The Union Budget 2012-13 presented by the
Finance Minister Pranab Mukherjee
in Lok Sabha identifies five objectives to be
addressed effectively in the ensuing fiscal year.
They include focus on domestic demand
driven growth recovery; create conditions for
rapid revival of high growth in private investment; address
supply bottlenecks in
agriculture, energy and transport sectors
particularly in coal, power, national highways , railways and civil
aviation; intervene decisively to
address the problem of malnutrition
especially in the 200 high-burden districts and expedite coordinated implementation of
decisions being taken to improve delivery systems , governance, and
transparency; and address the problem
of black money and corruption in public life.
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. He said though the global crisis had affected India, it still remains
among the front runners in economic
growth. 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.
Mukherjee
laid emphasis on striking a balance between fiscal consolidation
and strengthening macroeconomic fundamentals.
He announced introduction of amendments to the Fiscal Responsibility and
Budget Management Act, 2003 (FRBM Act) as part of the Finance Bill 2012. He said that concept of “Effective Revenue
Deficit” and “Medium Term Expenditure Framework” statement
are two important features of Amendment to FRBM Act in the direction of
expenditure reforms. This statement
shall set forth a three year rolling targets for expenditure indicators.
The Finance Minister called for a
need to have a close look at the growth of revenue expenditure, particularly,
on subsidies. He announced that from
2012-13 while
subsidies related to food and for administering the Food Security Act will be
fully provided for, all other subsidies
would be funded to the extent that they can be borne by the economy without any
adverse implications. He said that the
Government will endeavor to restrict the expenditure on central subsidies under
2 per cent of GDP in 2012-13and over the next three years, it would be further
brought down to 1.75 per cent of GDP.
Mukherjee said that based on recommendations of
the Task Force headed by NandanNilekani, a
mobile-based Fertilizer Management System has been designed to provide
end-to-end information on movement of fertilizers and subsidies which will be
rolled out nation-wide during 2012. He
said that transfer of subsidy to the retailer and eventually to the farmers
will be implemented in subsequent phases which will benefit 12 crore farmer families.
On the tax reforms, the Finance
Minister said that the
Direct Taxes Code (DTC) Bill will be enacted at the earliest
after expeditious examination of the report of the Parliamentary Standing Committee. He said drafting of model legislation for Centre and State Goods and Services Tax (GST) in
concert with States is under progress.
He added that the GST network will be set up as a National Information Utility and will
become operational by August 2012.
On the disinvestment policy, Mukherjee said that the Central Public Sector Enterprises
(CPSEs) are being given a level playing field vis-à-vis private sector with
regard to practices like buy-backs and listing at stock exchange. Stating that while in 2011-12, the
Government will raise about Rs.14,000crore
from disinvestment as against a target of Rs.40,000 crore, the Finance Minister proposed to raise Rs.30,000 crore
through disinvestment in 2012-13. He said at least 51 per cent ownership and
management of CPSEs will remain with the Government.
Calling for strengthening investment
environment, Mukherjee said that efforts are on
to arrive at a broad-based consensus in respect of decision to allow FDI in
multi-brand retail up to 51 per cent.
He proposed to introduce a new scheme called Rajiv Gandhi Equity Savings
Scheme to allow for income tax
deduction of 50 per cent to new retail investors who invest up to Rs.50,000 directly in equities and whose
annual income is below Rs.10 lakh. The scheme will have a lock-in period of 3
years. Regarding capital markets, the
Finance Minister
proposed to allow Qualified Foreign Investors (QFIs) to access Indian Corporate Bond market. He also proposed simplifying the process of Initial Public Offer (IPO).
Mukherjee
said that the Government is committed to protect the financial health of Public Sector
Banks and Financial Institutions. He
proposed to provide Rs. 15,888 crore for
capitalization of Public Sector Banks, Regional Rural Banks and other financial
institutions
including NABARD. He
added that a Central Know Your Customer (KYC) depositary will be developed in
2012-13 to avoid multiplicity of registration and data upkeep.
The Finance Minister informed that
out of 73,000 identified habitations that were to be covered under “Swabhimaan” campaign for providing banking facilities by
March 2012, about 70,000 habitations have been covered while the rest are
likely to be covered by March 31, 2012.
He added that as a next step Ultra Small Branches are being set up at
these habitations. In 2012-13, Swabhimaan campaign will be extended to more
habitations.
Emphasizing on infrastructure and
industrial development, Mukherjee said that
during the 12th Plan, infrastructure investment will go up to Rs.50 lakh crorewith half of this expected from private sector. Stating that in 2011-12 tax free bonds for
Rs.30,000 crore were announced for financing
infrastructure projects, he proposed to double it to raise Rs.60,000 crore in 2012-13.
The Minister proposed to allow External Commercial Borrowings (ECB) to
part finance Rupee debt of existing power projects.
The Finance Minister announced
a target of covering 8,800 km. under NHDP next year and increase
in allocation of the Road Transport and Highways Ministry by
14 per cent to Rs.25,360 crore in
2012-13. He proposed to permit ECB for
working capital requirements of the Airline Industry for a period of one year,
subject to a total ceiling of US dollar 1 billion to address the immediate financial
concerns of the Civil Aviation Sector.
He added that a proposal to allow foreign airlines to participate up to 49 per cent in the equity of an air transport undertaking is under
active consideration.
Expressing concern over shortage in
housing sector, the Finance Minister proposed various measures to address the
shortage of housing for low income groups in major cities and towns including
ECB for low cost housing projects and setting up of a Credit Guarantee Trust
Fund.
Regarding textile sector, the
Finance Minister announced setting up of two more mega clusters, one to cover Prakasam and Guntur districts in Andhra Pradesh and other
for Godda and neighboring districts in Jharkhand in
addition to 4 mega handloom clusters already operationalized. He also proposed setting up of three Weavers
Service Centres, one each in Mizoram, Nagaland and
Jharkhand. The Minister proposed aRs. 500 crore pilot scheme in twelfth plan for promotion and application of
Geo-textiles in the North East.
A powerloom Mega Cluster will be set up in Ichalkaranji in
Maharashtra.
The Finance Minister proposed to set
up a Rs.5000 croreIndia
Opportunities Venture Fund with SIDBI to enhance availability of
equity to Micro, Small and Medium Enterprises.
Stating that agriculture will
continue to be a priority for Government, Mukherjee
proposed an increase by 18 per cent to Rs. 20,208 crore in the total Plan Outlay for the Department of
Agriculture and Cooperation in 2012-13.
He said that the outlay for RashtriyaKrishiVikasYojana
(RKVY) is being increased to
Rs. 9217 crore in 2012-13.
Underlining importance of timely
access to affordable credit for farmers, the Finance Minister proposed to raise
the target for agricultural credit to
Rs.5,75,000 crore, which represents an increase of
Rs. 1,00,000 crore over the target for the current
year.. He said that a short term RRB
Credit Refinance Fund is being set up
to enhance the capacity of Regional Rural Banks to disburse short term crop
loans to the small and marginal farmers.
He added that Kisan Credit Card Scheme will be
modified to make it a smart card which can be used at ATMs.
The Financed Minister said that in
order to have a better out reach of the food processing sector, a new centrally
sponsored scheme titled National Mission on Food Processing will be started in
cooperation with the States in 2012-13.
The Finance Minister proposed an
increase of 18 per cent to
Rs.37,113crore for Scheduled Castes Sub Plan and an increase of 17.6 per cent to Rs.21,710 crore for Tribal Sub Plan during 2012-13.
Regarding food security, Mukherjee said that National Food Security Bill 2011 is
before Parliamentary Standing Committee.
He said a multi-sectoralprogramme to address
maternal and child malnutrition in selected 200 high burdened districts is
being rolled out during 2012-13. He further said that an
allocation of Rs.15,850 crore has been made for ICDS
scheme which is an increase of 58% and Rs.11,937 crore
for National Programme
of Mid-Day Meals in schools for the year 2012-13. He added that an allocation of Rs.750 crore
is proposed for Rajiv Gandhi Scheme for Empowerment of Adolescent Girls,
SABLA.
The allocation for rural drinking
water and sanitation is proposed to be increased by over 27 per cent to Rs.
14,000 crore and for PradhanMantri
Road SadakYojana by 20 per cent to Rs. 24,000 crore in 2012-13.
He proposed to enhance the allocation under Rural Infrastructure
Development Fund to
Rs. 20,000 crore with Rs.5,000 crore
exclusively earmarked for .creating warehousing facilities.
The Finance Minister proposed
an increase in allocation by 21.7 per cent for Right to Education – SarvaShikshaAbhiyan
to Rs.25,555 crore and by 29 per cent for RashtriyaMadhyamikShikshaAbhiyan
to Rs. 3,124 crore,
He proposed to set up a Credit Guarantee Fund to ensure better flow of
funds to students.
Regarding health sector he proposed an increase in allocation
for NRHM to Rs.20,822 crore in 2012-13. He also said that National Urban Health
Mission is being launched.
The Finance Minister said that
Mahatma Gandhi National Rural Employment Guarantee Scheme has had a positive
impact. He proposed an allocation of
Rs.3915 crore for National Rural Livelihood Mission
(NRLM) which represents an increase of 34 per cent. He proposed to provide Rs.200 crore to enlarge the corpus to Rs.300 crore
of the Women’s SHG’s Development Fund.
He said the fund will also support the objectives of Aajeevika
i.e. NRLM and will empower women SHGs to access bank credit. He also proposed to establish a
Bharat Livelihoods Foundation of India through Aajeevika
which will support and scale up civil society initiatives and interventions
particularly in the tribal regions covering around 170 districts.
Allocation under National Social
Assistance Programme (NSAP) is proposed to be raised
by 37 per cent to Rs. 8447 crore. Under the Indira
Gandhi National Widow Pension Scheme and Indira
Gandhi National Disability Pension Scheme for BPL beneficiaries, the monthly
pension amount per person is being raised from Rs. 200 to Rs.300.
The Finance Minister announced a
provision of Rs.1,93,407crore for Defence
Services including Rs.79,579 crore for capital
expenditure. He said the allocation is
based on present needs and any further requirement would be met.
Addressing Governance related
issues, Mukherjee said adequate funds are
proposed to be allocated to complete enrolments of another 40 crore persons under UID Mission. Outlining the steps taken
by the Government to address the issue of black money, the Minister proposed to
lay a White Paper on
Black Money in the current session of
Parliament.
In the Budget Estimates for 2012-13, the
Gross Tax Receipts are estimated at Rs.10, 77,612 crore
which is an increase of 15.6 per cent over the Budget Estimates and 19.5 per
cent over the revised estimates for 2011-12.
After devolution to States, the net tax to the Centre in 2012-13 is
estimated at Rs. 7,71,071crore. The Non Tax Revenue Receipts are estimated
at Rs.1,64,614crore and Non-debt Capital Receipts at Rs.41,650 crore. The total expenditure for 2012-13 is budgeted at
Rs.14,90,925 crore.
Of this Rs.5,21,025crore is the Plan
Expenditure while Rs.9,69,900 crore is budgeted as
Non Plan Expenditure.
The tax proposals are guided by the
need to move towards the Direct Tax Code(DTC) in the
case of direct taxes and Goods & Services Tax (GST) in the case of indirect
taxes.
Individual
income upto Rs.2 lakh will be free from income
tax; income upto Rs.1.8 lakh
was exempt in 2011-12. Income above Rs.5 lakh and upto Rs.10 lakh now carries tax at the rate of 20 per cent; the 20%
tax slab was from Rs.5 lakh to Rs.8 lakh in 2011-12. A
deduction of upto Rs.10,000
is now available for interest from savings bank accounts. Within the existing
limit for deduction allowed for health insurance, a deduction of upto Rs.5000 is
being allowed for preventive health check-up.
Senior citizens not having income from business will now not need to pay
advance tax.
While no
changes have been made in corporate taxes, the budget proposes a number of measures to promote
investment in specific sectors. In
order to provide low cost funds to some stressed infrastructure sectors, withholding tax
on interest payments on external borrowings (ECBs) is being reduced from 20
percent to 5 per cent for 3 years.
These sectors are - power, airlines, roads and bridges, ports and
shipyards, affordable housing, fertilizer, and dam.
Investment
linked deduction of capital expenditure in some businesses is proposed to be
provided at 150 per cent as against the current rate of 100 per cent. These sectors include cold chain facility, warehouses forstoring food-grains, hospitals, fertilizers and
affordable housing. Bee keeping, container freight
and warehousing for storage of sugar
will now also be eligible for investment linked deduction.
The budget also proposes weighted deduction for R&D
expenditure, agri-extension services and expenditure
on skill development in the manufacturing sector.
For small
and medium enterprises (SMEs) the turnover limit for compulsory tax audit of
accounts as well as for presumptive taxation is proposed to be raised from Rs.
60 lakh to Rs. 1 crore. In
order to augment funds for SMEs, sale of residential property will be exempt from
capital gains tax, if the proceeds are
used for purchase of plant and machinery, etc.
A General
Anti-Avoidance Rule (GAAR) is being introduced in order to counter aggressive
tax avoidance. Securities transaction tax (STT) is being reduced by 20 per cent
on cash delivery transactions, from 0.125% to 0.1%. Alternative Minimum Tax is proposed to be levied from all
persons, other than companies, claiming profit linked deductions.
The
Finance Minister has
proposed a series of measures to deter the generation and use of
unaccounted money. In the case of assets held abroad, compulsory reporting is
being introduced and assessment upto 16 years will
now be allowed to be re-opened. Tax
will be collected at source on trading in coal, lignite and iron ore; purchase
of bullion or jewellery above Rs. 2 lakh in cash; and transfer of immovable property (other
than agricultural land) above a specified threshold. Unexplained money, credits, investments, expenditures etc. will
be taxed at the highest rate of 30 per cent irrespective of the slab of income.
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