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PREPARED & PRESENTED BY:KANHAIYA (MBA 1st (A)) KUNDAN YADAV (PGDM 1st)
75 new services to be introduced in the Churchgate-Virar, Virar-Dahanu Road, Chhatrapati Shivaji Terminus-Kalyan-Kasara and Chhatrapati Shivaji Terminus-Kalyan-Karjat sections, Harbour and Trans-Harbour line, to further enhance the carrying capacity of suburban services in Mumbai. 18 new services on Chennai Beach-Tambaram, Chennai Beach-Chengalpattu, Chennai BeachAvadi, Chennai BeachTiruttani, Chennai Beach Gummidipundi/Sullurupetta and Chennai Beach Velachery sections 44 new passenger services to be introduced in Kolkata including from Sealdah-Ranaghat, Ranaghat-Naihati, RanaghatShantipur, Ranaghat-Krishnanagar, Ranaghat-Gede, RanaghatBangaon, Bangaon-Barasat, Barasat-Hasnabad, Bandel-Barddhaman, Bandel-Howrah, Bandel-Naihati, Seoraphuli-Tarkeswar, Santragachi-Bagnan, Santragachi-Amta, Santragachi-Mecheda, SantragachiPanskura, HowrahHaldia, Howrah Kharagpur and Mecheda-Digha. While, the minister announced to extend the run of 40 trains, frequency of 23 trains have also been increased.
By way of initiating a long term approach to safety and in line with recommendations of the Committee, I propose to set up an independent Railway Safety Authority as a statutory regulatory body. The functions of the Authority are to be chalked out in line with international practices. In tune with the recommendations of the Expert Group for Modernization of Indian Railways which suggested following of a Mission Mode' approach, the budget announced the formation of Missions headed by Mission Directors in each of the identified areas for a three year term. Also, a High Level Committee is to be set up to facilitate coordination amongst the Missions, fast-track implementation, and address bottlenecks.
Areas of Focus
The Union Railway Budget 2012-13 announced a number of new passenger services keeping in view the needs and aspirations of the people. 75 new Express trains, 21 Passenger trains, 8 new MEMU services and 9 DEMU services were proposed. Also it was proposed to extend the run of 40 trains and increase the frequency of 23 trains. The fares were raised in the budget. The fares were raised 2 paise per km for suburban and ordinary second class. Fares for mail express second class was raised by only 3 paise per km; for sleeper class by only 5 paise per km; for AC Chair Car, AC 3 tier & First Class by only 10 paise per km; AC 2 Tier by only 15 paise per km; and AC I by only 30 paise per km. Corresponding rationalization in minimum distance and fare chargeable in various classes was also proposed. It was also decided to incorporate a rounding off mechanism in the fare structure to address the problem passengers face at the ticket windows because of non-availability of loose change.
Union railway Minister proposed to raise the allocation under passenger amenities from Rs 762 crore in 2011-12 to Rs 1102 crore in 2012-13. A slew of passenger and other user friendly measures were proposed during 2012-13. To facilitate easy movement of passengers, installation of 321 escalators at important stations of which 50 will be commissioned during 2012-13 were proposed. He also proposed integration of the RPF Helpline with the All India Passenger Helpline to facilitate much faster response to the security needs of passengers. Initiative to start manufacturing especially designed coaches having earmarked compartments and toilets adapted to the needs of wheel chair borne/differently-abled person was a prime focus of the Union Railway Budget. The Union budget proposed to set up a factory at Shyamnagar in West Bengal on PPP basis for manufacture of next generation technology and also proposed to utilize and augment the electric loco Ancillaries Unit of CLW being set up at Dankuni for fabrication of locomotive shells. Several measures were initiated/ proposed to promote clean environment. On the occasion of the 175th Birth Anniversary of Rishi Bankim Chandra Chattopadhyay, propose setting up of a Coaching Terminal to be named after him at Naihati. Also it was decided that a special train would run across the country to disseminate his legacy to the young generation. Institution of a Rail Khel Ratna Award was also proposed to honors 10 sports-persons every year, based on their current performance. The awardees would be provided world class training to hone their skills further.
Rural drinking water and sanitation gets 27 per cent rise in allocation to 14000 crore rupees; PMGSY gets 20 per cent rise to 24000 crore rupees Right To Education-Sarva Shiksha Abhiyan gets 25555 crore rupees 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 34 per cent increase in allocation to National Rural Livelihood Mission, to 3915 crore rupees 1000 crore rupees allocated for National Skill Development Fund Widow pension and disability pension raised from Rs. 200 to Rs. 300 per month Grant on death of primary breadwinner of a BPL family in the age group 18-64 years doubled to 20000 rupees 4000 residential quarters to be constructed for Central Armed Police Forces Government doubles allocation for tax-free bonds to 600 billion rupees for financing infrastructure projects in 2012-13 Disinvestment target in 2012-13 of 300 billion rupees 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 Current account deficit seen at 3.6 percent of GDP in 2011-12
Exemption limit for the general category of individual taxpayers proposed to be enhanced from 180000 rupees to 200000 rupees giving tax relief of 2000 rupees.
Upper limit of 20 per cent tax slab proposed to be raised from 8 lakh rupees to 10 lakh rupees.
Proposal to allow individual tax payers, a deduction of upto 10000 rupees for interest from savings bank accounts. Proposal to allow deduction of upto 5000 rupees for preventive health checkup.
Senior citizens not having income from business proposed to be exempted from payment of advance tax. To provide low cost funds to stressed infrastructure sectors, rate of withholding tax on interest payment on ECBs proposed to be reduced from 20 per cent to 5 per cent for 3 years for certain sectors. Restriction on Venture Capital Funds to invest only in 9 specified sectors proposed to be removed.
Proposal to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15 per cent upto 31.3.2013. Investment link deduction of capital expenditure for certain businesses proposed to be provided at the enhanced rate of 150 per cent. New sectors to be added for the purposes of investment linked deduction.
Proposal to extend weighted deduction of 200 per cent for R&D expenditure in an in house facility for a further period of 5 years beyond 31 March 2012. Proposal to provide weighted deduction of 150 per cent on expenditure incurred for agri-extension services. Proposal to extend the sunset date for setting up power sector undertakings by one year for claiming 100 per cent deduction of profits for 10 years. Turnover limit for compulsory tax audit of account and presumptive taxation of SMEs to be raised from 60 lakhs rupees to 1 crore rupees. Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SME for purchase of new plant and machinery. Proposal to provide weighted deduction at 150 per cent of expenditure incurred on skill development in manufacturing sector. Reduction in securities transaction tax by 20 per cent on cash delivery transactions.
Proposal to extend the levy of Alternate Minimum Tax to all persons, other than companies, claiming profit linked deductions. Proposal to introduce General Anti Avoidance Rule to counter aggressive tax avoidance scheme. Measures proposed to deter the generation and use of unaccounted money.
A net revenue loss of 4500 crore rupees estimated as a result of Direct Tax proposals.
Given below are the major provisions under the Indirect Taxes Service Tax
Sevice tax confronts challenges of its share being below its potential, complexity in tax law, and need to bring it closer to Central Excise Law for eventual transition to GST. Overwhelming response to the new concept of taxing services based on negative list. Proposal to tax all services except those in the negative list comprising of 17 heads. Exemption from service tax is proposed for some sectors. Service tax law to be shorter by nearly 40 per cent.
Number of alignment made to harmonize Central Excise and Service Tax. A common simplified registration form and a common return comprising of one page are steps in this direction. Revision Application Authority and Settlement Commission being introduced in Service Tax for dispute resolution. Utilization of input tax credit permitted in number of services to reduce cascading of taxes.
Place of Supply Rules for determining the location of service to be put in public domain for stakeholders comments. Study team to examine the possibility of common tax code for Central Excise and Service Tax. New scheme announced for simplification of refunds. Rules pertaining to point of taxation are being rationalized.
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 18660 crore rupees.
No change proposed in the peak rate of customs duty of 10 per cent on nonagricultural goods. To stimulate investment relief proposals for specific sectors - especially those under stress.
Full exemption from basic customs duty for import of equipment for expansion or setting up of fertilizer projects upto 31 March 2015.
Infrastructure
Proposal for full exemption from basic customs duty and a concessional CVD of 1 per cent to steam coal till 31 March, 2014. Full exemption from basic duty provided to certain fuels for power generation.
Mining
Full exemption from basic customs duty to coal mining project imports.
Basic custom duty proposed to be reduced for machinery and instruments needed for surveying and prospecting for minerals.
Railways
Basic custom duty proposed to be reduced for equipment required for installation of train protection and warning system and up gradation of track structure for high speed trains.
Roads
Full exemption from import duty on certain categories of specified equipment needed for road construction, tunnel boring machines and parts of their assembly.
Civil Aviation
Tax concessions proposed for parts of aircraft and testing equipment for third party maintenance, repair and overhaul of civilian aircraft.
Manufacturing
Relief proposed to be extended to sectors such as steel, textiles, branded readymade garments, low-cost medical devices, labour-intensive sectors producing items of mass consumption and matches produced by semi-mechanized units.
Environment
Concessions and exemptions proposed for encouraging the consumption of energy-saving devices, plant and equipment needed for solar thermal projects. Concession from basic customs duty and special CVD being extended to certain items imported for manufacture for hybrid or electric vehicle and battery packs for such vehicles. Proposal to increase basic customs duty on imports of gold and other precious metals.
Education Sarva Siksha Abhiyan-Right to Education- 25555 crore rupees 3124 crore rupees provided for Rashtriya Madhyamik Shiksha Abhiyan (RMSA) Health 20822 crore rupees National Rural Health Mission Employment and skill development 3915 crore rupees provided for National Rural Livelihood Mission 1276 crore rupees allocated for Prime Ministers Employment Generation Programme 1000 crore rupees allocated for National Skill Development Fund Defence and Security 193407 crore rupees aallocated for Defence services including 79579crore rupees for capital expenditure 1185 crore rupees to be allocated for construction of nearly 4000 residential quarters for Central Armed Police Forces 3280 crore rupees proposed to be allocated for construction of office building of CentralArmed Police Forces Infrastructure and Industrial Development 25360 crore rupees allocated for Road Transport and Highways Ministry 3884 crore rupees loan waiver for handloom weavers and their cooperative societies 500 crore rupees pilot scheme announced for promotion and application of Geo-textile in the North Eastern Region 70 crore rupees allocated to set up a powerloom mega cluster in Ichalkaranji in Maharashtra 5000 crore rupees India Opportunities Venture Fund to be set up with SIDBI 15888 crore rupees to be provided for capitalisation of public sector banks and financial institutions Other major allocations 37113 crore rupees allocated for Scheduled Castes Sub Plan 21710 crore rupees earmarked for Tribal Sub Plan
A short term RRB Credit Refinance Fund was proposed to be set up to enhance the capacity of Regional Rural Banks to disburse short term crop loans to the small and marginal farmers. Also Kisan Credit Card Scheme is to be modified to make it a smart card which can be used at ATMs. With an objective to have a better out reach of the food processing sector, a new centrally sponsored scheme titled National Mission on Food Processing is to be started in cooperation with the States in 2012-13.
Initiative of Bringing Green Revolution to Eastern India (BGREI) had resulted in increased production and productivity of paddy. The budget for the 2012-13 fiscal increased the allocation for the scheme to Rs 1000 crore in 2012-13 from Rs 400 crore in 2011-12. Proposal to allocate Rs 300 crore to Vidarbha Intensified Irrigation Development Programme under RKVY was made. All remaining activities related agri sector development was proposed to be merged into following missions in Twelfth Plan: a. b. c. d. e. f. National Food Security Mission National Mission on Sustainable Agriculture including Micro Irrigation National Mission on Oilseeds and Oil Palm National Mission on Agricultural Extension and Technology National Horticultural Mission National Mission for Protein Supplement
Rs 2242 crore project launched with World Bank assistance to improve productivity in the dairy sector. Rs 500 crore proposed to be provided to broaden scope of production of fish to coastal aquaculture. A new centrally sponsored scheme titled National Mission on Food Processing to be started in 2012-13 in co-operation with State Governments.
Target for agricultural credit was raised by Rs 100000 crore to Rs 575000 crore in 2012-13. It was proposed that interest subvention scheme for providing short term crop loans to farmers at 7 per cent interest per annum would be continued in 2012-13. Additional subvention of 3 per cent is to be made available for prompt paying farmers. A sum of Rs 200 crore was proposed to be set aside for incentivizing research with rewards.
Irrigation and Water Resource Finance Company was proposed to be operationalized to mobilize large resources to fund irrigation projects. A flood management project approved by Ganga Flood Control Commission at a cost of `439 crore for Kandi sub-division of Murshidabad District To further promote agriculture and agro-processing sectors, the Government proposed to reduce basic customs duty from 7.5 per cent to 2.5 per cent on sugarcane planter, root or tuber crop harvesting machine and rotary tiller and weeder and parts for the manufacture of these. Pranab Mukherjee while presenting the budget announced reduction of basic customs duty from 7.5 per cent to 5 per cent on specified coffee plantation and processing machinery. The basic customs duty was also reduced on some water soluble fertilizers and liquid fertilizers, other than urea, from 7.5 per cent to 5 per cent and from 5 per cent to 2.5 per cent. The budget sought to provide substantial relief to the fertilizer sector. It was announced that imports of equipment for initial setting-up or substantial expansion of fertilizer projects were to be fully exempted from basic customs duty of 5 per cent for a period of three years up to 31 March 2015. Government adopted measures to finalise pricing and investment policies for urea to reduce Indias import dependence in urea. Rural Development and Panchayati Raj was identified as major thrust areas for the Government to ensure sustainable and more inclusive growth. Both Rural development and Panchayati Raj were emphasized upon to large extent in the Union 2012-13 presented by the Union Finance Minister Pranab Mukherjee on 16 March 2012. The Union Budget 2012-13 announced a major initiative to strengthen Panchayats across the country through Rajiv Gandhi Panchayat SAShaktikaran Abhiyan (RGPSA). Swarnajayanti Gram SwarojgarYojana (SGSY) was restructured into National Rural Livelihood Mission (NRLM) to provide self-employment opportunities. Pranab Mukherjee proposed to increase the allocation of NRLM by over 34 percent to Rs. 3915 crores in 2012-13.
Education
In the Union Budget 2012-13 tabled in the parliament on 16 March 2012, the Finance Minister proposed an increase in allocation by 21.7 per cent for Right to Education Sarva Shiksha Abhiyan to Rs.25555 crore. Increase in allocation by 29 per cent for Rashtriya Madhyamik Shiksha Abhiyan to Rs. 3124 crore was also proposed. He proposed to set up a Credit Guarantee Fund to ensure better flow of funds to students.
Health
Union finance minister in the Union budget 2012-13 proposed to increase the allocation for NRHM to Rs.20822 crore in 2012-13. He also announced the launch of National Urban Health Mission and declared that no new case of polio was reported in last one year.
Analysis
The slowdown in Indian economy was attributed largely to weakening industrial growth. The industrial sector has performed poorly, retreating to a 27% share of the GDP. The services sector however continued to be a star performer as its share in GDP climbed from 58% in 2010-11 to 59% in 2011-12 with a growth rate of 9.4%. Agriculture and allied sectors were estimated to achieve a growth rate of 2.5% in 2011-12. Agriculture & allied sectors were are estimated to achieve a growth rate of 2.5% in 2011-12 with food grains production likely to cross 250.42 million tones as a result of increase in the production of rice in a number of states. Overall growth during April-December 2011 reached 3.6% compared to 8.3% in the corresponding period of the previous year.
The fiscal 2011-12 was marked by a sharp depreciation of the Indian rupee. In the current fiscal 201112, on month-to-month basis the rupee depreciated by 12.4 per cent from 44.97 per US dollar in March 2011 to 51.34 per US dollar in January 2012. Rupee reached a peak of 43.94 on 27 July 27 2011 and lowest at 54.23 per US dollar on 15 December 2011 indicating a depreciation of 19 per cent. The RBI was required to sell dollars twice in the fiscal to help raise the value of the rupee. Also in 2011-12 Indias external debt stock increased by US $ 20.2 billion (6.6 per cent) to US $ 326.6 billion at end-September 2011 vis--vis US $ 306.4 billion at end-March 2011, primarily due to higher commercial borrowings and short-term debt. Inflation as measured by the wholesale price index (WPI) remained high during greater part of 201112 fiscal, though by year end a noticeable slowdown in price rise was registered. Food inflation, in particular came down significantly. RBI adopted stringent monetary policies to control inflation as well as curb inflationary pressures. The high rate of interest established by the central bank lowered growth rate of investment in the economy as the sharp increase in interest rates resulted in higher costs of borrowings and other rising costs affecting profitability.
Economic Survey 2011-12 stated that Indias foreign trade performance will remain a key driver of growth in the coming fiscal 2012-13. During the first half of 2011-12, Indias export growth was 40.5%, but it failed to remain high for the entire fiscal. Imports grew rapidly, by 30.4% during 201112 (April-December). Indias Balance of Payments widened to $ 32.8 billion in the first half of 201112, compared to $29.6 billion during the corresponding period of the earlier fiscal 2010-11. The foreign exchange reserves increased from US $ 279 billion at end March 2010 to US $ 305 billion at end March 2011. Reserves were found to vary from an all-time peak of US$ 322.2 billion at end August 2011 and a low of US $ 292.8 billion at end-January 2012. Wholesale Price Index (WPI) which remained persistently high throughout 2011 due to increasing global commodity prices and high crude prices began to moderate and it is expected to touch 6.5 to 7 percent by March 2012. Economic Survey 2011-12 observed that in 2011-12 the gap between WPI and CPI inflation narrowed due to sharp fall in food inflation. CPI-IW inflation, after remaining in single digit from August 2010 to August 2011, briefly touched double digits at 10.1 percent in September 2011. It however came down to 6.5 percent in December 2011. The banking sector- public and private showed impressive increase in priority sector lending. The Economic Survey 2011-12 underlined the fact that flow of agricultural credit was highly impressive. The Indian banking system disbursed credit of Rs 446779 crore to the agricultural sector as against a target of Rs 375000 crore in-2010-11. The Labour Bureau conducted twelve quarterly quick employment surveys to assess the impact of the economic slowdown on the employment sector. The surveys indicated an upward trend in employment since July 2009 was maintained. Overall employment in September 2011 over September 2010 increased by 9.11 lakh, with the highest increase recorded in IT/BPO (7.96 lakh) sector. The coverage under the MGNREGA consistently increased from 4.51 crore households during 200809 to 5.49 crore households during 2010-11 with averaged employment of 47 persondays per household. Average wage increased from Rs 65 in 2006-07 to Rs. 100 in 2010-11. The Survey stated that to strengthen transparency and accountability in the implementation of the MGNREGA, the
Government initiated a service delivery project for Information and Communication Technology (ICT) and biometrics related works of the MGNREGA on PPP basis. The performance of broad sectors and sub sectors in key infrastructure areas in 2011-12 was both good and bad. Whereas there was improvement in growth in power, petroleum refinery, cement, railway freight traffic, passenger handled at domestic terminals and upgradation of NHAI, coal, natural gas, fertilizers, handling of export cargo at airports and number of cell phone connections show negative growth. Steel sector witnessed moderation in growth.
Forecasts
The real GDP growth is expected to pick up to 7.6% in 2012-13 and 8.6% in 2013-14 as per the survey. Pranab Mukherjee predicted 7.6% GDP growth in 2012-13. As per the survey, given that fiscal consolidation is back on track, savings and capital formation should is likely to start rising. Also the RBI policy rates are expected to be reduced in the back of easing of inflationary pressures. The lowered interest rates will encourage investment activity and have a positive impact on growth. These projections were all made on the basis of assumptions regarding factors like normal monsoons, reasonably stable international prices, particularly oil prices, and global growth. The progressive deregulation of interest rates on savings accounts is expected to raise financial savings and thus improve transmission of monetary policy.
Survey Suggestions
Sustainable development and climate change were recognized by the survey as central areas of global concern. The Survey suggested need to examine the linkages and trade-offs between policy rate changes and inflation in the Indian context, for better calibration of monetary policy. The Economic Survey 2011-12 stated that it was essential to make lower carbon sustainable growth a central element of our Twelfth Five Year Plan commencing in April 2012.
In Conclusion
The Economic Survey in conclusion mentioned that India is more closely integrated with the world economy as its share of trade to GDP of goods and services tripled between 1990-2010. The extent of financial integration, measured by flows of capital as a share of GDP also increased leading to an expansion of Indias role in the world economy.