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Union Budget 2012-13 An Analysis

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Page 1: Analysis of Union Budget 2012-13

Union Budget 2012-13

An Analysis

Page 2: Analysis of Union Budget 2012-13

Overview of the Economy

• GDP growth estimated at 6.9 per cent in real terms in 2011-12. Slowdown in comparison to preceding two years is primarily due to deceleration in industrial growth.

• Headline inflation expected to moderate further in next few months and remain stable thereafter.

• Steps taken to bridge gaps in distribution, storage and marketing systems have helped in more effective management of inflation.

• Developments in India’s external trade in the first half of current year have been encouraging. Diversification in export and import market achieved.

• Current account deficit at 3.6 per cent of GDP for 2011-12 and reduced net capital inflow in the 2nd and 3rd quarters put pressure on exchange rate.

• India’s GDP growth in 2012-13 expected to be 7.6 per cent +/- 0.25 per cent

Page 3: Analysis of Union Budget 2012-13

Tax

• Income tax exemption limit raised to Rs.2 lakh to provide relief of Rs.2,000 for all assesses; 20 per cent tax on income over Rs.10 lakh, up from Rs.8 lakh.

• Deduction of up to Rs.10,000 from interest from savings bank accounts.• Service tax rate raised from 10 per cent to 12 per cent to bring in Rs.18,660

crore.• No change in corporate taxes but measures to enable them better access

funds.• Withholding tax on external commercial borrowings reduced from 20 per

cent to five per cent for power, airlines, roads, bridges, affordable houses and fertilizer sectors.

• Cinema industry exempted from service tax.

Page 4: Analysis of Union Budget 2012-13

Indirect Taxes• Service tax to be shorter by nearly 40 per cent. • Proposals from service tax expected to yield additional revenue of 18,660

crore.• Given the imperative for fiscal correction, standard rate of excise duty to be

raised from 10 per cent to 12 per cent, merit rate from 5 per cent to 6 per cent and the lower merit rate from 1 per cent to 2 per cent with few exemptions.

• Excise duty on large cars also proposed to be enhanced.• No change proposed in the peak rate of customs duty of 10 per cent on

nonagricultural goods.• Duty-free allowances increased for eligible passengers and for children of up

to 10 years.• Proposals relating to Customs and Central excise to result in net revenue gain

of Rs27,280 crore.

Page 5: Analysis of Union Budget 2012-13

Personal Taxation

General (both men & women) Tax slabIncome Tax Slab (in Rs.) Tax Applicable (%)

Upto Rs. 2,00,000 Nil

Rs. 2,00,000 – Rs. 5,00,000 10%

Rs. 5,00,000 – Rs. 10,00,000 20%

Rs. 10,00,000 above 30%

Page 6: Analysis of Union Budget 2012-13

Senior Citizens (Aged 60 years but less than 80 years)

Personal Taxation

Income Tax Slab (in Rs.) Tax Applicable (%)

Upto Rs. 2,00,000 Nil

Rs. 2,00,000 – Rs. 5,00,000 10%

Rs. 5,00,000 – Rs. 10,00,000 20%

Rs. 10,00,000 above 30%

Page 7: Analysis of Union Budget 2012-13

Very Senior Citizen (Above 80 years)

Personal Taxation

Income Tax Slab (in Rs.) Tax Applicable (%)

Upto Rs. 5,00,000 Nil

Rs. 5,00,000 - Rs. 10,00,000 20%

Rs. 10,00,000 above 30%

Page 8: Analysis of Union Budget 2012-13

Winners & Losers: How Budget 2012 played out

within key sectors

Page 9: Analysis of Union Budget 2012-13

S. No. Sector Won Lost1 Automobile Diesel Car

ManufacturersLarge Car Makers

2 Gems All Jewellery Manufacturers

 Gold and Gemstones Importers/Jewellery Brand Owners 

3 Retail  Branded Apparel Manufacturers/Small Retailers 

 Consumers

4 Power All Power Generation Companies 

 Domestic Power Generation Equipment Suppliers 

5 Real Estate & Hospitality

Affordable Housing Segment 

Sector as a Whole and Investors in the Sector

6 Transportation Maintenance Centers for Aircraft and Railways and Business Class Passengers

Locomotive Manufacturers/ Economy Class Air Flyers/ Indian Carriers 

Page 10: Analysis of Union Budget 2012-13

A look at the Budget

Dearer• Two wheeler• Car-SUV• Imported luxury vehicle• Gold• Refrigerator• A.C.• Washing machine• Watches• Soaps• Cosmetic• Cigarette• Tobacco• Imported jewellery• Platinum• Imported digital still

camera

•Branded apparel•Imported 20 inch LCD-LED TVs•LED bulbs•CFLs•Match box•Life saving & Probiotics medicines•Iodized Salt•Mobile phone•Branded silver jewellery•Foot wear-up to Rs 500/-•Soya protein foods products

Cheaper

Page 11: Analysis of Union Budget 2012-13

Transport: Roads and Civil Aviation

• Target of covering a length of 8,800 kilometer under NHDP next year.• Allocation of the Road Transport and Highways Ministry enhanced by 14

per cent to Rs. 25,360 crore.• ECB proposed to be allowed for capital expenditure on the maintenance

and operations of toll systems for roads and highways, if they are part of original project.

• Direct import of Aviation Turbine Fuel permitted for Indian Carriers as actual users.

• ECB to be permitted for working capital requirement of airline industry for a period of one year, subject to a total ceiling of US $ 1 billion.

• Proposal to allow foreign airlines to participate upto 49 per cent in the equity of an air transport undertaking under active consideration of the government

Page 12: Analysis of Union Budget 2012-13

Textiles

• Government has announced a financial package of 3,884 crore for waiver of loans of handloom weavers and their cooperative societies.

• Two more mega handloom clusters, one to cover Prakasam and Guntur districts in Andhra Pradesh and another for Godda and neighboring districts in Jharkhand to be set up.

• Three Weaver’s Service Centers one each in Mizoram, Nagaland and Jharkhand to be set up for providing technical support to poor handloom weavers.

• 500 crore pilot scheme announced for promotion and application of Geo-textiles in the North Eastern Region.

• A power loom mega cluster to be set up in Ichalkaranji in Maharashtra with a budget allocation of `70 crore.

Page 13: Analysis of Union Budget 2012-13

Micro, Small and Medium Enterprises

• 5,000 crore India Opportunities Venture Fund to be set up with SIDBI.

• To enable greater access to finance by Small and Medium Enterprises (SME), two SME exchanges launched in Mumbai recently.

• Policy requiring Ministries and CPSEs to make a minimum of 20 per cent of their annual purchases from MSEs approved. Of this, 4 per cent earmarked for procurement from MSEs owned by SC/ST entrepreneurs.

Page 14: Analysis of Union Budget 2012-13

Agriculture• Plan Outlay for Department of Agriculture and Co-operation increased by 18 per cent.• Outlay for Rashtriya Krishi Vikas Yojana (RKVY) increased to Rs. 9,217 crore in 2012-

13.• Initiative of Bringing Green Revolution to Eastern India (BGREI) has resulted in

increased production and productivity of paddy. Allocation for the scheme increased to `1,000 crore in 2012-13 from Rs. 400 crore in 2011-12.

• Rs. 300 crore to Vidarbha Intensified Irrigation Development Programme under RKVY.• Remaining activities to be merged into following missions in Twelfth Plan:

– National Food Security Mission– National Mission on Sustainable Agriculture including Micro Irrigation– National Mission on Oilseeds and Oil Palm– National Mission on Agricultural Extension and Technology– National Horticultural Mission– Target for agricultural credit raised by Rs.1,00,000 crore to Rs. 5,75,000 crore in 2012-13.

• Kisan Credit Card (KCC) Scheme to be modified to make KCC a smart card which could be used at ATMs

Page 15: Analysis of Union Budget 2012-13

Irrigation• Structural changes in Accelerated Irrigation Benefit

Programme (AIBP) being made to maximise flow of benefit from investments in irrigation projects.

• Allocation for AIBP in 2012-13 stepped up by 13 per cent to 14,242 crore.

• Irrigation and Water Resource Finance Company being operationalised to mobilise large resources to fund irrigation projects.

• A flood management project approved by Ganga Flood Control Commission at a cost of `439 crore for Kandi sub-division of Murshidabad District.

Page 16: Analysis of Union Budget 2012-13

Rural Development and Panchayati Raj

• Budgetary allocation for rural drinking water and sanitation increased from 11,000 crore to Rs. 14,000 crore representing an increase of over 27 per cent.

• Allocation for PMGSY increased by 20 per cent to Rs.24,000 crore to improve connectivity.

• Major initiative proposed to strengthen Panchayats through Rajiv Gandhi Panchayat Sashaktikaran Abhiyan.

• Backward Regions Grant Fund scheme to continue in twelfth plan with enhanced allocation of 12,040 crore in 2012-13, representing an increase of 22 per cent over the BE 2011-12.

Page 17: Analysis of Union Budget 2012-13

Education

• For 2012-13, 25,555 crore provided for RTE-SSA representing an increase of 21.7 per cent over 2011-12.

• 6,000 schools proposed to be set up at block level as model schools in Twelfth Plan.

• 3,124 crore provided for Rashtriya Madhyamik Shiksha Abhiyan (RMSA) representing an increase of 29 per cent over BE 2011-12.

Page 18: Analysis of Union Budget 2012-13

Health• No new case of polio reported in last one year.• Existing vaccine units to be modernized and new integrated

vaccine unit to be set up in Chennai.• Scope of ‘Accredited Social Health Activist’ – ‘ASHA’ is

being enlarged. This will also enhance their remuneration.• Allocation for NRHM proposed to be increased from 18,115

crore in 2011-12 to 20,822 crore in 2012-13.• National Urban Health Mission is being launched.• Pradhan Mantri Swasthya Suraksha Yojana being expanded to

cover up gradation of 7 more Government medical colleges.

Page 19: Analysis of Union Budget 2012-13

Security

• A provision of 1,93,407 crore made for Defense services including Rs. 79,579 crore for capital expenditure. Any further requirement to be met.

• Rs. 1,185 crore proposed to be allocated for construction of nearly 4,000 residential quarters for Central Armed Police Forces.

• Rs. 3,280 crore proposed to be allocated for construction of office building of Central Armed Police Forces.

• Scheme to create National Population Register likely to be completed within next 2 years.

Page 20: Analysis of Union Budget 2012-13

Governance

• UID-Aadhaar– Enrolment of 20 crore persons completed under UID mission. Adequate funds

to be allocated to complete enrolment of another 40 crore persons.

• Black Money – Proposal to lay a White Paper on Black Money in current session of

Parliament.

• Public Procurement Legislation– Bill regarding Public Procurement Legislation to be introduced in the Budget

• Session of the Parliament.– Legislative measures for strengthening anti-corruption framework are at

various stages of enactment.

Page 21: Analysis of Union Budget 2012-13

Other Highlights

• National Skill Development Fund allocated Rs.1,000 crore.• National Population Register to be completed in two years.• Integrated Child Development Scheme to be strengthened and

restructured with allocation of Rs.15,850 crore.• Completion of highway projects 44 per cent higher than in

previous fiscal.• External commercial borrowing of up to $1 billion permitted

for airline sector.

Page 22: Analysis of Union Budget 2012-13

• Allocation of Rs.200 crore for research on climate change.

• Infusion of Rs.15,888 crore in public sector banks, regional rural banks and NABARD in 2012-13.

• Hope to raise Rs. 30,000 crore from disinvestments• Better monitoring of expenditure on government

schemes

Other Highlights

Page 23: Analysis of Union Budget 2012-13

PROS

• This Budget identifies five objectives relating to growth recovery, private investment, supply bottlenecks, malnutrition and governance matters.

• This budget is good for our bright future because government is trying to reduce fiscal deficit it is possible through only increasing tax.

Page 24: Analysis of Union Budget 2012-13

CONS

• No capital gains tax for SMEs on sale of residential property

• Budget 2012 won't alter market expectations• Budget 2012 fails to deliver short-term growth

punch.• Budget 2012-13 disappoints InfoTech sector with

most expectations not met• Budget 2012: Not enough action on fiscal

correction• Union Budget 2012-13 is no tonic for a slowdown-

hit economy

Page 25: Analysis of Union Budget 2012-13

Capital Plan Outlay (in crore)

Particulars 2010 2011-12

2012-13

Grand total 464316 558172 651509Agriculture 13825 12861 161212Civil Aviation 6223 5621 7293Communication and IT 13708 15101 21394Environment and Forest 2181 1902 2430External Affairs 800 1125 1500Health and Family welfare 20726 24315 30477Home Affairs 2542 6152 10500Human Resource Development 43514 51772 61427Petroleum and Natural Gas 60967 69883 79728Power 42945 62792 62425Rural Development 720261 67139 73175Science and Technology 4650 5432 5975

Page 26: Analysis of Union Budget 2012-13

Impact AnalysisIndia Inc.

PROPOSAL EFFECTExcise duty and service tax raised to 12% from 10%

Price need to be raised, margins may get affected

Investment in infrastructure to go up to 50 lakhs crore in 12th plan; half expected from private sector

More opportunities for private sector to invest in PPP projects

New sector to be added for purpose of investment linked deduction

Incentives for investment

Page 27: Analysis of Union Budget 2012-13

Capital Market

Impact Analysis

PROPOSAL EFFECT

Reduction Of STT on delivery based sale and purchase of share from 0.125 to 0.1 %

Transaction costs will come down

Qualified foreign investors allowed to invest in corporate bond market

Deepening of corporate debt market

IPO of Rs 10 cr. And above will only be in electronic from

Cost of issuing shares will come downs; opens doors for more retail investors From Tier 2/3 towns

Page 28: Analysis of Union Budget 2012-13

Tax-Payer

Impact Analysis

PROPOSAL EFFECT

Individuals exemption limit to be raised to Rs 200,000

Provides tax relief of Rs 2,000

Allow deduction of up to Rs 10 lakhs for interest from saving accounts

More benefit for senior citizens

Upper limits of 20% to be raised to 10 lakh from 8 lakh

Tax benefit of Rs20,000

Allow deduction of up to Rs 5000 for preventive health check up

Health awareness

Page 29: Analysis of Union Budget 2012-13

EconomyPROPOSED EFFECT

Rs 30,000 crore to be raised from disinvestment in 2012-13

Retail investors will get PSU shares

Provision regarding implementation of Advance Pricing Agreement to be introduced in finance bill,2012

Minimize transfer pricing litigation Big boost to IT and BPO service providers

Rs 15, cr. To be provided for capitalization of public sector banks and financials institutions

Banks will be better equipped to face competition.

Tax-free bonds of Rs 60,000 cr. For financing infrastructure projects in 2012-13

More long term financing instruments for infrastructure projects

Impact Analysis

Page 30: Analysis of Union Budget 2012-13

Conclusion

• Demand will boost because of rural development and increase in exemption limit.

• Sales will increase as there is rise in the income of the consumer.• As the Profit increase it will lead to increase in

taxes.• Government income will increase.

Page 31: Analysis of Union Budget 2012-13

Thank YouA Presentation by:

Adit Gupta

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