Union Budget 2012 – Highlights

81st Union Budget of independent India for the financial year 2012 – 2013 has been presented by Pranab Mukherjee, the Finance Minister of India in Lok Sabha on 16th March 2012 . He has presented his 7th budget of carrier and joined the league of P Chidambaram, Yashwant Sinha, Y B Chavan and C D Deshmukh, who have presented seven Budgets each in the past.  

This year, Mr Mukherjee’s Budget speech is against the backdrop of a sharp slowdown in growth, deteriorating fiscal

conditions, continuing inflationary pressure and political turbulence. He faces a huge challenge of reviving economic growth, which has slowed down over the last six quarters.

At the very beginning of his speech Mr Mukherjee said that a “year of recovery interrupted” meant  that it was time to take tough decisions. The idea ahead of the budget was that fiscal deficit  needed to be controlled by cutting subsidies and raising taxes. The finance minister has raised  taxes and promised cuts in subsidies.

Mr. Pranab Mukherjee said that India’s GDP growth in 2012-13 is expected to be 7.6 per cent ± 0.25 per cent. He said that in 2011-12, India’s GDP is estimated to grow at 6.9 per cent after having grown at the rate of 8.4 per cent in each of the two preceding years. Mr. Mukherjee said the slowdown is primarily due to deceleration in industrial growth. Stating that the headline inflation remained high for most part of the year, the Finance Minister expressed hope that it will moderate further in the next few months and remain stable thereafter.

The Union Budget 2012-13 identifies five objectives to be addressed effectively in the ensuing fiscal year. They include focus on growth recovery, private investment, supply bottlenecks, malnutrition and governance matters.

                                             Highlights of Union Budget 2012-13
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Following are the prominent highlights of the Union Budget for 2012-13 presented in the Lok Sabha on
16th March 2012 by Shri Pranab Mukherjee, the Finance Minister of India.

 ECONOMY OVERVIEW / APPROACH TO THE BUDGET   

 • For Indian economy, recovery was interrupted this year due to intensification of debt crises in Euro
  zone, political turmoil in Middle East, rise in crude oil price and earthquake in Japan.
• Budget identifies five objectives relating to growth recovery, private investment, supply bottlenecks,
  malnutrition and governance matters.
• GDP growth estimated at 6.9 per cent in real terms in 2011-12. Slowdown in comparison to
  preceding two years is primarily due to deceleration in industrial growth.
• Deterioration in fiscal balance in 2011-12 due to slippages in direct tax revenue and increased
  subsidies.
• GDP growth to be 7.6 per cent (± 0.25 percent) during 2012-13
• At current prices the advance GDP estimate of 2011 – 12 is Rs. 82,80,000 Lakh Crore and at
  2004-05 prices Rs. 52,22,000 Lakh Crore.
• Amendment to the FRBM Act proposed as part of Finance Bill. New concepts of “Effective Revenue
  Deficit” and “Medium Term Expenditure Framework” introduced
• Current account deficit at 3.6 per cent of GDP for 2011-12 and reduced net capital inflow in the 2nd
  and 3rd quarters put pressure on exchange rate.

 SUBSIDIES / OTHER EXP. HEAD   

• Central subsidies to be kept under 2 per cent of GDP; to be
  further brought down to 1.75 per cent of  GDP over the next 
  3 years.
• Based on recommendation of task force headed by Shri 
  Nandan Nilekani, a mobile-based Fertilizer Management   
  System has been designed to provide end-to-end 
  information on movement of fertilisers and subsidies. Nation-
  wide roll out during 2012.
• Proposed LPG transparency portal; scaling up and rolling
  out of Aadhar enabled payment for government schemes in 
  at least 50 districts.
• Subsidies related to administering the Food Security Act 
   will be fully provided for.

     Projected Exp. & Deficit for FY 2012-13     
  • Total subsidies at          –  Rs. 1,90,015 cr.
  • Fertilizer subsidies at    –  Rs. 60,974 cr.
  • Food subsidies at          –  Rs. 75,000 cr
  • Oil & petrol subsidies at –  Rs. 43,580 cr.
  • State PF                         –  Rs. 12,000 cr.
  • External aid                    –  Rs.10,148 cr.
  • Less others                   –  Rs. 12,442 cr.
  • Fiscal deficit at               – Rs. 5,13,590 cr.
  • Market loans                  –  Rs. 4,79,000 cr
   The government’s total expenditure for                  FY 2012 -13 is projected at Rs. 14,90,925 cr.  

TAX REFORMS / DISINVESTMENT POLICY / STRENGHTENING INVESTMENT ENVIRONMENT   

• DTC Bill to be enacted at the earliest after expeditious examination of the reportof the Parliamentary
  Standing Committee.
• GST network to be set up as a National Information Utility and to become operational by August 2012.
• Rs. 30,000 crore to be raised through disinvestment.
  At least 51 per cent ownership and management 
  control to remain with Government.
• Efforts to reach broadbased consensus on FDI in 
  multi-brand retail.
• Rajiv Gandhi Equity Saving Scheme: to allow 
  income tax deduction to retail investors on investing
  in equities.
• A central “Know Your Customer” depository to be 
  developed in 2012-13 to avoid multiplicity of 
  registration and data upkeep.
• Rs. 15,888 crore to be provided for capitalization of 
  public sector banks and financial institutions.
• Swabhimaan: Out of 73,000 identified habitations 
  that were to be covered under “Swabhimaan” campaign by March, 2012, about 70,000 habitations
  have been covered. Rest likely to be covered by March 31, 2012. Ultra small branches to be set 
  up in Swabhimaan habitations.
• Out of 82 RRBs in India, 81 have successfully migrated to Core Banking Solutions and have also 
   joined the National Electronic Fund Transfer system.

INFRASTRUCTURE / INDUSTRIAL DEVELOPMENT

•  During 12th Plan period, investment in infrastructure to go up to Rs.50 lakh crore with half of this,
   expected from private sector.
•  Government has approved guidelines for establishing joint venture companies by defence PSUs in
   PPP mode.
•  First Infrastructure Debt Fund with an initial size of rS. 8,000 crore launched earlier this month.
•  Tax free bonds of Rs.60,000 crore to be allowed for financing infrastructure projects in 2012-13.
•  National Manufacturing Policy announced with the objective of raising, within a decade, the share
   of manufacturing in GDP to 25 per cent and creating of 10 crore jobs.
•  Allocation of Road Transport and Highways Ministry enhanced by 14 per cent to Rs. 25,360 crore
•  Projects covering length of 8800 km to be awarded under NHDP against 7,300 km during 2011-12
•  Financial package of Rs. 3,884 crore for waiver of loans to handloom weavers and their cooperative 
   societies; mega handloom clusters in Andhra, Jharkhand; weaver service centres in Mizoram, 
   Nagaland and Jharkhand.
•  Rs. 70 crore for powerloom mega cluster to be set up in Ichalkaranji in Maharashtra.
•  Rs. 500 crore pilot schemes for promotion and application of Geo-textiles in North-Eastern region
•  Rs. 5,000 crore India Opportunities Venture Fund to be set up with SIDBI to help small enterprises
•  Direct import of Aviation Turbine Fuel permitted for Indian Carriers as actual users.

  AGRICULTURE / HEALTH / EDUCATION / SECURITY / INCLUSION SCHEMES PROPOSALS

•  Outlay for Rashtriya Krishi Vikas Yojana (RKVY) increased to Rs. 9,217 crore in 2012-13.
•  Plan Outlay for Department of Agriculture and Co-operation increased by 18 per cent.
•  Target for agricultural credit raised by Rs.1,00,000 crore to Rs.5,75,000 crore in 2012-13.
•  Allocation to agriculture enhanced; RKVY gets Rs. 9,217 crore; Bringing Green Revolution to
   Eastern India (BGREI)I gets Rs. 1,000 crore; Rs.2242 crore project to improve dairy productivity;
   Rs. 500 crore for coastal aquaculture
•  Allocation of  Rs.15,850 crore made for Integrated Child Development Service (ICDS) scheme, 
   representing an increase of 58 per cent over BE 2011-12.
•  Various other agricultural activities merged into 5 missions
•  Target for agricultural credit raised to Rs. 5,75,000 crore
•  Interest subvention for short-term crop loans to farmers at 7 per cent interest continues; 
   additional 3 per cent for prompt paying farmers
•  Rs. 200 crore for awards to incentivise agricultural research
•  Provisions under rural housing fund increased to Rs. 4,000 crore from Rs. 3,000 crore
•  Interest subvention of 1 percent on housing loans uptoRs. 15 lakh extended for one more year
•  AIBP allocation raised by 13 per cent to Rs. 14,242 crore
•  National Mission on Food Processing to be started in cooperation with State Governments
•  Scheduled Caste Sub Plan allocation increases by 18 per cent to Rs. 37,113 crore; 
   Tribal Sub Plan by 17.6 per cent to Rs. 21,710 crore
•  Multi-sectoral programme to address maternal and child malnutrition in 200 high burden districts
•  58 per cent rise in allocation to ICDS, at Rs. 15,850 crore
•  Rural drinking water and sanitation gets 27 per cent rise in allocation to Rs. 14,000 crore;
   PMGSY gets 20 per cent rise to Rs. 24,000 crore
•  RTE-SSA gets Rs. 25,555 crore allocation, showing an increase of 21 per cent; 6000 schools to 
   be set up at block level as model schools in the 12th Plan; Credit Guarantee Fund to be set up for 
   better flow of credit to students
•  National Urban Health Mission is being launched
•  Allocation for NRHM proposed to be increased from Rs.18,115 crore in 2011-12 to Rs. 20,822 crore
   in 2012-13.
•  Pradhan Mantri Swasthya Suraksha Yojana being expanded to cover upgradation of 7 more
   Government medical colleges.
•  34 per cent increase in allocation to National Rural Livelihood Mission, to Rs. 3915 crore
•  Rs. 1000 crore allocated for National Skill Development Fund
•  Bharat Livelihood Foundation of India to be established to support livelihood interventions particularly 
   in tribal areas through Aajeevika scheme.
•  Widow pension and disability pension raised from Rs. 200 to Rs. 300 per month.
•  An allocation of Rs. 750 crore proposed for Rajiv Gandhi Scheme for Empowerment of Adolescent 
   Girls, SABLA.
•  Grant on death of primary breadwinner of a BPL family in the age group 18-64 years doubled to
   Rs. 20,000
•  A provision of Rs.1,93,407 crore made for Defence services including Rs.79,579 crore for 
   capital expenditure. Any further requirement to be met.
•  Rs.1,185 crore proposed to be allocated for construction of nearly 4,000 residential quarters for
   Central Armed Police Forces.
•  Rs. 3,280 crore proposed to be allocated for construction of office building of Central Armed 
   Police Forces.
•  Scheme to create National Population Register likely to be completed within next 2 years.
•  UID-Aadhar to get adequate funds for enrolment of 40 crore persons, in addition to the 20 crore 
    persons already enrolled

  BUDGET ESTIMATES FOR FY 2012-13                                                                                                                         

  •  Gross Tax Receipts estimated at Rs 10,77,612 crore.
  •  Net Tax to Centre estimated at Rs 7,71,071 crore.
  •  Non-tax Revenue Receipts estimated at Rs 1,64,614 crore.
  •  Non-debt Capital Receipts estimated at Rs 41,650 crore.
  •  Fiscal deficit at 5.9 per cent of GDP in RE 2011-12.
  •  Fiscal deficit at 5.1 per cent of GDP in BE 2012-13.
  •  Effective Revenue Deficit to be 1.8 per cent of GDP in 2012-13.
  •  Net market borrowing required to finance the deficit to be Rs.4.79 lakh crore in 2012-13.
  •  Total expenditure for 2012-13 budgeted at Rs 14,90,925 crore.
  •  Plan expenditure for 2012-13 at Rs 5,21,025 crore is 18 per cent higher than
     BE 2011-12. This is higher than 15 per cent projected in Approach to the Twelfth Plan.
  •  Non-plan expenditure estimated at Rs.9,69,900 crore.
  •  99 per cent of the total plan outlay met in the Eleventh Plan.
  •  Temporary arrangement to use disinvestment proceeds for capital expenditure
      in social sector schemes extended for one more year.
  •  Central Government debt at 45.5 per cent of GDP in 2012-13 as compared to Thirteenth
     Finance Commission target of 50.5 per cent.
  •  Rs.3,65,216 crore estimated to be transferred to States including direct transfers to
     States and district level implementing agencies.
  •  Entire amount of subsidy is given in cash and not as bonds in lieu of subsidies.

  TAX PROPOSALS                                                        

     DIRECT TAXES

•   DTC rates proposed to be introduced for personal income tax.
•   Exemption limit for the general category
    of individual taxpayers proposed to be 
    enhanced from Rs.1,80,000 to Rs.2,00,000
    giving tax relief of Rs. 2,000.
•   Upper limit of 20 per cent tax slab
    proposed to be raised from Rs. 8 lakh to
    Rs.10 lakh.
•   Senior citizens not having income from
    business proposed to be exempted from
    payment of advance tax.
•   Proposal to allow individual tax payers, a
    deduction of upto Rs.10,000 for interest 
    from savings bank accounts.
•   Proposal to allow deduction of upto Rs. 5,000 for preventive health check up.
•   A net revenue loss of Rs. 4,500 crore estimated as a result of Direct Tax proposals.
•   Turnover limit for compulsory tax audit for SMEs raised from Rs.60 lakh to Rs.1 crore
•   Security Transaction Tax (STT) reduced 20 % from 0.125 % to 0.10 % on all Delivery
    Cash Transaction.                           

     INDIRECT TAXES

•   To maintain a healthy fiscal situation proposal to raise service tax rate from 10
    per cent to 12 per cent, with corresponding changes in rates for individual services.
•   Proposals from service tax expected to yield additional revenue of Rs. 18,660 crore.
•   TDS on Buying/Selling of immovable property: TDS of 1 % of the transaction value if transaction 
    value is more than Rs. 50 lakhs in Tire 1 cities or more than Rs. 20 lakh in other cities. 
•   Standard rate of excise duty raised from 10 per cent to 12 per cent.
•   Custom duty on standard gold bars, coins of purity 99.5 per cent and Platinum have been 
     hiked from 2 per cent to 4 per cent & on non -standard gold from 5 per cent to 10 per cent.
•   Excise duty on large cars also proposed to be enhanced.
•   No change proposed in the peak rate of customs duty of 10 per cent on nonagricultural goods.
•   Full exemption from basic customs duty for import of equipment for expansion or setting up of 
    fertiliser projects upto March 31, 2015.
•   Full exemption from basic customs duty to coal mining project imports.
•   Duty-free allowances increased for eligible passengers and for children of upto 10 years.
•   Proposals relating to Customs and Central excise to result in net revenue gain of RS.27,280 crore.
•   Indirect taxes estimated to result in net revenue gain of Rs. 45,940 crore.
•   Net gain of Rs.41,440 crore in the Budget due to various taxation proposals.
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This is again a major burden on the common man as ultimately he has to pay this tax while using the various services in daily life under its purview.

Almost all the manufactured items used in every day life will become costlier, while luxury cars, gold, eating out at restaurants or hotel accommodation, wireless telecommunication, postal/banking services etc. will become even more expensive after a steep hike in tax rates proposed in Budget 2012-13. Hike in excise duty and service tax rates will increase the input cost, fuel inflation and lead to further slowdown in economic growth.

Cigarettes and bidis will also become dearer as Finance Minister Pranab Mukherjee has proposed to tax these items more in the Budget for 2012-13. With service tax being hiked to 12 per cent from the existing 10% except in a few items, common man will have to pay more while travelling by air or hiring a law firm.

Certainly, inflation rate will increase with the hiked tax rates. Inflation simply means rise in prices. Inflation is the overall increase in cost of products and services. Increase in taxes and fees leads to inflation. The ever increasing inflation has forced the common man to borrow money from banks and other financial institutions. The consequences, of course people have to stand with indefinite debts or either have to cut down on their lifestyle or beg for hike in compliance with inflation to assist them move at the forefront.

Inflation has become an ever  growing problem in our country but our government seems unwilling to address its causes.Why the government took decision to hike service tax rather than taking any guard against black money and curruption in its network of operations? If the government have the guts to recover the tax dues from the Corrupt Bureaucrats, Politicians and other Officers, then the government can avoid all these new taxes targeted to common man.

The reasons behind railways fare hike are reasonable but, my few question in concern to proposed new tax rates are :
Will it be a good move to raise service tax and excise duty to combat the high inflation rate?
What are the real reasons behind Government’s decision to raise service tax and excise duty?
(Put your views/ans. in comment section.)

Source : Budget Speech                                                                              Post created by –