Wednesday 28 March 2012

Union Budget 2012 Part A


UNION BUDGET 2012-13
(CLASS ROOM – for Student)
1.      Approach to the Budget
GDP: from 6.9% (2011-12) to 8% (next 2yrs)
            Expected (2012-13) 7.6% ± 0.25%
Classroom:
TERM
DEFINITION / FORMULA / INCLUDES
GNP
Market price
Total value of O/P(Goods & Services) + income received       (in a year)
Factor cost
GNP – net indirect taxes
GDP
Total value of O/P(G&S)produced within the country’s boundary
Gross National Income
Compensation of employees + operating surplus + mixed income + depreciation + net factor income from abroad
NNP
Market price
GNP – depreciation
Factor cost
NNP(market price) – Indirect taxes                                      (also called National income)
NDP
GDP - depreciation
Per capita income
GNP ÷ Total Population
Key: GDP- Gross Domestic Product, GNP – Gross National Product, NNP – Net National Product, NDP-Net Domestic Product
12th FYP – “Faster, Sustainable & More Inclusive Growth


2.      Overview of the Economy
Pressure on exchange rate
i)                    Current A/C Deficit – 3.6% of GDP (2011-12)
ii)                  Reduced net capital inflow in the 2nd & 3rd quarter
            Detritions in fiscal balance
i)                    Slippage in direct tax revenue
ii)                  Increased subsidies           
           
Classroom:                            
Current A/c
Capital A/c
All transaction relating to trade in goods and services
Short term & Long term lending and borrowing, loans, investment
Visible / merchandise – goods
Invisible account – all service
Unilateral transfer
Capital A/c outflow – debit
Capital A/c inflow - Credit
BoT
&
BoP

Balance of Payment  Visible & invisible                                         
Credit Rating is based on BoP                                                                 
Current A/c Balance and Capital A/c Balance
Balance of Trade - Visible Export
  Export >> Import : Favorable                                                 Import>> Export: Unfavorable (Deficit)                                
Methods to Manage BoP crisis:                                                                (Note: it concerns both Current A/c & Capital A/c)
1.      Devaluation of Domestic Currency ( »Import will be reduced)
2.      Import Substituting Policies (Outdated)
3.      Foreign Inflow enhancing Policies                                                         ( Capital A/c will compensate Current A/c)
4.      Convertibility Current / Capital Account
Tarapore committeeLaid the road map to capital account convertibility.        5 member committee setup by RBI                                                           Head :S.S.Tarapore (former deputy governor )


3.      FRBM ACT (Fiscal Responsibility and Budget Management Act,2003)
Classroom:
FRBM concern about Fiscal Deficit & Revenue Deficit
Reason: India’s total Liability = 6 times it’s annual Revenue (in 2000)
(Interest payment consumes = 1/3 tax revenue or 50% Govt Revenue)
2000(FRBM Bill @ parliament) – By Mr.Yashwant Singha
2003(FRBM Act) – Restricted
i)                    Borrowing from RBI ( exceptional in some case)
ii)                  Trading of G-Sec shares in secondary market
                                 Similar to
i)                    Gramm-Rudman-Hollings Balanced Budget Act (US)
ii)                  Stability & Growth Pact (EU)
2004(Effective Functioning) – Document to be presented along with AFS & DFG
i)                    Medium term fiscal Policy Statement
ii)                  Fiscal policy Strategy Statement
iii)                Macro Economic framework Statement
                         Task force on implementation of FRBM Act – Mr.Vijay Kelkar     
i)                     First Report – Changes need on Direct Taxation
ii)                  Second Report – Reduce Fiscal Deficit                    
2006(Fiscal Deficit Eliminated) – 2% GDP
2007(International Financial crisis) –
2009(FRMB suspended) – Fiscal Deficit rose to 6.6%GDP
Currently:
i)                    fiscal deficit – (target to maintain 4.6%)but rose to 5.9% of GDP
ii)                  PMEAC  advices to reinstating  the Act – Fiscal Deficit 3% target for 2014-15

Amendment of FRBM Act as part of Finance Bill/2012 (Expenditure Reform)
i)                    Effective Revenue Deficit – Difference between Revenue Deficit & Grants for creation of Capital Assets
ii)                  Medium Term Expenditure Framework – Sets 3yrs rolling target for Expenditure Indicator
4.      Subsidies
i)                     To keep central subsidies – 2% GDP (2012-13) ↓ 1.75% (next 3yrs)
Classroom: (from current affairs)
·         Agri Min proposed hike of `115/quintal of wheat at CCEA                      (i.e. MSP=`1285/quintal from `1170)
·         Hike up to 100/quintal of Rabi crops (i.e. barely, gram, maser,   rapeseed(Mustard),safflower)
ii)                  Mobile based fertilizer management system
                   Recommendation of Task force  (Shri Nandan Nilekani)
iii)                3 Pub Sec Oil Marketing Companies – to launch LPG transparency portal
iv)                Aadhaar based payment
5.      Disinvestment Policy
 `30k cr to be raised through disinvestment- (2012-13)
Classroom:
Started: 1991-92 » Disinvestment of the Govt’s equity in CPSE to Financial Institution
Five Types of Transactions
i)                    Sale of minority shareholding in PSUs
ii)                  Sale of majority shareholding in PSU to another PSU
iii)                Strategic sale
iv)                Other related transaction
v)                  Sale of residual shareholding in disinvested PSU
National Investment Fund (NIF) (Approved in 2005 ® started working in 2007)
·         Proceeds from disinvestment of CPSE – channelized to NIF
·         Maintained outside Consolidated Fund
·         Managed by Fund managers (Not under Finance Ministry)
Ø  UTI Assets Management Company
Ø  SBI Funds Management Company
Ø  Jeevan Bima Sahayog
Ø  Asset Management Company Ltd
·         From the Fund
Ø  75% for Financing Social sector schemes
Ø  25% utilized to the capital investment in profitable CPSE
Industries reserved for the PUBLIC SECTOR under Industrial Policy 1991
a)      Arms, ammunition, Defence Aircraft, warhead
b)      Atomic energy
c)      Coal and Lignite
d)     Mineral oils
e)      Mining of iron ore, Manganese ore, Chrome ore, gypsum, sulphur, gold, diamond, copper, lead, zinc, tin, molybdenum, wolfram
f)       Railway Transport

6.      Strengthening Investment Environment
i)                    FDI – 51% in multi brand equity
Classroom:
FDI TYPEs
EXPLANATION
1.
Outward
Direct Investment Abroad
Inward

2.
Vertical
If MNC own some share of enterprise, which supply I/P or utilize its O/P
Horizontal
If MNC  carries similar business operation across different nations
3.
Greenfield Investment
Investment to building New production capacity / expansion of the existing production- in the host country
Acquisitions and Mergers


FDI limits in various sectors/Activities

% of FDI permitted
Sectors / Activities
0% (Prohibited)
Agriculture, Real Estate Business, Lottery, Gambling, Chit fund
26%
Defence, Insurance, Petroleum Refining
49%
Telecommunication, Infrastructure, Banking, DTH
51%
Single Brand, Petro pipelines
74%
Atomic Mineral, Petro Marketing, Science magazine
100%
BPO, Power, Pharmacy, SEZ, mines, exploration, film, transport, hotel, tourism, wholesale cash & carry, township/housing

FDI Timeline – 15 years

Year
Proposal / Sanctions
1997
100% FDI in Cash & Carry Wholesale trade with case by case clearance
2001
NK Singh Committee (ahead of 10th FYP)
2002(Aug)
NK Singh Committee (ban on FDI in Retail should be stay)
2002 (Dec)
10th Plan document proposal to recommend (FDI in Retail)
2003
Metro AG (first foreign company) – Bangalore
2006
51% FDI in Single Brand Retail (Cash & Carry Wholesale)
2007
Wal-Mart + Bharti – to setup – Wholesale (Joint Venture)
2008
Tesco – exclusive franchise agreement with TRENT (Retail arm of TATA)
2009
Bharti Wal-Mart (Amritsar) – Cash & Carry Wholesale
2010 (July)
Discussion paper on FDI in Multi Brand Retail
2010 (Dec)
Carrefour (Delhi) – Cash & Carry Wholesale

FDI Issues: (From Current Affairs)
What Consumer can expect from the Wal-Mart, Tesco…etc.?
·         Supply chain management     
·         Gap between Indian & International Retail experience
·         Modern Retail Constitutes – 5% of Fast Moving Consumer Goods
·         Global Retailers – Wal-Mart, Tesco, Carrefour, Metro, IKEA
·         Agriculture Production Market Committee Act.

FDI in Multi Brand Retail
            CII National Retail Committee – Mr. Thomas Verghese (Aditya Birla- CEO)
·            35 Licences – to setup – supermarket
·            43 Licences – to setup – hypermarket
·            Food & Grocery – Account for 2/3 of Indian Retail Sales
·            CII – says – opening up of FDI can  ­ the organize Retail market size to $260bn (2020)

ii)                  Advanced Pricing Agreement
iii)                Rajiv Gandhi Equity Saving Scheme (RGESS)
a)      IT deduction 50%
b)      Invest up to `50k directly in equity
c)      Condition: Annual Income < `10L
iv)                Capital Market – IPO & QFI
v)                  Legislative Reforms:
PFRDA 2011, Banking Law 2011, Insurance Law 2008
Classroom:                            
Pension Fund Regulator & Development Authority (PFRDA)
Established
23 August 2003
Setup
As Trust (under Indian Trust Act,1882)
Operation Structure
10% of Basic, DP, DA
Guidelines
Minimum Monthly Contribution – `500
If failed
Default penalty  `100 per year
Minimum Annual Contribution – `6000
Investment option
Option
Auto Choice
18<Age <36
55>Age>36
E-Class (Equity)
50%
10%
G-Class (Govt Securities)
30%
10%
C-Class (Credit Risk)
20%
80%
Tax Treatment
Exempt-Exempt-Taxable (EET)                                        Aggregate Deduction under 80C, 80CCC,80CCD fixed at `1lakh
2009             D.Swarup Committee
Insurance agents should convert into independent financial adviser. Regulated by Financial Well Being Board (FINWEB)

vi)                Capitalization of Banks & Finance Holding Company (FHC)
a)      `15,888 Cr – Capitalization for Banks & Fin. Institutes
b)      Keep Your Customer Depository (KYC)
vii)              Financial Inclusion – Swabhimaan Scheme
Classroom: SWABHIMAAN (launched in Feb 2011)
Ø  Unique Financial Inclusion Initiative by Govt & Indian Banks’ Association.
Ø  Expansion of banks in rural areas (73k Unbanked villages / villages with population of over 2000)
Ø  Provides basic services like deposits, withdrawals, remittance using the services of business correspondent / Bank Saathis.
Ø  Program will be monitored through the State Level Bankers Committee mechanism.
viii)            Regional Rural Banks – 82 RRB to migrate to – CBS & NEFT
7.      Infrastructure & Industrial Development
i)                    12th FYP – Infrastructure - `50L Cr (50% from Pvt )
ii)                  Eligible Sectors – Viability Gap funding under Scheme “Support PPP Infrastructure”
iii)                First Infrastructure Debt Fund (IDF) - `8k Cr
Classroom:
·   Bank & Finance companies – allowed to float – IDF
·   SEBI amended MF regulation to permit IDF-MF
·   It allows:
            50% investment in borrower group + 10% (board’s discretion)
·   From current affairs
Two Structure
MF – to attract investor with high appetite
NBFC – for Risk averse investor

                                             

iv)                Tax free bonds of `60k Cr
v)                  National Manufacturing Policy
             To raise share of manuf in GDP – 25% (in next 10yrs)
Classroom: NMP
·                     Nation manufacturing policy – objection by – Env.Min, Forest Min, Labor min
·                     Min of SME (Virbhadra singh) – 40% land in proposed industrial corridor – Small & Medium Enterprises.
·                     NMP – piloted by DIPP (Dept of policy promotion)
·                     Group of Ministers on Manufcaturing Policy
Sharad Pawar
Jayanthi Natrajan
Mallikarjuna Kharge
Anand Sharma
Salman Khurshid
Virbhadra Singh
Agri (Head)
Env
Labour
Comm.
Law
MSME

·                     Unit proposed – National Manufacturing Investment Zone (NMIZ)
·                     Fiscal Incentive to Industries (SME)
·                     To creat 220 million job in the manufacturing sector by 2025

vi)                Power & Coal
            CIL » sign Fuel Supply Agreement» with power plant having Long term PPA with DISCOM

vii)              Transport: Road & Civil Aviation
a)      NHDP – 8800 Km(2012-13)
b)      Road Transport Highways Ministry – allocation `25k cr
c)      ECB allowed
Ø  Capital expenditure on O&M of Toll Sys (Road)
Ø  Working Capital expenditure of Airline Industries
              For period of 1yr and ceiling of $1bn
d)     Direct Import of ATF (Aviation Turbine Fuel)
Classroom:
Ø  Direct Import of ATF – to save on Sales tax (4-30 %)
Ø  ATF- Petroleum based fuel for Aircraft ( Reduce the risk of icing or explosion)
Ø  Current Issues» ATF fuel discontent:
 39% Sales tax + 45% raise in price + 40% Airline operating cost

e)      Foreign Airlines – in equity of an Air Transport – 49%
viii)            Delhi- Mumbai Industrial Corridor (DMIC)
                                    Centre (`18,500cr) + Japanese participation ($4.5bn)
                        Classroom: DMIC $90bn project
                                     7 New Cities + 9 Industries + 3 Ports+ 6 Airports
ix)                Textile
a)      Waiver of loans of handloom weavers - `3884 Cr
b)      2 Mega handloom cluster
Ø  Prakasam & Guntur (AP)
Ø  Godda district (Jharkhand)
c)      3 weaver’s service centre: Mizoram, Nagaland, Jharkhand
d)     Pilot project to promote Geo-Textile- `500cr @ NE region
e)      Power loom cluster: Ichalkaranji(Maharastra)-`70Cr
f)       MSME
Ø  `5 Cr India opportunities venture fund setup with SIDBI
Ø  2 SME Exchange @ Mumbai
Ø  Ministry & CPSE – minimum of 20% annual purchase from MSE (in that 4% from SC/ST)  
8.      Agriculture
i)                    Plan outlay for Dept. of Agri & cooperation ­ by 18%
ii)                  Outlay for Rashtriya Krishi Vikas Yojana (RKVY) ­ by `9217 Cr Classroom:
Ø  Launched in  2007-08 by NDC(National Development Council)
Ø  In Target: to achieve 4% annual growth in 11th FYP
Ø  New State plan scheme Addition Central Assistance
Ø  From Current Affairs – Project Golden Rays
o  Dept of Agri (Under RKVY)
o  2007 – Signed non biding agreement with Mansanto India
o  7 seed companies – Mansanto India, PHI seeds, Dupont Business, Advanta India, JK Agrigenetics, DCM Shriram Consolidated, Krishidhan Seed, Kanchan Jyoti Agro India
o  Company – State (buys seed from COs)-Distributed to farmers – Tech Support from (Mansanto India)

iii)                BGREI (Bringing Green Revolution to Easter India)
a)      Allocation `400cr(2011-12) ­  `1k cr(2012-13)
b)      Increase production & productivity – of paddy
iv)                Vidarbha Intensified Irrigation Development program (under RKVY)
v)                  National Mission for protein supplement
                   `2242cr project with World Bank
Ø  Dairy sector
Ø  Production of fish
Ø  Coastal aquaculture
vi)                Agriculture credit
                        Target: `1Lcr  ­  `5L75k cr
                        Kisan Credit Card (KCC) scheme » to be modified» KCC smart card
                        Classroom: current affairs
                        IIFCL + LIC + IDFC – MoU- Takeout Finance scheme
                        (20: 20: 10) – Takeout up to 50% total project cost – i.e. agri credit..etc
vii)              Agri research – `200cr
viii)            Irrigation
a)      AIBP (Accelerated Irrigation Benefit Program)
b)      Irrigation & Water Resource Finance Company
c)      Flood Management Project
                                                            Approved by – Ganga flood Control Commission
                                                            Cost: 439cr – Kandi Sub division(Murshidabad dt)
ix)                National Mission on food processing
9.      Inclusive growth
i)                    SC & ST – (37113 Cr & 21710 Cr)
ii)                  Food security
Classroom: Food Security bill (September end)
Priority list (BPL)
Rural
Urban
Kg/month
Price
46%
28%
7Kg grain
Rice – `3/kg
Wheat –` 2/kg
Coarse grain – `1/kg
29%
22%
3Kg food grains

iii)                Multi Sectoral Nutrition Augmentation Program (MSNAP)
a)      ICDS scheme
Classroom: ICDS – Main program of SSA
·   Intergrated Child Development Service
·   SSA- Sarva Shiksha Abhiyan (2001) 
·   Education for All Movement – 86th Amendment of Constitution
·   Anganwadi (Part of ICDS) – Court yardshelter (1975)
b)      National Program of Mid Day meals
c)      Rajiv Gandhi Scheme for Empowerment of Adolescent Girls (SABLA)
  Classroom: SABLA
Minister of Women & Child Development – Dec 2010

Schemes for adolescent Girl – Time line
2000
Kishori Shakti Yojana (KSY)- Under ICDS infrastructure- Nutrition for girls (11-18)
2002-03
Nutrition Program for Adolescent Girl (NPAG)
2010
RGSEAG/SABLA (Rajiv Gandhi Scheme for Empowerment of Adolescent girls
Kishori Diwas – Special Health Day – once in 3 months


iv)                Rural Development & Panchayat Raj
                                    Allocation for PMGSY ­ by 20% - 24K cr
                                    Rajiv Gandhi Panchayat Sashakti Karan Abhiyam

v)                  Rural Infrastructure Development Fund (RIDF)
10.  Education
i)                    RTE – SSA  - `25,555Cr
ii)                  Rashtriya Madhyamik Shiksha Abhiyan (RMSA) – `3124Cr
iii)                Credit Guarantee fund
11.  Health
i)                    Accredited Social Health Activist (ASHA)
Classroom: ASHA
Age
25-45
Semi Qualified
8th std
Selection (preferably)
Married, Divorced, widowed
Selected by & accountable to
Gram Panchayat (Local Govt )
Objective
To motivate women to give birth in hospital, bring child to immunization, encouraging “family planning”, treating basic illness & injury.
Remuneration
`600/Institutional delivery.
`150/Child completing immunization.
`150/Individual Family planning.

ii)                  Nation Urban Health Mission – to be initiated
iii)                Nation Rural Health Mission – `18Kcr ­  `20.8Kcr(2012-13)
iv)                Pradhan Mantri Swasthya Suraksha Yojana – upgrade +7 Govt Med.Colg
                        Classroom: PMSSY
§  Ministry of Health and Family Welfare
§  Tertiary healthcare in the country
§  6 AIIMS like institution and to upgrade 13 Medical colleges
§  Blindness, AIDS, Cancer, Mental Disorder


12.  Employment & Skill Development
i)                    Mahatma Gandhi National Rural Employment Guarantee Scheme
Classroom: NREGA (from current affairs)
·   Centre to fund 75% of NREGA – Admin Reform in Maoist Area.
·   Central Assistance for 10years – 72 districts – maoist affected area – says Jairam Ramesh (Rural Dev Min)
·   Integrated Action Plan – Launched in 2010
By Finance Min & Planning commission
o 100% wages for Unskilled work
o 75% of the material cost
o Unemployment allowance (in case of No work)
·   More farm works under MGNREGA – Committee headed by Nihis Shah (Planning Committee member) – ways to allow largest possible number to work.

ii)                  National Rural Livelihood Mission(NRLM)
iii)                Bharat Livelihood foundation of india – Through Aajeevika Scheme
iv)                PM’s Employment Generation Program
v)                  Skill Development
a)      National Skill Development Corp. – to train 6.2Cr (10 yrs)
b)      National Skill Dev. Fund – 1000cr (2012-13)
vi)                Himayat Scheme (J&K) – Skill Training 1L youths in 5yrs
Classroom: Himayat (form current affairs)
·         Centrally Sponsored
·         Employ after imparting free skill development to 1 Lakh School Dropouts
·         To break the poverty circle
·         Wages bill `14500cr & Internal Revenue – `4500cr
13.  Social Security & needs of weaker section
i)                    Indira Gandhi National Widow Pension Scheme
ii)                  Indira Gandhi National Disability Pension Scheme for BPL beneficiaries
iii)                SWAVALAMBAN scheme
Ø  LIC – Aggregator
Ø  PSB – point of presence
Classroom: SWAVALAMBAN
            Department of Women and Child Development
            Partial Assistance from Norway (Since 1982)
            Training & Skill Development – Women of weaker section SC/ST
             Self employment                   

14.  Governance
i)                    UIDIA
Classroom: UIDAI
o            Unique Identification Authority of India
o            Established in 2009 under chairmanship of Mr.Nadan Nilekani          (former Infosys boss - now hold cabinet minister rank)
o            AADHAAR (UID card)
§       Polyvinyl Carbonate Card
§       Two set of bar codes
·                              Linear code – 12digit number
·                              Matrix code – Demographic information (600 char)
§  Thickness of the card – 600 microns
§  Data centers
·         Currently(Bangalore)
·         Coming up (New Delhi)
·         Estimated file size: 75KB each
§  UID Data Readable (with following linked to UID server)
·         5MP camera
·         Bar code
·         Scanner
o            Part of Planning commission of India
o            (co-chair)
o            Ram sewak Sharma (DG & MD)
ii)                  White paper on Black Money
Classroom: (from current affairs)
o   Panel rules out New VDIS scheme for black money eradication
o   Committee headed by CBDT chair – M.C.Joshi
o   Other members: Members of (Law Min, Enforcement Directorate, Directorate of Revenue Intelligence, Financial Intelligence unit).
o   Decisions:
ü  No VDIS (Voluntary Disclosure of Income Scheme)
ü  No Capital Punishment
ü  Prevention of Money Laundering ACT to Strengthened with provision for minimum 7yrs punish
          
iii)                Public procurement
15.  Budget Estimate
           
Term
2011-12
2012-13
Expenditure
Plan Exp
4L 41K cr
5L 21K cr
Non Plan
8L 16K cr
9L 70K cr
Total
12L 58K cr
14L 91K cr
Fiscal Deficit
5.9% of GDP
5.1% of GDP
Central Govt Debt
44.2% of GDP
45.5% of GDP
Revenue Deficit

1.8% of GDP


No comments:

Post a Comment