BUDGET IDENTIFIES FIVE OBJECTIVES RELATING TO
·
GROWTH,
·
INVESTMENT,
·
SUPPLY BOTTLENECKS,
·
GOVERNANCE, AND
·
REMOVING MALNUTRITION
CENTRAL SUBSIDIES TO BE KEPT UNDER 2 PER CENT OF GDP; TO BE FURTHER BROUGHT DOWN TO 1.75 PER CENT OF GDP OVER THE NEXT 3 YEARS
Rs. 30,000 CRORE TO BE RAISED THROUGH
DISINVESTMENT
EFFORTS
TO REACH BROADBASED CONSENSUS ON FDI IN MULTI-BRAND RETAIL
INVESTMENT IN 12TH PLAN IN
INFRASTRUCTURE TO GO UPTO RS. 50,00,000 CRORE; HALF OF THIS IS EXPECTED FROM
PRIVATE SECTOR
TARGET FOR AGRICULTURAL CREDIT RAISED TO RS. 5,75,000
CRORE
NATIONAL URBAN HEALTH MISSION IS BEING LAUNCHED
A NUMBER OF MEASURES PROPOSED TO DETER
GENERATION AND USE OF UNACCOUNTED MONEY
WHITE PAPER ON BLACK MONEY TO BE LAID IN CURRENT
SESSION OF PARLIAMENT
TAX
PROPOSALS MARK PROGRESS IN THE DIRECTION OF MOVEMENT TOWARDS DTC AND GST
FISCAL
DEFICIT TARGETED AT 5.1 PER CENT OF GDP, AS AGAINST 5.9 PER CENT IN REVISED
ESTIMATES FOR 2011-12
CENTRAL
GOVERNMENT DEBT AT 45.5 PER CENT OF GDP AS COMPARED TO THIRTEENTH FINANCE
COMMISSION TARGET OF 50.5 PER CENT
*********************************************************************************
The Union
Budget 2012-13 presented by the Finance Minister ShriPranab Mukherjee in
LokSabha today identifies five objectives to be addressed effectively in the
ensuing fiscal year. They include focus on domestic demand driven
growth recovery; create conditions for rapid revival of high growth in
private investment; address supply bottlenecks in
agriculture, energy and transport sectors particularly in coal, power,
national highways , railways and civil aviation; intervene decisively to
address the problem of malnutrition especially in the 200 high-burden
districts and expedite coordinated implementation of decisions being
taken to improve delivery systems , governance, and transparency; and
address the problem of black money and corruption in public life.
ShriPranab
Mukherjee said that India’s GDP growth in 2012-13 is expected to be 7.6 per
cent +/-0.25 per cent. He said that in 2011-12, India’s GDP is estimated
to grow at 6.9 per cent after having grown at the rate of 8.4 per cent in
each of the two preceding years. He said though the global
crisis had affected India, it still remains among the front runners
in economic growth. Shri Mukherjee said the slowdown is primarily due to
deceleration in industrial growth. Stating that the headline inflation
remained high for most part of the year, the Finance Minister expressed hope
that it will moderate further in the next few months and remain stable
thereafter.
Shri Mukherjee
laid emphasis on striking a balance between fiscal consolidation and
strengthening macroeconomic fundamentals. He announced introduction of
amendments to the Fiscal Responsibility and Budget Management Act, 2003 (FRBM
Act) as part of the Finance Bill 2012. He said that 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. This statement shall set forth a three year rolling targets for
expenditure indicators.
The
Finance Minister called for a need to have a close look at the growth of
revenue expenditure, particularly, on subsidies. He announced that from
2012-13 while subsidies related to food and for administering the Food
Security Act will be fully provided for, all other subsidies would be
funded to the extent that they can be borne by the economy without any adverse
implications. He said that the Government will endeavor to restrict the
expenditure on central subsidies under 2 per cent of GDP in 2012-13and over the
next three years, it would be further brought down to 1.75 per cent of GDP.Shri
Mukherjee said that based on recommendations of the Task Force headed by
ShriNandanNilekani, a mobile-based Fertilizer Management System has been
designed to provide end-to-end information on movement of fertilizers and
subsidies which will be rolled out nation-wide during 2012. He said that
transfer of subsidy to the retailer and eventually to the farmers will be
implemented in subsequent phases which will benefit 12 crore farmer families.
On the
tax reforms, the Finance Minister said that the Direct Taxes Code (DTC)
Bill will be enacted at the earliest after expeditious examination of the
report of the Parliamentary Standing Committee. He said drafting
of model legislation for Centre and State Goods and Services Tax
(GST) in concert with States is under progress. He added that the GST
network will be set up as a National Information Utility and will become
operational by August 2012.
On the
disinvestment policy, Shri Mukherjee said that the Central Public Sector
Enterprises (CPSEs) are being given a level playing field vis-à-vis private
sector with regard to practices like buy-backs and listing at stock
exchange. Stating that while in 2011-12, the Government will raise about
Rs.14,000crore from disinvestment as against a target of Rs.40,000
crore, the Finance Minister proposed to raise Rs.30,000 crore
through disinvestment in 2012-13. He said at least 51 per cent
ownership and management of CPSEs will remain with the Government.
Calling
for strengthening investment environment, Shri Mukherjee said that efforts are
on to arrive at a broad-based consensus in respect of decision to allow FDI in
multi-brand retail up to 51 per cent. He proposed to introduce a new
scheme called Rajiv Gandhi Equity Savings Scheme to 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. Regarding
capital markets, the Finance Minister proposed to allow Qualified
Foreign Investors (QFIs) to access Indian Corporate Bond market. He
also proposed simplifying the process of Initial Public Offer
(IPO).
ShriPranab
Mukherjee said that the Government is committed to protect the financial health
of Public Sector Banks and Financial Institutions. He
proposed to provide Rs. 15,888 crore for capitalization of Public Sector Banks,
Regional Rural Banks and other financial institutions including
NABARD. He added that a Central Know Your Customer (KYC) depositary will
be developed in 2012-13 to avoid multiplicity of registration and data
upkeep.
The
Finance Minister informed that out of 73,000 identified habitations that were
to be covered under “Swabhimaan” campaign for providing banking facilities by
March 2012, about 70,000 habitations have been covered while the rest are
likely to be covered by March 31, 2012. He added that as a
next step Ultra Small Branches are being set up at these habitations. In
2012-13, Swabhimaan campaign will be extended to more habitations.
Emphasizing
on infrastructure and industrial development, Shri Mukherjee said that during
the 12th Plan, infrastructure investment will go up to Rs.50 lakh
crorewith half of this expected from private sector. Stating
that in 2011-12 tax free bonds for Rs.30,000 crore were announced for financing
infrastructure projects, he proposed to double it to raise Rs.60,000 crore in
2012-13. The Minister proposed to allow External Commercial Borrowings
(ECB) to part finance Rupee debt of existing power projects.
The
Finance Minister ShriPranab Mukherjee announced a target of
covering 8,800 km. under NHDP next year and increase in allocation of the
Road Transport and Highways Ministry by 14 per cent to
Rs.25,360 crore in 2012-13. He proposed to permit ECB for working capital
requirements of the Airline Industry for a period of one year, subject to a
total ceiling of US dollar 1 billion to address the immediate
financial concerns of the Civil Aviation Sector. He added that a
proposal to allow foreign airlines to participate up to 49 per cent
in the equity of an air transport undertaking is under active consideration.
Expressing
concern over shortage in housing sector, the Finance Minister proposed
various measures to address the shortage of housing for low income groups in
major cities and towns including ECB for low cost housing projects and setting
up of a Credit Guarantee Trust Fund.
Regarding
textile sector, the Finance Minister announced setting up of two more mega
clusters, one to cover Prakasam and Guntur districts in Andhra Pradesh and
other for Godda and neighboring districts in Jharkhand in addition to 4 mega
handloom clusters already operationalized. He also proposed setting up of
three Weavers Service Centres, one each in Mizoram, Nagaland and
Jharkhand. The Minister proposed aRs. 500 crore pilot scheme in
twelfth plan for promotion and application of Geo-textiles in the North
East. A powerloom Mega Cluster will be set up in
Ichalkaranji in Maharashtra.
The
Finance Minister proposed to set up a Rs.5000 croreIndia Opportunities
Venture Fund with SIDBI to enhance availability of equity to Micro, Small and
Medium Enterprises.
Stating
that agriculture will continue to be a priority for Government, Shri
Mukherjee proposed an increase by 18 per cent to Rs. 20,208 crore
in the total Plan Outlay for the Department of Agriculture and Cooperation in
2012-13. He said that the outlay for RashtriyaKrishiVikasYojana (RKVY) is
being increased to Rs. 9217 crore in 2012-13.
Underlining
importance of timely access to affordable credit for farmers, the Finance
Minister proposed to raise the target for agricultural credit to
Rs.5,75,000 crore, which represents an increase of Rs. 1,00,000 crore over the
target for the current year. He said that a short term RRB Credit
Refinance Fund is being set up to enhance the capacity of Regional Rural Banks
to disburse short term crop loans to the small and marginal farmers. He
added that Kisan Credit Card Scheme will be modified to make it a smart card
which can be used at ATMs.
The
Financed Minister said that in order to have a better out reach of the food
processing sector, a new centrally sponsored scheme titled National Mission on
Food Processing will be started in cooperation with the States in 2012-13.
The
Finance Minister proposed an increase of 18 per cent to Rs.37,113crore
for Scheduled Castes Sub Plan and an increase of 17.6 per cent to
Rs.21,710 crore for Tribal Sub Plan during 2012-13.
Regarding
food security, Shri Mukherjee said that National Food Security Bill 2011 is
before Parliamentary Standing Committee. He said a
multi-sectoralprogramme to address maternal and child malnutrition in selected
200 high burdened districts is being rolled out during 2012-13. He
further said that an allocation of Rs.15,850 crore has been made for ICDS
scheme which is an increase of 58% and Rs.11,937 crore for National
Programme of Mid-Day Meals in schools for the year 2012-13. He added that
an allocation of Rs.750 crore is proposed for Rajiv Gandhi Scheme for
Empowerment of Adolescent Girls, SABLA.
The
allocation for rural drinking water and sanitation is proposed to be increased
by over 27 per cent to Rs. 14,000 crore and for PradhanMantri Road SadakYojana
by 20 per cent to Rs. 24,000 crore in 2012-13. He proposed to enhance the
allocation under Rural Infrastructure Development Fund to Rs. 20,000 crore
with Rs.5,000 crore exclusively earmarked for .creating warehousing
facilities.
The
Finance Minister proposed an increase in allocation by 21.7 per
cent for Right to Education – SarvaShikshaAbhiyan to Rs.25,555 crore and
by 29 per cent for RashtriyaMadhyamikShikshaAbhiyan to Rs. 3,124
crore, He proposed to set up a Credit Guarantee Fund to ensure
better flow of funds to students.
Regarding
health sector he proposed an increase in allocation for NRHM to Rs.20,822
crore in 2012-13. He also said that National Urban Health Mission is
being launched.
The
Finance Minister said that Mahatma Gandhi National Rural Employment Guarantee
Scheme has had a positive impact. He proposed an allocation of Rs.3915
crore for National Rural Livelihood Mission (NRLM) which represents an
increase of 34 per cent. He proposed to provide Rs.200 crore to enlarge
the corpus to Rs.300 crore of the Women’s SHG’s Development Fund. He said
the fund will also support the objectives of Aajeevika i.e. NRLM
and will empower women SHGs to access bank credit. He also proposed
to establish a Bharat Livelihoods Foundation of India through Aajeevika which
will support and scale up civil society initiatives and interventions
particularly in the tribal regions covering around 170 districts.
Allocation
under National Social Assistance Programme (NSAP) is proposed to be raised by
37 per cent to Rs. 8447 crore. Under the Indira Gandhi National Widow
Pension Scheme and Indira Gandhi National Disability Pension Scheme for BPL
beneficiaries, the monthly pension amount per person is being raised from Rs.
200 to Rs.300.
The
Finance Minister announced a provision of Rs.1,93,407crore for Defence Services
including Rs.79,579 crore for capital expenditure. He said the allocation
is based on present needs and any further requirement would be met.
Addressing
Governance related issues, Shri Mukherjee said adequate funds are proposed to
be allocated to complete enrolments of another 40 crore persons under UID
Mission. Outlining the steps taken by the Government to address the issue of
black money, the Minister proposed to lay a White Paper on Black Money in
the current session of Parliament.
In the
Budget Estimates for 2012-13, the Gross Tax Receipts are estimated at Rs.10,
77,612 crore which is an increase of 15.6 per cent over the Budget Estimates
and 19.5 per cent over the revised estimates for 2011-12. After
devolution to States, the net tax to the Centre in 2012-13 is estimated at Rs.
7,71,071crore. The Non Tax Revenue Receipts are estimated at
Rs.1,64,614crore and Non-debt Capital Receipts at Rs.41,650 crore.
The total expenditure for 2012-13 is budgeted at Rs.14,90,925
crore. Of this Rs.5,21,025crore is the Plan Expenditure while Rs.9,69,900
crore is budgeted as Non Plan Expenditure.
The tax
proposals are guided by the need to move towards the Direct Tax Code(DTC) in
the case of direct taxes and Goods & Services Tax (GST) in the case of
indirect taxes.
\Individual
income upto Rs.2 lakh will be free from income tax; income upto Rs.1.8
lakh was exempt in 2011-12. Income above Rs.5 lakh and upto Rs.10
lakh now carries tax at the rate of 20 per cent; the 20% tax slab was from Rs.5
lakh to Rs.8 lakh in 2011-12. A deduction of upto Rs.10,000 is now
available for interest from savings bank accounts. Within the existing limit
for deduction allowed for health insurance, a deduction of upto Rs.5000
is being allowed for preventive health check-up. Senior citizens not
having income from business will now not need to pay advance tax.
\While no
changes have been made in corporate taxes, the budget proposes a number of
measures to promote investment in specific sectors. In order to
provide low cost funds to some stressed infrastructure sectors,
withholding tax on interest payments on external borrowings (ECBs) is being
reduced from 20 percent to 5 per cent for 3 years. These sectors are -
power, airlines, roads and bridges, ports and shipyards, affordable housing,
fertilizer, and dam.
Investment
linked deduction of capital expenditure in some businesses is proposed to be
provided at 150 per cent as against the current rate of 100 per cent.
These sectors include cold chain facility, warehouses forstoring
food-grains, hospitals, fertilizers and affordable housing. Bee
keeping, container freight and warehousing for storage of sugar
will now also be eligible for investment linked deduction.
The
budget also proposes weighted deduction for R&D expenditure, agri-extension
services and expenditure on skill development in the manufacturing sector.
For small
and medium enterprises (SMEs) the turnover limit for compulsory tax audit of
accounts as well as for presumptive taxation is proposed to be raised from Rs.
60 lakh to Rs. 1 crore. In order to augment funds for SMEs, sale of
residential property will be exempt from capital gains tax, if the
proceeds are used for purchase of plant and machinery, etc.
A General
Anti-Avoidance Rule (GAAR) is being introduced in order to counter aggressive
tax avoidance. Securities transaction tax (STT) is being reduced by 20 per cent
on cash delivery transactions, from 0.125% to 0.1%. Alternative Minimum
Tax is proposed to be levied from all persons, other than companies, claiming
profit linked deductions.
The
Finance Minister has proposed a series of measures to deter the
generation and use of unaccounted money. In the case of assets held abroad,
compulsory reporting is being introduced and assessment upto 16 years will now
be allowed to be re-opened. Tax will be collected at source on trading in
coal, lignite and iron ore; purchase of bullion or jewellery above Rs. 2 lakh
in cash; and transfer of immovable property (other than agricultural land)
above a specified threshold. Unexplained money, credits, investments,
expenditures etc. will be taxed at the highest rate of 30 per cent irrespective
of the slab of income.
The
Finance Minister has made an effort to widen the service tax base, strengthen
its enforcement and bring it as close as possible to the central excise. A
common simplified registration form and a common return are being introduced
for central excise and service tax.
All
services will now attract service tax, except those in the negative list.
The negative list has 17 heads and includes specified services
provided by the government or local authorities, and services in the fields of
education, renting of residential dwellings, entertainment and
amusement, public transportation, agriculture and animal
husbandry. A number of other services including health care, and services
provided by charities, independent journalist, sport persons, performing
artists in folk and classical arts, etc are exempt from service tax. Film
industry also gets tax exemption on copyrights relating to recording of
cinematographic films.
Service
tax rate is being increased from 10 per cent to 12 per cent, with consequential
change in rates for services that have individual tax rates. The standard rate
of excise duty for non-petroleum goods is also being raised from 10 per cent to
12 per cent. No change is proposed in peak rate of customs duty of 10 per cent
on non-agricultural goods.
The
Budget offers relief to different sectors of economy, especially those under
stress. Import of equipment for fertilizer projects are being fully
exempted from basic customs duty of 5 per cent for 3 years. Basic customs
duty is also being lowered for a number of equipment used in agriculture and
related areas.
In the
realm of infrastructure, customs relief is being given to power, coal and
railways sectors. While steam coal gets full customs duty exemption for 2
years (with the concessional counter-veiling duty of 1 per cent), natural gas,
LNG and certain uranium fuel get full duty exemption this year. Different
levels of duty concessions are being provided to help mining, railways, roads,
civil aviation, manufacturing, health and nutrition and environment. So
as to help modernization of the textile industry, a number of equipment are
being fully exempted from basic customs duty, and lower customs duty is being
proposed for some other items used by the textile industry.
Customs
duty is being raised for gold bars and coins of certain categories, platinum
and gold ore. Customs duty is to be imposed on coloured gem
stones. Excise duty on certain categories of cigarettes and bidis, pan
masala and chewing tobacco is being increased. Customs duty is being
increased on completely built large cars/ SUVs/ MUVs of value exceeding
$40,000.
Silver
jewellery will now be fully exempt from excise duty. Unbranded precious
metal jewellery will attract excise duty on the lines of branded jewellery.
Operations are being simplified and measures taken to minimize impact of this
provision on small artisans and goldsmiths.
While
direct tax proposals in the Budget will result in a net revenue loss of
Rs.4,500crore, indirect taxes will result in a net revenue gain of Rs.45,940
crore. Thus, the tax proposals will lead to a net gain of Rs.41,440crore.