UNION BUDGET

In India, the Budget is presented in

Parliament on a date fixed by the
President.
Part A of Budget deals with general
economic survey of the country while
Part B relates to taxation proposals.
• The finance minister is required to
submit the Budget in Parliament usually
on the last day of February so that the
Lok Sabha has one month to review and
modify the Budget proposals.

• If by April 1, the beginning of the

country's fiscal year, the parliamentary
discussion on the Budget is completed,
then only the Budget as proposed by
the finance minister comes into effect.
 Budget Division
• The Chief Economic Advisor assists the
concerned departmental officer in this
process.
• Works under Department of economic
affairs
• Under the supervision of Joint
Secretary/Addl. Secretary (Budget)
• Supplementary and Excess Demands of
State and Union Territories under the
President’s Rule
• All issues relating to Public Debt, market
loans of the Central Government and the
• matters relating to National Savings
Organisation and Small Savings
Schemes, Duties, Powers and
Condition of Service of the
Comptroller and Auditor General of
India, Accounting procedures and
Classification, dealing with issues
relating to National Defence Fund,
Railways Convention Committee and
Central Road Fund.
 I. Account Section
• II.
• III.
• IV.
• V.
• VI.
• VII.
• VIII.
• IX.
• X.
Section
• XI.
• XII.
• XIII.
Coordination Section
Demands Section
FRBM Cell
National Savings- I
National Savings – II
Public Debt Section
Reports Section
States Section
Supplementary Demands
Way and Means Section
Budget Press
Hindi Section I to IV
 The two sides of Budget
• Internal and External Budgetary
Resources(IEBR) :
• Assessing the revenues from different
Central Taxes is the primary function of
the Department of Revenue
• Estimate of tax receipts by CBDT&CBEC
in mid Jan based on collection figure up
to 31st Dec
• Estimate of dividends paid by the PSUs
on the government shareholdings
• capital receipts on account of the
• External receipts on account borrowing
from international agencies like World
Bank, ADB etc to various ministries.
• Resources of the PSU including their
operating surplus and the borrowings
by them also constitutes an important
component of the gross budgetary
resources.
• Estimate of earnings of PSUs done with
chairman of PSUs and Joint secretary,
MoF in August-September
 Expenditure Side
• Based on the inputs of different
ministries Revised Estimate (RE) and
additional fund for non plan
expenditure is prepared because of
over spending and under spending.
(Finance adviser of each ministry+
MoF),
• Estimate of Planned expenditure for
next year (Review meeting, Planning
commission + ministries ->MoF)
September-October
Suggestions of stakeholders
• DoEA + Trade Unions + Industry
Chambers + Economists +
Parliamentary committee
 FM and his team
• Finance Minister with his team
decides whether some new taxes
should be levied to collect more tax,
how to widen tax net in order to earn
more revenue.
 GDP assessment
• Department of Expenditure and the
Department of Economic Affairs sit to
decide GDP assessment for next
year. Generally a nominal growth in
GDP is projected.
The Budget speech of FM
• Around 15th of February, some of the
budget documents are almost ready
and goes for printing to a press
located in North Block itself. Security
Agencies cordons off the press and
entry is almost prohibited.
 The D Day : FM delivers
Budget Speech in
Parliament
• On 28th of February, the Finance
Minister delivers Budget speech in
Lok Sabha. After which Budget
documents are made available.
These are also put on the website
www.finmin.nic.in.
• In 2008 being a leap year, this time
Budget was presented to Parliament
on 29th February.
 Information from budget
and announcements
• Growth in Per capita Income in real
term & savings rate, investment rate
& their absolute figure
• Growth in bank credit,M3 expansion
rate and inflation figure
• Report card of govt. flagship program
• Five year plan performance-
• Increase in GBS and central plan
 Sectoral allocation
• Infrastructure
• Education SSA, Mid day
Meal,scholorship
• Health sector
– Polio, ICDS, HIV/AIDS,
– NHRM (Drinking water & Sanitation)
• Employment-NREGS,SGSY,
• Urbanisation-JNNURM
• NER specific fund/region specific
 Agriculture
• Farm credit
– expansion rate & provision for interest
rate
• Special grant
– Waiver for agriculture indebtedness
• Provision for Particular crop
• Plantation
• Accelerated Irrigation Benefits
Programme
 Agriculture cont.
• Water resource management
• Ground water recharge
• Training for farmer
• Fertilizer subsidy
• Agriculture insurance
• Grants and guarantees to Nabard
 Rural infrastructure
development fund(RIDF)
• Rural road
• Rural houses
• Village electrification
• Telecommunication
 Social Security
• Health/debilty/death insurance to
BPL families
• Jobs and income avenues
 Capital formation
• Increase/decrease in GDCF,FDI,FII etc
• CPSEs investment
 Infrastructure
• Power
• Genration increase/decrease and
proposed expansion
• Coal –policy major/direction and
report card
• National Highways development and
maintainence
• Road cum rail Bridges
• Funding for such development such
 Industry
• Petroleum & Natural Gas
• Policy and progress
• Textiles-Grant for handlooms, textile
parks
• Bank credit to SMEs
• Service sector- Policy and support to
Foreign trade, Tourism
• Financial sector
• Banking – Policy, disinvetment,
• Regianonal Rural Banks(RRBs)
• Housing loans- Policy, support
• Insurance- policy, support
• Capital Market-Policy, Guideline
 Tax proposal
• Growth in tax revenue, direct tax,
indirect tax
• Indirect Tax proposals-custom duties
rate hike/reduction/unchaged on
various products
• Excise duty hike/reduction/unchaged
on prodcuts
• Service Tax-Exemption limit
• Inclusion of services-
 Direct Tax
• Exemption limit, deduction, and rate
• Corporate income tax rate,
exemption, deduction etc.
• new taxes, estimated yield from new
direct tax proposals
• Proposal regarding the cess on taxes
 Indirect tax
• Reduction or increase in custom
duties(export/import)
• Reduction or increase in Excise
duties
• Exemption limit for excise duty
• Service tax: exemption limit for small
service provider, extension of service
tax to various services
• ANNUAL FINANCIAL STATEMENT

• CONSOLIDATED FUND

• CONTINGENCY FUND

• PUBLIC ACCOUNTS

• REVENUE RECEIPT/EXPENDITURE

• CAPITAL RECEIPT / EXPENDITURE

• CENTRAL PLAN

• PLAN EXPENDITURE

• NON PLAN EXPENDITURE

• FINANCE BILL

• TAX REVENUE

• DIRECT/ INDIRECT TAX

• NON TAX REVENUE

• DEFICIT(REVENUE/FISCAL/PRIMARY)
 IMPLICATIONS FOR THE
MARKET
 CHAIN OF EVENTS

• Pre budget jitters

• At 11 AM Sensex up

• At 11.30 AM loses

• At 12.40 PM Sensex loses further

• At 1.00 pm SENSEX recovers a bit

• HOTELS

• INFRASTRUCTURE

• HEALTHCARE

• PHARMACEUTICALS

• FMCG/HOUSE

• IT/HOUSEHOLD APPLIANCES

• MEDIA AND ENTERTAINMENT

• PAPER

• TEXTILES

• SUGAR
• GEMS AND JEWELLERY

• AUTO AND AUTO ANCILLARY

• OIL AND GAS

• POWER AND POWER EQUIPMENT

• REAL ESTATE

• BANKING

• CEMENT
• CAPITAL GOODS

• METAL
 Auto (Positive)
• Customs duty on steel melting and aluminum melting scrap
reduced from 5% to 0%
• Reduction in excise duties in select segments of
automobiles
• Excise duty has been reduced on: Small cars from 16% to
12%, Hybrid cars from 24% to 14%, Electric cars from 8%
to nil
• Buses and other vehicle for transport of more than 13
persons from 16% to 12%
• Two-wheelers and passenger three-wheelers (upto 7
persons) from 16% to 12%
Auto Sector
 Banking (Neutral)
• PSU banks and regional rural banks (RRBs) to offer debt
waiver on all agricultural loans disbursed upto March 2007
and due until the end of December 2007. The total value of
relief to be offered to farmers is estimated at Rs 60,000
crore
• Advise commercial banks including RRBs, to add at least
250 rural household accounts every year at each of their
rural and semi-urban branches
• Allow individuals such as retired bank officers, ex-
servicemen etc to be appointed as business facilitator or
business correspondent or credit counselor
• BCTT being withdrawn with effect from April 1, 2009
• The cost of adding more rural households in their rural
branches may increase the operating cost for the PSU
banks
Banking Sector
 Metal (Neutral)
• Custom duty on iron or steel melting
scrap cut from 5% to Nil
• Reduction in customs duty of
aluminium scrap has been reduced
from 5% to Nil
Metal Index
 Oil & Gas (Negative)
• Ad valorem part of the excise duty on unbranded petrol and
unbranded diesel being abolished and replaced by an equivalent
specific duty of Rs.1.35 per litre. There will be only a specific duty
of Rs.14.35 per litre on unbranded petrol and Rs.4.60 per litre on
unbranded diesel; there will be no impact on retail prices
• Customs duty on crude and unrefined sulphur has been reduced
from 5% to 2%
• Customs duty on phosphoric acid has been unified at 5%
irrespective of its use
• Customs duty exemption presently available on naphtha for
manufacture of specified polymers has been withdrawn
• Polymer industry will be negatively impacted
• Polymer is used in a host of downstream sectors such as plastics
and paints which will face margin pressures
Oil & Gas sector
 Power (Positive)
• Exemption from additional duty of customs of 4% levied
has been withdrawn from power generation projects (other
than mega power projects), transmission, sub-transmission,
distribution projects and goods for high voltage
transmission projects
• Fourth UMPP at Tilaiya to be awarded shortly; Chhattisgarh,
Karnataka, Maharashtra, Orissa and Tamilnadu urged to
bring five more UMPPs to the bidding stage by extending
the required support
• Rajiv Gandhi Grameen Vidyutikaran Yojana to be continued
during the Eleventh Plan period with a capital subsidy of
Rs.28,000 crore; allocation of Rs.5,500 crore for 2008-09
• Only negative factor- Removal of exemption of additional
duty of customs of 4% from power generation projects
Power Sector
 Real Estate (Neutral)
• Proposal to enhance the subsidy for new houses
under Indira Awas Yojana from Rs.25,000 to
Rs.35,000
• 5-year tax holiday for 2/3/4 star hotels in UNESCO
declared 'World Heritage Sites‘
• Extending 5-year tax holiday for setting up
hospitals in non-urban cities
• No relief on service tax on rentals will continue to
increase pricing pressure
Real Estate Sector
 Capital/Engineering Goods
(Positive)
• Growth in capital goods is still very
high at 20.2 %, indicating that
industry continues to make huge
capital investments and has a
positive outlook about the future
• Rs.800 cr allocated for the
Accelerated Power Development and
Reforms Project in 2008-09
• Thrust on power reforms augurs well
for the sector
Capital Goods Index
 Cement (Negative)
• Excise Duty on clinker increased to
Rs 450/MT from Rs 350/MT
• Excise Duty on bulk cement at Rs
400/MT or 14% in proportion to the
estimated value of the cement,
whichever is higher
 Telecom Sector (Positive)
• General rate of excise duty (CENVAT) has been
reduced from 16% to 14%
• Excise duty has been fully exempted on Wireless
data modem cards. CVD shall also be exempted
on imported cards
• Customs duty on specified parts of set-top boxes
has been reduced from 7.5% to Nil
• Reduction in the customs duty on convergence
products from 10% to 5%
• Excise duty has been reduced from 16% to 8% on
specified convergence products
 Gem & Jewellery (Neutral)
• Reduction of duty of rough cubic
zirconia and of polished cubic
zirconia from 10% to 5%. Similar is
the case of rough coral