An Overview of Indian Budget 2011

March 2, 2011 - PRLog -- The Budget for 2011-12 is widely seen as cautious approach of the Finance Minister, Dr. Pranab Mukherjee towards balancing this critical phase of Indian economy. We are facing complex issues relating to soaring inflation, high growth rate, employment problems, rising oil prices, increasing deficit on current and capital account, corruption, black money, internal law and order disturbances and many more. In these circumstances our Finance Minister can definitely be excused for remaining in hibernation and playing safe in his position.

We wish financial establishment gets more proactive towards the needs of the time and react muscularly keeping in mind the aspirations of the public. In view of the media generated publicity about wastages and misappropriations of public money by some selected class of individuals the whole governance has been put on public trial. In these circumstances Regulatory Bodies are required to get into action swiftly and clear the misgivings otherwise help the government to discipline the perpetrators.

However, if the government feels that, the regulatory mechanism and policing can not be the solution to the problems like black money and foreign bank accounts etc. than it should audaciously look for alternative means and measures in the larger interest of the nation without being conscientious of opposition party’s political criticism. Finance Minister should realise that, enormous Indian wealth is lying in other countries which he can attract discreetly and not by any kind of intimidation or coercion. In the interest of infrastructure development the government can come out with some scheme which permits this money to return back to India and strictly get invested in sector like education, health, roads, housing etc. A very simple scheme can do wonders to the entire nation and make our finance minister’s name and congress leadership immortal in the fiscal and financial history of India.

KEY FEATURES OF FINANCE MINISTER’S BUDGET 2011-2012

Overview of the Economy
Gross Domestic Product (GDP) estimated to have grown at 8.6 per cent in2010-11 in real terms. Economy has shown remarkable resilience. Continued high food prices have been principal concern this year. Exports have grown by 29.4 per cent, while imports have recorded a growth of 17.6 per cent during April to January 2010-11 over the corresponding period last year. Indian economy expected to grow at 9 per cent with an outside band of +/- 0.25 per cent in 2011-12.

Tax Reforms
Direct Taxes Code (DTC) to be finalised for enactment during 2011-12. DTC proposed to be effective from April 1, 2012. GST, Constitution Amendment Bill proposed to be introduced in this session of Parliament.

Expenditure Reform
Committee has been set up by Planning Commission to suggest government expenditure ( capital, revenue, plan and non plan) reforms.

Subsidies
Government actively considering extension of the Nutrient Based Subsidy regime to cover urea. Government to move towards direct transfer of cash subsidy to people living below poverty line in a phased manner for better delivery of kerosene, LPG and fertilisers.

PSU’s
Rs. 40,000 crore to be raised through disinvestment in 2011-12. Government committed to retain at least 51 per cent ownership and management control of the Central Public Sector Undertakings.

Investment Environment
Government to further liberalise the FDI policy. SEBI registered mutual funds permitted to accept subscription from foreign investors who meet KYC requirements for equity schemes. To enhance flow of funds to infrastructure sector, the FII limit for investment in corporate bonds issued in infrastructure sector being raised.

Banking and Micro Finance
Additional banking licences will be issued to private sector players. Rs. 6,000 crore will be provided to public sector banks for maintaining minimum of Tier I CRAR of 8 per cent. Rs. 500 crore will be provided to Regional Rural Banks for maintaining CRAR of at least 9 per cent as on March 31, 2012. India Microfinance Equity Fund of Rs. 100 crore to be created with SIDBI. New authority will vouch interest of small borrowers. Women’s SHG’s Development Fund to be created with a corpus of Rs. 500 crore. Target of providing banking facilities to all 73,000 habitations having a population of over 2,000 to be completed during 2011-2012.

Micro Small and Medium Enterprises
Rs. 5,000 crore will be provided to SIDBI for refinancing incremental lending by banks to these enterprises. Rs. 3,000 crore will be provided to NABARD to provide support to handloom weaver co-operative societies which have become financially unviable due to non-repayment of debt by handloom weavers facing economic stress. Public sector banks to achieve a target of 15 per cent as outstanding loans to minority communities under priority sector lending at the earliest.

Housing Sector Finance
Existing scheme of interest subvention of 1 per cent on housing loan further liberalised. Existing housing loan limit enhanced to Rs. 25 lakh for dwelling units under priority sector lending. Provision under Rural Housing Fund enhanced to Rs. 3,000 crore. To enhance credit worthiness of economically weaker sections and LIG households, a Mortgage Risk Guarantee Fund to be created under Rajiv Awas Yojana. Central Electronic Registry to prevent frauds involving multiple lending on the same immovable property to become operational by March 31, 2011.

Legislative Reforms
Financial Sector Legislative Reforms Commission set up to rewrite and streamline the financial sector laws, rules and regulations. Companies Bill to be introduced in the Lok Sabha during current session.

Food & Agriculture
Allocation under Rashtriya Krishi Vikas Yojana increased from Rs. 6,755 crore to Rs. 7,860 crore. To improve rice based cropping system in eastern region, allocation of Rs. 400 crore has been made. Allocation of Rs. 300 crore to promote production of 60,000 tons of pulses in rainfed areas. Allocation of Rs. 300 crore to bring 60,000 hectares under oil palm plantations. Initiative to yield about 3 lakh Metric tonnes of palm oil annually in five years. Allocation of Rs. 300 crore for implementation of vegetable initiative to provide quality vegetable. Allocation of Rs. 300 crore to promote higher production of Bajra, Jowar, Ragi and other millets, which are highly nutritious and have several medicinal properties. Allocation of Rs. 300 crore to promote animal based protein production through livestock development, dairy farming, piggery, goat rearing and fisheries. Allocation of Rs. 300 crore for Accelerated Fodder Development Programme to benefit farmers in 25,000 villages.

Agriculture Credit
Credit flow for farmers raised from Rs. 3,75,000 crore to Rs. 4,75,000 crore in 2011-12. Interest subvention proposed to be enhanced from 2 per cent to 3 per cent for providing short-term crop loans to farmers who repay their crop loan on time. In view of enhanced target for flow of agriculture credit, capital base of NABARD to be strengthened by Rs. 3,000 crore in phased manner. Rs. 10,000 crore to be contributed to NABARD’s Short-term Rural Credit fund for 2011-12. Approval being given to set up 15 more Mega Food Parks during 2011-12.

Infrastructure and Industry
Allocation of Rs. 2,14,000 crore for infrastructure in 2011-12. This is an increase of 23.3 per cent over 2010-11. This also amounts to 48.5 per cent of total plan allocation. Government to come up with a comprehensive policy for further developing PPP projects. IIFCL to achieve cummulative disbursement target of Rs. 20,000 crore by March 31, 2011 and Rs. 25,000 crore by March 31, 2012. Under take out financing scheme, seven projects sanctioned with debt of Rs. 1,500 crore. Another Rs. 5,000 crore will be sanctioned during 2011-12.......................................................

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The Author, A. K. Jain is practicing Chartered Accountant at New Delhi since 1984 under the banner, “Tapuriah Jain & Associates” ( TJA ). He can be contacted at E-Mail: copindia@hotmail.com or Telephone Number – 98-100-46108.