India Union Budget 2011-2012

Key Features of the 2011-2012 Government of India Budget

OPPORTUNITIES

• Swift and broad based growth in 2010-11 has put the economy back to its pre-crisis growth trajectory. Fiscal consolidation has been impressive.
• Significant progress in critical institutional reforms that would set the pace for double-digit growth in the near future.
• Dynamism in the rural economy due to scaled up flow of resources to the rural areas.

CHALLENGES

• Structural concerns on inflation management to be addressed by improving supply response of agriculture to the expanding domestic demand and through stronger fiscal consolidation.
• Implementation gaps, leakages from public programmes and the quality of outcomes pose a serious challenge.
• Corruption as a problem to be fought collectively. Government to improve the regulatory standards and administrative practices.

OVERVIEW OF THE ECONOMY

• Gross Domestic Product (GDP) estimated to have grown at 8.6 per cent in 2010-11 in real terms. Economy has shown remarkable resilience.
• 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.

SUSTAINING GROWTH

• Areas of divergence with States on proposed Goods and Services Tax (GST) have been narrowed. As a step towards roll out of GST, Constitution Amendment Bill proposed to be introduced in this session of Parliament.
• 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.
• 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

• 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.
• “India Microfinance Equity Fund” of Rs 100 crore to be created with SIDBI. Government considering putting in place appropriate regulatory framework to protect the interest of small borrowers.
• Rs 5,000 crore to be provided to SIDBI for refinancing incremental lending by banks to these enterprises.
• Public sector banks to achieve a target of 15 per cent as outstanding loans to minority communities under priority sector lending at the earliest.
• Provision under Rural Housing Fund enhanced to Rs 3,000 crore.

AGRICULTURE

• Allocation under Rashtriya Krishi Vikas Yojana (RKVY) increased from Rs 6,755 crore to Rs 7,860 crore.
• Approval being given to set up 15 more Mega Food Parks during 2011-12.
• Augmentation of storage capacity through private entrepreneurs and warehousing corporations has been fast tracked.
• Capital investment in creation of modern storage capacity will be eligible for viability gap funding of the Finance Ministry.

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.
• To boost infrastructure development, tax free bonds of Rs 30,000 crore proposed to be issued by Government undertakings during 2011-12.
• Share of manufacturing in GDP expected to grow from about 16 per cent to 25 per cent over a period of 10 years. Government will come out with a manufacturing policy.
• National Mission for hybrid and electric vehicle to be launched.
• Financial Assistance to be made available for metro projects in Delhi, Mumbai, Bengaluru, Kolkata and Chennai.
• Proposal to introduce scheme for refund of taxes paid on services used for export of goods.
• Mega Cluster Scheme to be extended for leather products. Seven mega leather clusters to be set up during 2011-12.

STRENGTHENING INCLUSION

• Allocation for social sector in 2011-12 (Rs 1,60,887 crore) increased by 17% over current year. It amounts to 36.4% of total plan allocation.
• Allocation for Bharat Nirman programme proposed to be increased by Rs 10,000 crore from the current year to Rs 58,000 crore in 2011-12.
• Plan to provide Rural Broadband Connectivity to all 2,50,000 Panchayats in the country in three years.
• In pursuance of last years budget announcement to provide a real wage of Rs 100 per day, the Government has decided to index the wage rates notified under the MGNREGA to the Consumer Price Index for Agricultural Labour.
• Allocation for education increased by 24 per cent over current year. Sarva Shiksha Abhiyan. Rs 21,000 crore allocated, which is 40 per cent higher than Budget for 2010-11.
• Connectivity to all 1,500 institutions of Higher Learning and Research through optical fiber backbone to be provided by March 2012.
• National Innovation Council set up to prepare road map for innovations in India. Special grant provided to various universities and academic institutions to recognise excellence.
• Additional Rs 500 crore proposed to be provided for National Skill Development Fund during the next year.
• Plan allocations for health stepped-up by 20 per cent.
• Target of providing banking facilities to all 73,000 habitations having a population of over 2,000 to be completed during 2011-2012.
• Rs 200 crore proposed to be allocated for Green India Mission from National Clean Energy Fund.
• Rs 200 crore proposed to be allocated for launching Environmental Remediation Programmes from National Clean Energy Fund.
• Special allocation of Rs 200 crore proposed to be provided for clean-up of some more important lakes and rivers other than Ganga.
• Provision of Rs 1,64,415 crore, including Rs 69,199 crore for capital expenditure to be made for Defence Services in 2011-12.

IMPROVING GOVERNANCE

• From 1st October, 2011 ten lakh Aadhaar numbers will be generated per day.
• Various IT initiatives taken for efficient tax administration. These include e-filing and e-payment of taxes, adoption of ‘Sevottam’ concept by CBEC and CBDT, web based facility for tax payers to track the resolution of refunds and credit for pre-paid taxes and augmentation of processing capacity.
• A new scheme with an outlay of Rs 300 crore to be launched to provide assistance to States to modernise their stamp and registration administration and roll out e-stamping in all the districts in the next three years.

BUDGET ESTIMATES 2011-12

• Gross Tax receipts are estimated at Rs 9,32,440 crore.
• Non-tax revenue receipts estimated at Rs 1,25,435 crore.
• Total expenditure proposed at Rs 12,57,729 crore.
• Increase of 18.3 per cent in total Plan allocation.
• Increase of 10.9 per cent in the Non-plan expenditure.
• “Effective Revenue Deficit” estimated at 2.3 per cent of GDP in the Revised Estimates for 2010-11 and 1.8 per cent for 2011-12.
• Central Government debt estimated at 44.2 per cent of GDP for 2011-12 as against 52.5 per cent recommened by the 13th Finance Commission.

PART B TAX PROPOSALS

• Exemption limit for the general category of individual taxpayers enhanced from Rs 1,60,000 to Rs 1,80,000 giving uniform tax relief of Rs 2,000.
• Current surcharge of 7.5 per cent on domestic companies proposed to be reduced to 5 per cent.
• Tax incentives extended to attract foreign funds for financing of infrastructure.
• Lower rate of 15 per cent tax on dividends received by an Indian company from its foreign subsidiary.
• Investment linked deduction to businesses developing affordable housing.
• Weighted deduction on payments made to National Laboratories, Universities and Institutes of Technology to be enhanced to 200 per cent.
• System of collection of information from foreign tax jurisdictions to be strengthened.
• Scope of exemptions from Excise Duty enlarged to include equipments needed for storage and warehouse facilities on agricultural produce.
• Basic Custom Duty reduced for specified agricultural machinery from 5 per cent to 2.5 per cent.
• Basic Custom Duty reduced on micro-irrigation equipment from 7.5 per cent to 5 per cent.
• Rate of Export Duty for all types of iron ore enhanced and unified at 20 per cent ad valorem. Full exemption from Export Duty to iron ore pellets.
• Cash dispensers fully exempt from basic Customs Duty.
• Full exemption from basic Customs Duty and a concessional rate of Central Excise Duty extended to batteries imported by manufacturers of electrical vehicles.
• Concessional Excise Duty of 10 per cent to vehicles based on Fuel cell technology.
• Exemption granted from basic custom duty and special CVD to critical parts/assemblies needed for Hybrid vehicles.
• Reduction in Excise Duty on kits used for conversion of fossil fuel vehicles into Hybrid vehicles.
• Excise Duty on LEDs reduced to 5 per cent and special CVD being fully exempted.
• Basic Customs Duty on solar lantern reduced from 10 to 5 per cent.
• Parallel Excise Duty exemption for domestic suppliers producing capital goods needed for expansion of existing mega or ultra mega power projects.
• Full exemption from basic Customs Duty to bio-asphalt and specified machinery for application in the construction of national highways.
• Exemption from Import Duty for spares and capital goods required for ship repair units extended to import by ship owners.
• Service Tax on air travel both domestic and international raised.
• All individual and sole proprietor tax payers with a turn over upto Rs 60 lakh freed from the formalities of audit.

Courtesy: Govt of India and The Indian Express.
Please visit Govt of India - Ministry of Finance for more official details.

The 2010-2011 Government of India Budget may be found here.