Budget 2011-12
Review Ranjan Das
-
Karthikeyan
Barath
Priyanka
Neither populist nor reformist
Budget for FY12 presented was
neither populist nor reformist in nature
and has tried to manage expectations
of different quarters. Given the
situation the FM has done a good
balancing job to try and control
inflation without hurting growth.
State of economy
Strengths Weakness
• Healthy Savings • High inflation
• Uncontrolled fiscal
• Increasing Domestic
deficit
Investments
• Unsustainable current
• Rising FDI Inflows
account deficit
• Boosted GDP Growth Rate
State of economy
Opportunities Threats
• Very Young Population • Skills Deficit
• Farm Deficit
• Fewer Dependents
• Infrastructure Deficit
• Growing Urbanization
• Governance Deficit
• Diversification Of Economy
ECONOMIC SURVEY 2010-11
ESTIMATES PROPOSALS
8.6% Growth In '10-11, 9% • Allow multi-brand retail
In '11-12 FDI
Fiscal Deficit At 5.1 % in • Streamline land buys &
'10-11 environment nod for core
7% Inflation By March End projects
Investments To Grow 8.4% • Auction of coal mines
Budget 2011-12 Estimates
(In crore of rupees)
2010-2011 Increase/
decrease
Estimates 2009-10
1. Tax Revenue Receipts 6,69,232 17.8%
2. Non Tax Revenue Receipts 2,63,210 24.3%
3. Total Revenue Receipts 9,32,442 4.2%
4. Non Plan Expenditure 8,16,000 10.9
5. Plan Expenditure 4,41,729 18.3
6. Total Revenue Expenditure 12,57,729 13.4
7. Fiscal deficit(3-6) 3,25,287 5.1%of
GDP
Note:GDP FOR FY 2010-11 has been projected at Rs.63,86,843 crore
assuming 8.6% growth over the revised estimates of 2009-10 (59,01,443
Tax Reforms
taxes – no major changes
• Central Excise Tax rate maintained at 10%.
• Minimum alternate tax (MAT) from the current rate of 18 %
to 18.5 % of book profits.
• Service tax retained at 10% while bringing in a few new
services into the tax net to expand the tax base.
• Surcharge decreased to 5% from 7.5% for domestic
companies.
Direct taxes
• Hike in exemption limit to Rs. 1,80,000 for individual & to
Rs.2,50,000 for senior citizens.
• New category of very senior citizens with exemption limit of
Rs.5,00,000 for individuals of 80 & above ..
• Reduction of age limit from 65yrs to 60yrs in senior citizen
category.
Budget 2011-12 Highlights
Current account deficit:
Current account deficit poses still hovers at 2009-10
levels and poses some concerns .
Direct taxes code (DTC):
To be finalized for enactment during 2011‐12 and
DTC is proposed to be effective from April 1, 2012.
Goods And Services Tax (GST):
Key processes are in final stages and by June 2011
NSDL will set up pilot portal in collaboration with
eleven states prior to roll out across the country.
Micro Small & Medium Enterprises:
Proposed to provide 5000 cr to SIDBI & 3000 cr to
NABARD to meet the shortfall in priority sector lending
Budget 2011-12 Highlights
Subsidies:
• The Government will move towards direct transfer of
cash subsidy for people below poverty line in a phased manner.
This will ensure greater efficiency, cost effectiveness and better
delivery of subsidies.
• Nutrient Based Subsidy (NBS) has improved the
availability of fertilizer; the Government is actively considering
extension of the NBS regime to cover urea as well.
Disinvestment:
The Government has set a target of ` 40000 crore for
FY12 but would retain 51% stake in all PSU’s. The Government
needs to achieve the target in order to manage the fiscal situation
better.
Foreign direct investment(FDI)
No mention in sector where FDI would be allowed, but
only said that discussions are under way to liberalize FDI policy.
Budget 2011-12 Highlights
Agriculture Sector Credit:
• Credit flow for farmers raised from ` 3,75,000 crore to
` 4,75,000 cr in 2011‐12.
• Interest subvention proposed to be enhanced from 2 per cent
to 3 per cent for providing short‐term crop loans to farmers who
repay their crop loan on time.
Education:
Proposed allocation of 52,057cr an increase of 24% over
the current year.
Health Care:
Proposed allocation of 26,760 to Rashtriya Swasthya Bima
Yojana.
SOME OTHER INITIATIVES:
• Allocation of funds for environmental & climate change
• Allocation of funds for development in north eastern states &
special category states
Budget 2011-12 Highlights
MGNREGA:
Real daily wage has now been linked to CPI for
agricultural labor as compared to `100/day earlier.
Investment in MF’s:
A foreign investor allowed to invest in MF’s is a big
positive for MF industry.
IFRS:
The budget did not mention anything regarding
implementation of IFRS.
Black Money:
Government has put into operation a five‐fold strategy
which consists of joining the global crusade against black money
by creating an appropriate legislative framework, setting up
institutions for dealing with illicit funds, developing systems for
implementation and imparting skills to the manpower for
effective action.
Companies Bill:
MARKET REACTION
Sensex-122.2
Nifty-29.7
Market Reaction-bse fmcg
Announcement Reaction Companies Impacted
Increase MAT Limit Neutral DABUR,GCPL,
MARICO
Reduction In Basic Positive ITC
Customs Duty On
Bamboo For & No
Additional Duty On
Cigarettes
Rs300 Crore To Positive HUL,DABUR
Bring 60,000 Hector
Area Under Palm Oil
Cultivation . & Full
exemption from
basic customs duty is
being provided to
Crude Palm
Market Reaction-bse bankex
Announcement Reaction Companies Impacted
Capital Infusion On 6000 Positive Sbi,pnb & Bank Of
Crores For PSU Baroda
Increased Limit For Home Positive For Banks And Housing
Loans Qualifying For Finance Companies-
Priority Sector Lending HDFC, LIC Housing
From Rs2m To Rs2.5m Finance
RBI To Issue Guidelines Positive Bajaj Fin, M&M
On New Banking Fin, Religare, Etc
Licenses By 31‐march‐
2011
Insurance Bill To Be Positive For Insurance Companies
Introduced In Budget And Financial
Session Services Companies
With Insurance Jvs /
Subsidiaries
MARKET REACTION-BSE AUTO
Announcement Reaction Positive
No Change In Positive Ashok
Excise Duty Leyland,Tata
Motors, M &M
Excise Duty Positive M&M In The Near
Reduced To 5% On Term As The
Hybrid Vehicle Company Plans
Production To Launch A
Electric Version Of
Maxximo
Reduction In Positive Lumax , Halonix
Excise Duty LEDds Etc (OEM’s)
To 5% From 10%
And Removal Of
4% CVD On LED
Market reaction-bse major
Indices Announcemen Reaction Companies
t
BSE-OIL & Fresh Positive OMC’S
GAS Subsidies &
No Addition
Tax On Oil
Companies
BSE-IT No Extension Not Very INFOSYS,
Of STPI Positive TCS,WIPRO
BSE- Increase In Very Positive DLF,UNITEC
REALTY Infrastructure H
Funding
Market reaction-S&P cnx 500
Major Announcemen Impact Companies
Industry t
Transport Propose To Negative Spice Jet,jJet
Raise Airways,kingf
Service Tax isher
On Air
Travel
Minerals Iron Ore Ad Negative Nmdc,sesa
/Mining Valorem Goa
@20%
Cement Ad Valorem Negative Ultra Tech,
@ 20% Acc
Textiles 10% Excise Negative Arvind,
Duty Alok
Impact on prices of goods &
services
Cheaper Costlier
Steel Cement
Precious Stones ,Gold & Labeled Jewellery
Jewellery
LED TV Treatment In Big Hospitals
& Legal Cases
Raw Silk Branded Clothes
Farm Equipments Having Liquor In AC -Bars
Hybrid Cars Air Travel & Hotel
Accommodation