OVERVIEW OF THE ECONOMY
- Gross Domestic Product (GDP) estimated to have grown at 8.6 per cent in 2010-11 in real terms.
- Exports have grown by 29.4 per cent, while imports have recorded a growth of 17.6 per cent during April to January 2010-11 over the corresponding period last year.
- Indian economy expected to grow at 9 per cent with an outside band of +/- 0.25 per cent in 2011-12.
- Average inflation expected lower next year and current account deficit smaller.
- Monetary policy measures taken expected to further moderate inflation in coming months.
Fiscal Consolidation
Tax Reforms
Expenditure Reforms
A Committee already set up by Planning Commission to look into the extant classification of public expenditure between plan, non-plan, revenue and capital.
Subsidies
People’s Ownership of PSUs
Investment environment
FDI
�Discussions underway to further liberalise the FDI policy.
Foreign Institutional Investors
�SEBI registered mutual funds permitted to accept subscription from foreign investors who meet KYC requirements for equity schemes.
�To enhance flow of funds to infrastructure sector, the FII limit for investment in corporate bonds issued in infrastructure sector being raised.Discussions are underway to further liberalise the FDI policy.
Financial Sector legislative Initiatives
The financial sector reforms initiated during the early 1990s have borne good results for the Indian economy. To take the process of financial sector reforms further, various legislations
proposed in 2011-12.
It is proposed to move the following legislations in the financial sector:
(i) The Insurance Laws (Amendment) Bill, 2008;
(ii) The Life Insurance Corporation (Amendment) Bill, 2009;
(iii) The revised Pension Fund Regulatory and Development Authority Bill, first introduced in 2005;
(iv) Banking Laws Amendment Bill, 2011;
(v) Bill on Factoring and Assignment of Receivables;
(vi) The State Bank of India (Subsidiary Banks Laws) Amendment Bill, 2009; and
(vii) Bill to amend RDBFI Act 1993 and SARFAESI Act 2002.
The Government has set up a Financial Sector Legislative Reforms Commission under the Chair of Justice B. N. Srikrishna. It would rewrite and streamline the financial sector laws, rules and regulations and bring them in harmony with the requirements of a modern financial sector. The Commission will complete its work in 24 months.
Licenses to private players
Reserve Bank of India would consider giving some additional banking licences to private sector players. Amendments proposed to the Banking Regulation Act in the context of additional banking licences to private sector players. And RBI is planning to issue the guidelines for banking licences before the close of this financial year.
Public Sector Bank Recapitalisation
6,000 crore for the year 2011-12 to enable Public Sector Banks to maintain a minimum Tier I CRAR at 8 per cent.
Recapitalisation of Regional Rural Banks
500 crore during 2011-12 to enable them maintain a CRAR of at least 9 percent as on March 31, 2012.
Micro Finance Institutions
It is proposed to create in the course of the year, "India Microfinance Equity Fund" of `100 crore with SIDBI.
To empower women and promote their Self Help Groups (SHGs), a “Women’s SHG’s Development Fund” with a corpus of 500 crore will be created.
Rural Infrastructure Development Fund
The Rural Infrastructure Development Fund (RIDF) is an important instrument for routing bank funds for financing rural infrastructure.
It is proposed to raise the corpus of RIDF XVII to 18,000 crore in 2011-12 from 16,000 crore in the current year.
Micro, Small and Medium Enterprises
- Micro and Small enterprises play a crucial role in furthering the objective of equitable and inclusive growth.
- In Budget, 5,000 crore has been provided to SIDBI for the same purpose out of the shortfall of banks on priority sector lending targets.
- 3,000 crore to be provided to NABARD to provide support to handloom weaver co-operative societies which have become financially unviable due to non-repayment of debt by handloom weavers facing economic stress.
- Public sector banks to achieve a target of 15 per cent as outstanding loans to minority communities under priority sector lending at the earliest.
Housing Sector Finance
- To further stimulate growth in housing sector, budget is liberalising the existing scheme of interest subvention of 1 per cent on housing loans by extending it to housing loan upto 15 lakh where the cost of the house does not exceed 25 lakh from the present limit of 10 lakh and 20 lakh respectively.
- On account of increase in prices of residential properties in urban areas, FM has proposed to enhance the existing housing loan limit from 20 lakh to 25 lakh for dwelling units under priority sector lending.
- To provide housing finance to targeted groups in rural areas at competitive rates, It is proposed to enhance the provision under Rural Housing Fund to 3,000 crore from the existing 2,000 crore.
- Credit enablement of Economically Weaker Sections (EWS) and LIG households is a serious challenge. To address this issue, it is proposed to create a Mortgage Risk Guarantee Fund under Rajiv Awas Yojana. This would guarantee housing loans taken by EWS and LIG households and enhance their credit worthiness.
- To prevent frauds in loan cases involving multiple lending from different banks on the same immovable property, the Government has facilitated setting up of Central Electronic Registry under the SARFAESI Act, 2002. This Registry will become operational by March 31, 2011.
Agriculture
The total allocation of RKVY is being increased from 6,755 crore in 2010-11 to 7,860 crore in 2011-12.
Bringing Green Revolution to Eastern Region
To improve rice based cropping system in this region, allocation of 400 crore has been made.
The program would target the improvement in the rice based cropping system of Assam, West Bengal, Orissa, Bihar, Jharkhand, Eastern Uttar Pradesh and Chhattisgarh.
Integrated Development of 60,000 pulses villages in rainfed areas
To attain self-sufficiency in production of pulses within next three years, It is proposed to provide an amount of 300 crore to promote 60,000 pulses villages in rainfed areas for increasing crop productivity and strengthening market linkages.
Promotion of Oil Palm
The domestic production of edible oil meets only about 50 per cent demand. The gap in supply is met through imports.
It is proposed to provide an amount of 300 crore to bring 60,000 hectares under oil palm plantation, by integrating the farmers with the markets. The initiative will yield about 3 lakh metric tonnes of palm oil annually in 5 years.
Initiative on Vegetable Clusters
The growing demand for vegetables has to be met by a robust increase in the productivity and market linkage.
An amount of 300 crore has been proposed for implementation of vegetable initiative to set in motion a virtuous cycle of higher production and incomes for the farmers.
Nutri-cereals
Allocation of 300 crore to promote higher production of Bajra, Jowar, Ragi and other millets, which are highly nutritious and have several medicinal properties.
National Mission for Protein Supplements
Allocation of 300 crore to promote animal based protein production through livestock development, dairy farming, piggery, goat rearing and fisheries.
National Mission for Sustainable Agriculture
Government to promote organic farming methods, combining modern technology with traditional farming practices.
Accelerated Fodder Development Programme
300 crore has been proposed for Accelerated Fodder Development Programme which will benefit farmers in 25,000 villages.
Agriculture Credit
- Credit flow for farmers raised from 3,75,000 crore to 4,75,000 crore in 2011-12.
- The existing interest subvention scheme of providing short term crop loans to farmers at 7 per cent interest will be continued during 2011-12. There is an additional subvention to 3 per cent in 2011-12 who repay their crop loans on time.
- It is proposed to strengthen NABARD's capital base by infusing 3000 crore, in a phased manner, as Government equity.
- To enable NABARD refinance the short-term crop loans of the cooperative credit institutions and RRBs at concessional rates, a contribution of 10,000 crore to NABARD’s Short-term Rural Credit Fund for 2011-12 from the shortfall in priority sector lending by Scheduled Commercial Banks.
Mega Food Parks
- Approval being given to set up 15 more Mega Food Parks during 2011-12.
Stress on increasing Storage Capacity and Cold Chains
- Process to create new storage capacity of 150 lakh metric tonnes through private entrepreneurs and warehousing corporations has been fast tracked.
- Decision to create 20 lakh metric tonnes of storage capacity under Public Entrepreneurs Guarantee (PEG) Scheme through modern silos has been taken.
Infrastructure and Industry
- Allocation of 2,14,000 crore for infrastructure in 2011-12. This is an increase of 23.3 per cent over 2010-11. This also amounts to 48.5 per cent of total plan allocation.
- Government established India Infrastructure Finance Company Limited (IIFCL) to provide long term financial assistance to infrastructure projects. It is expected to achieve a cumulative disbursement target of 20,000 crore by March 31, 2011 and 25,000 crore by March 31, 2012.
- Under take out financing scheme, seven projects sanctioned with debt of 1,500 crore. Another 5,000 crore will be sanctioned during 2011-12.
- To boost infrastructure development, tax free bonds of 30,000 crore proposed to be issued by Government undertakings during 2011-12.
National Manufacturing Policy
- Share of manufacturing in GDP expected to grow from about 16 per cent to 25 per cent over a period of 10 years. Government will come out with a manufacturing policy.
- To provide green and clean transportation for the masses, National Mission for Hybrid and Electric Vehicles will be launched
- Capital investment in fertiliser production proposed to be included as an infrastructure sub-sector.
Exports
- Of 23 suggestions made by Task Force on Transaction Cost, constituted by the Department of Commerce, 21 suggestions already implemented. Action to be taken on the remaining two suggestions. Transaction Cost of 2,100 crore will thus be mitigated.
- Mega Cluster Scheme to be extended for leather products. Seven mega leather clusters to be set up during 2011-12.
- Jodhpur to be included for the development of a handicraft mega cluster.
Strengthening Inclusion
- The proposed allocation of 1, 60,887 crore for social sector in 2011-12 is an increase of 17 per cent over current year. It amounts to 36.4 per cent of the total plan allocation.
- National Food Security Bill (NFSB) to be introduced in the Parliament during the course of this year.
Bharat Nirman
- Allocation for Bharat Nirman programme proposed to be increased by 10,000 crore from the current year to 58,000 crore in 2011-12.
- Plan to provide Rural Broadband Connectivity to all 2,50,000 Panchayats in the country in three years.
MGNREGA
- To provide a real wage of 100 per day, the Government has decided to index the wage rates notified under the MGNREGA to the Consumer Price Index for Agricultural Labour.
- From 1st April, 2011, remuneration of Anganwadi workers increased from 1,500 per month to 3,000 per month and for Anganwadi helpers from 750 per month to 1,500 per month.
Scheduled Castes and Tribal Sub-plan
- Specific allocation earmarked towards Schedule Castes Sub-plan and Tribal Sub-plan in the Budget.
��Allocation for primitive Tribal groups increased from 185 crore in 2010-11 to 244 crore in 2011-12.
Education
Education gets an allocation of 52,057 crore, which is an increase of 24 per cent over the current year.
Sarva Shiksha Abhiyan
- 21,000 crore allocated, which is 40 per cent higher than Budget for 2010-11.
- Pre-matric scholarship scheme to be introduced for needy SC/ST students studying in classes IX and X.
- A revised Centrally Sponsored Scheme “Vocationalisation of Secondary Education” will be implemented from 2011-12 to improve the employability of our youth.
National Knowledge Network
Connectivity to all 1,500 institutions of Higher Learning and Research through optical fiber backbone to be provided by March, 2012
Innovations
National Innovation Council set up to prepare road map for innovations in India.
Skill Development
Additional 500 crore proposed to be provided for National Skill Development Fund during the next year.
Health
Health sector has been stepped up in 2011-12 by 20 percent to 26,760 crore. The Rashtriya Swasthya Bima Yojana has emerged as an effective instrument for providing a basic health cover to poor and marginal workers. It is now being extended to MGNREGA beneficiaries, beedi workers and others.
In 2011-12, It has been decided to further extend this scheme to cover unorganized sector workers in hazardous mining and associated industries like slate and slate pencil, dolomite, mica and asbestos etc.
Unorganised sector
- Co-contributory pension scheme “Swavalamban” was announced in the Budget 2010-11. The exit norms in this scheme has been relaxed whereby a subscriber under Swavalamban will be allowed exit at the age of 50 years instead of 60 years, or a minimum tenure of 20 years, whichever is later. It is proposed to extend the benefit of Government contribution from three to five years for all subscribers of Swavalamban who enroll during 2010-11 and 2011-12.
- Under the on-going Indira Gandhi National Old Age Pension Scheme for BPL beneficiaries, the eligibility for pension is proposed to be reduced from 65 years at present to 60 years. Further, for those who are 80 years and above, the pension amount is being raised from 200 at present to 500 per month.
Environment and Climate Change
Forests: - Government has launched an ambitious ten-year Green India mission.
An allocation worth 200 crore from the National Clean Energy Fund has been drifted towards for its implementation in 2011-12.
Environmental Management:- There is an allocation of worth 200 crore from the National Clean
Energy Fund as Centre's contribution in 2011-12 for launching environmental remediation programmes.
Cleaning of Rivers and Lakes:- A special allocation of 200 crore for the clean-up of some important lakes and rivers other than the Ganga. All these projets fall under the National Ganga River Basin Authority.
Some Other Initiatives
- In order to boost development in the North Eastern Region and Special Category States, the allocation for special assistance has been almost doubled to 8,000 crore for 2011-12.
- 8,000 crore provided in current year for development needs of Jammu and Kashmir.
- Allocation made in 2011-12 to meet the infrastructure needs for Ladakh (100 crore) and Jammu region (150 crore).
- To give a boost to the development of backward regions, the allocation under the Backward Regions Grant Fund has been increased from 7,300 crore to 9,890 crore amounting to an increase of over 35 per cent.
- To address problems related to Left Wing Extremism affected districts, an Integrated Action Plan (IAP) for 60 selected tribal and backward districts has been launched in December 2010. The scheme is being implemented with 100 per cent block grant of 25 crore and 30 crore per district during the years 2010-11 and 2011-12, respectively.
- To build judicial infrastructure, plan provision for Department of Justice increased by three fold to 1,000 crore.
Defence
1,64,415 crore has been allocated for Defence services which include 69,199 crore for capital expenditure.
Census 2011
The 15th Census in the country is being conducted from 9th February. It is the largest administrative exercise in the country providing statistical data on different socio-economic parameters of population.
In response to the overwhelming demand for enumeration of castes other than Scheduled Castes and Scheduled Tribes in Census 2011, it has been decided to canvass ‘caste’ as a separate time bound exercise. This exercise will start in June 2011 and will be completed by 30th September 2011.
UID Mission
From 1st October, 2011 ten lakh Aadhaar numbers will be generated per day.
IT Initiatives
- Various IT initiatives taken for efficient tax administration. These include e-filing and e-payment of taxes, adoption of ‘Sevottam’ concept by CBEC and CBDT, web based facility for tax payers to track the resolution of refunds and credit for pre-paid taxes and augmentation of processing capacity.
- A new scheme with an outlay of 300 crore to be launched to provide assistance to States to modernise their stamp and registration administration and roll out e-stamping in all the districts in the next three years.
Performance Monitoring and Evaluation System
- Pursuant to the recommendations of Second Administrative Reforms Commission, the Government has set up a Performance Monitoring and Evaluation System (PMES) to assess the effectiveness of Government departments in their mandated functions. It involves preparation of a Results Framework Document (RFD) by each department, highlighting its objectives and priorities for the financial year and achievements against pre-specified targets at the end of the year. This document would be available for public information on the departmental websites.
Budget Estimates 2011-12
- Gross Tax receipts are estimated at 9,32,440 crore which is an increase of 24.9 per cent
- Non-tax revenue receipts estimated at 1,25,435 crore.
- After devolution to States, the net tax to Centre in 2011-12 is 6,64,457 crore.
- The total expenditure proposed for 2011-12 is 12,57,729 crore, which is an increase of 13.4 per cent over the Budget Estimates for 2010-11.
- The Plan Expenditure at 4,41,547 crore marks an increase of 18.3 per cent
- The Non Plan Expenditure at 8,16,182 crore is an increase of 10.9 per cent over BE 2010-11.
- The total plan and non-plan transfers of 2,01,733 crore to States and UT Governments increased by 23 per cent
Fiscal deficit
It has come down from 5.5 per cent in BE 2010-11to 5.1 per cent of the GDP in BE 2010-11.
For 2011-12, It has been at 4.6 per cent of GDP. And Fiscal deficit is placed at 4.1 per cent for 2012-13, and 3.5 per cent for 2013-14.
The fiscal deficit of 4.6 per cent of GDP in 2011-12 works out to 4,12,817 crore.
The net market borrowing of the Government in 2011-12 would be 3.43 lakh crore. In addition, 15,000 crore is proposed to be financed through Treasury Bills.
Accordingly, the Central Government debt as a proportion of GDP is estimated at 44.2 per cent for 2011-12 as against 52.5 per cent ecommended by the Thirteenth Finance Commission.
Direct Taxes
- The exemption limit for the general category of individual taxpayers from 1,60,000 to 1,80,000 this year. This measure will provide a uniform tax relief of 2,000 to every taxpayer of this category.
Senior citizens have been given special attention. For them,
• reduce the qualifying age, from 65 years to 60 years;
• enhance the exemption limit from 2,40,000 to 2,50,000;
• create a new category of Very Senior Citizens, eighty years and above, who will be eligible for a higher exemption limit of 5,00,000.
- In the case of corporate, the current surcharge of 7.5 per cent on domestic Companies has been reduced to 5 per cent.
- Minimum Alternate Tax (MAT) has been stepped up from the current rate of 18 per cent to 18.5 percent of book profits to keep the effective rate of the MAT at the same level.
- Tax incentives extended to attract foreign funds for financing of infrastructure.
- Additional deduction of 20,000 for investment in long-term infrastructure bonds proposed to be extended for one more year.
- To attract foreign funds for financing of infrastructure,
• create special vehicles in the form of notified infrastructure debt funds;
• subject interest payment on the borrowings of these funds to a reduced withholding tax rate of 5 per cent instead of the current rate of 20 per cent;
• exempt the income of the fund from tax.
- A lower rate of 15 per cent tax on dividends received by an Indian company from its foreign subsidiary.
- Weighted deduction on payments made to National Laboratories, Universities and Institutes of Technology to be enhanced to 200 per cent.
- Direct taxes are estimated to result in a net revenue loss of 11,500 crore for the year.
Indirect Taxes
- To stay on course for transition to GST.
- Central Excise Duty to be maintained at standard rate of 10 per cent.
- Nominal Central Excise Duty of 1 per cent imposed on 130 items entering in the tax net.
- The lower rate of Central Excise duty has been enhanced from 4 per cent to 5 per cent.
- Optional levy on branded garments or made up proposed to be converted into a mandatory levy at unified rate of 10 per cent.
Agriculture and Related Sectors
- Scope of exemptions from Excise Duty enlarged to include equipments needed for storage and warehouse facilities on agricultural produce.
- Basic Custom Duty reduced for specified agricultural machinery from 5 per cent to 2.5 per cent.
- Basic Custom Duty reduced on micro-irrigation equipment from 7.5 per cent to 5 per cent.
- De-oiled rice bran cake to be fully exempted from basic Custom Duty. Export Duty of 10 per cent to be levied on its export.
- Proposals relating to indirect taxes are estimated to result in a net revenue gain of 11,300 crore.
Manufacturing Sector
Measures takes are to
• reduce basic customs duty on raw silk (not thrown) from 30 to 5 per cent;
• reduce basic customs duty from 5 per cent to 2.5 per cent on certain textile intermediates and inputs for chemicals, ferro-alloys and paper;
• reduce basic customs duty on certain specified inputs for manufacture of certain technical fibre and yarn from 7.5 per cent to 5 per cent;
• fully exempt stainless steel scrap from basic customs duty;
• reduce import duties on specified raw material for the manufacture of syringes and needles to 5 per cent basic and 4 per cent CVD;
• extend the concession available to parts, components and accessories for manufacture of mobile handsets till 31st March, 2012 and to include few more items in its ambit;
• expand the raw material list for manufacture of specified electronic components that are fully exempt from basic customs duty;
• reduce excise duty (and hence CVD) on parts of ink-jet and laserjet printers from 10 per cent to 5 per cent.
- enhancing the rate of export duty for all types of iron ore and unify it at 20 per cent ad valorem.
- The basic customs duty on two critical raw materials of cement industry viz. petcoke and gypsum is proposed to be reduced to 2.5 per cent.
- In response to the growing demand for green products, a technology has been developed indigenously for the conversion of fossil fuel vehicles into Hybrid vehicles through the fitment of a kit. It is proposed to reduce the excise duty on such kits and their parts from 10 per cent to 5 per cent.
- The excise duty on LED lights is being reduced to 5 per cent and special CVD is being fully exempted.
- The basic customs duty on solar lanterns is being reduced from 10 per cent to 5 per cent.
- Pre-tanning or tanning processes in the leather industry use chemicals which are pollutants. To encourage use of green processes, full exemption from basic excise duty is being granted to enzyme based preparations for pre-tanning.
- Some of the other relief measures proposed are:
• Reduction in basic customs duty on raw pistachio from 30 per cent to 10 per cent;
• Reduction in basic customs duty on bamboo for agarbatti from 30 per cent to 10 per cent;
• Reduction in basic customs duty on lactose for the manufacture of homeopathic medicines from 25 per cent to 10 per cent; and
• Reduction in central excise duty on sanitary napkins, baby and adult diapers from 10 per cent to 1 per cent.
- customs and Central excise are estimated to result in a net revenue gain of 7,300 crore for the year.
Service Tax
- Standard rate of Service Tax retained at 10 per cent, while seeking a closer fit between present regime and its GST successor.
- Hotel accommodation in excess of 1,000 per day and service provided by air conditioned restaurants that have license to serve liquor added as new services for levying Service Tax.
- Tax on all services provided by hospitals with 25 or more beds with facility of central air conditioning.
- Service Tax on air travel both domestic and international raised.
- Services provided by life insurance companies in the area of investment and some more legal services proposed to be brought into tax net.
- All individual and sole proprietor tax payers with a turn over upto 60 lakh freed from the formalities of audit.
- To encourage voluntary compliance the penal provision for Service Tax are being rationalised. Similar changes being carried out in Central Excise and Custom laws.
- Proposals relating to Service Tax estimated to result in net revenue gain of
4,000 crore.
- Proposals relating to Direct Taxes estimated to result in a revenue loss of 11,500 crore and those related to Indirect Taxes estimated to result in net revenue gain of 11,300 crore.
- Gross Domestic Product (GDP) estimated to have grown at 8.6 per cent in 2010-11 in real terms.
- Exports have grown by 29.4 per cent, while imports have recorded a growth of 17.6 per cent during April to January 2010-11 over the corresponding period last year.
- Indian economy expected to grow at 9 per cent with an outside band of +/- 0.25 per cent in 2011-12.
- Average inflation expected lower next year and current account deficit smaller.
- Monetary policy measures taken expected to further moderate inflation in coming months.
Fiscal Consolidation
- Amendment to Centre’s FRBM Act, 2003 laying down the fiscal road map for the next five years to be introduced in the course of the year.
- Proposal to introduce the Public Debt Management Agency of India Bill in the next financial year.
- The Thirteenth Finance Commission has worked out a fiscal consolidation road map for States requiring them to eliminate revenue deficit and achieve a fiscal deficit of 3 per cent of their respective Gross State Domestic Product latest by 2014-15. It has also recommended a combined States’ debt target of 24.3 per cent of GDP to be reached during this period. The States are required to amend or enact their FRBM Acts to conform to these recommendations.
Tax Reforms
- As a step towards the roll-out of GST, It is proposed to introduce the Constitution Amendment Bil. Work is also underway on drafting of the model legislation for the Central and State GST.
- Significant progress in establishing GST Network (GSTN), which will serve as IT infrastructure for introduction of GST.
- The National Securities Depository Limited (NSDL) has been selected as technology partner for incubating the National Information Utility that will establish and operate the IT backbone for GST. By June 2011, NSDL will set up a Pilot portal in collaboration with eleven States prior to its roll out across the country.
- Direct Taxes Code (DTC) proposed to be effective from April 1, 2012.
- Govt in the process of setting up independent debt managing committee within finance ministry
Expenditure Reforms
A Committee already set up by Planning Commission to look into the extant classification of public expenditure between plan, non-plan, revenue and capital.
Subsidies
- The extension of the NBS regime to cover urea is under active consideration of the Government.
- 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 fertilisers.
- A task force headed by Shri Nandan Nilekani has been set-up to work out the modalities for the proposed system of direct transfer of subsidy for kerosene, LPG and fertilisers. The interim report of the task force is expected by June 2011. The system will be in place by March 2012.
People’s Ownership of PSUs
- As against a divestment target of 40,000 crore, the Government will raise about 22,144 crore from disinvestment in 2010-11.
- 40,000 crore is intended to be raised through disinvestment in 2011-12.
- The Government is committed to retain at least 51 per cent ownership and management control of the CPSUs
Investment environment
FDI
�Discussions underway to further liberalise the FDI policy.
Foreign Institutional Investors
�SEBI registered mutual funds permitted to accept subscription from foreign investors who meet KYC requirements for equity schemes.
�To enhance flow of funds to infrastructure sector, the FII limit for investment in corporate bonds issued in infrastructure sector being raised.Discussions are underway to further liberalise the FDI policy.
Financial Sector legislative Initiatives
The financial sector reforms initiated during the early 1990s have borne good results for the Indian economy. To take the process of financial sector reforms further, various legislations
proposed in 2011-12.
It is proposed to move the following legislations in the financial sector:
(i) The Insurance Laws (Amendment) Bill, 2008;
(ii) The Life Insurance Corporation (Amendment) Bill, 2009;
(iii) The revised Pension Fund Regulatory and Development Authority Bill, first introduced in 2005;
(iv) Banking Laws Amendment Bill, 2011;
(v) Bill on Factoring and Assignment of Receivables;
(vi) The State Bank of India (Subsidiary Banks Laws) Amendment Bill, 2009; and
(vii) Bill to amend RDBFI Act 1993 and SARFAESI Act 2002.
The Government has set up a Financial Sector Legislative Reforms Commission under the Chair of Justice B. N. Srikrishna. It would rewrite and streamline the financial sector laws, rules and regulations and bring them in harmony with the requirements of a modern financial sector. The Commission will complete its work in 24 months.
Licenses to private players
Reserve Bank of India would consider giving some additional banking licences to private sector players. Amendments proposed to the Banking Regulation Act in the context of additional banking licences to private sector players. And RBI is planning to issue the guidelines for banking licences before the close of this financial year.
Public Sector Bank Recapitalisation
6,000 crore for the year 2011-12 to enable Public Sector Banks to maintain a minimum Tier I CRAR at 8 per cent.
Recapitalisation of Regional Rural Banks
500 crore during 2011-12 to enable them maintain a CRAR of at least 9 percent as on March 31, 2012.
Micro Finance Institutions
It is proposed to create in the course of the year, "India Microfinance Equity Fund" of `100 crore with SIDBI.
To empower women and promote their Self Help Groups (SHGs), a “Women’s SHG’s Development Fund” with a corpus of 500 crore will be created.
Rural Infrastructure Development Fund
The Rural Infrastructure Development Fund (RIDF) is an important instrument for routing bank funds for financing rural infrastructure.
It is proposed to raise the corpus of RIDF XVII to 18,000 crore in 2011-12 from 16,000 crore in the current year.
Micro, Small and Medium Enterprises
- Micro and Small enterprises play a crucial role in furthering the objective of equitable and inclusive growth.
- In Budget, 5,000 crore has been provided to SIDBI for the same purpose out of the shortfall of banks on priority sector lending targets.
- 3,000 crore to be provided to NABARD to provide support to handloom weaver co-operative societies which have become financially unviable due to non-repayment of debt by handloom weavers facing economic stress.
- Public sector banks to achieve a target of 15 per cent as outstanding loans to minority communities under priority sector lending at the earliest.
Housing Sector Finance
- To further stimulate growth in housing sector, budget is liberalising the existing scheme of interest subvention of 1 per cent on housing loans by extending it to housing loan upto 15 lakh where the cost of the house does not exceed 25 lakh from the present limit of 10 lakh and 20 lakh respectively.
- On account of increase in prices of residential properties in urban areas, FM has proposed to enhance the existing housing loan limit from 20 lakh to 25 lakh for dwelling units under priority sector lending.
- To provide housing finance to targeted groups in rural areas at competitive rates, It is proposed to enhance the provision under Rural Housing Fund to 3,000 crore from the existing 2,000 crore.
- Credit enablement of Economically Weaker Sections (EWS) and LIG households is a serious challenge. To address this issue, it is proposed to create a Mortgage Risk Guarantee Fund under Rajiv Awas Yojana. This would guarantee housing loans taken by EWS and LIG households and enhance their credit worthiness.
- To prevent frauds in loan cases involving multiple lending from different banks on the same immovable property, the Government has facilitated setting up of Central Electronic Registry under the SARFAESI Act, 2002. This Registry will become operational by March 31, 2011.
Agriculture
The total allocation of RKVY is being increased from 6,755 crore in 2010-11 to 7,860 crore in 2011-12.
Bringing Green Revolution to Eastern Region
To improve rice based cropping system in this region, allocation of 400 crore has been made.
The program would target the improvement in the rice based cropping system of Assam, West Bengal, Orissa, Bihar, Jharkhand, Eastern Uttar Pradesh and Chhattisgarh.
Integrated Development of 60,000 pulses villages in rainfed areas
To attain self-sufficiency in production of pulses within next three years, It is proposed to provide an amount of 300 crore to promote 60,000 pulses villages in rainfed areas for increasing crop productivity and strengthening market linkages.
Promotion of Oil Palm
The domestic production of edible oil meets only about 50 per cent demand. The gap in supply is met through imports.
It is proposed to provide an amount of 300 crore to bring 60,000 hectares under oil palm plantation, by integrating the farmers with the markets. The initiative will yield about 3 lakh metric tonnes of palm oil annually in 5 years.
Initiative on Vegetable Clusters
The growing demand for vegetables has to be met by a robust increase in the productivity and market linkage.
An amount of 300 crore has been proposed for implementation of vegetable initiative to set in motion a virtuous cycle of higher production and incomes for the farmers.
Nutri-cereals
Allocation of 300 crore to promote higher production of Bajra, Jowar, Ragi and other millets, which are highly nutritious and have several medicinal properties.
National Mission for Protein Supplements
Allocation of 300 crore to promote animal based protein production through livestock development, dairy farming, piggery, goat rearing and fisheries.
National Mission for Sustainable Agriculture
Government to promote organic farming methods, combining modern technology with traditional farming practices.
Accelerated Fodder Development Programme
300 crore has been proposed for Accelerated Fodder Development Programme which will benefit farmers in 25,000 villages.
Agriculture Credit
- Credit flow for farmers raised from 3,75,000 crore to 4,75,000 crore in 2011-12.
- The existing interest subvention scheme of providing short term crop loans to farmers at 7 per cent interest will be continued during 2011-12. There is an additional subvention to 3 per cent in 2011-12 who repay their crop loans on time.
- It is proposed to strengthen NABARD's capital base by infusing 3000 crore, in a phased manner, as Government equity.
- To enable NABARD refinance the short-term crop loans of the cooperative credit institutions and RRBs at concessional rates, a contribution of 10,000 crore to NABARD’s Short-term Rural Credit Fund for 2011-12 from the shortfall in priority sector lending by Scheduled Commercial Banks.
Mega Food Parks
- Approval being given to set up 15 more Mega Food Parks during 2011-12.
Stress on increasing Storage Capacity and Cold Chains
- Process to create new storage capacity of 150 lakh metric tonnes through private entrepreneurs and warehousing corporations has been fast tracked.
- Decision to create 20 lakh metric tonnes of storage capacity under Public Entrepreneurs Guarantee (PEG) Scheme through modern silos has been taken.
Infrastructure and Industry
- Allocation of 2,14,000 crore for infrastructure in 2011-12. This is an increase of 23.3 per cent over 2010-11. This also amounts to 48.5 per cent of total plan allocation.
- Government established India Infrastructure Finance Company Limited (IIFCL) to provide long term financial assistance to infrastructure projects. It is expected to achieve a cumulative disbursement target of 20,000 crore by March 31, 2011 and 25,000 crore by March 31, 2012.
- Under take out financing scheme, seven projects sanctioned with debt of 1,500 crore. Another 5,000 crore will be sanctioned during 2011-12.
- To boost infrastructure development, tax free bonds of 30,000 crore proposed to be issued by Government undertakings during 2011-12.
National Manufacturing Policy
- Share of manufacturing in GDP expected to grow from about 16 per cent to 25 per cent over a period of 10 years. Government will come out with a manufacturing policy.
- To provide green and clean transportation for the masses, National Mission for Hybrid and Electric Vehicles will be launched
- Capital investment in fertiliser production proposed to be included as an infrastructure sub-sector.
Exports
- Of 23 suggestions made by Task Force on Transaction Cost, constituted by the Department of Commerce, 21 suggestions already implemented. Action to be taken on the remaining two suggestions. Transaction Cost of 2,100 crore will thus be mitigated.
- Mega Cluster Scheme to be extended for leather products. Seven mega leather clusters to be set up during 2011-12.
- Jodhpur to be included for the development of a handicraft mega cluster.
Strengthening Inclusion
- The proposed allocation of 1, 60,887 crore for social sector in 2011-12 is an increase of 17 per cent over current year. It amounts to 36.4 per cent of the total plan allocation.
- National Food Security Bill (NFSB) to be introduced in the Parliament during the course of this year.
Bharat Nirman
- Allocation for Bharat Nirman programme proposed to be increased by 10,000 crore from the current year to 58,000 crore in 2011-12.
- Plan to provide Rural Broadband Connectivity to all 2,50,000 Panchayats in the country in three years.
MGNREGA
- To provide a real wage of 100 per day, the Government has decided to index the wage rates notified under the MGNREGA to the Consumer Price Index for Agricultural Labour.
- From 1st April, 2011, remuneration of Anganwadi workers increased from 1,500 per month to 3,000 per month and for Anganwadi helpers from 750 per month to 1,500 per month.
Scheduled Castes and Tribal Sub-plan
- Specific allocation earmarked towards Schedule Castes Sub-plan and Tribal Sub-plan in the Budget.
��Allocation for primitive Tribal groups increased from 185 crore in 2010-11 to 244 crore in 2011-12.
Education
Education gets an allocation of 52,057 crore, which is an increase of 24 per cent over the current year.
Sarva Shiksha Abhiyan
- 21,000 crore allocated, which is 40 per cent higher than Budget for 2010-11.
- Pre-matric scholarship scheme to be introduced for needy SC/ST students studying in classes IX and X.
- A revised Centrally Sponsored Scheme “Vocationalisation of Secondary Education” will be implemented from 2011-12 to improve the employability of our youth.
National Knowledge Network
Connectivity to all 1,500 institutions of Higher Learning and Research through optical fiber backbone to be provided by March, 2012
Innovations
National Innovation Council set up to prepare road map for innovations in India.
Skill Development
Additional 500 crore proposed to be provided for National Skill Development Fund during the next year.
Health
Health sector has been stepped up in 2011-12 by 20 percent to 26,760 crore. The Rashtriya Swasthya Bima Yojana has emerged as an effective instrument for providing a basic health cover to poor and marginal workers. It is now being extended to MGNREGA beneficiaries, beedi workers and others.
In 2011-12, It has been decided to further extend this scheme to cover unorganized sector workers in hazardous mining and associated industries like slate and slate pencil, dolomite, mica and asbestos etc.
Unorganised sector
- Co-contributory pension scheme “Swavalamban” was announced in the Budget 2010-11. The exit norms in this scheme has been relaxed whereby a subscriber under Swavalamban will be allowed exit at the age of 50 years instead of 60 years, or a minimum tenure of 20 years, whichever is later. It is proposed to extend the benefit of Government contribution from three to five years for all subscribers of Swavalamban who enroll during 2010-11 and 2011-12.
- Under the on-going Indira Gandhi National Old Age Pension Scheme for BPL beneficiaries, the eligibility for pension is proposed to be reduced from 65 years at present to 60 years. Further, for those who are 80 years and above, the pension amount is being raised from 200 at present to 500 per month.
Environment and Climate Change
Forests: - Government has launched an ambitious ten-year Green India mission.
An allocation worth 200 crore from the National Clean Energy Fund has been drifted towards for its implementation in 2011-12.
Environmental Management:- There is an allocation of worth 200 crore from the National Clean
Energy Fund as Centre's contribution in 2011-12 for launching environmental remediation programmes.
Cleaning of Rivers and Lakes:- A special allocation of 200 crore for the clean-up of some important lakes and rivers other than the Ganga. All these projets fall under the National Ganga River Basin Authority.
Some Other Initiatives
- In order to boost development in the North Eastern Region and Special Category States, the allocation for special assistance has been almost doubled to 8,000 crore for 2011-12.
- 8,000 crore provided in current year for development needs of Jammu and Kashmir.
- Allocation made in 2011-12 to meet the infrastructure needs for Ladakh (100 crore) and Jammu region (150 crore).
- To give a boost to the development of backward regions, the allocation under the Backward Regions Grant Fund has been increased from 7,300 crore to 9,890 crore amounting to an increase of over 35 per cent.
- To address problems related to Left Wing Extremism affected districts, an Integrated Action Plan (IAP) for 60 selected tribal and backward districts has been launched in December 2010. The scheme is being implemented with 100 per cent block grant of 25 crore and 30 crore per district during the years 2010-11 and 2011-12, respectively.
- To build judicial infrastructure, plan provision for Department of Justice increased by three fold to 1,000 crore.
Defence
1,64,415 crore has been allocated for Defence services which include 69,199 crore for capital expenditure.
Census 2011
The 15th Census in the country is being conducted from 9th February. It is the largest administrative exercise in the country providing statistical data on different socio-economic parameters of population.
In response to the overwhelming demand for enumeration of castes other than Scheduled Castes and Scheduled Tribes in Census 2011, it has been decided to canvass ‘caste’ as a separate time bound exercise. This exercise will start in June 2011 and will be completed by 30th September 2011.
UID Mission
From 1st October, 2011 ten lakh Aadhaar numbers will be generated per day.
IT Initiatives
- Various IT initiatives taken for efficient tax administration. These include e-filing and e-payment of taxes, adoption of ‘Sevottam’ concept by CBEC and CBDT, web based facility for tax payers to track the resolution of refunds and credit for pre-paid taxes and augmentation of processing capacity.
- A new scheme with an outlay of 300 crore to be launched to provide assistance to States to modernise their stamp and registration administration and roll out e-stamping in all the districts in the next three years.
Performance Monitoring and Evaluation System
- Pursuant to the recommendations of Second Administrative Reforms Commission, the Government has set up a Performance Monitoring and Evaluation System (PMES) to assess the effectiveness of Government departments in their mandated functions. It involves preparation of a Results Framework Document (RFD) by each department, highlighting its objectives and priorities for the financial year and achievements against pre-specified targets at the end of the year. This document would be available for public information on the departmental websites.
Budget Estimates 2011-12
- Gross Tax receipts are estimated at 9,32,440 crore which is an increase of 24.9 per cent
- Non-tax revenue receipts estimated at 1,25,435 crore.
- After devolution to States, the net tax to Centre in 2011-12 is 6,64,457 crore.
- The total expenditure proposed for 2011-12 is 12,57,729 crore, which is an increase of 13.4 per cent over the Budget Estimates for 2010-11.
- The Plan Expenditure at 4,41,547 crore marks an increase of 18.3 per cent
- The Non Plan Expenditure at 8,16,182 crore is an increase of 10.9 per cent over BE 2010-11.
- The total plan and non-plan transfers of 2,01,733 crore to States and UT Governments increased by 23 per cent
Fiscal deficit
It has come down from 5.5 per cent in BE 2010-11to 5.1 per cent of the GDP in BE 2010-11.
For 2011-12, It has been at 4.6 per cent of GDP. And Fiscal deficit is placed at 4.1 per cent for 2012-13, and 3.5 per cent for 2013-14.
The fiscal deficit of 4.6 per cent of GDP in 2011-12 works out to 4,12,817 crore.
The net market borrowing of the Government in 2011-12 would be 3.43 lakh crore. In addition, 15,000 crore is proposed to be financed through Treasury Bills.
Accordingly, the Central Government debt as a proportion of GDP is estimated at 44.2 per cent for 2011-12 as against 52.5 per cent ecommended by the Thirteenth Finance Commission.
Direct Taxes
- The exemption limit for the general category of individual taxpayers from 1,60,000 to 1,80,000 this year. This measure will provide a uniform tax relief of 2,000 to every taxpayer of this category.
Senior citizens have been given special attention. For them,
• reduce the qualifying age, from 65 years to 60 years;
• enhance the exemption limit from 2,40,000 to 2,50,000;
• create a new category of Very Senior Citizens, eighty years and above, who will be eligible for a higher exemption limit of 5,00,000.
- In the case of corporate, the current surcharge of 7.5 per cent on domestic Companies has been reduced to 5 per cent.
- Minimum Alternate Tax (MAT) has been stepped up from the current rate of 18 per cent to 18.5 percent of book profits to keep the effective rate of the MAT at the same level.
- Tax incentives extended to attract foreign funds for financing of infrastructure.
- Additional deduction of 20,000 for investment in long-term infrastructure bonds proposed to be extended for one more year.
- To attract foreign funds for financing of infrastructure,
• create special vehicles in the form of notified infrastructure debt funds;
• subject interest payment on the borrowings of these funds to a reduced withholding tax rate of 5 per cent instead of the current rate of 20 per cent;
• exempt the income of the fund from tax.
- A lower rate of 15 per cent tax on dividends received by an Indian company from its foreign subsidiary.
- Weighted deduction on payments made to National Laboratories, Universities and Institutes of Technology to be enhanced to 200 per cent.
- Direct taxes are estimated to result in a net revenue loss of 11,500 crore for the year.
Indirect Taxes
- To stay on course for transition to GST.
- Central Excise Duty to be maintained at standard rate of 10 per cent.
- Nominal Central Excise Duty of 1 per cent imposed on 130 items entering in the tax net.
- The lower rate of Central Excise duty has been enhanced from 4 per cent to 5 per cent.
- Optional levy on branded garments or made up proposed to be converted into a mandatory levy at unified rate of 10 per cent.
Agriculture and Related Sectors
- Scope of exemptions from Excise Duty enlarged to include equipments needed for storage and warehouse facilities on agricultural produce.
- Basic Custom Duty reduced for specified agricultural machinery from 5 per cent to 2.5 per cent.
- Basic Custom Duty reduced on micro-irrigation equipment from 7.5 per cent to 5 per cent.
- De-oiled rice bran cake to be fully exempted from basic Custom Duty. Export Duty of 10 per cent to be levied on its export.
- Proposals relating to indirect taxes are estimated to result in a net revenue gain of 11,300 crore.
Manufacturing Sector
Measures takes are to
• reduce basic customs duty on raw silk (not thrown) from 30 to 5 per cent;
• reduce basic customs duty from 5 per cent to 2.5 per cent on certain textile intermediates and inputs for chemicals, ferro-alloys and paper;
• reduce basic customs duty on certain specified inputs for manufacture of certain technical fibre and yarn from 7.5 per cent to 5 per cent;
• fully exempt stainless steel scrap from basic customs duty;
• reduce import duties on specified raw material for the manufacture of syringes and needles to 5 per cent basic and 4 per cent CVD;
• extend the concession available to parts, components and accessories for manufacture of mobile handsets till 31st March, 2012 and to include few more items in its ambit;
• expand the raw material list for manufacture of specified electronic components that are fully exempt from basic customs duty;
• reduce excise duty (and hence CVD) on parts of ink-jet and laserjet printers from 10 per cent to 5 per cent.
- enhancing the rate of export duty for all types of iron ore and unify it at 20 per cent ad valorem.
- The basic customs duty on two critical raw materials of cement industry viz. petcoke and gypsum is proposed to be reduced to 2.5 per cent.
- In response to the growing demand for green products, a technology has been developed indigenously for the conversion of fossil fuel vehicles into Hybrid vehicles through the fitment of a kit. It is proposed to reduce the excise duty on such kits and their parts from 10 per cent to 5 per cent.
- The excise duty on LED lights is being reduced to 5 per cent and special CVD is being fully exempted.
- The basic customs duty on solar lanterns is being reduced from 10 per cent to 5 per cent.
- Pre-tanning or tanning processes in the leather industry use chemicals which are pollutants. To encourage use of green processes, full exemption from basic excise duty is being granted to enzyme based preparations for pre-tanning.
- Some of the other relief measures proposed are:
• Reduction in basic customs duty on raw pistachio from 30 per cent to 10 per cent;
• Reduction in basic customs duty on bamboo for agarbatti from 30 per cent to 10 per cent;
• Reduction in basic customs duty on lactose for the manufacture of homeopathic medicines from 25 per cent to 10 per cent; and
• Reduction in central excise duty on sanitary napkins, baby and adult diapers from 10 per cent to 1 per cent.
- customs and Central excise are estimated to result in a net revenue gain of 7,300 crore for the year.
Service Tax
- Standard rate of Service Tax retained at 10 per cent, while seeking a closer fit between present regime and its GST successor.
- Hotel accommodation in excess of 1,000 per day and service provided by air conditioned restaurants that have license to serve liquor added as new services for levying Service Tax.
- Tax on all services provided by hospitals with 25 or more beds with facility of central air conditioning.
- Service Tax on air travel both domestic and international raised.
- Services provided by life insurance companies in the area of investment and some more legal services proposed to be brought into tax net.
- All individual and sole proprietor tax payers with a turn over upto 60 lakh freed from the formalities of audit.
- To encourage voluntary compliance the penal provision for Service Tax are being rationalised. Similar changes being carried out in Central Excise and Custom laws.
- Proposals relating to Service Tax estimated to result in net revenue gain of
4,000 crore.
- Proposals relating to Direct Taxes estimated to result in a revenue loss of 11,500 crore and those related to Indirect Taxes estimated to result in net revenue gain of 11,300 crore.
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