Budget 2012: Pranab concludes Budget Speech, markets unmoved

www.mangaloretoday.com

New Delhi, Mar 14, 2012: Some reason to smile amid all the grim reality that Finance Minister Pranab Mukherjee is recounting. He has raised the income tax exemption limit to Rs 2 lakhs for all individual tax payers. This will result in savings of a minimum Rs 22,000 for all tax payers. Also, the upper limit for the 20% tax slab has been raised - from incomes up to 8 lakhs to incomes up to 10 lakhs.

The tax slabs proposed by Mr Mukherjee today are:
• Income up to Rs 2 lakh - nil
• Income between Rs 2 lakh to Rs 5 lakh - 10%
• Rs 5-10 kakh - 20%
• Above Rs 10 lakh - 30 %


Also interest of up to Rs 10,000 from saving accounts will be tax-deductible. And deduction of up to Rs 5,000 has been allowed for health checkups.


When the Finance Minister began presenting his Union Budget 2012-13, he could barely be heard. A shouting Opposition allowed him to speak only after the Speaker intervened.

Today’s Budget is one of the biggest challenges of his long, political career, and the Finance Minister set the tone for it when he described the year gone by as a “year of recovery interrupted.” He began with listing grim ground realities – the global economic scenario that resulted in a two-year slowdown, India’s battle with double digit inflation, a disappointing performance this year and said it was time for tough decisions.

All economic indicators have been crying for that “tough budget” from the Finance Minister. On Thursday, the economic survey tabled in Parliament and the credit policy announcement of the Reserve Bank of India together called in one voice for “fiscal consolidation”.

The finance minister has said that fiscal consolidation calls for big efforts. He said high growth needs to sustain over the medium-term and India needs to accelerate its pace of reforms.

Mr Mukherjee outlined five objectives of his budget:
• Focus on domestic demand driven growth recovery
• Creating conditions for growth
• Addressing supply bottlenecks, energy transport, road, power and civil aviation
• Decisively tackling malnutrition
• And expediting decision-making for better governance and address black money problem

The Finance Minister has pegged GDP growth for the next year at 7.6 %; he says he foresees lower inflation has said that central subsidies will be kept under 2% of the GDP in the next financial year. Having said that he said some subsidy was inevitable, like food, but “better, leakage-proof delivery of subsidies would be implemented”. The Food Security Act would be fully provided for, the minister said.

The finance minister spent a considerable time over the fiscal deficit and the need to cut subsidies in his speech. He is introducing amendments to the Fiscal Responsibility and Budget Management Act to cut the fiscal deficit in a phased manner.

He has set a fiscal deficit target of 5.1 per cent for 2012-13 against 5.9 per cent for 2011-12. The intention seems to be good. Yet, the BSE Sensex, which rose over 1 per cent when he announced this intention, fell 0.5 per cent below the previous close as the finance minister announced that the fiscal government borrowing would be Rs 4,79,000 crore against the market expectation of Rs 4,34,000 crore.

The 30-share BSE Sensex, that rose 1 per cent as the finance minister spoke of fiscal consolidation and expenditure management plan for subsidies, gave up all gains and traded flat 12.45 pm.


He has called for priority-based allocation of revenue and utilizing the Unique Identity number or Aadhaar to cut pilferages.


The government plans to raise Rs 30,000 crore through disinvestment, assuring the House that at least 51 per cent control remains with the government. It hopes to raise Rs 14000 crore through divestment.


There has so far been little levity in this year’s Budget speech . The only laughs came when the FM was asked by some MP’s to read again what he had just said. “Rollback of Budget speech,” quipped Mr Mukherjee. And then when he quoted Shakespeare to indicate the thankless nature of his job. "I must be cruel, only to be kind," said Mr Mukherjee quoting Hamlet to illustrate the dilemmas of his job. And then, "Life of a finance minister is not easy," leading to laughter in the house.


Investment sentiment is at an all-time low and industry is clear that is looking to the finance minister for a pro-growth Budget. Coalition politics of the fragile nature that the UPA government has on its hands now demands exactly the opposite – doles, freebies, populist measures, no reforms.

Experts of all hue have called on the finance minister to act in the interest of the nation. Dinesh Trivedi, the railway minister, is on the verge of losing his job for having done that – he raised train fares after nine years, a bold move hailed universally, and now his own party the Trinamool Congress wants him axed. Today, insists Mamata Banerjee.

Pressure from allies like Ms Banerjee pushed the UPA government into what is seen as a “policy paralysis” all through last year. Reform measures were announced only to be stalled by a red-faced government after much arm-twisting by those allies whose support ensured that the government survived.

Following are the highlights of Finance Minister Pranab Mukherjee’s speech:

* Income tax exemption limit raised to Rs.2 lakh to provide relief of relief of Rs.2,000 for all assessees; 20 percent tax on income over Rs.10 lakh, up from Rs.8 lakh.
* Deduction of up to Rs.10,000 from interest from savings bank accounts.
* Defence to get Rs.1.93 lakh crore during 2012-13.
* Service tax rate raised from 10 percent to 12 percent to bring in Rs.18,660 crore.
* Number of proactive steps taken on black money (stashed away abroad); information has started flowing in, prosecution to be initiated; White Paper in current session.
* No change in corporate taxes but measures to enable them better access funds.
* Withholding tax on external commercial borrowings reduced from 20 percent to five percent for power, airlines, roads, bridges, affordable houses and fertiliser sectors.
* National Skill Development Fund allocated Rs.1,000 crore.
* Four thousand residential quarters to be constructed for paramilitary forces with an allocation of Rs.1,185 crore.
* National Population Register to be completed in two years.
* Excise duty raised from 10 to 12 percent.
* Cinema industry exempted from service tax.
* Branded silver jewellery fully exempt from excise duty.
* Customs duty on warning systems/track upgrade equipment for railways reduced from 10 percent to 7.5 percent.
* Import duty on equipment for iron ore mining reduced from 7.5 to 2.5 percent.
* Allocation of Rs.200 crore for research on climate change.
* Irrigation and water resource company to be operationalised.
* National mission on food processing to be started in cooperation with state governments.
* Integrated Child Development Scheme to be strengthened and restructured with allocation of Rs.15,850 crore.
* Allocation of Rs.14,000 crore for rural water supply and sanitation.
* Infusion of Rs.15,888 crore in public sector banks, regional rural banks and NABARD in 2012-13.
* Infrastructure will require Rs.50 lakh crore in 12th Plan, half of this from the private sector.
* Completion of highway projects 44 percent higher than in previous fiscal.
* External commercial borrowing of up to $1 billion permitted for airline sector.
* External commercial borrowings permitted to low-cost housing sector.
* From 2012-13, full subsidies for providing food security; in other sectors to the extent the economy can bear this.
* Hope to raise Rs.30,000 crore from disinvestments.
* New equity savings scheme to provide for income tax deduction of 50 percent for those who invest Rs.50,000 in equity and whose annual income is less than Rs.10 lakh.
* Corporate market reforms to be initiated.
* Bills on micro-finance institutions, national land bank and public debt management among those to be introduced in 2012-13.
* Addressing malnutrition, black money and corruption in public life among five priorities in year ahead.
* India’s inflation structural, driven largely by agricultural constraints.
* Current account deficit 3.6 percent in 2011-12; this put pressure on exchange rate.
* Growth in 2012-13 estimated at 7.6 percent; expect inflation to be lower.
* Better monitoring of expenditure on government schemes.
* Fiscal 2011-12 year of recovery interrupted; reality turned out to be different.
* GDP growth in 2011-12 estimated at 6.9 percent; had to battle double digit inflation for two years.
* Good news: agriculture and services continued to perform well; economy is now turning around; recovery in core sectors.
* Now at juncture where it is necessary to take hard decisions; have to accelerate pace of reforms.

 

Courtesy: NDTV / Deccan Herald