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Substituting Policies (Outdated)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 committee – Laid 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
|
||
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