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Tuesday, 20 March 2012

Detailed Union Budget 2012-13(2)

3.Central subsidies to be kept under 2% of GDP to be further brought to 1.75% of GDP over the next 3 years.

The reforms program initiated in 1991 aimed at, among other things,reducing fiscal imbalances and improving allocative efficiency by minimizing the distortions in relative prices.
Subsidies are an important element of reforms.

The main objectives of subsidies are

1.Remove economic distortions , there by improving economic efficiency and growth.
2. Achieve redistributive objective
3.Reduce budgetary burden and release precious resources .
4.Improve the environment by realigning the incentive structure to favor environmentally sound practices.
Subsidies are different from transfer payments. 

Subsidies are categorized in two types.

1.Economic Subsidies:
     Agriculture &cooperation
     Irrigation & food control
     Power & energy
     Communication & others.
2.Social Subsidies:
     Water supply & sanitation
     Rural housing and others.

Economic Sector subsidies are nearly 5 1/2 times as large as that of the Social Sector

There are 6 types of Subsidies.

1. Cash subsidies: providing food or fertilizer to consumer at lower price
2.Interest or credit subsidies
3.Tax subsidies
4.In kind subsidies
5.Procurement subsidies
6.Regulatory subsidies. 

4.Proposed :Mobile based fertilizer management system; LPG transparency portal;scaling up and rolling out of Aadhaar enabled payment for Government schemes in at least 50 districts.

Mobile Based Fertilizer Management System:

The MFMS has been designed to provide all the information on fertilizers and subsidies. The system will be rolled out during 2012 and will benefit 120 million farmer families.
It will allow the government to set up a mechanism for directly transferring subsidies to the farmers across the country.
Direct transfer of subsidies to the retailer and eventually the farmer will be implemented in subsequent phases. This benefit 12 crore farmers, while reducing the leakages and expenditure on subsidies by curtailing the misuse of fertilizer.
LPG Transparency Portal:

Transparency portal is aimed at providing the citizens of India the information on the number of HP Gas consumers(distributors wise) and the number of refills consumed by HP Gas consumers 
Domestic LPG is a subsidized commodity and the subsidy is borne by the Government and the oil marketing companies
The portal aims at proving information on the consumers who are enjoying this subsidy and their consumption of HP gas domestic LPG cylinders.

Aadhaar enabled payments for government schemes:

APB is a repository of Aadhaar number of residents and their primary bank account number used for receiving all social security and entitlement payments from various government agencies.
This would weed out all fakes and ghosts from the system and ensure that the benefits reach the intended beneficiaries.


Sunday, 18 March 2012

Detailed Union Budget 2012-13

1.GDP growth to be 7.6% during 2012-13.

What is GDP?

2. Amendment to the FRBM(Fiscal Responsibility and Budget Management) act proposed as part of finance bill. 

The main features of this act are

1.Effective Revenue Deficit 
2.Medium term Expenditure Frame work.

What is FRBM Act?

FRBM( Fiscal Responsibility and Budget Management) was introduced in India by the then Finance Minister of India , Mr.Yashwant Sinha in December 2000.
The main purpose was to eliminate revenue deficit.

The main objects of the act were 

1. To introduce transparent fiscal management system in the country.
2.To introduce more equitable and manageable distribution of the country's debts over the years.
To aim for fiscal stability for India in the long run.

The main rules of the act were

1. The central Government shall not borrow from the RBI(Reserve Bank of India) except under exceptional circumstances where there is temporary shortage of cash in particular financial year.
2. It also prevent RBI from trading in the Primary market for government securities.
3.It restricted RBI to the trading of government securities in the secondary market after April ,2005.

The main failure point is

The rules of this act were unfavorable since it might require the government to cut back on social Expenditure necessary to create productive assets and general up liftment of rural poor of India.  The sudden fancy of monsoon in India,The social dependence on agriculture and over optimistic projections of the task force in charge of developing the targets.
Effective Revenue Deficit: It is the difference between revenue deficit and growth for creation of capital assets.This will help in reducing consumptive component of revenue deficit and create space for increased capital spending.

Medium Term Expenditure Frame work: It sets forth a three year rolling target for expenditure indicators.

Implementation of this act at cent re and the corresponding acts at state level was the pivot in the successful consolidation of fiscal balance prior to the global financial crisis of 2008

continued .....

Saturday, 17 March 2012

The five main key areas in the Budget2012-13

The focus of the government would be on five key areas

1.Growth recovery: 

The growth of the Indian economy estimated at 6.9% in 2011-12  has been disappointing. Agriculture and services have continued to grow but the industrial performance was acting as a drag.The global crisis has affected our Economy.Finance Minister wanted to recover the growth of economy by framing policies that trigger demand recovery.

2.Private investment:

 A private investment firms,mutual funds or other qualified investors purchase of stocks in a company at a discount to the current market value per share for the purpose of raising capital.
Finance minister ensuring rapid rise in private investment but he did nothing in his budget.


A bottleneck is a phenomenon where the performance or capacity of entire system is limited by a single or limited number of components or resources.
Finance minister recognized the sectors which are under stress and wanted to improve the performance of those particular sectors(Agriculture,energy,transport,coal,power and national highways) by removing bottlenecks.


Despite its rapid economic growth,India has struggled with persistently high rates of malnutrition, for worse than many worse performing economies.
A recent Indian survey found 42% of those under the age of 5 are underweight. India fares worse than some much poorer regions including sub-Saharan Africa, with an underweight rate of 24% according to the United Nations Children's Fund.In china ,the rate is 6% according to the UN Group.
Finance Minister increases the spending on malnutrition programs by 58%.

5.Governance Matters:

Finding ways to expedite implementation of decision,prompt delivery and good governance with transparency,while curbing black money and corruption.

Tuesday, 13 March 2012

Union Budget 2012-13 Expectations and Highlights


1.The government may motivate the pharma sector to boost the higher spending in research and development. The central government also planing to lower the taxes and duties on life saving drugs and active pharmaceutical ingredients(API).
2.The micro,small and medium enterprises(MSMES) sector is seeking separate consultation 
3.Ministry of Petroleum and Natural Gas has requested the Union Finance Ministry to lower the excise duty on branded diesel due to the strong decline in the sale of the fuel.
4.Association of Biotechnology led Entrepreneurs (ABLE) has demanded various fiscal and tax incentives from the Union Budget
5.Agricultural ministry has demanded lowering of interest rate on crop loans to 3% for those farmers who pay in time, from the existing 4%.
6.The tax exemption slab is expected to be increased from the present Rs.1.8 lakhs to Rs 3 lakhs in case the proposed recommendation of Yashwant Sinha led parliamentary standing committee on finance get cleared in the union budget for the year 2012-13.
7.Finance minister Mr.Pranab mukherjee attempt to push the entrepreneurs for more investment by introducing major investor-friendly policies.
8.Centre may reveal a series of measures in the union budget 2012-13 to help the export sector and also the micro,small and medium Enterprises(MSMES)in India.
9.Central Government is planing to increase the income tax exemption for up to Rs.3 lakhs paid as interest on housing loans in one year as compared to the current limit of Rs.1.5 lakhs with the aim to strengthen housing sector credit.


1.Tax reforms like implementation of GST(goods and service tax) and DTC(direct tax code).
2.Relaxation in service taxes.
3.Subsidies in FDI norms in sectors like Retail, media and BFSI etc.
4.Subsidies on Gas ,iol,fertilizer,food etc.

Tuesday, 6 March 2012

What is Union Budget?

It is the Financial Minister who prepares Union Budget in India,the date of announcement of Budget is decided by president.
The Budget has to be passed by the house before it can come into effect on April 1, the start of India's financial year.
Former Minister Morarji Desai presented the budget eight times the most by any.
Budget is a plan for saving, borrowing and spending. It is a financial plan and an organizational plan.
It provide a prediction of revenues and expenditures and enable the actual financial operation. We need Budget to control activities, to motivate and to evaluate the performance.

Union Budget is the annual report of India . It contains the government of India's revenue and expenditure for the end of a particular fiscal year, which runs from April 1 to March 31.

Union Budget contains revenues from all sources and expenses of all activities.
It consists of Revenue Budget and the Capital Budget. It also contains estimates for the next fiscal year.

Revenue Budget:

 The Revenue Budget consists of revenue receipts of the Government like revenues from Tax and other sources and expenditure.
There are two revenue receipts 
1.Tax revenue
2.Non-tax revenue
Tax revenues are made up of taxes such as income tax,corporate tax,excise,customs and other duties.
Non tax revenues are the government 's sources like interest on loans and dividends on investments like PSUs,fees etc.
Fiscal deficit: The government spends more than its earns is called fiscal deficit.

Capital Budget: 

 The Capital Budget consists of capital receipts and payments. 
Capital Receipts are Government loans raised from the public,government borrowing from the Reserve Bank and treasury bills,loans received from foreign bodies and governments divestment of equity holding in public sector enterprises,securities against small savings,state funds and special deposits. 
Capital Payments are capital expenditure on acquisition of assets like land,buildings,machinery, and equipment. Investments in shares,loans and advances granted by the central government to state and union territory governments,government companies,corporations and other parties.