First union budget was presented by Mr. Chetty on 26th November, 1947. From 1947 to 2012 union budget has sincerely followed its ‘parampara’ in Indian context.
Does Union budget 2012-13 satisfy, ‘I’ (taken from BRICS nations)?
From 2012 year India is entering into 12th five year plan; focus is faster, sustainable and inclusive growth. What are those indications, which Mr. Mukherjee tried to reflect on 16th March, 2012 for upcoming five year plan?
India share its prosperity with world through three main sectors, Agriculture (contributes 18%), Industry (26%) and Services (55%). In India inflation structure is largely driven by agriculture. To bring down inflation government introduce schemes for short term crop loans, cash inflow in rural banks and raised agriculture credit.
To maintain sustainability, India should sound strong in its financial sector. Funds inflow of 159bn, to capitalization of PSB, RRB and financial institutes. To improve investment; infra sector is open for foreign investment, QFI get green flag in Indian corporate bond market, STT cut from 20% to 0.1%, also by simplifying IPO process, to reach more retail investors.
Union budget 2012-13 gave some fresh oxygen to individual in direct tax, by basic exemption of I-T raised to 2 lakh from 1.8 lakh, additional deduction from saving bank account. These will results in high disposable income, which would impact on demand-driven growth.
To tap fiscal deficit government find direct way through raising indirect tax. Central excise duty and service tax increase by 200bps, this will increase inflationary pressure and delay in the interest rate cut. Custom duty remains unchanged, but to control domestic saving, custom duty on yellow metal has been doubled.
Major industrial impact,
On Automobile industry impact would be neutral, reasons are, excise duty increased by 2% but manufacturer would pass this burden to users, increase in import custom duty will force manufacturer to increase assembly activities in India, in-house R&D facilities gets benefits.
Power industry has positive impact, by exemption from custom duty on coal and LNG, will boost power production and reduction on withholding tax on interest by ECB from 10% to 5%, will increase funding.
Cement, Fertilizer and Metal & Mining industry would see positive impact, while other side Oil & Gas and Real Estate industry would see neutral impact. Parma will face negative impact by levy of Minimum Alternate Tax.
Union budget has its unique impact in each sector, this year for some it’s aesthetic and for some it’s dry.