BUDGET SPECIAL ISSUE
24th MARCH [SATURDAY]
EDITOR’S DESK
- POOJA DALAL
EDITOR
1 OPINION
5 FOCUS
8
COVER
2 BRAND
6 MARKET
9
FAST-TRACK
3 QUICK BITES
7
THE IBS TIMES
COVER STORY– UNION BUDGET
- KAPIL OTWSAL & KRITIKA SETHI
The Union Budget 2012- 13 was presented by the Finance Minister Mr. Pranab Mukherjee- Mr. Workaholic. In his speech he said “The life of a Finance Minister is not easy” and I totally agree with him. I can say this because when I started writing this article, I was so confused about what all should I include and what not. The challenge lies in bringing the various stakeholders of the economy such as corporate, policy makers, government and public to a common ground and still pursuing the structural changes required in the system. Through this article I try to analyze the union budget 2012-13 with my all empathies towards Mr. Mukherjee on this exhaustive job. In the wake of a challenging business environment and weak global economic conditions Mr. Pranab Mukherjee presented the Union Budget 2012-13 on the 16 march 2012. Main challenges The challenge lies in bring- faced by Indian economy in year 2011-12 were continued slowdown in Indian GDP growth, ing the various stakeholders high inflation rate, high deficits and low investor confidence. Still India managed to achieve of the economy such as cor- 6.9% of GDP growth rate. porate, policy makers, government and public to a common ground and still pursuing the structural changes required in the system.
The focus of this year‟s budget is on addressing the issue of decreasing foreign investments, supply chain management of agriculture produce, stagnating manufacturing sector and problems of malnutrition, black money and corruption. In previous years the increase in the central subsidy burden has been major reason for the fiscal deficit, for year 2012-13, finance minister has made attempt to restrict the central subsidies to less than 2% of the GDP which will bring down the fiscal deficit to 5.1% from 5.9% last year. Although time will tell whether this target is achieved, part of fiscal imbalance is proposed to be filled through the INR 30,000 crore of disinvestment in public sector enterprises. Net market borrowing requirement of INR 4.79 lakh crore is still a cause of worry. In this budget there is no notable announcement on allowing FDI in multi-brand retail up to 51% though the Finance minister has recognized the need for boasting the investor confidence. Government continues to focus on the infrastructure development. For this Finance minister has doubled the limit for the Tax free infrastructure bond from INR 30,000 to 60,000 per person. Additional investment of 50 Lakh crore in infrastructure sector is proposed by the government. Before turning to the tax proposals in his speech Finance minister said “I must be cruel only to be kind” which I think is very apt in today‟s scenario. In his direct tax proposals corporate tax rates remains unchanged at 30% for domestic companies and 40% for the foreign companies. Rate of Minimum Alternate Tax (MAT) and ATM also remains unchanged. Marginal increase in income tax slabs for Individuals is proposed which is as following:
Before turning to the tax proposals in his speech Finance minister said “I must be cruel only to be kind” which I think is very apt in today‟s scenario.
1
Income Slab (INR)
Tax Rate
0 – 2,00,000
Nil
2,00,001-5,00,000
10%
5,00,001-10,00,000
20%
Above 10,00,000
30%
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THE IBS TIMES
COVER STORY– UNION BUDGET (CONT..)
Direct Tax Code (DTC) has not been introduced this year but Finance minister reaffirmed that the government intends to legislate it shortly after the careful examination of the report of the parliamentary Standing committee.
On in direct taxes, Finance minister did not give any fix dates for the GST legislation but indicated that it is being drafted in concert with states.
On in direct taxes, Finance minister did not give any fix dates for the GST legislation but indicated that it is being drafted in concert with states. Peak rate of excise duty and service tax has been increased from 10% to 12% while the scope of service tax has been widened by introduction of a negative list. CST rate has been reduced from 4 % to 2% providing stimulus to supply chain restructurings. Looking at the political scenario it is the best what Mr. Pranab Mukherjee can present to India. But in my opinion for reforms we need to take tough decisions which was lacking in the budget. On the whole it is a directionary budget not a reformist budget. In this budget Finance Minister clearly conveyed the message that we intend to bring reforms but right now we canâ€&#x;t due to political pressures. Budget Financials (figs. In Crore)
Particulars
But in my opinion for reforms we need to take tough decisions which was lacking in the budget. On the whole
FY 2011-12
FY 2011-12
FY 2012-13
Estimates 789,892
Revised Estimates 766,989
Budget Estimates 935,685
1
Revenue Receipts
Actual Budget 788,471
2
Capital Receipts
402,428
467,837
576,395
555,240
3
Total Receipts (1 + 2)
1,190,899
1,257,729
1,343,384
1,490,925
4
Non Plan Expenditure
818,299
816,182
892,116
969,900
5
Plan Expenditure
379,029
441,547
426,604
521,025
6
Total Expenditure (4 + 5)
1,197,328
1,257,729
1,318,720
1,490,925
7
Revenue Expenditure
1,040,723
1,097,162
1,161,940
1,286,109
8
Capital Expenditure
156,605
160,567
156,780
204,816
9
Revenue Deficit (7 - 1)
252,252
307,270
394,951
350,424
10
Fiscal Deficit [6 - (1 + Recoveries of Loans + Other Receipts) Primary Deficit (10 - Interest Payments)
373,592
412,817
521,980
513,590
139,569
144,831
246,362
193,831
it is a directionary budget not a reformist budget.
FY 2010-11
11
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THE IBS TIMES
COVER STORY– RAILWAY BUDGET
The issue which has created buzz everywhere and has become cause of concern is rail budget. Union Railway Minister Dinesh Trivedi presented the Railway Budget in Parliament on Wednesday. It sets ambitious targets for FY13 (revenue) and 4x increase in capital outlay 12th five year plan to Rs7350bn. Aims to achieve sharp improvement in operating ratio
Passenger fares increased marginally. The increase will be by 2 paise per km for suburban and ordinary second class; 3 paise per km for mail/express second class; 5 paise per km for sleeper class; 10 paise per km for AC Chair Car, AC 3 tier and First Class; 15 paise per km for AC 2 tier and 30 paise per km for AC I.
75 additional services to run in Mumbai suburban; 44 new suburban services to be introduced in Kolkata area, 50 new services to be introduced in Kolkata Metro; 18 additional services in Chennai area.
The highlights of Railway are: Passenger fares increased marginally. The increase will be by 2 paise per km for suburban and ordinary second class; 3 paise per km for mail/express second class; 5 paise per km for sleeper class; 10 paise per km for AC Chair Car, AC 3 tier and First Class; 15 paise per km for AC 2 tier and 30 paise per km for AC I. Minimum fare and platform tickets to cost Rs 5. 50 per cent concession in fare in AC-2, AC-3, Chair Car and Sleeper classes to patients suffering from 'Aplastic Anaemia' and 'Sickle Cell Anaemia'. Extending the facility of travel by Rajdhani and Shatabdi trains to Arjuna Awardees. Travel distance under 'Izzat Scheme' to increase from 100 kms to 150 kms. SMS on passenger mobile phone in case of e-ticket to be accepted as proof of valid reservation. Introduction of satellite based real time train information system (SIMRAN) to provide train running information to passengers through SMS, internet, etc. On board passenger displays indicating next halt station and expected arrival time to be introduced. Installation of 321 escalators at important stations of which 50 will be commissioned in 2012 -13. Introduction of regional cuisine at affordable rates; launching of Book-a-meal scheme to provide multiple choice of meals through SMS or email. Introduction of coin/currency operated ticket vending machines. Upgradation of 929 stations as Adarsh Stations including 84 stations proposed in 2012-13; 490 stations have been completed so far. Specially designed coaches for differently-abled persons to be provided in each Mail/Express trains. Introduction of Rail Bandhu on-board magazines on Rajdhanis, Shatabdis and Duronto trains. Setting up of AC Executive lounges at important stations 75 new Express trains to be introduced. 21 new passenger services, 9 DEMU services and 8 MEMU services to be introduced. Run of 39 trains to be extended. Frequency of 23 trains to be increased. 75 additional services to run in Mumbai suburban; 44 new suburban services to be introduced in Kolkata area, 50 new services to be introduced in Kolkata Metro; 18 additional services in Chennai area. 725 km new lines, 700 km doubling, 800 km gauge conversion and 1,100 km electrification targeted in 2012-13. Rs 6,872 cr provided for new lines, Rs 3,393 crore for doubling, Rs 1,950 cr for gauge conversation, Rs 828 cr for electrification Highest ever plan outlay of Rs 60,100 crore Rae Bareli coach factory manufactured 10 coaches in 2011-12; phase-II of the factory would be commissioned in 2012-13. A wagon factory to be set up at Sitapali (Ganjam District of Odisha)
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THE IBS TIMES
COVER STORY– RAILWAY BUDGET (CONT..)
Setting up of a factory at Shyamnagar in West Bengal to manufacture next generation technology pro pulsion system for use in high power electric locomo tives.
Setting up of a Railway Safety Authority as a statutory regulatory body as recommended by Kakodkar Committee Three 'Safety Villages' to be set up at Bengaluru, Kharagpur and Lucknow for skill development for disaster management.
A rail coach factory with the support of Government of Kerala to be set up at Palakkad; two additional new manufacturing units for coaches to be established in the Kutch area in Gujarat and at Kolar in Karnataka with active participation of the State Governments. Setting up of a factory at Shyamnagar in West Bengal to manufacture next generation technology propulsion system for use in high power electric locomotives. Creating Missions as recommended by Pitroda Committee to implement the modernization programme. Setting up of Railway Tariff Regulatory Authority to be considered. New Board Members for Safety/Research and PPP/Marketing to be inducted. Rail-Road Grade Separation Corporation to be set up to eliminate level crossings. Indian Railway Station Development Corporation to be set up to redevelop stations through PPP mode. Logistics Corporation to be set up for development and management of existing railway goods sheds and multi-modal logistics parks. National High Speed Rail Authority to be set-up. Pre-feasibility studies on six high speed corridors already completed; study on Delhi-JaipurAjmer-Jodhpur to be taken up in 2012-13. Introduction of a „Green Train‟ to run through the pristine forests of North Bengal. Setting up of 200 remote railway stations as „green energy stations‟ powered entirely by solar energy. Providing solar lighting system at 1,000 manned level crossing gates. 2,500 coaches to be equipped with bio toilets. Setting up of 72 MW capacity windmill plants in Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and West Bengal. Installation of Integrated Security System at all 202 identified stations to be completed in 2012-13. Escorting of trains by RPF/GRP extended to 3,500 trains. Integration of RPF helpline with the All India Passenger Helpline. Setting up of a Railway Safety Authority as a statutory regulatory body as recommended by Kakodkar Committee Three 'Safety Villages' to be set up at Bengaluru, Kharagpur and Lucknow for skill development for disaster management. Over one lakh persons to be recruited in 2012-13" backlog of SC/ST/OBC and other categories to be wiped off. Introduction of a wellness programme for railway staff at their work places. Ensuring proper rest for skilled and technical staff including the running crew. Institution of 'Rail Khel Ratna' Award for 10 rail sports-persons every year. New coaching terminal at Naihati, the birth place of Rishi Bankim Chandra Chattopadhyay commemorating him on 175th Birth Anniversary. Project to connect Agartala with Akhaura in Bangladesh to be taken up in 2012-13. Freight loading of 1,025 MT targeted; 55 MT more than 2011-12 Passenger growth targeted at 5.4 per cent.
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THE IBS TIMES
COVER STORY– SECTORWISE ANALYSIS SECTOR
Budget (2012)
BANKING AND FINANCIAL SECTOR
-SAMEER JHANJI
prop osal
Impact
Companies fected
Rajiv Gandhi equity saving Scheme to allow for income tax deduction of 50% to new retail investors, who invest upto Rs. 50000 directly in equities. Rs. 15888 crores capital support proposed to public sector banks and financial institutions. Tax free bonds of Rs 60000 crores to be allowed for financing infrastructure sectors. Investment in infrastructure sector to go upto Rs 50 lakhs crores, half of which is expected from private sector.
Govt. owned financial institutions will get capital infusion of $ 3 billion which is largely seen as insufficient to capitalize state run banks such as state bank of India, Punjab National Bank, Bank of India and Bank of Baroda. Indian banks will also be under pressure to achieve the target of 5.75 trillion rupees for farm credit, where bad loans are relatively higher.
HSBC, SBI, BOI, ICICI, HDFC, Bajaj Capital, LIC (and other banking institutions in the country).
CEMENT SECTOR
Allocation of Road Transport and Highways Ministry enhanced by 14% to Rs. 25360 crores. Projects covering length of 8800 km to be awarded under NHDP. Rs.1185 crores to be allocated for construction of nearly 4000 residential quarters for Central Armed Police forces. Rs. 3280 crores allocated for construction of office building of Central Armed Police forces.
The impact on cement industry is somewhat positive even though excise duty has increased from 10 to 12% but the proposal to exempt the non- coking coal from basic custom duty will have a positive impact on operating profits of the company. The cement industry is dependent on this imported coal as it constitutes one fourth of the total requirement.
Ultratech, Ambuja, ACC, JK Cement, Jaypee Cement, Century, Grasim Birla
REAL ESTATE SECTOR
Decision on FDIâ€&#x;s in multi brand retail upto 51% still pending. Service tax increased from 10 to 12%. 1% tax rebate for home loans upto Rs 15 lakhs on homes costing upto Rs. 25 lakhs. Exempting proceeds from sale of a residential property from capital gains tax if they are invested in equity or equipment of SME. Allowing ECB for affordable housing.
The increase in service tax will increase the cost of production for developers when input costs are already high, thus the burden will be passed to the end users. Allowing ECB in the sector is expected to increase the volumes and make it more attractive to the investors. The disappointment was the postponement of FDI in multi brand retail segment. So overall it was a mixed bag for the real estate sector this time around.
DLF, L&T, Ambuja realty group, Sun City projects, Merlin Group
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af-
THE IBS TIMES
COVER STORY– SECTORWISE ANALYSIS
-DEVANSHI PODDAR
SECTOR
Budget proposal (2012)
Impact
Companies affected
POWER SECTOR
Custom duty on imported fuel to be removed. External commercial borrowings to part finance rupee debt of existing power projects. Increase in quantum of tax-free bonds limit from Rs. 5000 to Rs. 10000. Cut in withholding tax on ECBs from 20% to 5%. Reinforcement of intentions to introduce DTC and GST in the near future.
Increase the import of fuel and make sufficient fuel supply for the companies to increase the production.
NTPC, Coal India, Powergrid
TELECOM SECTOR
There is a 2% increase in the service tax i.e from 10% to 12% which will increase the bills of the customers. Companies are waiting for the NATIONAL TELECOM POLICY (NTP) scheduled to be announced in June.
Any correct prediction can be made only after the announcement of NTP.
BSNL, Bharti Airtel, VodafoneEssar, Uninor, Reliance communications, TATA
IT SECTOR
The Minimum Alternative Tax imposed on SEZ has not been abolished. Improving consumption through the Rs. 14233 Crore UID projects and its use in the Public Distribution System. Transfer Pricing introduced. Number of areas in the negative list exempted from service tax.
Relief to the sector from litigations. Areas in the negative list will be a relief for the inflows
Infosys, Wipro, TCS, Cognizant, Accenture, IBM, HP, HCL, Patni, Mphasis, Cisco, Polaris
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THE IBS TIMES
COVER STORY– SECTORWISE ANALYSIS
-RAJ AGARWAL
SECTOR
Budget proposal (2012)
Impact
Companies affected
PHARMACEUTICAL SECTOR
Likely to allocate a modest 13% -15 % jump in this year's Union Budget due to a resource squeeze caused by slowing growth.
Will lead to wider health-
Hospitals: Fortis, Apollo hospital. Pharmaceutical: L u pin, Sunpharma, Dr Reddy, Ranbaxy.
FMCG SECTOR
Provision and funds for agriculture schemes and rural schemes an increase of 18 % in plan layo u t . Incentives for food parks, warehousing and storage would help in supply chain Hike in excise duty by 1% and 2 % Hike in service tax by 2%
If a uniform GST comes into play, it will mean doing away with multiple other taxes like octroi, central sales tax, value added tax and entry tax. This could make consumer goods cheaper and boost demand for the FMCG sector.
ITC, HUL, Marico, Godrej, Dabur, Nestle, Marico, Britannia, P&G
AUTOMOBILE SECTOR
Government has decided to hike the excise duty by 2 percent. Import duty increased from 50% to 75% for cars priced above 20 lakhs. Extra tax removed from diesel car
Earlier the critics had made a prediction especially for the luxury car market that The sales percentage of these cars will see a 6% increase from 22 to 16% but instead the duty has been increased by 24% and thus the cost of the cars is set to rise up, that may decrease demand (but it is relatively inelastic). Whereas small cars segment may experience an increased demand (the oneâ€&#x;s running on diesel especially)
TATA, Ford, Mahindra & Mahindra, Maruti, Hero, Bajaj, Ashok Leyland
care coverage and ensure better medical facilities in the country.
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FAST-TRACK NEWS
THE IBS TIMES -ANKITA AGNIHOTRI & SUHANI GUPTA
Timing of key reforms implementation remains uncertain Global rating agencies declare the budget proposals fail to give timeline on GST and DTC. According to Standard and poor‟s although the financial minister had announced various fiscal reforms but the timings of key reforms like GST and DTC remains uncertain. S&P said India's deficit in the next fiscal is expected to remain high, and the results of uncertainty might lead to subsidy consolidation and lowering fiscal vulnerability to volatile commodity prices.
Several companies to get adversely affected by federal budget 2012 The companies that will be hurt by the federal budget 2012 are ONGC, Oil India and Cairn India, Gold loans providers such as Muthoot Finance and Manappuram Finance Ltd , Gold loans providers such as Muthoot Finance and Manappuram Finance Ltd, Indian power equipment makers, Indian banks will also be under pressure to achieve the target of 5.75 trillion rupees for farm credit, Indian banks will also be under pressure to achieve the target of 5.75 trillion rupees for farm credit, Indian engineering exporters such as Larsen & Toubro and Punj Lloyd.
India’s exports much lesser than Imports from china According to a survey done by Nasscom, out of the 2.7 million people in India‟s IT services industry just 16,000 are in China. Nontariff trade barriers such as requirements to obtain security clearances before doing business with government-backed companies etc are some problems faced by Indian companies in China. According to Nasscom President, Som Mittal. “The markets are really closed,” and he wants Indian officials to make improved access a priority in talks with Chinese leaders.
Apple shares shows an increase of 100$ in less than a month Apple has added about $92 billion to its market capital in less than a month. Apple is just $14 billion away from being bigger than the entire U.S. retail sector. These days, Apple had seen about 4.2 times sales and by the end of 2011 was earning about $14 a share. Today, it trades at 16.8 times its earnings for the previous 12 months.
Tata Steel, Wipro in world's most ethical Survey Ethisphere's annual list of the World's Most Ethical Companies (WME) recognises the companies that go beyond making statements and conduct their business ethically. There are 145 companies across the world which stood out for setting high standards of employee behaviour and conduct. And these are the only two Indian companies to have featured in the 2012 list of World's Most Ethical Companies prepared by US-based Ethisphere Institute. "It is a great honour for Tata Steel to be recognised under such an important and prestigious parameter. Ethical business principles and practices have been the key differentiators of Tata Group and Tata Steel since inception," said H M Nerurkar, managing director of Tata Steel.
Deutsche Bank brings Rs 455 cr to India The German banking leader Deutsche Bank has increased the capital base Rs 455 crore in order to fund growth plans. This step will result in Deutsche Bank AG's capital base to over Rs 5,500 crore, depicting the bank's strong focus on this market. It might happen that the Frankfurt-based lender may nominate Anshu Jain, head of the investment banking, as the next chief executive. The India branch's PAT stood at Rs 630 crore in 2011, growing with a compounded average growth rate of 38 percent over the last five years.
World’s Fourth richest Politician Sonia Gandhi is declared to be the world‟s fourth richest politician by Business Insider. As per the report Sonia‟s wealth is measured to be Rs.1, 17, 70,468 of movable assets and Rs.20, 24,300 of immovable property.
Pradhan Mantri Swasthya Suraksha Yojana- PMSSY is the program for improving the health of the people. 7 more government medical colleges will be started under this program.
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THE IBS TIMES Four-wheeler luxury will be costlier Car companies announced price increments following the duty hike in the Budget ranging from Rs 15 lakh on t he i mp o r t ed A u di A 8 s e da n t o R s 4 2 00 -5 9 0 0 o n A l t o f r o m M ar ut i . Big trucks and buses manufacturing companies have also said prices for customers will go up as the government levied a 3% excise duty on the chassis against the current flat rate of Rs 10,000. "We have no option but to pass on the new rates to the market," Audi India Michael Perschke said. As the Government raised customs duty from 60% to 75%, along with a 5% increase in countervailing duty that is levied in lieu of local taxes imported models would bear most of the burden.
Common recruitment test for RRBs Institute of banking personal selection (IBPS) will be conducting the common recruitment test for filling up vacancies in the various regional rural banks (RRBs). According to the Director of IBPS, M Balachandran told PTI, they are working out details for conducting exams for both officers and clerks for 82 RRBs. National Bank for Rural and Agriculture Development (NABARD) will supervise the whole selection process of CWE of IBPS.
Many people mourn Egypt’s Coptic Pope Shenouda III Thousands of Egyptian Coptic Christians spent the night outside St Mark's Cathedral to mourn the death of their spiritual Leader Pope Shenouda III. He was 88 when he expired and he held the church for four decades. The government had declared three days off to prepare for his funeral. The successor of Pope is still not decided.
Gaddafi spy chief arrested in Mauritania Muammar Gaddafi's ex-spy chief, Abdullah al-Senussi was arrested in Mauritania.Senussi for decades inspired fear and hatred in Libyans and he has charges for crimes against humanity by the international court of Hague. Libya demanded that he should be brought back to the country for trial for which the y have sent an extradition request to Mauritania but ICC and France want to conduct the trial because he is also accused in the case of the 1989 bombing of an airliner over Niger in which 54 French nationals died.
Akhilesh yadav takes Oath Akhilesh yadav was sworn in as the youngest Chief Minister of Uttar Pradesh on 15th march , Thursday along with other 47 ministers. He kept fifty departments under him. Raja Bhaiya having 8 criminal cases against him will be the head of U.P‟s prison Department along with food and civil supply
100’s of 100 At last the day arrived when the God of Cricket hit his 100th International century. The history was created against Bangladesh in Mirpur in Asia Cup on 16th march 2012, Friday. Tendulkar's century came off 138 balls and was full of 10 fours and a six. This was a delight for all the Indian fans. The game ended by Bangladesh winning the match by chasing the score of 290 runs (again). Especially his performance in overseas matches can be hardly matched by any player," Sehwag told reporters at a promotional event here.
Customs Duty- Customs duty is a kind of indirect tax which is realized on goods of international trade. It is levied upon the imported and exported goods.
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OPINION FORUM–
THE IBS TIMES
–AVLEEN KAUR SARNA & POOJA DALAL
VIEW A PRACTICAL PLAN- KEEPING FINGERS CROSSED!!
While the food subsidy target looks achievable, the fuel and fertilizer subsidy target can be achieved only if the government increases retail end-product prices sharply.
Rightly or wrongly, expectations had risen after the presentation of the railway budget that the finance minister Pranab Mukherjee would bite the bullet and present a bold national budget. However, under the present circumstances he has presented a practical plan. The Union Budget 2012-13 presented in the Lok Sabha has identified five main objectives to be addressed effectively in the ensuing fiscal year. These include the focus on domestic demand driven growth recovery, creating conditions for rapid revival of high growth in private investment, address supply bottlenecks in agriculture, energy and transport sectors particularly in coal, power, national highways, railways and civil aviation , intervene decisively to address the problem of malnutrition especially in the 200 high-burden districts and expedite coordinated implementation of decisions being taken to improve delivery systems , governance, transparency and address the problem of black money and corruption in public life. Adding to its credit, despite strong pressures the budget emphasizes the government‟s long-term objective to control and eventually reduce subsidies i.e in 2012-13 the budget hopes to keep the overall subsidies under 2% of GDP. While the food subsidy target looks achievable, the fuel and fertilizer subsidy target can be achieved only if the government increases retail end-product prices sharply. Also, given the quantum of fiscal deficit and the government‟s higher gross borrowing programme for the year, the pressure on inflation is likely to be maintained because the government has overshot its fiscal deficit target for 2011-12 by a wide margin, even more than the most pessimistic estimates. However, it has reiterated its commitment to fiscal consolidation and has forecasted a lower fiscal deficit of 5.1% of gross domestic product (GDP) in 2012-13. Now how credible is this target? It is considered that this target is based on what we believe the unrealistic growth projections and an ambitious target on subsidies, hence most probably the fiscal deficit is likely to be closer to 5.5% of GDP during 2012-13 and thus with the manufacturing on the cusp of a revival, Finance Minister is betting more on redoubling the focus on domestic demand driven growth recovery and creating conditions for a revival in private investment in the coming year to spur growth headline inflation, which is expected to moderate further in the next few months and remain stable thereafter as it is expected to aid the rebound in growth.
Thus while the finance minister can be taken to task on parts of the tax changes, he has made a definite effort to offer tax concessions to encourage investments and bridge the rapidly growing infrastructure deficit as the shortage of power, roads, ports and other infrastructure has begun to retard economic growth.
So, the government‟s primary concern now is to advance the economy‟s productivity and improve income distribution. Thus while the finance minister can be taken to task on parts of the tax changes, he has made a definite effort to offer tax concessions to encourage investments and bridge the rapidly growing infrastructure deficit as the shortage of power, roads, ports and other infrastructure has begun to retard economic growth. Similarly, he has declared his intent to move ahead with the goods and services tax (GST) by promising that the information technology network to drive this reform will be in place by August and as it goes about the task of rapid fiscal consolidation, along with the aim of keeping inflation down, the major task on hand for the Centre is to raise the tax-GDP ratio and cutting down wasteful expenditures.
Excise Duty- An excise or excise tax is commonly referred to as an inland tax on the sale, or production for sale, of specific goods; or, more narrowly, as a tax on a good produced for sale, or sold, within a country or licenses for specific activities.
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OPINION FORUM (CONT..)
The Reserve Bank of India has already hinted at the structural problems when it said that the growth rate India can sustain without fanning high inflation is 7%.
THE IBS TIMES
Now how important is this subtle yet important change in approach? The political economy of the UPA government has revolved around entitlements, subsidies, consumption-spending and reforms inertia. The strategy worked as long as strong economic growth yielded ample tax revenues, but it unraveled after 2008 to result in a toxic combination of growth trending downwards while inflation trending up. The Reserve Bank of India has already hinted at the structural problems when it said that the growth rate India can sustain without fanning high inflation is 7%. Thus what India needs right now is a dose of supply-side economics, especially initiatives to get private sector investment back on track soon as well as coherent policies to overcome significant medium-term constraints such as food, energy, water, logistics and infrastructure and also fiscal consolidation to raise the national savings rate while the economic reforms to improve business confidence are also central to these policy challenges at this juncture when India seems to be in the midst of a structural rather than the cyclical slowdown. Yet, it has to be conceded that the Finance Minister has struggled in unenviable conditions to make some sense out of the helpless situation in which he has been placed by his party and government.
COUNTERVIEW The Downside While one of the main objective of the Budget remains-„to bring down inflation‟, the increase in service tax from 10 to 12 percent and the widening of the service tax net has not done quite so, at least for the end consumers. Though it has been done to cover the increased expenditure on subsidies to industries, the change has been very predictable, not to mention „not at all helpful in correcting the structural problems in the economy.‟ From the general public‟s point of view, there is no respite from high inflation and increasing cost of living. „Travelling, eating out, telephone bill - all these have become dearer. It's also going to be difficult for frequent flyers.‟ Only the personal tax exemption limits have been raised, but considering the growing inflation, it seems to be just a cosmetic correction rather than an actual relief.
if just the reforms stated by Finance Minister come to pass, it would be worth the inflation and restricted growth that this budget is going to result into.
„It‟s more directed at maintaining a status quo rather than providing that much required thrust to take forward the reforms agenda.‟ No decision has yet been passed on FDI in retail and aviation. Even the growth is pegged to be low. FICCI President R.V. Kanoria said: "It is a big non-event. It is not going to stimulate growth in economy." Nothing mentioned in the budget managed to excite the investor‟s and this may well become a long term norm. But if just the reforms stated by Finance Minister come to pass, it would be worth the inflation and restricted growth that this budget is going to result into. We wouldn‟t know it for sure yet, as the budget had made some tall promises, but not yet revealed the math behind it. All in all the budget seems to have been made under political pressure, where the finances could have gone down better for the country, if only the ruling party trusted the voting audience to understand the brighter side. Guess it didn‟t.
RTE-SSA- Right to education has been implemented since 1st April 2010, through SSA that is the Sarva Shiksha Abhiyan. Finance minister Pranab Mukherjee has given Rs. 25555 crore for RTE-SSA in Union Budget 2012-13.
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THE IBS TIMES
OPINION FORUM– RAILWAY BUDGET
The increase in train fares would have given the much needed cash to Railways to expand its operations, endure safety in transport and at the same time, increase the welfare of its employees.
„Bold and futuristic‟ I would call the budget that was ordered to be rolled back by Didi, just because it didn‟t have her blessings. India has not seen fare raises for quite a decade now. It would be mostly because burning a bigger hole into the „aam aadmi‟s‟ pocket usually means losing polls in the next elections. But here was a man who was bold enough to announce to the public, that the largest employer in the world that is giving salary hikes needs to save its balance sheet too. It too needs a money inflow growth. But as we know now, you lose your office for being so bold. The increase in train fares would have given the much needed cash to Railways to expand its operations, endure safety in transport and at the same time, increase the welfare of its employees. The efficiency of the railways should have been tested as a bases for further funds requirement but at the same time, attacking the complete budget just on the bases of it being unfair to the masses seems to illogical. But put in the political parlance- any profit made by the corporation (it is usually a state owned corporation that is accused of it) is at the expense of the public. Mr. Dinesh Trivedi had drawn out a brilliant plan of connecting our nation better. Connecting Mumbai to its suburbs better (as well as some other faraway places), upgrade railway station infrastructure, setup factories to manufacture more couches. And none of this could have been done without the availability of the funds. As state is on a fiscal deficit slimming drive, the aforesaid funds were denied in the form of investment or subsidy to the corporation. This left but only one choice with the rail minister- fare hike. But looking at it after the Union Budget from „aam aadmi‟s‟ lens, the actual fare hike would have seemed cruel. With an already inflationary budget underway, the end consumer is already paying more even for small luxuries of life like dining out. And this would get worst on the consumer confidence of the country as all the services are set to become costlier. Thus the impact would have been large on the public and adverse. But there are no free lunches in this world. If the corporation has to progress (very few state owned organisations do), the people have to share the burden of growth. For availing better facilities and better infrastructure, people have to bear the monster of inflation. And with the exemption limit for tax increased and no more direct tax levied, shouldn‟t have the consumers‟ nagging.
But looking at it after the Union Budget from „aam aadmi‟s‟ lens, the actual fare hike would have seemed cruel. With an already inflationary budget underway, the end consumer is already paying more even for small luxuries of life like dining out.
Only time will tell whether, the conservative politics will pay off or we will repent firing Trivedi forever.
Securities Transaction Tax- STT, introduced in 2004, is levied on the sale and purchase of equities and according to estimates it accounts for 51 per cent of the transaction cost in stock markets. The Budget has proposed a reduction in Securities Transaction Tax (STT) from 0.125 per cent to 0.1 per cent on cash delivery transactions.
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THE IBS TIMES
BRAND TRACK—BRAND CONGRESS-HIDING BEHIND THE LONG LOST GLORY!
Congress-the sole decider of “democratic” India‟s fate has a very good branding exercise to give us all. Well unrealistic melodrama can serve a good platter for entertainment but the reality can get far worse.
Our so called youth icon Mr. Rahul Gandhi faced a sharp defeat in UP elections despite his door to door assurances of Changing India which has of course threatened the command of INC since UP being a major state no party can gain majority if lost here.
-ATREYEE SENGUPTA
Behind the scenes is something that has always captured my fancy so when the common man is still busy balancing his life‟s income statement I am on a reality check spree. Indian National Congress-the sole decider of “democratic” India‟s fate has a very good branding exercise to give us all. Well unrealistic melodrama can serve a good platter for entertainment but the reality can get far worse. Sometimes the stakes are at the expense of the hapless naïve while the intelligentsias are busy diving into their hollow inexplicable dogmas in vain. Sad but true! Ever since India and Britain had a mutual break up agreement signed, Congress stood strong with its head held high up in the air symbolizing a secular State for one and all. And thereafter came into power the Nehru-Gandhi dynasty thus giving the party a high recall power for every Indian. The brand equity further increased when every possible scheme generated by Congress bore the name of one of the assassinated high command protagonists of the party be it Indira Gandhi or Rajiv Gandhi. In fact when NREGA (National Rural Employment Guarantee Scheme) was a flop the prefix of Mahatma Gandhi simply widened its spectrum. Nevertheless the glory remained intact and congress came up with redoubled load of renewed enthusiasm in 2004 and 2009 General Elections and why not when a whopping 150-200 crores was attached with its campaigns mostly handled by Perfect Relations that has been a part of it right since the golden era of Rajiv Gandhi. Even the “Jai Ho” track and slogans like “Aam Aadmi ke badte kadam” had a gleam that faded even the “Shining India” campaigns led by BJP. The common man was more than happy to absorb the overfriendly ads and wait for their change of development. Now that “change” stood for what only the recent times can tell. The never ending scams have led the Tihar Jail brimming with politicians than criminals now of course both the professions are interchangeable in terms of usage. Our so called youth icon Mr. Rahul Gandhi faced a sharp defeat in UP elections despite his door to door assurances of Changing India which has of course threatened the command of INC since UP being a major state no party can gain majority if lost here. Again Pranab Sir‟s budget speech didn‟t have any bold reforms or major tax cuts which were mainly to handle or attain the fiscal discipline but it‟s however beyond the scope of understanding of the common man. The high profile Rail-Budget drama has put a big question mark on the transparency level of the Government and the will to stick to righteous instead of the powerful. Team Anna has suddenly vanished and the present status of Jan Lokpal Bill is completely alien to the masses. A generous amount of 16 crore has been kept aside for the protection of the most high profile criminal Ajmal Kasab. The victims of Bhopal Gas tragedy still await justice because the Parliament is busy prioritizing the nuclear liability bill with the US. And as if this were not all India is the home to fourth richest politician in the world Sonia Gandhi. Wonder how long will the country take to reach that stature? Well the blame game cannot simply be passed on to one political party alone at least not that bears an entity of being a witness to some of the most glorious years in the past and whose reins were or are at least handled by the best of educated men. The question over here is about accountability. A good product does not automatically sell for itself even that needs to be build up on a high stratum of brand management. So what congress is expected is to come up with a well drafted game plan so as to re-assure the support of its voters for it is high time that the so called visionaries put things in the right place because evil succeeds only when good men do nothing!
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THE IBS TIMES
FOCUS OF THE WEEK– PRANAB MUKHERJEE
He attended the Suri Vidyasagar College Suri (Birbhum), which was then affiliated with the University of Calcutta and holds a Master of Arts degree in History and Political Science & also has a degree in law from the University of Calcutta.
He also has the distinction of being a Minister for various high profile Ministries including Defence, Finance, External Affairs, Revenue, Shipping, Transport, Communication, Economic Affairs, Commerce and Industry.
-ANKIT SHARMA
Pranab Kumar Mukherjee is the current Finance Minister of India and leader of the current (15th) Lok Sabha. He was born on 11 December 1935, in West Bengal, India. His father Kamada Kinkar Mukherjee was a member of AICC and West Bengal Legislative Council (1952–64) and President District Congress Committee Birbhum (WB). He attended the Suri Vidyasagar College Suri (Birbhum), which was then affiliated with the University of Calcutta and holds a Master of Arts degree in History and Political Science & also has a degree in law from the University of Calc u t t a . He has a parliamentary career of over four decades, which began as a member of Rajya Sabha (upper house) from the Congress Party in 1969 and was re-elected in 1975, 1981, 1993 and 1999. In 1973, he joined the cabinet as Union Deputy Minister of Industrial Development. He rose through a series of cabinet posts to become the Finance Minister of India from 1982 to 1989. His term was noted for India not withdrawing the last billion installment of an IMF loan. It was Dr. Manmohan Singh who was serving Reserve Bank of India as Governor during Pranab's term as Finance Minister. He was not included in Rajiv Gandhi's cabinet after Lok Sabha election held subsequent to Indira Gandhi's assassination. He was pushed out of the Congress party for a brief period, and during this period he formed his own political party Rashtriya Samajwadi Congress, but later merged it with Congress party in 1989 after settlement with Rajiv Gandhi. His political career revived when P.V. Narasimha Rao chose to appoint him as deputy chairman of the planning commission and subsequently as a union cabinet minister. He served as External Affairs Minister for the first time from 1995 to 1996 in Rao‟s cabinet. In 1997 he was voted as an „Outstanding Parliamentarian‟. He was the President of the West Bengal state unit of Congress since 1985, but resigned in July 2010 due to work-load and was succeeded by Manas Bhunia. In 2004, when the Congress formed a government at the head of a coalition the new Congress Prime Minister Manmohan Singh was only a Rajya Sabha MP. So Pranab Mukherjee was made Leader of the House in the Lok Sabha when he won the Lok Sabha elections for the first time from Jangipur (Lok Sabha constituency). He also has the distinction of being a Minister for various high profile Ministries including Defence, Finance, External Affairs, Revenue, Shipping, Transport, Communication, Economic Affairs, Commerce and Industry. He also heads the Congress Parliamentary Party and the Congress Legislative Party which consists of all the Congress MPs and MLAs in the country apart from being Leader of the House in Lok Sabha, Bengal Pradesh Congress Committee President and the Union Cabinet Minister of Finance in the Council of Ministers under Prime Minister Manmohan Singh in the Congress-led Government. Pranab played a crucial role in steering the Cabinet pre-Lok Sabha elections when the Prime Minister underwent by-pass surgery by taking additional charges as chairman of the Cabinet Committee of Political Affairs and Union Minister in Finance Ministry despite already being Union Minister of External Affairs. Pranab Mukherjee married Suvra Mukherjee on July 13, 1957 and has two sons, Abhijit and Indrajit and a daughter.
DTC- Direct Tax Code- DTC rates proposed to be introduced for personal income tax. Exemption limit for the general category of individual taxpayers proposed to be enhanced from Rs 1,80,000 to Rs 2,00,000 giving tax relief of Rs 2,000. Upper limit of 20 per cent tax slab proposed to be raised from Rs 8 lakh to Rs 10 lakh.
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THE IBS TIMES MARKET WATCH
- SWATI VERMA
The Finance Minister this week did not leave any opportunity to disappoint the common man in India. The Budget could not deliver the much awaited relief expected out of it. Apart from raising the tax exemption limit to 2 lakh from the existing 1.8 lakh, there was nothing much to look forward to (to should be removed). Over the last few weeks, investors were hoping that the Union Budget could set the direction of the stock markets for some time to come but it failed to bring about the reforms that we all had been hoping for. The dull budget from the Finance Minister resulted in the markets ending on a lower note. The markets were down by 0.2% for the week ended March 16, 2012 and ended at 17466.20 down 209.65 points from the previous trading session, Nifty closed at 5317.90, down 62.60 points. However, the new Rajiv Gandhi Equity Savings scheme that would allow for some tax benefits on equity investments by first time investors could be positive for the Indian stock markets in the longer run. It could help in bringing (help bringing) in more domestic investor money into the stock markets for long term.
The Movers & Shakers of the Week
SURGES VOLTAS
%Change 9
DOWNFALLS NMDC LTD
%Change 16.4
JET AIRWAYS
8.5
TECH MAHINDRA
11.3
CESC LTD
8
BIOCON LTD
10.9
Earlier during the week, Reserve Bank of India (RBI) kept the key rates of repo, reverse repo and cash reserve ratio unchanged during its midquarter policy. The central bank however hinted at further lowering of interest rates but refused to give a time frame for the same. Pharma major Ranbaxy declared that it has opened a new production facility in Morocco. This will help Ranbaxy in having a direct presence in the North African pharma (pharmacy) market. The facility has been successfully audited by the Moroccan Health Authorities. It may be noted here that Moroccan phrama (pharmacy) market is pegged at US$ 1 billion. In some more news from the PSU banking space, in his budget statement, the Finance Minister proposed setting up of a company to hold the government's stake in banks. This will help in overcoming the problem of periodic capital investment in such PSU banks by the government that disturbs its fiscal calculations. It may be recollected here that the government has to often rely on LIC for funding these public sector enterprises. It had injected around Rs 80 billion in such banks to ensure that they had sufficient capital with them.
Global Cues: The world stock markets except China closed the week on a positive note. The European markets in particular showed a very positive performance after investor (investorsâ€&#x;) focus shifted from Greece to global growth. In the US too, markets posted their biggest gains of year during the course of the week. Federal Reserve's announcement regarding improving of (improvement of) the economy along with continued fall in unemployment triggered positive investor sentiments. China (down by 1.4%) was the only stock market to close the week in the red. European markets in particular showed positive performance led by Germany (up by 4%) and France (up by 3.1%).
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THE IBS TIMES MARKET WATCH 12 MARCH 2012 17,813.62
13 MARCH 2012 17,919.30
14 MARCH 2012 17,675.85
15 MARCH 2012 17,466.20
16 MARCH 2012 17,466.20
Nifty
5,359.55
5,429.50
5,463.90
5,380.50
5,317.90
DJIA
12,959.71
13,177.68
13,194.10
13,252.76
13,232.62
HangSeng
21,134.18
21,339.70
21,307.89
21,353.53
21,317.85
FTSE100
5,892.75
5,955.91
5,945.43
5,940.72
5,965.58
Gold ($/oz.)
1704.40
1676.90
1646.30
1661.70
1660.10
Crude($/bl)
123.88
124.59
124.29
123.03
-
INR v/s USD
49.33
49.93
50.43
50.84
51.10
INR v/s EURO
64.71
65.50
66.21
66.36
66.69
Sensex
- FIGURES NOT AVAILABLE Goods and Services Tax (GST) -The implementation of GST will lead to the abolition of other taxes such as octroi, Central Sales Tax, State-level sales tax, entry tax, stamp duty, telecom licence fees, turnover tax, tax on consumption or sale of electricity, taxes on transportation of goods and services, et cetera, thus avoiding multiple layers of taxation that currently exist in India. BUDGET JARGONS BY– ABHIGYAN SHARMA
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SourcesThe Economics Times, The Hindu Business Line, Times of India, Business Standard, Financial Ex-press, Financial Times, Business Week, Business World, The Economist, Wall Street Journal, Bloomberg, Reuters, Moneycontrol.com, Vccircle.com, yahoofinance.com, Business Today, India Today, Investopedia.com, Wikipedia.com, DNA, The Deccan Chronicle, The Hindu, The Tele-graph.
EDITORIAL TEAMABHIGYAN SHARMA, ANKIT SHARMA, ANKITA AGNIHOTRI, ATREYEE SENGUPTA, AVLEEN KAUR SARNA, DEVANSHI PODDAR, KAPIL OTSWAL, KRITIKA SETHI, POOJA DALAL, RAJ AGARWAL, SAMEER JANJHI, SUHANI GUPTA, SWATI VERMA
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