Budget Analysis 2011 RUPESH KUMAR

8/6/2019 Budget Analysis 2011 RUPESH KUMAR

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BUDGET ANALYSIS2011-12

SUBMITTED BY

Mr. RUPESH KUMAR


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BUDGET ANALYSIS

The three microeconomic concerns before the union budget

2011- 12 were high inflation and fiscal consolidation. Additionally,there was an expectation that the government would restart the reform

process. The budget has made an attempt through to address small step.

Despite the strong performance of the economy in 2010 11, the

outlook is clouded by stubborn and persistently high inflation and

rising external risks

The government continued with it is stance of the past few years

support to consumption and support to infrastructure, while theannouncement of the fiscal deficit at 4.6% of the GDP initially brought

cheer to the market expenditure assumptions ignited concerns about the

achievability of the fiscal deficit target.

Target set for fiscal deficit at 4.6% seem aggressive given the

lower provision for subsidies and lower budgetary allocations to

flagship schemes like NREGA. Contrary to expectations of an increase

in excise duties government maintained status quo thus allayingindustrys concern on the growth.

There was no major announcement on financial sector reforms.

FIIs can now invest in the Indian mutual funds is a positive move. For

the taxations reform DTC is scheduled to be implemented from April?

12 whil on GST, the governments is planning to bring constitution

amendment bill in the current session

For infrastructure founding corporate bonds limited increased by

usd20bn to usd25bn. This should deepen the corporate bond market

and at same time boost infrastructure creations in the country


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Agriculture sector

Agriculture is estimated to grow at 5.4% in FY 11. Interest

subvention on short term crop loan enhanced to 3% effective rate to

farmers @4% .the total allocation to Rashtriya Krishi Vikas yojana(RKVY) is being increased from RS 67.5bn in FY11 to RS 78.6bn in

FY12

Banking and financial Reforms

Housing loan limited under priority sector could be enhance RS20

Lac to RS 25 Lac. Also the limit for interest rate subvention of 1% on

home loan would be increased from RS 10 Lac for housing period be low

RS 25 Lac. Hike in interest rate subvention for agriculture loan from

2%to3%and increase target for credit flow to framer could be facilitate

availability for cheaper rate

Direct Taxation

Individual

The basic exemption limit of income tax raised to RS180, 000 fromRS160, 000which will result in the total tax saving of Rs 2000. Deduction

for investment of Rs 20000 long term infra bounds extended by one more

year

Corporate

Increases in mat rate from 18.0% to 18.5%. However there is no

material charge in effective mat rate on back of reduction in surcharge

surcharge for domestic companies is reduced to 5% from 7.5%. this

would lead to reduction in normal corporate tax rate by 75bps. MAT and

DDT would now be levied on SEZ. Developer as well as unit operating in

SEZ. Dividend from foreign subsidiary will now be taxed at 15% from

earlier full tax rate.


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Automobile and Auto components

The extension and increase in interest subventions on crop loan

from 2% to 3%, revision of wage rate under NREGA (National Rural

Employment Guarantee Act) scheme and continued focus on ruraldevelopment will have a marginally positive impact on rural two-

wheeler and tractor sale. The lunch of national mission for hybrid

and electrical vehicles and various benefit proposed for hybrid

electrical fuel cell and hydrogen cell technology based vehicles, it

will show effect in the long term.

Cement

There is an effective 2-4% increase in the excise duty for the

cement industry. In the current operating environment, cement

player will not be able to pass on the increase in duty to customer.

Further, there is reduction in a custom duty for gypsum and pet cock

from 5% to 2.5%. Since gypsum account for a mere 2-3% of the

total cost of sales for cement players.

Hotel

The levy of a 5% service tax on room accommodation and 3%

on restaurants will negative impact player in the industry. The

ability of hotel player to pass on levy of the service tax by way of

higher charges is limited.

Information technologyThe proposal to bring SEZ (special economic zones) unit under

purview of MAT and non-extensions of tax benefit for STPI (Software

Technology Parks of India) unit is expected to adversely impact

profitability of it player.


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Oil and gas

Government has indicate that it could be gradually move toward

direct transfer of cash subside on LPG and kerosene to

People living below to poverty line. This will reduces under

recoveries for oil marketing companies in future.

Steel

Iron ore export duty has been hiked to 20%. This will benefit to

steel industry in long term as the increase the thrust on conservation

will help in India to continue to be self reliant in term of iron ore

requirement

Union Budget of India

The Union Budget of India, referred to as the Annual Financial

Statement[1] in Article 112 of the Constitution of India, is the

annual budget of the Republic of India, presented each year on the

last working day of February by the Finance Minister of India in

Parliament. The budget has to be passed by the House before it can

come into effect on April 1, the start of India's financial year.

Former Finance MinisterMorarji Desai presented the budget eight

times, the most by any.[2]


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POSITIVES

y Current surcharge of 7.5 per cent on domestic companies proposed tobe reduced to 5 per cent

y Higher exemption limit of Rs 5,00,000 for very senior citizens, whoare 80 years or above

y Allocation to Sarva Shiksha Abhiyan increase by 40 per cent to Rs21,000 crore

y Allocation for education increased by 24 per cent over current yeary Allocation of Rs 2,14,000 crore for infrastructure in 2011-12; an

increase of 23.3 per cent over 2010-11

y Excise duty to be reduced from 10% to 5% on parts of specifiedmachinery

y Surcharge for companies cut to 5 per cent, from 7.5 per centy Citizens over 80 years to have exemption limit of Rs 5 lakhy Special incentives for hybrid vehicle makers if manufacturing done in

India to be positive for auto companies

y Crude palm used in sports exempted from customs duty to be positivefor palm oil companies

y Duty reduced on hybrid & electric cars along with batteries importedfor such vehicles

y Senior Citizen Age Limit reduced from 65 years to 60 years forIncome Tax purposes


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y Naina Lal Kidwai: The green orientation of the budget is a welcomepositive

y Basic customs duty on agricultural machinery reduced to 4.5 per centfrom 5 per cent

y Uday Kotak: Direct investment in Indian Mutual Funds by anyforeigner is a big move

y Uday Kotak: MFs allowed to raise money from foreign investors ispathbreaking

y Uday Kotak: Budget is positive for equity marketsy Uday Kotak: Lower fiscal deficit target is commendabley No import duty on ship parts positive for SCIy Tax exemption limit for senior citizens raised to Rs 2.5 lakh from 2.4

lakh

NEGATIVES.

1.Rate of MAT proposed to be increased from 18 per cent to 18.5 percent of book profits

2.Lower rate of Central Excise Duty enhanced from 4 per cent to 5per cent

3.AC restaurants serving liquor to come under service tax net4.

Health Check-Ups in Private hospitals to become expensive

5.EXPENSIVE: International Air Travel6.EXPENSIVE: Domestic Air Travel7.Tax on life insurance service providers could be negative for

insurance companies


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8.Travel, Healthcare to become expensive due to increased servicetax

1.Lack of FDI in retail was a disappointment2.Nirmal Jain: New service tax to hurt companies in hospitality3.Hike in export duty on Iron Ore is a negative, says Motilal Oswal4.Air travel to cost more5.Branded clothes may cost more6.Rise in MAT to hurt RIL, GVK Power, telcos7.

FY 11 fiscal deficit above estimates, negative, says Motilal

Oswal

8.Swaminathan: Divestment but no privatisation is timid9.Swaminathan A Aiyer: Doubled anganwaadi wages with a check

on absenteeism not good


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Budget Analysis 2011 RUPESH KUMAR

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