union budget 2012-13 impact analysis - .kisan credit card (kcc) scheme to be modified to make kcc

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  • UNION BUDGET 2012-13

    Impact Analysis

  • UNION BUDGET 2012-13: Impact Analysis

    CONTENTS

    BUDGET AT A GLANCE ............................................................................................ 1

    UNION BUDGET 2012-13 : A MACROECONOMIC PERSPECTIVE .......................... 2-3

    SECTORAL IMPACT ............................................................................................. 4-27

    CHANGE IN CENTRAL PLAN OUTLAY ..................................................................... 29

    RECEIPTS .......................................................................................................... 29-30

    EXPENDITURE .................................................................................................. 31-32

    KEY ECONOMIC INDICATORS (Absolute Values) ................................................... 33

    KEY ECONOMIC INDICATORS (Percentage Change Over Previous Year) ............... 34

    GLOSSARY ........................................................................................................ 35-36

  • UNION BUDGET 2012-13: Impact Analysis

    1

    BUDGET AT A GLANCE

    (` bn) 2011-12 2012-13 Revised Estimates Budget Estimates

    1) Revenue Receipts 7,669.89 9,356.85 Tax Revenue (net to centre) 6,422.52 7,710.71 Non-Tax Revenue 1,247.37 1,646.14

    4) Capital Receipts (5+6+7)$ 5,517.30 5,552.41 Recoveries of loans 142.58 116.50 Other receipts 154.93 300.00 Borrowings and other liabilities * 5,219.80 5,135.90

    8) Total Receipts (1+4)$ 13,187.20 14,909.25

    9) Non-Plan Expenditure 8,921.16 9,699.00 On Revenue Account of which 8,157.40 8,655.96 Interest Payments 2,756.18 3,197.59 On Capital Account 763.76 1,043.04

    13) Plan Expenditure 4,266.04 5,210.25 On Revenue Account 3,462.01 4,205.13 On Capital Account 804.04 1,005.12

    16) Total Expenditure (9+13) 13,187.20 14,909.25 Revenue Expenditure (10+14) 11,619.40 12,861.09 Of Which, Grants for creation of Capital Assets 1,375.05 1,646.72 Capital Expenditure (12+15) 1,567.80 2,048.16

    20) Revenue Deficit (17-1) 3,949.51 3,504.24 % of GDP (4.4) (3.4)

    21) Effective Revenue Deficit (20-18) 2,574.46 1,857.52 % of GDP (2.9) (1.8)

    22) Fiscal Deficit {16-(1+5+6)} 5,219.80 5,135.90 % of GDP (5.9) (5.1)

    23) Primary Deficit (22-11) 2,463.62 1,938.31 % of GDP (2.8) (1.9)

    $ Excluding receipts under Market Stabilisation Scheme. * Includes draw-down of Cash Balance.Note: 1). GDP for BE 2012-2013 has been projected at ` 101599 bn assuming 14% growth over the Advance Estimates of 2011-2012 (` 89122 bn) released by CSO. 2) Individual items in this document may not sum up to the totals due to rounding off.

  • UNION BUDGET 2012-13: Impact Analysis

    2

    UNION BUDGET 2012-13 : A MACROECONOMIC PERSPECTIVE

    The Union Budget for FY13 is presented at a time when the domestic economy is in the midst of a slowdown with the downturn in the global economic environment further impeding the growth momentum. Measures for boosting demand, especially on the investment front through progressive policy action and at the same time laying a credible fiscal consolidation road map were widely anticipated in this budget. However, the announcements in the Union Budget for FY13 could best be described as workmanlike in nature. Acknowledging that the government has limited fiscal space to manoeuvre, the realistically high fiscal deficit target of 5.1% could ensure that going ahead the economic agents would set their expectations on growth on the right path.

    The Union Budget FY13, though lacks major big bang announcements, it has made an attempt to manage the government finances in a much prudent manner. Hike in the excise duties and service tax was required to garner more revenue. The increase in the tax limits though marginal, would ensure some savings to the middle income group which constitute the majority of the population, thereby boosting demand. Further, the intention to implement the Advance Pricing Agreement which would significantly bring down tax litigation and provide tax certainty to foreign investors is a positive development.

    On the expenditure front, governments decision to stay away from allocating a major proportion of funds towards the social sector or new announcements is a welcome move as it would lead to divergence of funds towards other productive areas. The government has also emphasised the need to accelerate infrastructure development. Allowing irrigation terminal markets, common infrastructure in agriculture markets, soil testing laboratories and capital investment in fertiliser sector, Oil and Gas/LNG storage facilities and oil and gas pipelines, fixed network for telecommunication and telecommunication towers eligible for Viability Gap Funding (VGF) for support to Public Private Participation (PPP) projects would enhance financing. However, it would be the effective realization of the scheme which would boost infrastructure development as during the previous budget announcements lack of implementation had created bottlenecks.

    The focus of the government on capital market is a positive given it would accelerate capital generation and funding requirement for the Indian corporate thereby boosting investment. Besides, allowing External Commercial Borrowings (ECBs) to part finance Rupee debt of existing power projects, for capital expenditure on the maintenance and operations of toll systems for roads and highways and also for working capital requirements of the airline industry is commendable as it would ensure securing of funds by these sectors which are facing financing crunch.

    The biggest disappointment in the budget was that the government did not lay down a strong reform agenda. While it was highly expected that specific progressive policy action would be taken regarding subsidies, FDI, labour laws or land acquisitions, the budget failed to deliver on

  • UNION BUDGET 2012-13: Impact Analysis

    3

    that front. Moreover, the government also did not set out effective timelines for implementation of the much anticipated Direct Tax Code (DTC) & Goods & Services Tax (GST). Nonetheless, governments efforts are expected to continue outside the Budget which is required to boost the growth momentum. Fiscal Arithmetic for FY13The fiscal year FY13 is expected to witness a slow pace of recovery in growth, thus entailing lower revenue generation and exacting higher expenditure from the government. For FY13, total expenditure is budgeted to increase by 13.1% to ` 14,909.25 bn as compared to the revised estimates (RE) of ` 13,187.20 bn for FY12. As in the last budget, the plan expenditure received a major boost with an allocation of ` 5,210.25 bn, an increase of 22.1% over FY12 (RE). However, unlike the previous budget where the non-plan expenditure was budgeted to decline, this time around it is budgeted to increase by 8.7% to ` 9,699 bn. The subsidy burden during FY13 though budgeted to decrease by 12.2% during FY13 from the revised estimates of FY12; it is budgeted to increase by over 32.0% over the budget estimate of FY12. The government aims to restrict the expenditure on Central subsidies to under 2% of GDP in FY13 through better targeting and leakage proof delivery of the subsidies.

    For FY13, the Gross Tax Receipts are estimated to increase by 15.6% over FY12 (BE) and by 19.5% over the FY12 (RE) given the moderation in the economic growth. On the direct tax front, corporate profitability is expected to remain subdued; revenue from corporate tax is budgeted to increase only by 13.9% (RE). In spite of broadening of the income tax slabs, the personal income tax collection is budgeted to increase by 13.9% in FY13 over FY12 (RE). The 2% increase in excise duties from 10% to 12% is expected to lead to larger collection of indirect taxes; revenue from Union excise duty is budgeted to increase by 29.0%. Further as a result of an increase in service tax from 10% to 12%, services tax is budgeted to increase by 30.5% by FY13.

    Unlike in the previous budget, Non-tax revenue is budgeted to record an increase of 32% during FY13 as compared to (RE) of FY12. This would be achieved primarily owing to significant 82.0% increase in other Non-tax revenue collections as external grants as well as interest receipts have been budgeted to register a decline. During this budget, the Government plans to generate only ` 300.00 bn through disinvestments. During the previous year against a target of ` 400.00 bn, the Government had been able to raise only about ` 140.00 bn from disinvestment. As a result of expected lower revenue regeneration as compared to higher expenditure the government has pegged the fiscal deficit target of 5.1% during FY13 as compared to an estimated of 5.95% during FY12. Market borrowings are slated to increase by around 9.8% to around ` 4790.00 bn as compared to ` 4364.14 bn in FY12 (RE).

  • UNION BUDGET 2012-13: Impact Analysis

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    SECTORAL IMPACT

    Sector Rating

    1. Agriculture Positive+

    2. Social Sector Positive

    3. Infrastructure Positive

    Services

    4. Banking, Financial Services and Insurance (BFSI) Positive+/Positive/Marginally Positive

    5. Hospitality Neutral

    6. IT&ITeS Marginally Positive

    7. Media & Entertainment Marginally Positive

    8. Real Estate & Construction Positive

    9. Telecom Neutral

    Manufacturing

    10. Automotive Neutral

    11. Capital Goods & Engineering Positive

    12. Cement Marginally Positive

    13. Consumer Goods Positive

    14. Gems & Jewellery Negative

    15. Leather Marginally Positive

    16. Metals & Mining Positive

    17. MSMEs Positive

    18. Oil & Gas Marginally Positive

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