Highlights of Budget

Budget identifies five objectives relating to growth recovery, private investment, supply bottlenecks, malnutrition and governance matters CAD deficit is estimated to keep below 3.6% of GDP. 12th five year plan with the aim of faster, sustainable & more inclusive growth. Targeted fiscal deficit to be at or below 5.1% of GDP. Central subsidies to be kept under 2 per cent of GDP; to be further brought down to 1.75 per cent of GDP over the next 3 years. GDP growth to be 7.6 per cent (+ 0.25 percent) during 201213.

 Rs. 15,888 crore to be provided for capitalization of public sector banks and financial institutions. Investment in 12th Plan in infrastructure to go upto Rs. 50,00,000 crore; half of this is expected from private sector Tax Free Bonds of Rs. 60,000 crore to be allowed for financial infrastructure projects. Amendment to the FRBM Act proposed as part of Finance Bill. New concepts of Effective Revenue Deficit and Medium Term Expenditure Framework introduced Proposed: Mobile based fertilizer management system; LPG transparency portal; scaling up and rolling out of Aadhar enabled payment for government schemes in at least 50 districts.

 Rs. 30,000 crore to be raised through disinvestment Efforts to reach broadbased consensus on FDI in multi-brand retail Rajiv Gandhi Equity Saving Scheme: to allow income tax deduction to retail investors on investing in equities 50% upto rs. 50,000.

Actuals
GDP for the year 2012-13 is 5.5%. CAD for the year 2012-13 is 4.2% Higher inflation throughout the FY, some relief in January when it hits 3 year low at 6.6%. Government is able to maintain central subsidies around 2% of GDP though the target was to keep it below 2% and to reduce it by .25% each year. Deregulation in petrol price and hike in LPG gas have made it possible.

Fiscal deficit over the years

Fiscal deficit as % of GDP
7 6 5 4 3 2 1 0 5.7 6.2 5.9 6 6.4 5.9 4.9 3.9 4 3.3 5.3 4.8

4.5

2.6

Fiscal deficit & its components

16000 14000

12000

10000 GFD (Receipts) 8000 GFD (Expenditure) Gross fiscal deficit 6000

4000

2000

0 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Financing of Deficit
6000 5000

4000

3000 External Financing Internal Financing Total deficit 2000

1000

0 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

-1000

Challenges for fiscal budget 2013-14

GDP growth Inflation Deficit(Current & Fiscal) Depreciation of rupee Subsidies FDI & FII Unemployment

Steps to control Inflation

1. 2. 3. 4. 5. 6. Increase and develop industrial production. Companies amendment bill 2012 one person company Increase the tax slabs 3L, 3.5L 80C- 3L Financial Inclusion, New banks Infrastructure bonds Reduce in STT Encourage retail investors.

Steps to increase in FDI & FII

Disinvestment 30000Cr - Target

NTPC NMDC Oil India Hindustan Copper NBCC

Coal India

11469 6000 3114 800 125

Indian Oil
PGCIL National Electric Power company SAIL BHEL HAL

Steps to increase in FDI & FII

Removal of Retrospective effect Industry status to real estate Infrastructure spending Single window clearance system Service tax exemption for First premium and separate exemption limit for insurance pension funds. Reduction in Excise duty on 3 wheelers.