1. Union Budget
2012-13
Speculating
on the
Fiscal Deficit
Friday, 16th Mar, 2012
2. 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
3. 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
4. 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
5. 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
7. 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
8. 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
9. 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
10. 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
11. 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
12. 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
13. 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
14. 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
15. 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
16. 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
17. 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
18. 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
19. 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
20. 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
21. 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
22. 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
23. 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
25. 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
26. 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
27. Union Budget 2012-13
Autos and Autos Ancillaries
No imposition of excise duty on diesel vehicles a major positive
Budget Expectations Budget Declaration Impact
Increase in excise duty from Excise duty raised to 12% and duty on large cars
Negative
current 10% to 12%. raised from 22% to 24%.
No additional excise on No additional excise duty on diesel cars
Positive
diesel cars imposed.
Custom duty to be increased on completely built
Higher allocation to rural
large cars/SUV’s/MUV’s of value exceeding Positive
sector
$40,000 to 75% from 50%
Exemption of import duty on specific parts
N/A Positive
required for manufacturing of hybrid vehicles
Impact Companies
Gainers Mahindra & Mahindra, Maruti Suzuki India Ltd, Tata Motors
Losers
27 Friday, 16th Mar, 2012
28. Union Budget 2012-13
Aviation
No timeline on enhancement of FDI limit
Budget Expectations Budget Declaration Impact
Direct import of Aviation Turbine Fuel permitted
Direct Import of ATF for Indian Carriers. However infrastructure Neutral
development would take 2-3 years.
Proposal to allow foreign
airlines to participate up to Under active discussion. Positive
49% 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 Companies
Gainers
Losers
28 Friday, 16th Mar, 2012
29. Union Budget 2012-13
Banking and Financial Services
MFI Bill a major positive
Budget Expectations Budget Declaration Impact
Interest subvention for loans
No Declaration Negative
to SEBs.
Reduction of STT by 20% to 0.1% on cash Positive for Motilal Oswal,
delivery transactions Edelweiss and IIFL
Clarity on Private Sector Negative for L&T Finance,
No Declaration
Bank Licenses Shriram Transport
Allocated Rs 15,888 crore for Capitalization of
Negative for PSB`s
Public sector banks and financial institutions
Permission to raise funds by Positive for IFCI, ICICI and
Permission granted for long term infra bonds
issuing 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 IDFC
Reduction in FD lock-in
No Declaration Neutral for all Banks
period to 3 years from 5 years
29 Friday, 16th Mar, 2012
30. Union Budget 2012-13
Banking and Financial Services
Budget 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 Companies
Gainers
Losers
30 Friday, 16th Mar, 2012
31. Union Budget 2012-13
Capital Goods
No declaration on levy of import duties on power equipments
Budget Expectations Budget Declaration Impact
Imposition of 19% import
duties (currently nil) on No declaration Negative
power generation equipment
Expect 10% hike in capital Defense capital outlay up by 14% to Rs 79500
Marginally positive
outlay for defense sector crore
Increase in depreciation rate No declaration Negative
Allocation to R-ARDRP up by 53.0% to Rs 3114
Higher allocation to R-ARDRP Positive
crore.
Impact Companies
Gainers BEL, Siemens
Losers BHEL, BGR Energy, L&T
31 Friday, 16th Mar, 2012
32. Union Budget 2012-13
Cement
Government spending to boost demand
Budget Expectations Budget Declaration Impact
Higher infrastructure Government to spend Rs 25 lakh crore in the
Positive
spending 12th Five year plan
Review of the duty structure
on imports of Coke, Pet Coke No declaration Negative
(current 2.5%) and Gypsum
Impact Companies
Gainers
Losers
32 Friday, 16th Mar, 2012
33. Union Budget 2012-13
FMCG/Consumer Durables
Hike in excise duty
Budget Expectations Budget Declaration Impact
•Increase in basic excise duty on cigarettes of
more than 65mm length by 10% advalorem
Increase in excise duty by •Increase in basic excise duty on hand-rolled Positive for ITC and VST
10‐12% for cigarettes. bidis from Rs 8 to Rs 10 per thousand and on Industries
machine-rolled bidis from Rs 19 to Rs 21 per
thousand
Increase in excise duty from
Excise duty increased to 12% from 10% Neutral for the sector
current 10% to 12%.
Efforts being put for consensus on FDI in multi-
Clarity on FDI in retail sector Neutral for retail sector
brand retail
Higher allocation to rural Allocation of Rs 73,175 crore as against Negative for the sector
spending Rs 74,100 crore
Full exemption from basic customs duty on LCD Positive for the sector
and LED TV panels
Impact Companies
Gainers
Losers
33 Friday, 16th Mar, 2012
34. Union Budget 2012-13
Fertilizers
Policies on urea to be the decision maker
Budget Expectations Budget Declaration Impact
Urea will be brought under Mobile-based Fertilizer Management System on Positive
the NBS regime movement of fertilizer and subsidies
Per unit subsidy to be cut
under the Nutrient Based Government to finalize pricing and investment
Positive
Subsidy (NBS) system for policies for urea
non-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 Companies
Gainers Nagarjuna Fertilizer, Chambal Fertilizer
Losers
34 Friday, 16th Mar, 2012
35. Union Budget 2012-13
Healthcare / Pharma
In line with expectations
Budget Expectations Budget Declaration Impact
Weighted deduction remains unchanged,
Higher Weighted Deduction
however tax exemptions for in-house R&D Positive
for R&D (From 150% to 200%)
extended further by 5 years
Tax holiday on healthcare in
Tier‐II and III towns should be
No declaration
extended from 5 years to 10
years
Increased spending on Rs. 20,822 crore earmarked for National Rural
Positive
healthcare Health Mission against Rs. 18,115 crore in FY11.
Impact Companies
Gainers
Sun Pharmaceuticals, Cadilla Healthcare (impacted negatively due to domestic
Losers
formulations partnerships bought under perview of MAT)
35 Friday, 16th Mar, 2012
36. Union Budget 2012-13
Infrastructure
Increased spending to boost growth
Budget Expectations Budget Declaration Impact
Higher infrastructure Infrastructure spending in Twelfth Plan period to
Positive
spending go up to Rs. 50 lakh crore.
Rate of withholding tax for interest payment on
Increased spending on
ECBs proposed to be reduced from 2% to 5% for Positive
Bharat Nirman
3 years for certain sectors.
Higher allocation to road Allocation to road transport enhanced by 14% to
Positive
transportation Rs. 25,360 crore.
Increase in limit for Exemption from import duty on certain
Positive
infrastructure bonds equipment needed for road construction
Higher spending on rural Plan outlay for rural development is Rs. 73,175
Neutral
development crore
Higher investment limits for
FII in corporate bonds
Impact Companies
Gainers
Losers
36 Friday, 16th Mar, 2012
37. Union Budget 2012-13
IT / BPO’s
Budget – A non event for the sector
Budget Expectations Budget Declaration Impact
Revival of these benefits
under section 10A/B of the
No Declaration
Income tax Act for STP/EOU
units
Financial incentives for IT-
Rs. 14,232 crore allocated to complete enrolment
BPO vendors who take up Neutral.
of 40 crore persons under UID mission
eGovernance projects
Abolishing MAT levy on the
SEZ developers/ units and
carry forward of MAT credit No Declaration
entitlement for an indefinite
period
Impact Companies
Gainers
Losers
37 Friday, 16th Mar, 2012
38. Union Budget 2012-13
Media
Lack of steps on FDI limit, weakens investor sentiments
Budget Expectations Budget Declaration Impact
Raising of FDI limit for
broadcast carriage services
No Declaration
to 74% (Current Radio 26%,
DTH -49% and Cable 49%)
Reduction of customs duty
on digital head‐ends and set No Declaration Negative
top boxes (current 5%)
Relief from levy and
collection of service tax on Service tax rate increased from 10% to 12%. Negative
subscription charges
Amortization rules for Film industry will get tax exemption on
intangibles like license fees copyright relating to recording of Positive
paid by radio broadcasters cinematographic films
Impact Companies
Gainers
Losers
38 Friday, 16th Mar, 2012
39. Union Budget 2012-13
Metals & Mining
Positive policies to improve investment scenario
Budget Expectations Budget Declaration Impact
Rise in import duty on Hot
Import duty on flat-rolled steel enhanced from Positive for the domestic
Rolled Coils (steel) from
5% to 7.5% steel companies
prevailing 5% to 10%.
Basic customs duty on machinery for surveying
Reduction or removal of 5%
and prospecting minerals reduced from 10% or
import duty on coke / coking Neutral for mining sector
7.5% to 2.5%. Full exemption from basic
coal
customs duty to coal mining projects
Export 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 ore
may be reduced to 20% from iron ore pellet plants or iron ore beneficiation pelletisation industry
the current level of 30% plants from 7.5% to 2.5%
Increase in import duty on
manganese ore from 2% to No declaration
5%.
Impact Companies
Gainers
Losers
39 Friday, 16th Mar, 2012
40. Union Budget 2012-13
Oil & Gas
Increase in cess – a major disappointment
Budget 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 Neutral
duty on LNG & natural gas.
Oil and Gas, LNG storage facilities, oil & gas
pipelines eligible for VGF (Viability Gap Neutral
Funding)
Declaring Goods Status to
natural gas & LNG to limit No declaration No Impact
sales tax to less than 5%.
Reduction in excise duty of
No declaration Negative for OMCs
branded diesel
Impact Companies
Gainers
Losers Cairn India, ONGC
40 Friday, 16th Mar, 2012
41. Union Budget 2012-13
Power / Utilities
Bag full of positives
Budget Expectations Budget Declaration Impact
•Coal India advised to sign FSA with power
plants
Reduction/removal of duties •Full exemption from basic customs duty and a
Positive for the power
on imported coal but no concessional CVD of 1% for a period of two
sector
changes 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% sector
Impact Companies
Gainers
Losers
41 Friday, 16th Mar, 2012
42. Union Budget 2012-13
Miscellaneous
Budget Declaration Impact
Coal India to sign FSAs with power projects commissioning
Negative impact for Coal India
companies before 31st March’15
Cascading impact of dividend distribution tax to be eliminated All companies
No excise duty on branded silver jewellery whereas non branded
Branded Jewellery Players
gold jewellery to attract 1% excise duty
Increase in excise duty from 1.5% to 3% on import of refined gold
Exemption of basic custom duty for waste paper NR Agarwal, Rainbow Paper, TNPL
Abatement on excise duty for branded retail business enhanced to
70% from 55% earlier, reducing the incident of duty from 4.5% to Shoppers Stop, Pantaloon, Provogue
3.6%
42 Friday, 16th Mar, 2012
44. 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
45. 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
46. 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
47. Union Budget 2012-13
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47 Friday, 16th Mar, 2012