Highlights of Union Budget 2010-11

Finance Minister Pranab Mukherjee presented the Union Budget 2010-11 in parliament on Monday(28-02-2011).

Here are some of the highlights:

·        Exemption limit for the general category of individual taxpayers enhanced from

Rs 1,60,000 to Rs 1,80,000. For senior citizens, the qualifying age reduced to 60 years from the present 65 years and exemption limit raised to Rs 2.50 lakh. Citizens over 80 years to have exemption limit of Rs 5 lakh. No Change in women tax exemption limit i.e1,90,000.

·        Total expenditure proposed at Rs 12, 57,729 crore. Increase of 18.3 per cent in total Plan allocation i.e Rs 4, 41,547 crores . Increase of 10.9 per cent in the Non-plan expenditure i.e Rs 8, 16,182 crores.

·        Indian economy expected to grow at 9 per cent with an outside band of +/- 0.25 per cent in 2011-12. Gross Domestic Product (GDP) estimated to have grown at 8.6 per cent in 2010-11 in real terms.

·        Fiscal Deficit brought down from 5.5 per cent in BE 2010-11 to 5.1 per cent of GDP in RE 2010-11. Fiscal Deficit kept at 4.6 per cent of GDP for 2011-12. Fiscal Deficit to be progressively reduced to 3.5 per cent by 2013-14.

·        “Effective Revenue Deficit” estimated at 2.3 per cent of GDP in the Revised Estimates for 2010-11 and 1.8 per cent for 2011-12.

·        Priority sector home loans limit raised to Rs. 25 lakh from Rs. 20 lakh.

·        Current surcharge of 7.5 per cent on domestic companies proposed to be reduced to 5 per cent.

·        Rate of Minimum Alternative Tax proposed to be increased from 18 per cent to

18.5 per cent of book profits.

·        Central Excise Duty to be maintained at standard rate of 10 per cent.

·        Disinvestment in 2011-12 seen at 400 billion rupees.

·        Provision of Rs 1,64,415 crore, including Rs 69,199 crore for capital expenditure to be made for Defence Services in 2011-12.

·        Rs 6,000 crore to be provided during 2011-12 to enable public sector banks to maintain a minimum of Tier I CRAR of 8 per cent.

·        Rs 500 crore to be provided to enable Regional Rural Banks to maintain a CRAR of at least 9 per cent as on March 31, 2012.

·        Rs 5,000 crore to be provided to SIDBI for refinancing incremental lending by banks to these enterprises.

·        Rs 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.

·        Allocation under Rashtriya Krishi Vikas Yojana (RKVY) increased from Rs 6,755 crore to Rs 7,860 crore.

·        Credit flow for farmers raised from Rs 3,75,000 crore to Rs 4,75,000 crore in 2011-12.

·        Allocation of Rs 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.

·        National Food Security Bill (NFSB) to be introduced in the Parliament during the course of this year.

·        Allocation for social sector in 2011-12 (` 1,60,887 crore) increased by 17 per cent over current year. It amounts to 36.4 per cent of total plan allocation.

·        Allocation for social sector in 2011-12 (` 1,60,887 crore) increased by 17 percent over current year. It amounts to 36.4 per cent of total plan allocation.

·        Allocation for Bharat Nirman programme proposed to be increased by ` 10,000 crore from the current year to Rs 58,000 crore in 2011-12.

·        Plan to provide Rural Broadband Connectivity to all 2,50,000 Panchayats in the country in three years.

·        From 1st April, 2011, remuneration of Anganwadi workers increased from Rs 1,500 per month to Rs 3,000 per month and for Anganwadi helpers from Rs 750 per month to Rs 1,500 per month.

·        Allocation for primitive Tribal groups increased from Rs185 crore in 2010-11 to Rs 244 crore in 2011-12.

·        21,000 crore allocated to Sarva Shiksha Abhiyan, which is 40 per cent higher than Budget for 2010-11.

·        Target of providing banking facilities to all 73,000 habitations having a population of over 2,000 to be completed during 2011-2012.

·        Eligibility for pension under Indira Gandhi National Old Age Pension Scheme for BPL beneficiaries reduced from 65 years of age to 60 years. Those above 80 years of age will get pension of Rs 500 per month instead of ` 200 at present.

·        Rs 200 crore proposed to be allocated for Green India Mission from National Clean Energy Fund.

·        Rs 200 crore proposed to be allocated for launching Environmental Remediation Programmes from National Clean Energy Fund.

·        Special allocation of ` 200 crore proposed to be provided for clean-up of some more important lakes and rivers other than Ganga.

·        Rs 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).

·        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.

·        A new simplified form ‘Sugam’ to be introduced to reduce the compliance burden of small tax payers falling within presumptive taxation.

Highlights of Economic Survey 2010-11

The Economic Survey of India 2010-11 was tabled by the Union Finance Minister of India Pranab Mukherjee on 25 February 2011.

Here are the some of the highlights of Economic survey:

·        The Survey predicted the 9% growth for Indian economy in the next fiscal and estimated 8.6 percent growth in this financial year.

·        As per the survey, the inflation stood at 8.23 per cent in January 2011.

·        The economic Survey of India stated that the trade gap has narrowed to over 82 billion US dollars in the first nine months of the current fiscal and gross fiscal deficit is at 4.8 per cent which is 1.5 percent less than last fiscal(6.3%).

·        The Survey stated that the spending in social sector programmes increased by five percent of the GDP over past five years.

·        The Survey pointed out that Forex reserves of India are estimated to be over 297 billion US dollars. This is mainly due to growth in export sector.

·        Agriculture likely to grow at 5.4% in 2010-11.(For complete details Click here)

·        Industrial output grows by 8.6% ; manufacturing sector registers 9.1%.

·        Exports in April-December 2010 up by 29.5 %.

What is a Budget

The Union Budget is the annual report of India as a country. It contains the government of India's revenue and expenditure for the end of a particular fiscal year, which runs from April 1 to March 31.

The Union Budget is the most extensive account of the government's finances, in which revenues from all sources and expenses of all activities undertaken are aggregated. It comprises the revenue budget and the capital budget. It also contains estimates for the next fiscal year.

What is a revenue budget?

The revenue budget consists of revenue receipts of the government (revenues from tax and other sources), and its expenditure.

Revenue receipts are divided into tax and non-tax revenue.

Tax revenues are made up of taxes such as income tax, corporate tax, excise, customs and other duties that the government levies.

In non-tax revenue, the government's sources are interest on loans and dividend on investments like PSUs, fees, and other receipts for services that it renders.

Revenue expenditure is the payment incurred for the normal day-to-day running of government departments and various services that it offers to its citizens.

The difference between revenue receipts and revenue expenditure is usually negative. This means that the government spends more than it earns. This difference is called the revenue deficit.

What is a capital budget?

The capital budget is different from the revenue budget as its components are of a long-term nature.
The capital budget consists of capital receipts and payments.

Capital receipts are government loans raised from the public, government borrowings from the Reserve Bank and treasury bills, loans received from foreign bodies and governments, divestment of equity holding in public sector enterprises, securities against small savings, state provident funds, and special deposits.

Capital payments are capital expenditures on acquisition of assets like land, buildings, machinery, and equipment. Investments in shares, loans and advances granted by the central government to state and union territory governments, government companies, corporations and other parties.

What are direct taxes?

These are the taxes that are levied on the income of individuals or organizations. Income tax, corporate tax, inheritance tax are some instances of direct taxation.

Income tax is the tax levied on individual income from various sources like salaries, investments, interest etc.

Corporate tax is the tax paid by companies or firms on the incomes they earn.

What are indirect taxes?

These are the taxes paid by consumers when they buy goods and services.

These include excise and customs duties.

Customs duty is the charge levied when goods are imported into the country, and is paid by the importer or exporter.

Excise duty is a levy paid by the manufacturer on items manufactured within the country.

Usually, these charges are passed on to the consumer.

What is plan and non-plan expenditure?

There are two components of expenditure -- plan and non-plan.

Of these, plan expenditures are estimated after discussions between each of the ministries concerned and the Planning Commission.

Non-plan revenue expenditure is accounted for by interest payments, subsidies (mainly on food and fertilisers), wage and salary payments to government employees, grants to States and Union Territories governments, pensions, police, economic services in various sectors, other general services such as tax collection, social services, and grants to foreign governments.

Non-plan capital expenditure mainly includes defence, loans to public enterprises, loans to States, Union Territories and foreign governments.

What is the Central Plan Outlay?

It is the division of monetary resources among the different sectors in the economy and the ministries of the government.

What is fiscal policy?

Fiscal policy is a change in government spending or taxing designed to influence economic activity. These changes are designed to control the level of aggregate demand in the economy.

Governments usually bring about changes in taxation, volume of spending, and size of the budget deficit or surplus to affect public expenditure.

What is a fiscal deficit?

This is the gap between the government's total spending and the sum of its revenue receipts and non-debt capital receipts. It represents the total amount of borrowed funds required by the government to completely meet its expenditure.

What is the Finance Bill?

The government proposals for the levy of new taxes, alterations in the present tax structure or continuance of the current tax structure beyond the period approved by the Parliament, are laid down before the Parliament in this bill.

The Parliament approves the Finance Bill for a period of one year at a time, which becomes the Finance Act.

Source: Rediff.

Third Quarter Review of Monetary Policy 2009-10

What is Monetary Policy?

• Monetary policy is a tool used by the central bank to manage money supply in the economy in order to achieve a desirable growth. The central bank controls the money supply by increasing and decreasing the cost of money, the rate of interest.

What is Fiscal Policy? How is it different from Monetary Policy?

• The fiscal policy is used to monitor the economy. Two major tools of the fiscal policy are revenue spending and collection by government.

• So, while the monetary policy aims to stabilize the economy by controlling the money supply and interest rates, the fiscal policy uses government spending and taxation to achieve the same goal.

• A fiscal policy can be of three kinds — neutral, expansionary and contractionary.

When the revenue collection and spending of the government is equal it is called a neutral policy. An expansionary fiscal policy means higher government spending than tax collection, whereas, contractionary fiscal policy indicates lower spending than tax collections. While the former may lead to a budget deficit, the latter can result in budget surplus.

• During slowdown, the government uses expansionary fiscal policy and pumps in huge amount of money as stimulus packages and decreases the tax rates so that people have more money to spend. This is mainly to revive demand in the economy. On the contrary, when the economy becomes overheated and inflation goes up, the government increases the tax rates and decreases the spending to squeeze the money from the system.

• Central bank has two sets of tools - quantitative and qualitative - to signal easing or tight money conditions, depending on its policy objective.

While quantitative tools would include imposing cash reserve requirements (CRR) for banks, fixing the repo or reverse-repo rates, the bank rate and prescribing the level of statutory liquidity ratio (SLR) to signal the level of growth in the financial markets, pursuant with its growth objective for the economy.

Popular qualitative measures would include imposing margins on certain loans and moral suasion. However, RBI often tweaks only the repo or reverse-repo rates and CRR.

Changes in Third Quarter Review of Monetary Policy 2009-10:

• RBI has increased the cash reserve ratio (CRR) of scheduled banks by 75 basis points from 5.0 per cent to 5.75 per cent of their net demand and time liabilities.

• As a result of the increase in the CRR, about Rs. 36,000 crore of excess liquidity will be absorbed from the system.

• However key interest rates remain unchanged; Repo Rate (4.75%), Reverse Repo rate (3.25%), Bank Rate (6%).

Source: RBI, ET.

Highlights of Union Budget 09-10

1. Total budget expenditure for 2009-10 will be Rs 10, 28,032 cr.

2. For Non-plan expenditure Rs.6, 95,689 cr and for Plan expenditure Rs.3, 25,149 cr registering an increase of 37% in non-plan and 34% in Plan expenditure over 2008-09.
3. Total expenditure increased by 36% in 2009-10 over 2008-09.
4. Fiscal deficit in 2009-10 is proposed at 6.8% of GDP.
5. Revenue deficit in 2009-10 is proposed at 4.8% of GDP.
6. Personal income tax exemption limit for senior citizens raised by Rs 15,000, from Rs 2, 25,000 to Rs 2, 40,000.
7. The exemption limit for income tax for women raised by Rs 10,000, from 1, 80,000 to Rs 190,000.
8. For all others, exemption limit for income tax raised by Rs 10,000 from Rs 150,000 to 1, 60,000.
9. No change in corporate tax.
10. Fringe Benefit Tax abolished.
11. Commodities Transaction Tax abolished.
12. Goods and Services Tax to be introduced from April 1, 2010.
13. To lead economy to high GDP growth rate of 9% per annum at the earliest, which is dipped from an average of over 9% in the previous three fiscal years to 6.7% during 2008-09.
14. Aim to create 12 million jobs.
15. Govt took 3 stimulus packages to fight slowdown.
16.Defence gets Rs 1,41,703 cr for 2009-10,a 34% hike from 200-09 budgetary allocation.

17. Allocation to National Highways Authority of India (NHAI) for the National
Highway Development Programme (NHDP) increased by 23 per cent.
18. Allocation under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) stepped up by 87% to Rs.12, 887 cr.
19. Allocation under Rashtriya Krishi Yojana (RKVY) stepped up by 30%.
20. Allocation under NREGS increased by 144% to 39,100 cr.
21. National Food Security Act to be brought in to ensure entitlement of 25 kilo of rice or wheat per month at Rs.3/kg to every BPL families in rural or urban areas.
22. Allocation for Bharat Nirman increased by 45%.
23. Allocation under Pradhan Mantri Gram Sadak yojana (PMGSY) increased by 59% amounting to 12,000 crore.
24. Allocation under Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) increased by 27% to Rs.7000cr.
25. Allocation under Indira Awaas Yojana (IAY) increased by 63% to 8,800 cr.
26. Allocation under National Rural Health Mission (NRHM) increased by Rs.2,057 cr amounting 14,064 crore in 2009-10.
27. New Scheme Pradhan Mantri Adarsh Gram Yojana (PMAGY) with an allocation of Rs.100 cr for integrated development of 1000 villages having population of Scheduled castes above 50%.
28. Overall plan budget for higher education is to be increased by Rs.2,000 cr.
29. Rs.2, 113 cr allocated for IITs and NITs which includes a provision of Rs.450 cr for new IITs and NITs.
30. Rs.827 cr allocated for opening one Central University in each uncovered state.
31. National unique identification numbers to start rolling out in 12-18 months with a provision of Rs.120 cr.
32. Allocation for Commonwealth Games, 2010 raised to Rs.3, 472 cr from Rs.2, 112cr.
33. Rs.500 cr allocated for rehabilitation of internally displaced persons and reconstruction of the Northern and eastern areas of Srilanka.
34. Rs.1, 000 cr allocated for rebuilding the damaged infrastructure caused due to cyclone Aila in West Bengal.