India Budget: FM juggles populism with economics
New Delhi: Faced with growing concern over food inflation, Union Finance Minister Pranab Mukherjee on Monday presented the Budget 2011 with a focus on the common man and the social and farm sectors, while raising the income tax exemption modestly at Rs 1.8 lakh from the existing Rs 1.6 lakh and assuring that inflation will come down.
The budget boosted the stock market immediately with the Sensex rising by 585 points to 18276 and the Nifty going up by 162 points at 5465.
Analysts said the budget focuses on fiscal consolidation and that is a positive, while current account deficit and trade deficit are not addressed much.
The Finance Minister, who presented his sixth annual budget, said the exemption for senior citizen has been raised to Rs 2.5 lakh and their age limit has been reduced to 60 years.
For those above 80 years he created a new "very senior citizen" category and made the exemtion limit at Rs 5 lakh.
Mukherjee said the priority is to make the taxes moderate.
"The FM has focused on inclusive growth," said Prime Minister Manmohan Singh praising the budget.
"The exemption limit reduction will benefit all tax payers," the PM said.
Opposition slammed the budget. While the communists called it an insensitive budget, the BJP said it is a timid and pedestrian budget.
The FM said high inflation and food inflation are concerns while the economy is expected to grow at 9 percent and the GDP at 8.6 percent in real terms.
He said current account deficit will come down along with inflation.
The FM also announced a direct cash subsidy to the poor (under the Below Poverty Line or BPL) from March 2012 to offset misuse of subsidy on schemes like distribution of kerosene and fertilizers.
". To ensure greater cost efficiency and better delivery for both kerosene and fertilizer, the government will move toward direct transfer of cash subsidy for people below poverty line in a phased manner," Mukherjee said.
For the air travellers, it is not good news as both domestic and international travel will get costlier.
The auto sector was jubilant as there was no increase on the excise duty. So were the companies like ITC whose stocks went up along with the auto stocks.
ITC stocks were up 7.85% to Rs. 168.40 since the budget did not suggest any change in the excise duty on cigarettes.
Finance Minister announced a number of measures to strengthen the agricultural sector particularly in the areas of pulses, vegetables and oil palm .
He announced Rs. 300 crore expenditure to promote 60,000 pulses villages in rain fed areas for increasing crop productivity and strengthening market linkages.
He also proposed to spend Rs. 300 crore to promote oil palm plantation in 60,000 hectares and Rs. 300 crore for the initiative on vegetable cluster. Rs. 400 crore is proposed to be spent to improve rice based cropping system in the Eastern Region.
The FM has proposed to raise the target of credit flow to the farmers from Rs. 3,75,000 crore this year to Rs.4,75,000 crore in 2011-12. Banks have been asked to step up direct lending for agriculture and credit to small and marginal farmers.
The allocation for social sector has been increased by 17% to Rs. 1,60,887 crore which amounts to 36.4% of the total plan allocation.
Bharat Nirman, which includes Pradhan Mantri Gram Sadak Yojana (PMGSY), accelerated irrigation benefit programme, Rajiv Gandhi Grameen Vidyutikaran Yojana, Indira AwasYojana, National Rural Drinking Water Programme and Rural Telephony have together been allocated Rs. 58,000 crore.
Social development was the focus of the FM as he brought cheer to the Anganwadi workers, the backbone of child-care and mother-care development, by raising their pay from the existing Rs 1500 per month to Rs 3000 per month.
For the Anganwadi helpers it has been raised from Rs 750 to Rs 1500, the FM said as he presented the annual budget on Monday.
They will take effect from April 1, 2011. The FM said about 2 lakh Anganwadi workers will benefit from it.
The FM said there would be 17 percent increase in social sector spending.
Old age pension to persons of over the age of 80 has been raised from Rs 200 to Rs 500 in the budget.
He announced boost in development of Maoist affected areas and more compensation for the paramiliatary forces who fight the Red Rebels and die or get disabled in the process.
A food security bill is also proposed. It is a move to provide cheap grains for the poor millions of India's poor but might lead to fiscal cost.
Allocation in healthcare went up by 20 percent at Rs 27, 600 crore in the budget, while allocation for education has been raised to Rs 52,000 crore.
Rural Housing fund has been raised to Rs 3000 crore.
The government will implement direct tax code from April 2012, Pranab Mukherjee said.
In the budget, the FM also hiked farm development to Rs 7860 crore.
The FM announced that discussions are underway to further liberalize the Foreign Direct Investment (FDI) policy. All prior regulations and guidelines have earlier been consolidated into one comprehensive document in order to make FDI policy more user friendly. This is reviewed every six months, said the Finance Minister.
The Union Budget 2011-12 also proposes to raise the FII limit for investment in corporate bonds to enhance the flow of funds to the infrastructure sector.
Mukherjee said that the limit for investment in corporate bonds, with residual maturity of over five years issued by companies in infrastructure sector is being raised by US $20 billion which would now be US $25 billion. This would raise the total limit available to FIIs for investment in corporate bonds to US $40 billion.
Union Budget 2011-12 estimates will make net revenue gain of Rs. 4000 crore for the year by way of new Service Tax proposals, the FM said.
In keeping with thrust to encourage voluntary compliance, the penal provisions of Service Tax are under the process of rationalization.
"This will ensure less harsh treatment to those who have maintained truthful records but fallen short of discharging their tax liability.
Deliberate evaders with un-recorded business transactions will be dealt with more severely," said the FM.
.
Mukherjee said his government is committed to taking the process of financial sector reforms further and proposed to move the several legislations in the financial sector.
They are: The Insurance Laws (Amendment) Bill, 2008; The Life Insurance Corporation (Amendment) Bill, 2009; The revised Pension Fund Regulatory and Development Authority Bill, first introduced in 2005; Banking Laws Amendment Bill, 2011; Bill on Factoring and Assignment of Receivables; The State Bank of India(Subsidiary Banks Laws) Amendment Bill, 2009; and Bill to amend RDBFI Act 1993 and SARFAESI Act 2002.
The Finance Minister also stated that amendments are proposed to the Banking Regulation Act to give some additional licenses to the private sector players.
He mentioned that the discussion by way of inviting feedback from the public on the paper issued in this context by the Reserve Bank of India (RBI) in August 2010 is complete.
Mukherjee said the RBI is planning to issue the guidelines for banking licenses before close of this financial year.
In the budget, certain changes in the Central Excise Rate structure has been proposed to prepare the ground transition to GST (Goods and Service Tax).
The exemption has been withdrawn on 130 items that are exempt from Central Excise Duty but chargeable to VAT. A nominal central excise duty of one per cent is being imposed on these 130 items that are mainly in the nature of consumer goods.
No Cenvat credit would be available for the manufacture of these items.
Presenting the Budget, Mukherjee said that basic food and fuel would continue to be exempt. This levy would also not apply to precious metals and stones.
In case of jewellery and articles of gold, silver and precious metals, the levy would apply only to goods sold under a brand name. The remaining 240 items would be brought into the tax net when GST is introduced.
The lower rate of Central Excise Duty has been enhanced from 4 per cent to 5 per cent, in line with the States’ increased merit rate of VAT.
For readymade garments and made-ups of textiles, the optional levy has been converted into a mandatory levy at a unified rate of 10 per cent. The levy would however, apply only to branded garments or made-ups and not to those tailored or made to order for a retail customer.
Credit of tax paid on inputs, capital goods and input services would be available to manufacturers of these products. Export o these items would continued to be zero-rated.
New Delhi: Faced with growing concern over food inflation, Union Finance Minister Pranab Mukherjee on Monday presented the Budget 2011 with a focus on the common man and the social and farm sectors, while raising the income tax exemption modestly at Rs 1.8 lakh from the existing Rs 1.6 lakh and...
New Delhi: Faced with growing concern over food inflation, Union Finance Minister Pranab Mukherjee on Monday presented the Budget 2011 with a focus on the common man and the social and farm sectors, while raising the income tax exemption modestly at Rs 1.8 lakh from the existing Rs 1.6 lakh and assuring that inflation will come down.
The budget boosted the stock market immediately with the Sensex rising by 585 points to 18276 and the Nifty going up by 162 points at 5465.
Analysts said the budget focuses on fiscal consolidation and that is a positive, while current account deficit and trade deficit are not addressed much.
The Finance Minister, who presented his sixth annual budget, said the exemption for senior citizen has been raised to Rs 2.5 lakh and their age limit has been reduced to 60 years.
For those above 80 years he created a new "very senior citizen" category and made the exemtion limit at Rs 5 lakh.
Mukherjee said the priority is to make the taxes moderate.
"The FM has focused on inclusive growth," said Prime Minister Manmohan Singh praising the budget.
"The exemption limit reduction will benefit all tax payers," the PM said.
Opposition slammed the budget. While the communists called it an insensitive budget, the BJP said it is a timid and pedestrian budget.
The FM said high inflation and food inflation are concerns while the economy is expected to grow at 9 percent and the GDP at 8.6 percent in real terms.
He said current account deficit will come down along with inflation.
The FM also announced a direct cash subsidy to the poor (under the Below Poverty Line or BPL) from March 2012 to offset misuse of subsidy on schemes like distribution of kerosene and fertilizers.
". To ensure greater cost efficiency and better delivery for both kerosene and fertilizer, the government will move toward direct transfer of cash subsidy for people below poverty line in a phased manner," Mukherjee said.
For the air travellers, it is not good news as both domestic and international travel will get costlier.
The auto sector was jubilant as there was no increase on the excise duty. So were the companies like ITC whose stocks went up along with the auto stocks.
ITC stocks were up 7.85% to Rs. 168.40 since the budget did not suggest any change in the excise duty on cigarettes.
Finance Minister announced a number of measures to strengthen the agricultural sector particularly in the areas of pulses, vegetables and oil palm .
He announced Rs. 300 crore expenditure to promote 60,000 pulses villages in rain fed areas for increasing crop productivity and strengthening market linkages.
He also proposed to spend Rs. 300 crore to promote oil palm plantation in 60,000 hectares and Rs. 300 crore for the initiative on vegetable cluster. Rs. 400 crore is proposed to be spent to improve rice based cropping system in the Eastern Region.
The FM has proposed to raise the target of credit flow to the farmers from Rs. 3,75,000 crore this year to Rs.4,75,000 crore in 2011-12. Banks have been asked to step up direct lending for agriculture and credit to small and marginal farmers.
The allocation for social sector has been increased by 17% to Rs. 1,60,887 crore which amounts to 36.4% of the total plan allocation.
Bharat Nirman, which includes Pradhan Mantri Gram Sadak Yojana (PMGSY), accelerated irrigation benefit programme, Rajiv Gandhi Grameen Vidyutikaran Yojana, Indira AwasYojana, National Rural Drinking Water Programme and Rural Telephony have together been allocated Rs. 58,000 crore.
Social development was the focus of the FM as he brought cheer to the Anganwadi workers, the backbone of child-care and mother-care development, by raising their pay from the existing Rs 1500 per month to Rs 3000 per month.
For the Anganwadi helpers it has been raised from Rs 750 to Rs 1500, the FM said as he presented the annual budget on Monday.
They will take effect from April 1, 2011. The FM said about 2 lakh Anganwadi workers will benefit from it.
The FM said there would be 17 percent increase in social sector spending.
Old age pension to persons of over the age of 80 has been raised from Rs 200 to Rs 500 in the budget.
He announced boost in development of Maoist affected areas and more compensation for the paramiliatary forces who fight the Red Rebels and die or get disabled in the process.
A food security bill is also proposed. It is a move to provide cheap grains for the poor millions of India's poor but might lead to fiscal cost.
Allocation in healthcare went up by 20 percent at Rs 27, 600 crore in the budget, while allocation for education has been raised to Rs 52,000 crore.
Rural Housing fund has been raised to Rs 3000 crore.
The government will implement direct tax code from April 2012, Pranab Mukherjee said.
In the budget, the FM also hiked farm development to Rs 7860 crore.
The FM announced that discussions are underway to further liberalize the Foreign Direct Investment (FDI) policy. All prior regulations and guidelines have earlier been consolidated into one comprehensive document in order to make FDI policy more user friendly. This is reviewed every six months, said the Finance Minister.
The Union Budget 2011-12 also proposes to raise the FII limit for investment in corporate bonds to enhance the flow of funds to the infrastructure sector.
Mukherjee said that the limit for investment in corporate bonds, with residual maturity of over five years issued by companies in infrastructure sector is being raised by US $20 billion which would now be US $25 billion. This would raise the total limit available to FIIs for investment in corporate bonds to US $40 billion.
Union Budget 2011-12 estimates will make net revenue gain of Rs. 4000 crore for the year by way of new Service Tax proposals, the FM said.
In keeping with thrust to encourage voluntary compliance, the penal provisions of Service Tax are under the process of rationalization.
"This will ensure less harsh treatment to those who have maintained truthful records but fallen short of discharging their tax liability.
Deliberate evaders with un-recorded business transactions will be dealt with more severely," said the FM.
.
Mukherjee said his government is committed to taking the process of financial sector reforms further and proposed to move the several legislations in the financial sector.
They are: The Insurance Laws (Amendment) Bill, 2008; The Life Insurance Corporation (Amendment) Bill, 2009; The revised Pension Fund Regulatory and Development Authority Bill, first introduced in 2005; Banking Laws Amendment Bill, 2011; Bill on Factoring and Assignment of Receivables; The State Bank of India(Subsidiary Banks Laws) Amendment Bill, 2009; and Bill to amend RDBFI Act 1993 and SARFAESI Act 2002.
The Finance Minister also stated that amendments are proposed to the Banking Regulation Act to give some additional licenses to the private sector players.
He mentioned that the discussion by way of inviting feedback from the public on the paper issued in this context by the Reserve Bank of India (RBI) in August 2010 is complete.
Mukherjee said the RBI is planning to issue the guidelines for banking licenses before close of this financial year.
In the budget, certain changes in the Central Excise Rate structure has been proposed to prepare the ground transition to GST (Goods and Service Tax).
The exemption has been withdrawn on 130 items that are exempt from Central Excise Duty but chargeable to VAT. A nominal central excise duty of one per cent is being imposed on these 130 items that are mainly in the nature of consumer goods.
No Cenvat credit would be available for the manufacture of these items.
Presenting the Budget, Mukherjee said that basic food and fuel would continue to be exempt. This levy would also not apply to precious metals and stones.
In case of jewellery and articles of gold, silver and precious metals, the levy would apply only to goods sold under a brand name. The remaining 240 items would be brought into the tax net when GST is introduced.
The lower rate of Central Excise Duty has been enhanced from 4 per cent to 5 per cent, in line with the States’ increased merit rate of VAT.
For readymade garments and made-ups of textiles, the optional levy has been converted into a mandatory levy at a unified rate of 10 per cent. The levy would however, apply only to branded garments or made-ups and not to those tailored or made to order for a retail customer.
Credit of tax paid on inputs, capital goods and input services would be available to manufacturers of these products. Export o these items would continued to be zero-rated.
Leave a Comment