OVERVIEW OF THE ECONOMY<br />Analysis of the economic situation of the country over the past 12 months states that:<br /> -Gross Domestic Product (GDP) of India is estimated to have grown at 8.6 per cent.<br /> -Agriculture is estimated to have grown at 5.4 per cent.<br /> -Industry at 8.1 per cent.<br /> -Services at 9.6 per cent.<br /> -Exports have grown at 29.4% to reach US Dollar 184.6 billion.<br /> -Imports at US Dollar 273.6 billion have recorded a growth of 17.6%<br /> - Continued high food prices have been principal concern this year.<br /> - Indian economy expected to grow at 9 per cent with an outside band of +/- 0.25% in 2011-12.<br />
CHALLENGES<br />Structural concerns on inflation management to be addressed by improving supply response of agriculture to the expanding domestic demand and through stronger fiscal consolidation.<br />Implementation gaps, leakages from public programmes and the quality of outcomes pose a serious challenge.<br />Impression of drift in governance and gap in public accountability is misplaced.<br />Corruption as a problem to be fought collectively. Government to improve the regulatory standards and administrative practices.<br />Inputs from colleagues on both sides of House are important in the wider national interest.<br />Budget 2011-12 to serve as a transition towards a more transparent and result oriented economic management system in India.<br />
FISCAL CONSOLIDATION <br /><ul><li> Economy is back to its pre-crisis growth trajectory.</li></ul>Total food inflation declined from 20.2 per cent in February 2010 to less than half at 9.3 per cent in January 2011.<br />Fiscal deficit for <br /> -FY'11 at 5.1%<br /> -FY'12 seen at 4.6%<br />Revenue deficit for 2011-12 at 2.3%<br />The Central Government would introduce an amendment to the FRBM Act, laying down the fiscal road map for the next five years.<br />The Government has been in the process of setting-up an independent Debt Management Office in the Finance Ministry.<br />
Financial Sector legislative Initiatives<br />Financial Minister propose to move the following legislations in the financial sector:<br />(i) The Insurance Laws (Amendment) Bill, 2008;<br />(ii) The Life Insurance Corporation (Amendment) Bill, 2009;<br />(iii) The revised Pension Fund Regulatory and Development Authority Bill, first introduced in 2005;<br />(iv) Banking Laws Amendment Bill, 2011;<br />(v) Bill on Factoring and Assignment of Receivables;<br />(vi) The State Bank of India (Subsidiary Banks Laws) Amendment Bill, 2009; and<br />(vii) Bill to amend RDBFI Act 1993 and SARFAESI Act 2002.<br />
The Direct Taxes Code is likely to be effective from 1 April 2012<br />The Corporate tax , Firms, Local authority, Co operative Societies rate remains unchanged<br />The basic rate of MAT increased to 18.5% from 18 %<br />The surcharge for domestic companies reduced to 5% from 7.5 %<br />The surcharge Non domestic companies reduced to 2% from 2.5 %<br />NEW INCOME-TAX return form called Sugam to be introduced for small business.<br />Salary earners having an income of less than 5 lakh is exempted for filing income tax return from this year.<br />Provision for tax-free infrastructure bonds extended by 1 more year.<br />DIRECT TAXESCorporate Tax<br />
TAX HOLIDAY for IT companies finally ends.<br /> Levy MAT on developers of SEZ and units operating in them.<br />Levy Alternative Minimum Tax (AMT) in the case of Limited Liability partnerships at 18.5%<br />Money market and debt funds will pay a higher Dividend Distribution tax (DDT) for investment made by firms.<br />DDT will rise to 30% from 25% but stay unchanged at 12% for individual investors.<br />The TDS structure & rates remains unchanged<br />Above rules are made effective from 01.04.2011<br />
For Senior Citizen (60-80years)<br />Age for eligibility reduced from 65 years to 60 Years<br />Upto 240,000 Upto 250,000 Nil<br />240,001to500,000 250,001to500,000 10%<br />500,001to800,000 500,001to800,000 20%<br />Above800,001 Above 800,001 30%<br />For Senior Citizen (80years & above)<br />Hike in exemption limit to 5 lakh will result on big gains<br />Upto 240,000 Upto 500,000 Nil<br />240,001to500,000 - 10%<br />500,001to800,000 500,001to800,000 20%<br />Above 800,001 Above 800,001 30%<br />
INDIRECT TAXESCentral Excise<br /> Central Excise Duty to be maintained as 10% only (unchanged)<br />Nominal Central Excise Duty of 1 % without Cenvat credit facility is being imposed on 130 items entering in the tax net.<br />Lower rate of Central Excise Duty enhanced from 4 % to 5 %<br />Optional levy on branded garments or made up proposed to be converted into a mandatory levy at unified rate of 10 per cent.<br />Labelled jewellery and Precious metals attract 1% excise duty.<br />Excise duty on sanitary napkin, baby & clinical diapers and adult diapers is being reduced from 10% to 1% with no cenvat credit.<br />Concessional rate of excise duty for Hydrogen / hybrid vehicle.<br />Exemption withdrawn on HD drive, CD/DVD drive,& writers, Flash memory, Combo drives meant for fit inside of CPU or Laptop will attract 5% of concessional excise duty .<br />Changes come into effect immediately unless otherwise specified.<br />
Service Tax<br />Service tax rate remains unchanged at 10 percent as a pre-cursor to GST<br />Legal Cases will also become a costly affair to cover all legal consultations, except individual to individual ,under service tax net.<br />Hotel accommodation in excess of 1,000 per day will come under the ambit of tax , although there will be an abatement of 50% service provided by air conditioned restaurants that have license to serve liquor added as new services for levying Service Tax at 3- 5%. After an abatement of 70%<br />Tax on all services provided by hospitals with 25 or more beds with facility of central air conditioning at the rate of 5%<br />Service Tax on air travel raised from 100 to 150 in the case of domestic air travel and 500 to 750 on international journeys by economy class. <br />The domestic air travel on higher classes will be taxed at the standard rate of 10% <br />Services provided by life insurance companies in the area of investment and some more legal services proposed to be brought into tax net.<br />Above rules are made effective from 01.04.2011<br />
Customs Duty<br />Basic customs duty on agricultural machinery reduced to 4.5 per cent from 5%<br />Basic customs duty on raw silk reduced from 30 to 5%.<br />Basic customs duty on solar lantern or lamps reduced from 10 to 5%<br />CVD exempted fully on LEDs used for manf of LEDs light & fixtures.<br />Fully exemption from basic custom duty is being extended battery charger, hands free, head phones and PC connectivity cable of mobile handset including cellular phones.<br />Basic customs duty on bamboo used for manf of agarbattis is being reduced from 30% to 10%<br />The government has added a fixed excise duty of 160 per tonne on cement and reduced custom duty on petcoke and gypsum, key inputs for the sector.<br /> Changes come into effect immediately unless otherwise specified.<br />
GST proposed to be rolled out from April 2012<br />Several proposals under the existing tax regime should facilitate a move towards GST:<br />Focus on building robust IT infrastructure<br />Further rationalization of rates under Excise and Customs<br />Central Sales Tax<br />No Changes in CST act 1956<br />Goods and Service Tax<br />
SUBSIDIES<br /> Nutrient Based Subsidy (NBS) has improved the availability of fertilizer; Government actively considering extension of the NBS regime to cover urea.<br /> Government to move towards direct transfer of cash subsidy to people living below poverty line in a phased manner for better delivery of kerosene, LPG and fertilizers. Task force set up to work out the modalities for the proposed system.<br />Subsidy bill in 2011-12 seen at 1.44 trillion rupees <br />Food subsidy bill in 2011-12 seen at 605.7 billion rupees<br />Fertilizer subsidy bill in 2011-12 seen at 500 billion rupees<br />Petroleum subsidy bill in 2011-12 seen at 236.4 billion rupees<br />State-run oil retailers to be provided with 200 billion rupee cash subsidy in 2011-12 <br />
<ul><li>Total expenditure in 2011-12 seen at 12.58 trillion rupees.
Plan expenditure seen at 4.41 trillion rupees in 2011-12, up 18.3%.</li></ul>SPENDING<br />
* Gross tax receipts seen at 9.32 trillion rupees in 2011-12 * Non-tax revenue seen at 1.25 trillion rupees in 2011-12 * Corporate tax receipts seen at 3.6 trillion rupees in 2011-12 * Tax-to-GDP ratio seen at 10.4 percent in 2011-12; seen at 10.8 percent in 2012-13 * Customs revenue seen at 1.52 trillion rupees in 2011-12 * Factory gate duties seen at 1.64 trillion rupees in 2011-12 *Service tax receipts seen at 820 billion rupees in 2011-12 * Revenue gain from indirect tax proposals seen at 113 billion rupees in 2011-12 * Service tax proposals to result in net revenue gain of 40 billion rupees in 2011-12<br /> REVENUE<br />
Disinvestment in 2011-12 seen at 400 billion rupees.<br />Government committed to retaining 51 percent stake in public sector enterprises. <br />DISINVESTMENT<br />
<ul><li> Net market borrowing for 2011-12 seen at 3.43 trillion rupees, down from 3.45 trillion rupees in 2010-11
Gross market borrowing for 2011-12 seen at 4.17 trillion rupees
Revised gross market borrowing for 2010-11 at 4.47 trillion rupees </li></ul> BORROWING<br />
* To create infrastructure debt funds * FDI policy being liberalised. * To boost infrastructure development with tax-free bonds of 300 billion rupees * Food security bill to be introduced this year * To permit SEBI registered mutual funds to access subscriptions from foreign investments * Raised foreign institutional investor limit in 5-year corporate bonds for investment in infrastructure by $20 billion * Setting up independent debt management office; Public debt bill to be introduced in parliament soon * Bills on insurance, pension funds, banking to be introduced. *Constitution Amendment Bill for introduction of GST regime in this session. *New Companies Bill to be introduced in current session<br />POLICY REFORMS<br />
SECTOR SPENDING <br /> * To allocate more than 1.64 trillion rupees to defense sector in 2011-12 <br /> * Corpus of rural infrastructure development fund raised to 180 billion rupees in 2011-12 * To provide 201.5 billion rupees capital infusion in state-run banks in 2011-12 * To allocate 520.5 billion rupees for the education sector. Rs.21,000 crore for Sarva Shiksha Abhiyan<br /> * To raise health sector allocation to 267.6 billion rupees.* Rs.500 crore more for national skill development fund. * Rs.54 crore each for AMU (Aligarh Muslim University) centres at Murshidabad and Mallapuram. * Rs.58,000 crore for Bharat Nirman; increase of Rs.10,000 crore. * Mahatma Gandhi National Rural Employment Guarantee Scheme wage rates linked to consumer price index; will rise from existing Rs.100 per day. * Increased outlay on social sector schemes. * Infrastructure critical for development; 23 percent higher allocation in 2011-12.<br />
AGRICULTURE<br /> * Removal of supply bottlenecks in the food sector will be in focus in 2011-12 * Agriculture growth key to development: Green Revolution waiting to happen in eastern region. * To raise target of credit flow to agriculture sector to 4.75 trillion rupees * Gives 3 percent interest subsidy to farmers in 2011-12 * Cold storage chains to be given infrastructure status * Capitalization of National Bank for Agriculture and Rural Development (NABARD) of 30 billion rupees in a phased manner * To provide 3 billion rupees for 60,000 hectares under palm oil plantation * Actively considering new fertilizer policy for urea * Food storage capacity to be augmented - 15 more mega food parks to be set up in 2011-12; of 30 sanctioned in previous fiscal, 15 set up. * Comprehensive policy on further developing PPP (public-private-partnership) model. * Farmers need access to affordable credit. * Moving to improve nutritional security. * Necessary to accelerate production of fodder.<br /> * Farm loans at 4%.<br />
ENVIRONMENT AND CLIMATE<br />200 crore proposed to be allocated for launching Environmental Remediation Programmes from National Clean Energy Fund.<br />Special allocation of Rs. 200 crore proposed to be provided for clean-up of some more important lakes and rivers other than Ganga.<br />Rs 200 crore proposed to be allocated for Green India Mission from National Clean Energy Fund.<br />
OTHER AREAS<br /><ul><li>Govt to move towards direct transfer of cash subsidy for kerosene, LPG and fertilizers.
Financial Sector Legislative Reforms Commission, to be headed by former Supreme Court judge B Srikrishna, to complete its work in 24 months; to overhaul financial regulations.
Five-fold strategy against black money; 13 new double taxation avoidance agreements; foreign tax division of CTBT strengthened; strength of Enforcement Directorate increased three-fold.
Bill to be introduced to review Indian Stamp Act.
New coins carrying new rupee symbol to be issued.
Anganwadi workers salary raised from Rs.1,500 to Rs.3,000.
Mortgage risk guarantee fund to be created for economically weaker sections.
Housing loan limit for priority sector lending raised to Rs.25 lakh.