Prepared by:

Jain Amit Manraj

Assistant Manager
IDBI Bank Ltd.
Mumbai
(D) 022- 66263916
E-mail: jain.amit@idbi.co.in
 Opportunities &
Challenges

 Swift and broad based growth in 2010-11 has put the
economy back to its pre-crisis growth trajectory.

 Inflation management, Implementation gaps &

leakages & Corruption

 Budget 2011-12: a transition towards a more

transparent and result oriented economic
management system in India.
3rd March 2011 INDIA's UNION BUDGET 2011 2
 OVERVIEW OF THE
ECONOMY

• The Gross Domestic Product (GDP) growth for 2010-11
pegged at 8.6 per cent

• High Food Inflation still remains a major concern since

2009-10 when it was double digit. Apt monetary measures
to moderate it coming months

• The growth rate in exports @ 29.4% and imports @ 17.6%

for April-Jan

• Expected GDP Growth 2011-12 @ 9% (+/- 0.25%)

3rd March 2011 INDIA's UNION BUDGET 2011 3
 CONSOLIDATING
GROWTH

• Fiscal Consolidation
 Government to introduce the Public Debt
Management Agency of India Bill in the next financial
year.
• Tax reforms
 Implementation of the Direct Tax Code DTC pushed
one year back to April 1, 2012
 Constitution Amendment Bill to introduce GST by
April, 2011. significant progress made in IT Infra
development for GSTN (Goods & Sales Tax Network)
3rd March 2011 INDIA's UNION BUDGET 2011 4
 Contd...

• People’s ownership of PSUs
 Overwhelming response to Public Issues of PSUs
have led to higher non-tax revenue.
 New w 40,000crs to be raised next year
• Subsidies
 Nutrient Based Subsidy (NBS) has improved the
availability of fertiliser & considering extension of the
NBS regime to cover urea
 direct transfer of cash subsidy to people living below
poverty line in a phased manner for better delivery of
kerosene, LPG and fertilisers
3rd March 2011 INDIA's UNION BUDGET 2011 5
 Improving Investment
Environment

 FII & FDI
 SEBI registered mutual funds permitted to accept
subscription from foreign investors who meet KYC
requirements
 FII limit for investment in corporate bonds issued in
infrastructure sector being raised
 Micro Finance Institutions
 “India Microfinance Equity Fund” of r 100 crore to be
created with SIDBI
 “Women‟s SHG‟s Development Fund” to be created with a
corpus of r 500 crore

3rd March 2011 INDIA's UNION BUDGET 2011 6

 Banking

 Banking Licenses
 Amendments proposed to the Banking Regulation Act in
the context of additional banking licences to private sector
players
 Public Sector Bank Capitalisation
 a 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
 Recapitalisation of Regional Rural Banks (RRB)
 a 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

3rd March 2011 INDIA's UNION BUDGET 2011 7

 Still More Financial Aid

 Rural Infrastructure Development Fund
 Corpus of RIDF XVII to be raised from r 16,000 crore to r
18,000 crore
 Micro Small and Medium Enterprises
 R 5,000 crore to be provided to SIDBI for refinancing
incremental lending
 r 3,000 crore to be provided to NABARD to provide
support to financially stressed handloom weaver co-
operative societies.
 Public sector banks to achieve a target of 15% as
outstanding loans to minority communities under priority
sector lending
3rd March 2011 INDIA's UNION BUDGET 2011 8
 Home Finance

 Interest Subvention of 1 per cent on housing loan
further liberalised. Existing housing loan limit
enhanced to k 25 lakh for dwelling units under
priority sector lending
 Mortgage Risk Guarantee Fund to be created under
Rajiv Awas Yojana
 Central Electronic Registry to prevent frauds
involving multiple lending on the same immovable
property to become operational by March 31, 2011
 Rural Housing Fund enhanced to j 3,000 crore
3rd March 2011 INDIA's UNION BUDGET 2011 9
 Agriculture Growth
 r 300 crore each:

 to promote 60,000 pulses villages in rainfed areas
 to bring 60,000 hectares under oil palm plantations to yield about
3 lakh Metric tonnes of palm oil annually
 for implementation of vegetable initiative to provide quality
vegetable at competitive prices
 to promote higher production of Bajra, Jowar, Ragi and other
millets, which are highly nutritious and have several medicinal
properties
 to promote animal based protein production through livestock
development, dairy farming, piggery, goat rearing and fisheries
 Accelerated Fodder Development Programme to benefit farmers in
25,000 villages.
3rd March 2011 INDIA's UNION BUDGET 2011 10
 Contd.…

 Allocation under Rashtriya Krishi Vikas Yojana (RKVY)
increased from r 6,755 crore to r 7,860 crore

 Improve rice based cropping system in Eastern region,

allocation of r 400 crore has been made.

 Credit flow for farmers raised from v 3,75,000 crore to v

4,75,000 crore in 2011-12.

 Interest Subvention proposed to be enhanced from 2 per

cent to 3 per cent for those who repay crop loan on time
3rd March 2011 INDIA's UNION BUDGET 2011 11
 Contd.…

 Capital base of NABARD to be strengthened by v 3,000 crore
for increased flow of credit & invest v 10,000 crore for Short-
term Rural Credit fund for 2011-12.
 Storage Facilities & Mega Food Parks
 private entrepreneurs and warehousing corporations has
been fast tracked.
 Viability gap funding of the Finance Ministry for creation of
modern storage capacities.
 15 more Mega Parks in 2011-12
 State Governments to review and enforce a reformed
Agriculture Produce Marketing Act in view of untamed
inflation
3rd March 2011 INDIA's UNION BUDGET 2011 12
 Infrastructure &
Industry

 w 2,14,000 crore for infrastructure in 2011-12. This is
an increase of 23.3 per cent over 2010-11.
 India Infrastructure Finance Company Limited
(IIFCL)
 Disbursements reach around w 20,000 crore by March
2011 & w 25,000 by 2012
 Tax Free Bonds of w 30,000 crore proposed to be issued
by Government undertakings during 2011-12

3rd March 2011 INDIA's UNION BUDGET 2011 13

 Contd....

 Manufacturing
 Share of manufacturing in GDP expected to grow
from about 16% to 25% over a period of 10 years.
 National Mission for hybrid and electric vehicle to be
launched
 Financial Assistance to be made available for metro
projects in Delhi, Mumbai, Bengaluru, Kolkata and
Chennai
 Capital investment in fertiliser production proposed
to be included as an infrastructure sub-sector.

3rd March 2011 INDIA's UNION BUDGET 2011 14

 Exports

 21 of 23 suggestions of Task Force on Transaction
Cost already implemented q 2100cr will be mitigate
 Introduce scheme for refund of taxes paid on
services used for export of goods.
 Seven mega leather clusters to be set up during 2011-
12
 Jodhpur to be included for the development of a
handicraft mega cluster

3rd March 2011 INDIA's UNION BUDGET 2011 15

 BLACK Money

 Finance Ministry has commissioned study on
unaccounted income and wealth held within and outside
the country & Five fold strategy to be put into operation
to deal with the problem of generation and circulation of
black money
 Membership of various international forums engaged in
anti money laundering, Financial integrity and Economic
development, Exchange of information for tax purposes
and transparency, secured
 Various Tax Information Exchange Agreements (TIEA)
and Double Taxation Avoidance Agreements (DTAA)
concluded
3rd March 2011 INDIA's UNION BUDGET 2011 16
 INCLUSIVE
DEVELOPMENT

 Social Sector spending has been gradually increased to a
1,60,887 crore in 2011-12, which is 36.4% of the total plan outlay
in 2010-11.
 Bharat Nirman Allocation to be increased by a
10,000 crore from the current year to a 58,000 crore in
2011-12.
 Rural Broadband Connectivity to all 2,50,000
Panchayats in the country in three years
 Financial Inclusion: Target of providing banking
facilities to all 73,000 habitations having a population
of over 2,000 to be completed during 2011-2012
3rd March 2011 INDIA's UNION BUDGET 2011 17
 Education

 Plan allocation for school education increased by 24 per cent from s 31,036
crore in 2010-11
 Sarva Shiksha Abhiyan allocated s 21,000crs, Pre-metric scholarship
scheme to be introduced for needy SC/ST students studying in classes IX
and X.
 National Knowledge Network Connectivity to all 1,500 institutions of
Higher Learning and Research through optical fiber by March, 2012
 National Innovation Council set up to prepare road map for innovations in
India
 s 500 crore proposed to be provided for National Skill Development Fund
during the next year
 An international award with prize money of s 1 crore being instituted for
promoting values of universal brotherhood as part of National celebrations
of 150th Birth Anniversary of Gurudev Rabindranath Tagore.

3rd March 2011 INDIA's UNION BUDGET 2011 18

 Contd…

 MGNREGA

 From 1st April, 2011, remuneration of Anganwadi workers

increased from a 1,500 per month to a 3,000 per month and for
Anganwadi helpers from a 750 per month to a 1,500 per month.

 provide a real wage of a 100 per day, the Government has

decided to index the wage rates notified under the MGNREGA
to the Consumer Price Index for Agricultural Labour

 SC / ST Sub plan : Allocation for primitive Tribal groups

increased from a 185 crore in 2010-11 to a 244 crore in 2011-12.

3rd March 2011 INDIA's UNION BUDGET 2011 19

 Inclusion (Contd.)

 Health: Scope of Rashtriya Swasthya Bima Yojana to be
expanded to widen the coverage

 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 a 500 per month instead of a 200 at
present

 Exit norms under co-contributory pension scheme

“Swavalamban” to be relaxed for unorganised sector

3rd March 2011 INDIA's UNION BUDGET 2011 20

 Environmental &
Climate Change

 R 200 crore proposed to be allocated each for:

 Green India Mission from National Clean Energy Fund

 Launching Environmental Remediation Programmes from

National Clean Energy Fund

 Clean-up of some more important lakes and rivers other

than Ganga

3rd March 2011 INDIA's UNION BUDGET 2011 21

 Special Mention

 North Eastern Region and Special Category States,
allocation for Special Assistance doubled

 B 8000 crore provided in current year for

development needs of Jammu and Kashmir
 Infrastructure needs for Ladakh (B 100 crore) and
Jammu region (B 150 crore).

 Backward Regions Grant Fund increased by over 35

per cent
3rd March 2011 INDIA's UNION BUDGET 2011 22
 Contd....

 Integrated Action Plan (IAP) for addressing
problems related to Left Wing extremism affected
districts.

 Provision of B 1,64,415 crore, including B 69,199 crore

for capital expenditure to be made for Defence
Services

 Enumerate castes other than Schedule Castes and

Schedule Tribes in Census 2011
3rd March 2011 INDIA's UNION BUDGET 2011 23
 Governance

 1st October, 2011 ten lakh Aadhaar numbers will be
generated per day under UID Scheme.

 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

 funds released to 31 projects received from

States/UTs for computerisation of Commercial taxes
3rd March 2011 INDIA's UNION BUDGET 2011 24
 Contd....

 Group of Ministers constituted to consider measures for
tackling corruption. Recommendations to be made in a
time bound manner

 62 departments covered under Performance Monitoring

and Evaluation System (PMES) to assess their
effectiveness

 Recommendations of Technology Advisory Group for

Unique Projects (TAGUP) submitted and accepted in
principle

3rd March 2011 INDIA's UNION BUDGET 2011 25

 BUDGET ESTIMATES
2010-11

2009-10 2010-11
Particulars % Change
(s crore) (s crore)
Gross Tax Receipt 7,46,651 9,32,440 24.88%
Non Tax Revenue
1,48,118 1,25,435 15.31%
Receipts

Total Expenditures 11,08,749 12,57,729 13.43%

5.5 % in BE 5.1% of GDP in

Fiscal Deficit 0.4% of GDP
2010-11 RE 2010-11

3rd March 2011 INDIA's UNION BUDGET 2011 26

 Contd....

 Fiscal Deficit kept at 4.6% of GDP for 2011-12 and 3.5% by
2013-14

 Central Government Debt estimated at 44.2% of GDP for 2011-

12 as against 52.5% recommended by the 13th Finance
Commission.

 Net Market Borrowing of the Government through dated

securities in 2011-12 would be s 3.43 lakh crore.

 “Effective Revenue Deficit” estimated at 2.3%of GDP in the

Revised Estimates for 2010-11 and 1.8% for 2011-12

3rd March 2011 INDIA's UNION BUDGET 2011 27

 TAX PROPOSALS

 Direct Taxes

 Exemption for General Individuals increased from s 160,000 to

s 180,000

 Eligibility for Senior Citizen reduced to 60 years from 65 years

with exemption limit increased to s 2,50,000

 New category of Very Senior Citizen for 80 years age

 Tax incentives on Foreign Investment in Infrastructure

 Rebate of Infrastructure Bond Investment for One more Year

3rd March 2011 INDIA's UNION BUDGET 2011 28

 Contd….

 Surcharge on Companies from 7.5% to 5.0%

 Minimum Alternate Tax (MAT) from 18.0% to 18.5%

 Lower rate of 15 per cent tax on dividends received by an Indian company

from its foreign subsidiary (should result in more funds coming back to the
country)

 Benefit of investment linked deduction extended to businesses engaged in

the production of fertilisers or developing affordable housing.

 Deduction on payments made to National Laboratories, Universities and

Institutes of Technology to be enhanced to 200 per cent.

3rd March 2011 INDIA's UNION BUDGET 2011 29

 Indirect Taxes
 Central Excise Duty

 Standard Rate at 10% maintained. Also Peak rate maintained at
current level.

 Nominal Central Excise Duty of 1 % imposed on 130 items entering in

the tax net

 Lower rate of Central Excise Duty enhanced from 4% to 5%

 Branded garments or made up proposed to be converted into

mandatory from optional levy at unified rate of 10%.

 Reduction in number of exemptions in Central Excise rate structure

3rd March 2011 INDIA's UNION BUDGET 2011 30

 Agriculture and Related

 Equipments needed for storage and warehouse facilities
on agricultural produce included in Exemption from
Excise

 Basic Custom Duty reduced for specified agricultural

machinery from 5% to 2.5% & on micro-irrigation
equipment from 7.5% to 5%

 De-oiled rice bran cake to be fully exempted from basic

Custom Duty. Export Duty of 10% to be levied on its
export.

3rd March 2011 INDIA's UNION BUDGET 2011 31

 Manufacturing

 Basic Custom Duty reduced for various items to
encourage domestic value addition vis-à-vis imports

 Rate of Export Duty for all types of iron ore enhanced and
unified at 20 % ad valorem while 0% Export Duty on iron
ore pellets

 Basic Custom Duty on two critical raw materials of

cement industry viz. Petcoke and gypsum is proposed to
be reduced to 2.5%.

 Cash dispensers fully exempt from basic Customs Duty

3rd March 2011 INDIA's UNION BUDGET 2011 32
 Environment

 0% basic Customs Duty and a concessional rate of Central Excise Duty on
batteries imported by manufacturers of electrical vehicles

 Concessional Excise Duty of 10% to vehicles based on Fuel cell technology

 Excise Duty on LEDs reduced to 5% and special CVD being fully exempted

 Basic Customs Duty on solar lantern reduced from 10 to 5%

 0% basic Customs Duty to Crude Palm Stearin used in manufacture of

laundry soap, critical parts/assemblies needed for Hybrid vehicles

 0% basic Excise Duty granted to enzyme based preparation for pre-

tanning.
3rd March 2011 INDIA's UNION BUDGET 2011 33
 Infrastructure

 Parallel Excise Duty exemption for domestic
suppliers producing capital goods needed for
expansion of existing mega or ultra mega power
projects.

 0% Basic Customs Duty to bio-asphalt and specified

machinery for application in the construction of
national highways

3rd March 2011 INDIA's UNION BUDGET 2011 34

 Other Proposals

 Scope of exemptions from basic Customs Duty for work of art and antiquities
extended to apply for exhibition or display in private art galleries open to the
general public.

 Exemption from Import Duty for spares and capital goods required for ship
repair units extended to import by ship owners.

 Jumbo rolls of cinematographic film fully exempted from CVD by providing

full exemption from Excise Duty

 Out right concession to factory-built ambulances from Excise Duty.

 Relief measures proposed for raw pistachio, bamboo for agarbatti, lactose for
the manufacture of homoeopathic medicines, sanitary napkins, baby and adult
diapers.
3rd March 2011 INDIA's UNION BUDGET 2011 35
 SERVICE TAX

 Rate of tax on services retained at 10% to pave the way
forward for GST.

 Some New Services under Service Tax Include:

 Hotel accommodation in excess of ` 1,000 per day and service

provided by air conditioned restaurants that have license to
serve liquor,

 Hospitals with 25 or more beds with facility of central air

conditioning, air travel both domestic and international raised,

 Life Insurance Companies in the area of investment and some

more legal services proposed to be brought into Service Tax net
3rd March 2011 INDIA's UNION BUDGET 2011 36
 Contd.…

 All individual and sole proprietor tax payers with a
turn over upto s 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.

3rd March 2011 INDIA's UNION BUDGET 2011 37

 IMPACT OF CHANGES
ON GOVT. REVENUE

 Direct Taxes estimated to result in a revenue loss of s
11,500 crore

 Indirect Taxes estimated to result in a revenue gain

of s 11,300 crore.

 Net Revenue Loss of s 200crore

3rd March 2011 INDIA's UNION BUDGET 2011 38

 MARKET WATCH

 SENSEX which had soared by around 600 points in the aftermath of the
FM‟s speech, surrendered more than 400 points from intra-day highs and
slipped below the 18k mark to end up a mere 131 points at 17832 while the
following day SENSEX soared by 600points

 NIFTY ended up 29 points at 5333 down from its highest Intraday level of
5477

 Budget week:

 The SENSEX swung in a range of around 1000 points between a high of 18,736
and a low of 17,718 before ending at 18,486, higher by 785 points or 4.4%.

 The NIFTY moved in a range of 300 points, from a low of 5309 to a high of 5608
before eventually registering weekly gains of 235 points at 5539.

 The MIDCAP INDEX ended at 6592, higher by 3.7% and the SMALLCAP
INDEX ended at 7998, up 2.6%.
3rd March 2011 INDIA's UNION BUDGET 2011 39
 Experts Speak

 “…FM has done decent balancing act. Govt.‟s move to allow global
investors in MF is positive..” – Ridham Desai, MD, Morgan Stanley

 “…While this budget is adequate to manage a growth rate of about

8-9%, what the FM has perhaps missed is announcement of
reforms like allowing FDI in sectors like retail, insurance, step
taken in order to increase the investment activity in the country
and reforms to address the supply side pressures plaguing the
economy...”- Rashesh Shah , Chairman CEO Edelweiss Group

 The CPM and the BJP said the 2011-12 Budget had no steps to
tackle inflation, neglected key sectors such as agriculture,
manufacturing and infrastructure and ignored the problem of
black money

3rd March 2011 INDIA's UNION BUDGET 2011 40