of State, UT 164,832 219303 263458 255414 301921 15% -3% Less: Transfer to NCCF 3,160 3900 4525 3998 4620 2% -12% Tax Revenue for Central (Net) 456,536 569,869 664,457 642,252 771,070 16% -3% Non Tax Revenue 116,275 218,602 125,435 124,738 164,614 31% -1% Interest Receipts 21,756 19733 19578 20125 19231 -2% 3% Dividends and Profits 50,248 47992 42624 50122 50153 18% 18% Other non-tax 44,271 150877 63233 54491 95230 51% -14% Capital Receipt 453,062 402,427 447,837 576,396 555,241 24% 29% Debt Receipts 419,868 367,161 392,817 546,645 513,591 31% 39% Mark et Borrowings 398,424 325414 343000 436414 479000 40% 27% Other short, medium & long term loan (9,769) 7759 15000 116084 9000 -40% 674% External Debt 11,038 23556 14500 10311 10148 -30% -29% Others 20,175 10,432 20,317 -16164 15443 -24% -180% Non Debt Receipts 33,194 35,266 55,020 29,751 41,650 -24% -46% Recoveries of loan and Advances 8,613 12420 15020 14258 11650 -22% -5% Others 24,581 22846 40000 15493 30000 -25% -61% Draw Down Balance of Cash (1,386) 6430 20000 -24664 0 -100% -223% 44 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Expenditure (Rs. in Crore) 2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE % Change Chg 12 BE/RE Total Expenditure 1,024,488 1,197,328 1,257,729 1,318,722 1,490,925 19% 5% Non Plan Expenditure 721,096 818,299 816,182 892,117 969,900 19% 9% Revenue Expenditure 657,925 726,491 733,558 815,741 865,596 18% 11% Int. Payment and Debt Servicing 213,093 234022 267986 275618 319759 19% 3% Defence 90,669 92061 95216 104793 113829 20% 10% Subsidies 141,351 173420 143570 216297 190015 32% 51% Others 212,812 226,988 226,786 219,033 241,993 7% -3% Capital Expenditure 63,172 91,808 82,624 76,376 104,304 26% -8% Loan and Advances to State, UT 83 85 85 75 85 0% -12% Defence 51,112 62056 69199 66144 79579 15% -4% Others 11,976 29,667 13,340 10,157 24,640 85% -24% Plan Expenditure 303,391 379,029 441,547 426,605 521,025 18% -3% Revenue Expenditure 253,884 314,232 363,604 346,201 420,513 16% -5% State Plan 75,082 81778 95317 93604 116985 23% -2% Central Plan 178,802 232454 268287 252597 303528 13% -6% Capital expenditure 49,507 64,797 77,943 80,404 100,512 29% 3% State Plan 9,408 11,301 10,709 11,595 13,013 22% 8% Central Plan 40,099 53,496 67,234 68,809 87,499 30% 2% 45 Friday, 16th Mar, 2012
    • Union Budget 2012-13 Deficit Ratios (Rs. in Crore) 2009-10 2010-11 2011-12BE 2011-12RE 2012-13BE Chg 13/12 Chg 12 BE/RE GDP Nominal 6,550,271 7,877,947 8,986,860 8,912,179 10,159,884 13% -1% Gross Fiscal Deficit 418,483 373,591 412,817 521,981 513,591 24% 26% Fiscal deficit as a % of GDP 6.4% 4.74% 4.59% 5.86% 5.06% 10% 28% Revenue Deficit 338,998 252,252 307,270 394,952 350,425 14% 29% Revenue deficit as a % of GDP 5.18% 3.20% 3.42% 4.43% 3.45% 1% 30% Primary Deficit 205,389 139,569 144,831 246,363 193,832 34% 70% Primary deficit as a % of GDP 3.14% 1.77% 1.61% 2.76% 1.91% 18% 72% 46 Friday, 16th Mar, 2012
    • Union Budget 2012-13Ventura Securities Limited.Corporate Office: C-112/116, Bldg No. 1, Kailash Industrial Complex, Park Site, Vikhroli (W), Mumbai – 400079This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to bereliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions inthe securities mentioned in their articles. Neither Ventura Securities Limited nor any of the contributors accepts any liability arising out of theabove information/articles. Reproduction in whole or in part without written permission is prohibited. This report is for private circulation. 47 Friday, 16th Mar, 2012