FINANCE MINISTER ON GOVERNANCE
“We have to accelerate the pace of reforms and improve supply side management of the economy.”
The Union Budget for 2012-13 presented by Finance minister Pranab Mukherjee on Friday 16th March’12 against the backdrop of a sharp slowdown in growth, deteriorating fiscal conditions, continuing inflationary pressure and political turbulence.
This will be the seventh time Pranab Mukherjee will be presenting the budget in the Lok Sabha, the second highest number of time by any finance minister. Pranab had presented budgets for three consecutive years in early 1980s.
The maximum number of 10 budgets was presented by former Prime Minister Morarji Desai. He held the finance portfolio from 1959-64, 1967-70 and between 1977 and 1979.
Pranab is facing a huge challenge of reviving economic growth, which has slowed down over the last six quarters.
The country’s gross domestic product (GDP) growth fell to three year low of 6.1 per cent in third quarter of the current financial year. It was recorded 7.7 per cent in the first quarter and 6.9 per cent in the second quarter of the current fiscal.
According the Central Statistical Organization data, economic growth is expected to fall to 6.9 per cent for the fiscal ending March 31, against the budgetary target of around nine per cent.
The Economic Survey, which was tabled in parliament on Thursday, projected economic growth at 7.6 per cent for 2012-13 and 8.6 per cent for 2013-14.
Fiscal situation has worsened this year. Fiscal deficit is projected to increase to 5.6 per cent of the GDP as against the budgetary target of 4.6 per cent.
Despite the recent moderation, inflationary pressure continues and the Reserve Bank of India said in its mid-quarter review Thursday that it would resurface if the government did not control its spending.
The survey, presented a day before the annual budget, said inflation will remain in the range of 6.5-7 per cent by end of March.
Highlights of Budget 2012-13
And this is the Highlights of Budget 2012-13 for the upcoming financial year beginning in April.
FISCAL DEFICIT: 5.9 percent of GDP in 2011-12; 5.1 percent of GDP in 2012-13
BORROWING: Net market borrowing seen at 4.8 trillion rupees in 2012-13
EXPENDITURE seen at 14.9 trillion rupees total, up 29 percent in 2012-13
- Plan expenditure budgeted at 521.25 billion rupees in 2012-13, up 18 percent
REVENUE will go up
- 2% rise in S Tax: Proposes to raise service tax rate to 12 percent from 10 percent
- Gross tax receipts seen at 10.8 trillion rupees in 2012-13
- Non-tax revenue seen at 1.64 trillion rupees in 2012-13
- Proposes to levy tax on all services except 17 items in the negative list from 2012-13
- No change in corporate tax rates
- To enhance tax exemption limit to 200,000 rupees from 180,000 for individuals income in 2012-13
GROWTH AND INFLATION:
- Expect headline inflation to moderate in next few months and remain stable thereafter
- Economy expected to grow at 7.6 percent in 2012-13, plus or minus 0.25 percent
- Economy expected to grow at 6.9 percent in 2011/12
- Signs of economy turning around in March quarter
- Hope to achieve “broad-based consensus” to open multi-brand retail sector to foreign investors
- Allow external commercial borrowing of up to $1 billon to raise working capital for airlines industry for 1 year
- To allow qualified foreign investors in Indian corporate debt markets
- To allow external commercial borrowing to part finance rupee debt in power projects
- Proposes to remove sector-specific restriction on venture capital fund investments
SECTOR SPENDING: Allocates 1.94 trillion rupees for defense in 2012-13, up from 1.64 trillion rupees in previous year
- To award contracts to build 8,800 km of roads in 2012-13
- Govt. doubles allocation for tax-free bonds to 600 billion rupees for financing infrastructure projects in 2012-13
DISINVESTMENT targeted of Rs.300 billion in 2012-13
- Expects country to become self-sufficient in urea production in five years
- Proposes to raise agricultural credit target in 2012-13 to 5.75 trillion rupees
- To keep 2012-13 subsidies under 2 percent of GDP
- To inject 159 billion rupees to capitalize state-run banks in 2012-13
- Current account deficit seen at 3.6 percent of GDP in 2011/12
- Expect smaller current account deficit in 2012-13