Summer Training Project Report For A Macro Trend Analysis Of Capital Budget In India For 2009-2011

Submitted in partial fulfillment of the requirements for the award of the degree of

Bachelor of Business Administration (BBA) Semester-III (Paper Code-BBA 209)

To

Guru Gobind Singh Indraprastha University, Delhi

Guide: Ms. Neha Saini Shivani Submitted by Name of Student: Roll No.:13121101711 Batch:2011-2014

Institute of Information Technology & Management, New Delhi 110058 2012-13

Certificate

I, Ms Shivani, Roll No. -13121101711 certify that the Minor Project Report/Dissertation (Paper Code BBA-209) entitled A Macro Trend Analysis Of Capital Budget in India For 2009-2011 is completed by me by collecting the material from the refe renced sources. The matter embodied in this has not been submitted earlier for the award of any degree or diploma to the best of my knowledge and belief.

(Shivani) Date: Certified that the Minor Project Report (Paper Code BBA-209) entitled A Macro Trend Analysis of Capital Budget in India For 2009-2011 done by Ms. Shivani, Roll No. 13121101711, is completed under my guidance.

Designation: Professor Ms. Neha

Saini

Date:

Countersigned

Director/Project Coordinator

ACKNOWLEDGEMENT
This Project would not have been a success without the guidance and motivation of all my Mentors. I am thankful to all the persons behind this project.Project Work is never the accomplishment of an individual rather it is an amalgamation of the Efforts, ideas and cooperations of a number of entities. I would like to express my special thanks of gratitude to my teacher Ms. Neha Saini who gave me the golden opportunity to do this wonderful project on the topic A Macro trend Analysis on Capital Budget Of India for 2009-2011 which also helped me in doing lots of Research and I came to know about so many new things. I am really thankful to him.

Secondly I would also like to thank my parents and friends who helped me a lot in finishing this project within the limited time.

Shivani 13121101711

ASSIGNMENT DIRECTIVE

CONTENTS
S No Topic Page No

1 2 3 4 5 7 8 9 10 11

Certificate Acknowledgement Assignment Directive List of Tables List of Figures List of Abbreviations Executive Summary Body of the Report References/Bibliography Appendices

LIST OF TABLES Table No 1.1 1.2 3.1 Title Key Statistics Of Defence Budget Thirteenth Finance Commissions Proposed Roadmap for Defence Spending Capital Budget (Receipts And Capital Disbursements) Page No 10 13 40-41

LIST OF SYMBOLS S No 1 Symbol % Nomenclature & Meaning Percentage

LIST OF ABBREVIATIONS S No 1 2 3 4 Abbreviated Name GDP DPP NPV DCF Full Name Gross Domestic Product Defence Procurement Procedure Net Present Value Discounted Cash Flow

EXECUTIVE SUMMARY

The objective of writing the report for understanding topic A Macro Trend Analysis Of Capital Budget In India For 2009-2011. For collecting the material, a research was made by which we extracted the material from different sources like books and internet, and write comprehensive and exhaustive dissertation related to the topic. During the study the Concept of Capital Budget in general was studied and Concept of Capital Receipts and Capital Disbursement with its meaning was studied. Then further Different Sources of Receipts Capital Budgeting and Revenue Budgeting was studied and how Government allocate his Budget in different Sectors. Further Theoretical concept of Direct , Indirect Taxes ,Central Plan Outlay , Plan or NonPlan Expenditure was studied.

CHAPTER-1 What is Union Budget?

The dictionary meaning of budget is a systematic plan for the expenditure of a usually fixed Resource during a given period. Thus, Union Budget, which is a yearly affair, is a comprehensive display of the Governments Finances. It is the most significant economic and financial event in India. The Finance Minister Puts down a report that contains Government of Indias revenue and expenditure for one fiscal Year. The fiscal year runs from April 01 to March 31. The Union budget is preceded by an Economic Survey which outlines the broad direction of the Budget and the economic performance of the country. The Budget is the most extensive account of the Government`s finances, in which revenues from All sources and expenses of all activities undertaken are aggregated. It comprises the revenue Budget and the capital budget. It also contains estimates for the next fiscal year called budgeted Estimates. Barring a few exceptions -- like elections Finance Minister presents the annual Union Budget In the Parliament on the last working day of February. The budget has to be passed by the

Look Sabah before it can come into effect on April 01.

What is revenue budget?

The revenue budget consists of revenue receipts of the government (revenues from tax and other Sources) and the expenditure met from these revenues. Revenue receipts are divided into tax and non-tax revenue. Tax revenues are made up of taxes Such as income tax, corporate tax, excise, customs and other duties which the government levies. Non-tax revenue consist of interest and dividend on investments made by government, fees and other receipts for services rendered by Government. Revenue expenditure is the payment incurred for the normal day-to-day running of government departments and various services that it offers to its citizens. The government also has other expenditure like servicing interest on its borrowings, subsidies, etc. Usually, expenditure that does not result in the creation of assets, and grants given to state governments and other parties are revenue expenditures. However, all grants given to state governments and other parties are also clubbed under revenue expenditure, although some of them may go into the creation of assets. The difference between revenue receipts and revenue expenditure is usually negative. This means that the government spends more than it earns. This difference is called the revenue deficit.

What is a capital budget?

It consists of capital receipts and payments. The main items of capital receipts are loans raised by Government from public which are called Market Loans, borrowings by Government from Reserve Bank and other parties through sale of Treasury Bills, loans received from foreign Governments and bodies and recoveries of loans granted by Central Government to State and Union Territory Governments and other parties. Capital payments consist of capital expenditure on acquisition of assets like land, buildings, Machinery, equipment, as also investments in shares, etc., and loans and advances granted by Central Government to State and Union Territory Governments, Government companies, Corporations and other parties. Capital Budget also incorporates transactions in the Public Account.

What are direct taxes?

These are the taxes that are levied on the income of individuals or organizations. Income tax,Corporate tax, inheritance tax are some examples of direct taxation. Income tax is the

tax levied on individual income from various sources like salaries, investments, Interest etc. corporate tax is the tax paid by companies or firms on the incomes they earn.

What are indirect taxes?

These are the taxes paid by consumers when they buy goods and services. These include excise And customs duties. Customs duty is the charge levied when goods are imported into the country, and is paid by the Importer or exporter. Excise duty is a levy paid by the manufacturer on items manufactured within the country. These charges are passed on to the consumer.

What is plan and non-plan expenditure?

There are two components of expenditure - plan and non-plan. Of these, plan expenditures are estimated after discussions between each of the ministries Concerned and the Planning Commission. Plan expenditure forms a sizeable proportion of the Total expenditure of the Central Government. The Demands for Grants of the various Ministries Show the Plan expenditure under each head separately from the Non-Plan expenditure. Non-plan revenue expenditure is accounted for by interest payments, subsidies (mainly on food And fertilizers), wage and salary payments to government employees, grants to States and Union Territories governments, pensions, police, economic services in various sectors, other General Services such as tax collection, social services, and grants to foreign governments. Non-plan capital expenditure mainly includes defense, loans to public enterprises, loans to States, Union Territories and foreign governments.

What is the Central Plan Outlay?

It is the division of monetary resources among the different sectors in the economy and the Ministries of the government.

What is fiscal policy?

Fiscal policy is a change in government spending or taxing designed to influence economic activity. These changes are designed to control the level of aggregate Demand in the economy. Governments usually bring about changes in taxation, volume of Spending and size of the budget deficit or surplus to affect public expenditure.

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What is a fiscal deficit?

This is the gap between the government`s total spending and the sum of its revenue receipts and Non-debt capital receipts. It represents the total amount of borrowed funds required by the Government to completely meet its expenditure.

What is the Finance Bill?

The proposals of the Government for levy of new taxes, modification of the existing tax structure Or continuance of the existing tax structure beyond the period approved by Parliament is Submitted to Parliament through the Finance Bill. The Budget documents presented in terms of the Constitution have to fulfill certain legal and Procedural requirements and hence may not by themselves give a clear indication of the major Features of the Budget. To facilitate an easy comprehension of the Budget, certain explanatory documents are presented along with the Budget. The Union Budget 2010-11 has raised the defence outlays to Rs. 1,47,344 crore (US $31.9billion). This represents a growth rate of a mere 3.98 per cent, in nominal terms (or 0.3 per centin real terms) over the previous years allocation of Rs. 1,41,703 crore, and far below the 34 per cent nominal increase witnessed in the budget for 2009-10. The sudden dip in the defence budgets growth rate follows two related steps taken by the government. While the first one is related to the governments resolve about fiscal consolidation, the second is on account of the acceptance by the government of the recommendation of the Thirteenth Finance Commission (TFC). This commentary analyses the latest defence budget as well as the likely impact of TFCs recommendation on Indias future defence spending.

Defence Budget 2010-11: Key Statistics

Although the defence budget for 2010-11 has been increased by less than four per cent over the previous years allocation, it has nonetheless been increased by a modest 8.13 per cent over therevised estimate for 2009-10. In other words, the Ministry of Defence (MoD) has surrendered (at the time of revised estimate) Rs. 5,439 crore from the original allocations made in 2009-10. The surrendered amount could have been more if the Revenue Expenditure - which accounts for running expenses of the defence services - had not been revised upwards by Rs 1,561 crore over the original estimates. On the other hand, the Capital Expenditure most of which is accounted for acquisition of defence hardware - has been revised 11

downward by Rs. 7,000 crore. The marginal increase in the defence budget has a negative impact on almost all key components(see Table-I). On the positive side, however, the ratio between Revenue Expenditure and Capital Expenditure has been improved towards the latter. The improvement is largely due to the marginal increase in Revenue Expenditure, which itself was inflated in last years budget by salary increases and one-time arrears due to implementation of Sixth Central Pay Commission recommendations. Table-1.1: Key Statistics of Defence Budgets, 2009-10 and 2010-11 2009-10 Defence Budget (Rs. in Crore) Growth of Defence Budget (%) Revenue Expenditure (Rs in Crore) Growth of Revenue Expenditure (%) 1,41,703 34.19 86,879 50.85 2010-11 1,47,344 3.98 87,377 0.57 59.3 60,000 9.44 40.7 2.12 13.29

Share of Revenue Expenditure in Defence 61.3 Budget (%) Capital Expenditure (Rs. in Crore) Growth of Capital Expenditure (%) 54,824 14.20

Share of Capital Expenditure in Defence Budget 38.7 (%) Share of Defence Budget in GDP (%) 2.30

Share of Defence Budget in Central Government 13.88 Expenditure (%)

Sources: Ministry of Defence, Defence Services Estimates 2009-10 and Ministry of Finance, Union Budget 2011.Among the defence services, the Army with a budget of approximately Rs. 74,582 crore in 2010-11 has the largest share, distantly followed by the Air Force (Rs. 40,462 crore), Navy (Rs. 21,467 crore), DRDO (Rs. 9,809 crore), and Ordnance Factories (Rs. 1,015 crore). However, in terms of Capital Expenditure, the Air Force with a budget of Rs. 25,251 crore holds the largest share (42 per cent) among the three services, followed by the Army (Rs. 17,255 crore; 29 per cent) and the Navy (Rs. 12,138; 20 per cent).

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From the modernization point of view, out of Rs. 60,000 crore, nearly 78 per cent (Rs. 46,521) crore will be available to the three services for procurement of Aircraft and AeroEngine, Heavy and Medium Vehicles, Naval Ships, and Other Equipments (Armaments, Electronics, Ammunition, Missiles, etc.) among others. Within each services acquisition budget, the Air Force will have Rs. 15,206 crore for procurement of Air Craft and AeroEngine; while Rs. 10,464 crore have been provisioned for procurement of Other Equipments for the Army. The Navy will get Rs. 6,950 crore for procurement of Naval Fleet. Figure: Shares of Defence Services in Defence Budget 2010-11

Note: Figure is based on total Capital Outlay for Defence Services (Rs. 60,000 crore) minus Rs.7.50 crore, which is allocated under the Others head

Source: Ministry of Finance, Union Budget 2010-11

Why Meagre Growth in Defence Budget?

While presenting the Union Budget, the Finance Minister (FM) emphasised that Secure border and security of life and prosperity fosters development. The 3.8 per cent increase in the defence budget (in comparison to the 8.6 per cent increase in total central government expenditure) does not however seem to be fully in sync with the above emphasis. This is more so when Indias more troubling neighbours have increased their defence spending at a sharp pace. Of particular interest is China, whose double digit increase in defence spending over the past twenty years and resultant military modernisation in both qualitative and quantitative terms has been taken noteof by the Ministry of Defence. (Chinas 2009 official defence budget of $70.37 billion is 2.2 times that of Indias 2010 budget.) However the above note does not seem to be backed by adequate growth in Indias defence budget. In fact, in the last 10 years, Indias defence budget has grown by 10 per cent and more only in three years. Notwithstanding the seemingly direction-less growth in Indias defence budget, the reasons for the small increase in the latest defence budget is not so difficult to fathom. There are in fact two clear reasons for it. The first is related to the governments resolve to come back to the path of fiscal consolidation at the earliest. It is noteworthy that the central government had announced several stimulus packages to fight the economic crisis which was harsher in 2008-09. As a result the fiscal deficit had increased to an unsustainable level. Now with the crisis less severe, the government has made an attempt to bring down the fiscal deficit for 2010-11 to 5.5 per cent of GDP, as against 6 per cent in 2008-09 and 6.7 per cent in 2009-10 (revised estimate). The fiscal tightening means limited the scope for accommodating more resource demands from the MoD which accounts for over 13 per cent of total central government expenditure. The scope has been 13

further limited by the governments focus on inclusive growth, by way of increased agricultural, social and infrastructural spending. For instance, in the Union Budget, the Finance Minister has increased the Central Plan Outlay on Agriculture, Rural Development, Transport and Social Sector by 14 per cent to Rs. 2,97,065 crore. If the imperatives of fiscal consolidation and inclusive growth have limited government spending capacity, the MoDs inability to spend the resources allocated in the previous years budget has also not helped its cause. As mentioned earlier, the MoD has so far surrendered. Rs. 5,439 crore from its 2009-10 budget. This inability to spend has no doubt strengthened the Finance Ministrys justification for a smaller increase with the customary promise that anyadditional requirement for the security of the nation will be provided for. The Finance Ministry is fully aware that the MoD has difficulties in spending the allocated resources, especially the amount given in the capital account.

Impact of Thirteenth Finance Commission (TFC) Recommendations on Future Defence Spending up to 2014-15
If the Finance Ministrys emphasis on fiscal prudence and inclusive growth has resulted in a smaller increase in the latest defence budget, the Report of the Thirteenth Finance Commission, tabled in Parliament on February 25, 2010, also does not paint a very optimistic scenario for Indias future defence spending. The Constitutional Commission, which has recommended on specific aspects of Centre-State fiscal relations, has also proposed a roadmap for defence spending for the period 2010/11-2014/15. As per the roadmap, defence spending is to grow by an annual average of 8.33 per cent during this period, with the revenue and capital components slated to increase by an annual average of seven per cent and ten per cent, respectively. As a percentage of GDP, defence spending is to be progressively decreased to 1.76 per cent in 2014-15 (see Table-II). Table-1.2: Thirteenth Finance Commissions Proposed Roadmap for Defence Spending 2010/11-2014/15 Year Revenue Capital Total Defence Share of (Rs. in (Rs. in Crore) Expenditure Defence Crore) (Rs. in Crore) Expenditure in GDP (%) 2009-10 (BE) 2009-10 (Re-assessed) 2010-11 2011-12 2012-13 86,879 73,968 (-14.9) 79,146 (7.0) 84,686 (7.0) 90,614 (7.0) 54824 54,824 (0.0) 60,306 (10.0) 66,337 (10.0) 72,971 (10.0) 1,41,703 1,28,792 (-9.1) 1,39,452 (8.3) 1,51,023 (8.3) 1,63,585 (8.3) 2.42 2.20 2.12 2.03 1.94

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2013-14 2014-15

96,957 (7.0) 1,03,744 (7.0)

80,268 (10.0) 88,295 (10.0)

1,77,225 (8.3) 1,92,039 (8.4)

1.85 1.76

Notes: 1. Figures in parentheses represent percentage growth 2. The reassessed figures for 2009-10 is based on the figures of 2009-10 (BE) after factoring 3. In the one-time arrears due to implementation of Sixth Central Pay Commission. Source: Authors estimation based on the Report of the Thirteenth Finance Commission The significance of the above figures is that they are in sync with the fiscal consolidation part outlined by the Commission. More importantly, the Finance Ministry, which is in charge of implementing the Commissions recommendations, is not only in agreement with the path but also tries to better the fiscal roadmap suggested by the Commission. This means that MoDs future spending as outlined in the TFC could come under further stress in coming years.

The Road Ahead

While projecting the MoDs budget through 2014-15, the TFC took into account the projections made by both the Finance Ministry and the MoD. The final projection by the TFC however turned out to be the same as made by the Finance Ministry - possibly to the dissatisfaction of the MoD, which argued for the need to provide adequately for enhanced force multipliers. The TFC however stuck to its guns, saying the Finance Ministrys projections address these needs [of the MoD] and further added that:we [the Thirteenth Finance Commission] are of the view that there exists considerable scope toimprove the quality and efficiency of defence expenditure through increased private sector engagement, import substitution and indigenisation; improvements in procedures and practices and better project management, within the parameters of Government of Indias policy. Efforts in this direction will further expand the fiscal space available for defence spending. The above assessment made by the Finance Commission needs careful consideration, given the indication that Indias future defence budget may not grow as desired by the MoD. In this regard,the Defence Ministry needs to carve out a plan as to where it can bring efficiency in its spending. At present, the defence budget is broadly divided into Revenue and Capital expenditures, with the former accounting for nearly 60 per cent of total budget. However, given the cost-

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intensive nature of capital acquisition, the MoD, as argued rightly before the Finance Commission, needs more resources for enhanced force multipliers. This makes a case for rationalisation of revenue expenditure, if the overall budget is to grow by a fixed 10 per cent annually. The MoD has therefore to revisit its spending on major revenue components such as Pay and Allowance; Stores and Equipment; and Transportation, among others. Of particular focus should be Pay and Allowances, which has increased significantly from Rs. 24,690 crore in 2007-08 (budget estimate) to approximately Rs. 46,767 crore in 2010-11. The way defence Capital budget is spent has been major a source of major concern, expressed by various authorities, particularly the Comptroller and Auditor General of India C&AG). Besides, the repeated surrender of capital funds and Indias heavy import dependency have probably attracted the maximum attention for remedial measures.Although the MoD has taken a keen interest in alleviating the problems by way of revising the Defence (Capital) Procurement Procedure (DPP), some lacunae still persist. The biggest problem perhaps is the lack of an integrated acquisition structure, as brought out by the Reports of Group of Ministers (2001) and C&AG (2007). In the absence of accountability at one place, various acquisition functions, carried out by different agencies, lack a mission-oriented approach, often at the cost of optimum time-cost trade offs and indigenisation/self-reliance. This not only raises the acquisition cost but also delays or hampers defence preparedness. It is high time the MoD looks deep into this issue. The 2009 Union Budget Of India was presented by the Finance Minister , Pranab Mukhergi on 6 July 2009.

Background Budget Estimates Short Term Economic Rival Measures o Infra Structure Development o Agriculture Development o Export Growth Restoration Medium Term Economic Rival Measure Inclusive Development Measures Building Accountable institution Taxation o Direct Taxes o Indirect Taxes o Central Excise Duty Service Tax Reactions o political Parties o Industry o Share Market Refernces

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External Links

Background
During 2008-09, the growth rate of GDP of India fell from an average of over 9% in the previous three fiscal years to 6.7 %.The Wholesale price Index of India also witnessedlarge fluctuations between 13% in August 2008 to 0% in March 2009. The Fiscal Deficit of Indian government had gone up to 6.1% in March 2009. The budget was preceded by an interim budget by Pranab Mukherjee on 16 Feb 2009.

Budget Estimates
The total estimated expenditure for 2009-10 was 10,20,838 crore, of which 6,95,689 crore wastowards Non Plan and 3,25,149 crore towards Plan expenditure. Total estimated revenue was 6,19,842 crore, including revenue receipts of 6,14,497 and capital receipts of 5345 crores, excluding borrowings. The resulting Fiscal Deficit was 4,00,996 crore while revenue deficit was 2,82,735 crore.The gross tax receipts were budgeted at 6,41,079 crore and NonTax Revenue receipts at 1,40,279

Short term economic revival measures

Infrastructure development

Allocation of Allocation of Allocation of poor. Allocation of Allocation of Programme

15,800 crore to National Highway Authority Of India 12,887 crore to Jawaharlal Nehru National Urban Renewal Mission 3,973 crore for housing and provision of basic amenities to urban 500 crore for Brihan Mumbai Storm Water Drainage Project.. 2,080 crore for Accelerated Power Development And Reform

Agriculture development

Allocation of 411 crore for interest subvention for short term crop loans. Extension of time given to the farmers to pay their overdues under Debt Waiver And Debt Relief Scheme to 31 December 2009. Allocation under Accelerated Irrigation Benefit Programme (AIBP) increased by 75 %over B.E. 2008-09. Allocation under Rashtriya Krishi Vikas Yojana (RKVY) stepped up by 30 % in B.E. 2009-10 over B.E. 2008-09.

Export growth restoration

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Allocation of 124 crore for Market Development Assistance Scheme Extension of deadline for Interest subvention of 2 % on pre-shipment credit for employment oriented export sectors to 31 March 2010.

Medium term economic revival measures

Setting up of an expert group to advise on pricing petroleum products in sync with globalprices. Raising of the threshold for non-promoter public shareholding for listed companies. Setting up of State Level Bankers Committee for providing banking facilities in under-banked/unbanked areas in the next three years.

Inclusive development measures

Allocation of 39,100 crore to National Rural Employment Gaurantee Scheme National Food Security Act to be brought in to ensure entitlement of 25 kilo of rice or wheat per month at 3 per kilo to every family living below the Poverty Line in rural or urban areas. Allocation of 12,000 crore to Pradhan Mantri Gram Sadak Yojna and 7,000 crore to Rajiv Gandhi Gramin Vidyutikaran Yojna Allocation of 8,800 crore Indira Awaas Yojna and 2,000 crore toRural Housing Fund Allocation of 100 crore to Pratyan Mantri Adarsh Gram Yojna. Interest subsidy to poor households to be provided for loans up to 1 lakh. Increase of Corpus of Rashtriya Mahila Kosh from 100 crore to 500 National Mission For Female Literacy to be launched with the aim to reduce level of female illiteracy by half in three years. Full interest subsidy for student loans during the period of moratorium introduced for approved courses of study in technical and professional streams from recoganised institutions in India Plan outlay of Ministry Of Minority Affairs enhanced to 1,740 crore. 75 corers allocated for establishing three campuses for Aligarh Muslim University Setting up of Handloom mega clusters in West Bengal and Tamilnadu , Powerloom mega cluster in Rajasthan and mega clusters for carpets in Srinagar and Mirzapur. Allocation of 12,070 crore to National Rural Health Mission. Launching of eight national missions under National Action Plan On Climate Change. Setting up of National Ganga Basin River Authority and allocation of 562 crore for River and Lake Conservation Plans. One-time grant of 100 crore for Indian Council For Forestry Research, Dehradun

Building Accountable Institutions

Unique Identification Authority Of India to set up online data base with identity and biometric details of Indian residents.

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430 crore provided to modernise police machinery in the States. 2,284 crore proposed for construction of fences, roads, flood lights on the international borders. 1 lakh dwelling units for housing of Central Para-Militry Forces Of India personnel to be made. Increase of pension for servicemen at a cost of 2,100 crore. 495 crore allocated to setting up and upgrading of polytechnics 827 crore allocated for opening one Central University in each uncovered State. 50 crore allocated for Punjab University , Chandigarh. Outlay for Commonwealth Games 2010 increased to 3,472 crore. 500 crore allocated for rehabilitation of Srilankan Tamils. 2,113 crore allocated for IITS and NITS 1,000 crore allocated rebuilding the damaged infrastructure caused due to cyclone Ailain West Bengal.

Taxation
The tax proposals on direct taxes were claimed to be revenue neutral while those on indirect taxes were claimed to yield a net gain of 2,000 crore in a year.

Direct taxes

Increase of personal income tax exemption limit from 2.25 lakh to 2.40 lakh for senior citizens, from 1.80 lakh to 1.90 lakh for women tax payers and from 1.50 lakh to 1.60 lakh for all other categories of individual taxpayers. Increase of the deduction under section 80-DD to 1 lakh from 75,000. Elmination of surcharge of 10 % on personal income tax Extension of deduction in respect of export profits under sections 10A and 10B of the Income-tax Act till 2010-11. Abolition of Fringe Benefit Taxes Extension of weighted deduction of 150% on in-house R&D expenditure to all manufacturing businesses. Increase of Minimum Alternate Tax from 10% of book profits to 15%. Exemption of income of the National Pension Scheme Trust from income tax and any dividend paid to this Trust from dividend Distribution Tax. Abolition of Commodity Transaction Tax introduced in The Finance Act, 2008 . Extension of the tax holiday under section 80-IB(9) to profits derived from the commercial production of mineral oil and natural gas from oil and gas blocks

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awarded under the New Exploration Licensing Policy-VIII round of bidding.

Indirect taxes

Imposition of 5% basic Custom Duties to imported Set Top Boxes Reduction of basic customs duty of LCD Panel from 10% to 5% Extension of CVD exemption of 4% for components of mobile phones. Reduction of customs duty from 10% to 5% for life saving drugs. Reduction of customs duty from 7.5% to 5% for life saving devices used in treatment of heart conditions. Increase of customs duty from 100 to 200 per ten grams for gold bars, from 250 to 500 per ten grams for gold jewellery and from 500 to 1000 per kg for silver.

Central excise duties

Restoring the ad valorem central excise duty of 4 % for cotton textiles beyond the fibre stage. Reduction of basic customs duty on wool waste and cotton waste from 15% to 10%. Increase of central excise duty rates for items attracting the rate of 4 % to a mean rate of 8% with exceptions like food items and drugs. Reduction of basic customs duty on bio-diesel from 7.5 % to 2.5 % Full exemption to such goods manufactured at site for construction industry, when used for further construction at site. Reduction of ad valorem duty for vehicles of engine capacity above 2000 cc to 15,000 from 20,000 Reduction of excise duty for Petrol driven trucks from 20% to 8%. Exemption of branded jewellery from excise duty.

Service tax

Exemption of service tax on the membership and other fees collected by Federation Of Indian Exports Organizations Extension of service tax to goods carried by Indian Railways and those carried as coastal cargo or through inland waterways

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Extension of service tax on advice, consultancy or technical assistance provided in the field of law.

Exemption of service tax for private enterprises transporting passengers in vehicle having Contract Carriage Permits

Reactions Political parties

Bharatiya Janta Party (BJP) president Rajnath Singh criticized the budget, claiming that the government failed to fulfil the people's expectations. BJP leader Venkaish Naidu described the Budget as "escapist" and alleged that no steps were taken to attract investment or to provide relief for farmers. Communist Party Of India (Marxist) (CPM) leader Brinda Karat termed the Budget as s pro-rich and claimed that there were no major allocations in health, education and food subsidy. Communist Party Of India (CPI) leader Gurudas Das Gupta criticized the projected economic growth as 'utopian'. RJD chief Lalu Prasad Yadav described the Budget as balanced but criticized it for not providing funds for reconstruction of Bihar following the floods In Kosi.

Industry
The Confederation Of Indian Industry welcomed the budget, claiming that many of their recommendations were implemented.NASS also welcomed the initiatives like modernization of employment exchanges, the UIAD project, and smart cards for healthcare services. Sudip Nandy, CEO of Aricent lauded the one year extension granted to the tax holiday scheme and the abolition of Fringe Benefit Tax and double taxation on the packaged software. D Sucheth Rao of Neuland Laboratories claimed that the government has largely ignored the demands of the Pharma segment.

Share market
Sensex- the benchmark index of Bombay Stock Exchange reacted adversely to the budget, falling over 869 points, a loss of 6.53%- the biggest fall on any budget day and in 2009. Nifty of National Stock Exchange fell by 258 points. The biggest impact was on banking stocks, with the sectoral index losing 8.17%

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CHAPTER-2
Capital budgeting (or investment appraisal) is the planning process used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing. It is budget for major capital, or investment, expenditures. Many formal methods are used in capital budgeting, including the techniques such as Accounting Rate Of Return Payback Period Net Present Value Profitability Index Internal Rate Of Return Modified Internal Rate Of Return Equivalent Annuity Real Option Valuation These methods use the incremental cash flows from each potential investment, or project. Techniques based on accounting earnings and accounting rules are sometimes used though economists consider this to be improper - such as the accounting rate of return, and "return on investment." Simplified and hybrid methods are used as well, such as payback period and discounted payback period. Net Present Value Internal Rate Of Return Equivalent Annuity Method Real Options Ranked Process Funding Sources External Links And References

Net present value

Main article: Net Present Value Each potential project's value should be estimated using a Discounted Cash Flow(DCF) valuation, to find its net Present Value (NPV). (First applied to Corporate Finance by Jeol Dean in 1951; see Also Fisher Separation Theorem ,John Burr William Theory.) This valuation requires estimating the size and timing of all the incremental cash flows from the project. (These future cash highest NPV(GE).) The NPV is greatly affected by the discount 22

rate, so selecting the proper rate sometimes called the hurdle rate - is critical to making the right decision. The hurdle rate is the Minimum Exceptable Rate of Return on an investment. This should reflect the riskiness of the investment, typically measured by the volatility of cash flows, and must take into account the financing mix. Managers may use models such as the CAPM or the APT to estimate a discount rate appropriate for each particular project, and use the weighted Average cost of capital(WACC) to reflect the financing mix selected. A common practice in choosing a discount rate for a project is to apply a WACC that applies to the entire firm, but a higher discount rate may be more appropriate when a project's risk is higher than the risk of the firm as a whole.

Internal rate of return

Main article: Internal Rate of Return The Internal Rate of Return (IRR) is defined as the discounted rate that gives a net present value(NPV) of zero. It is a commonly used measure of investment efficiency. The IRR method will result in the same decision as the NPV method for (non-mutually exclusive) projects in an unconstrained environment, in the usual cases where a negative cash flow occurs at the start of the project, followed by all positive cash flows. In most realistic cases, all independent projects that have an IRR higher than the hurdle rate should be accepted. Nevertheless, for mutually exclusive projects, the decision rule of taking the project with the highest IRR - which is often used - may select a project with a lower NPV. In some cases, several zero NPV discount rates may exist, so there is no unique IRR. The IRR exists and is unique if one or more years of net investment (negative cash flow) are followed by years of net revenues. But if the signs of the cash flows change more than once, there may be several IRRs. The IRR equation generally cannot be solved analytically but only via iterations.One shortcoming of the IRR method is that it is commonly misunderstood to convey the actual annual profitability of an investment. However, this is not the case because intermediate cash flows are almost never reinvested at the project's IRR; and, therefore, the actual rate of return is almost certainly going to be lower. Accordingly, a measure called Modified Internal Rate of return (MIRR) is often used. Despite a strong academic preference for NPV, surveys indicate that executives prefer IRR over NPV, although they should be used in concert. In a budget-constrained environment, efficiency measures should be used to maximize the overall NPV of the firm. Some managers find it intuitively more appealing to evaluate investments in terms of percentage rates of return than dollars of NPV.

Equivalent annuity method

Main article: Equivalent Annuity Cost The equivalent annuity method expresses the NPV as an annualized cash flow by dividing it by the present value of the annuity factor. It is often used when assessing only the costs of specific projects that have the same cash inflows. In this form it is known as the equivalent annual cost (EAC) method and is the cost per year of owning and operating an asset over its entire lifespan.

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It is often used when comparing investment projects of unequal lifespans. For example if project A has an expected lifetime of 7 years, and project B has an expected lifetime of 11 years it would be improper to simply compare the net present values (NPVs) of the two projects, unless the projects could not be repeated. The use of the EAC method implies that the project will be replaced by an identical project. Alternatively the chain method can be used with the NPV method under the assumption that the projects will be replaced with the same cash flows each time. To compare projects of unequal length, say 3 years and 4 years, the projects are chained together, i.e. four repetitions of the 3 year project are compare to three repetitions of the 4 year project. The chain method and the EAC method give mathematically equivalent answers. The assumption of the same cash flows for each link in the chain is essentially an assumption of Zero inflation, so a real interest rate rather than a no9minal interest rate is commonly used in the calculations.Y

Real options
Main article: Real Options AnalysisReal Option analysis has become important since the 1970s as option Prising models have gottenmore sophisticated. The discounted cash flow methods essentially value projects as if they wererisky bonds, with the promised cash flows known. But managers will have many choices of how to increase future cash inflows, or to decrease future cash outflows. In other words, managers get to manage the projects - not simply accept or reject them. Real options analysis try to value the choices the option value - that the managers will have in the future and adds these values to the NPV. Ranked Projects The real value of capital budgeting is to rank projects. Most organizations have many projects that could potentially be financially rewarding. Once it has been determined that a particular project has exceeded its hurdle, then it should be ranked against peer projects (e.g. - highest profitability Index to lowest Profitability index). The highest ranking projects should be implemented until the budgeted capital has been expended.

Funding Sources
When a corporation determines its capital budget, it must acquire said funds. Three methods are generally available to publicly traded corporations Corporate bonds , Preferred Stock , and common stock. The ideal mix of those funding sources is determined by the financial managers of the firm and is related to the amount of financial risk that corporation is willing to undertake. Corporate bonds entail the lowest financial risk and therefore generally have the

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lowestinterest rate. Preferred stock have no financial risk but dividends, including all in arrears, must be paid to the preferred stockholders before any cash disbursements can be made to common stockholders; they generally have interest rates higher than those of corporate bonds. Finally, common stocks entail no financial risk but are the most expensive way to finance capital projects. The Internal Rate of Return is very important

What is a revenue budget?

The revenue budget consists of revenue receipts of the government (revenues from tax and other sources), and its expenditure. Revenue receipts are divided into tax and non-tax revenue. Tax revenues are made up of taxes such as income tax, corporate tax, excise, customs and other duties that the government levies. In non-tax revenue, the government's sources are interest on loans and dividend on investments like PSUs, fees, and other receipts for services that it renders. Revenue expenditure is the payment incurred for the normal day-to-day running of government departments and various services that it offers to its citizens. The government also has other expenditure like servicing interest on its borrowings, subsidies, etc. Usually, expenditure that does not result in the creation of assets, and grants given to state governments and other parties are revenue expenditures. The difference between revenue receipts and revenue expenditure is usually negative. This means that the government spends more than it earns. This difference is called the revenue deficit.

Meaning of Capital Budgeting

Capital expenditure budget or capital budgeting is a process of making decisions regarding investments in fixed assets which are not meant for sale such as land, building, machinery or furniture. The word investment refers to the expenditure which is required to be made in connection with the acquisition and the development of long-term facilities including fixed assets. It refers to process by which management selects those investment proposals which are worthwhile for investing available funds. For this purpose, management is to decide whether or not to acquire, or add to or replace fixed assets in the light of overall objectives of the firm. What is capital expenditure, is a very difficult question to answer. The terms capital expenditure are associated with accounting. Normally capital expenditure is one which is intended to benefit future period i.e., in more than one year as opposed to revenue 25

expenditure, the benefit of which is supposed to be exhausted within the year concerned.

Nature of Capital Budgeting

Nature of capital budgeting can be explained in brief as under

Capital expenditure plans involve a huge investment in fixed assets. Capital expenditure once approved represents long-term investment that cannot be reserved or withdrawn without sustaining a loss. Preparation of coital budget plans involve forecasting of several years profits in advance in order to judge the profitability of projects.

It may be asserted here that decision regarding capital investment should be taken very carefully so that the future plans of the company are not affected adversely.

Procedure of Capital Budgeting

Capital investment decision of the firm have a pervasive influence on the entire spectrum of entrepreneurial activities so the careful consideration should be regarded to all aspects of financial management. In capital budgeting process, main points to be borne in mind how much money will be needed of implementing immediate plans, how much money is available for its completion and how are the available funds going to be assigned tote various capital projects under consideration. The financial policy and risk policy of the management should be clear in mind before proceeding to the capital budgeting process. The following procedure may be adopted in preparing capital budget :(1) Organization of Investment Proposal. The first step in capital budgeting process is the conception of a profit making idea. The proposals may come from rank and file worker of any department or from any line officer. The department head collects all the investment proposals and reviews them in the light of financial and risk policies of the organization in order to send them to the capital expenditure planning committee for consideration. (2) Screening the Proposals. In large organizations, a capital expenditure planning committee is established for the screening of various proposals received by it from the heads of various departments and the line officers of the company. The committee screens the by the committee whether the proposals are within the selection criterion of the firm, or they do not lead to department imbalances or they are profitable. 26

(3) Evaluation of Projects. The next step in capital budgeting process is to evaluate the different proposals in term of the cost of capital, the expected returns from alternative investment opportunities and the life of the assets with any of the following evaluation techniques: Degree of Urgency Method (Accounting Rate of return Method) Pay-back Method Return on investment Method Discounted Cash Flow Method. (4) Establishing Priorities. After proper screening of the proposals, uneconomic or unprofitable proposals are dropped. The profitable projects or in other words accepted projects are then put in priority. It facilitates their acquisition or construction according to the sources available and avoids unnecessary and costly delays and serious cot-overruns. Generally, priority is fixed in the following order.

Current and incomplete projects are given first priority. Safety projects ad projects necessary to carry on the legislative requirements.

Projects of maintaining the present efficiency of the firm. Projects for supplementing the income

Projects for the expansion of new product.

(3) Final Approval. Proposals finally recommended by the committee are sent to the top management along with the detailed report, both o the capital expenditure and of sources of funds to meet them. The management affirms its final seal to proposals taking in view the urgency, profitability of the projects and the available financial resources. Projects are then sent to the budget committee for incorporating them in the capital budget. (4) Evaluation. Last but not the least important step in the capital budgeting process is an evaluation of the programmed after it has been fully implemented. Budget proposals and the net investment in the projects are compared periodically and on the basis of such evaluation, the budget figures may be reviewer and presented in a more realistic way.

Significance of capital budgeting

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The key function of the financial management is the selection of the most profitable assortment of capital investment and it is the most important area of decision-making of the financial manger because any action taken by the manger in this area affects the working and the profitability of the firm for many years to come. The need of capital budgeting can be emphasised taking into consideration the very nature of the capital expenditure such as heavy investment in capital projects, long-term implications for the firm, irreversible decisions and complicates of the decision making. Its importance can be illustrated well on the following other grounds:(1) Indirect Forecast of Sales. The investment in fixed assets is related to future sales of the (2) firm during the life time of the assets purchased. It shows the possibility of expanding the production facilities to cover additional sales shown in the sales budget. Any failure to make the sales forecast accurately would result in over investment or under investment in fixed assets and any erroneous forecast of asset needs may lead the firm to serious economic results. (3) Comparative Study of Alternative Projects Capital budgeting makes a comparative study of the alternative projects for the replacement of assets which are wearing out or are in danger of becoming obsolete so as to make the best possible investment in the replacement of assets. For this purpose, the profitability of each projects is estimated. (4) Timing of Assets-Acquisition. Proper capital budgeting leads to proper timing of assets-acquisition and improvement in quality of assets purchased. It is due to ht nature of demand and supply of capital goods. The demand of capital goods does not arise until sales impinge on productive capacity and such situation occur only intermittently. On the other hand, supply of capital goods with their availability is one of the functions of capital budgeting. (5) Cash Forecast. Capital investment requires substantial funds which can only be arranged making determined efforts to ensure their availability at the right time. Thus it facilitates cash forecast. (6) Worth-Maximization of Shareholders. The impact of long-term capital investment decisions is far reaching. It protects the interests of the shareholders and of the enterprise because it avoids over-investment and under-investment in fixed assets. By selecting the most profitable projects, the management facilitates the wealth maximization of equity share-holders. (7) Other Factors. The following other factors can also be considered for its significance:-

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It assist in formulating a sound depreciation and assets replacement policy. It may be useful n considering methods of coast reduction. A reduction campaign may necessitate the consideration of purchasing most up-todate and modern equipment. The feasibility of replacing manual work by machinery may be seen from thecapital forecast be comparing the manual cost an the capital cost. The capital cost of improving working conditions or safety can be obtained through capital expenditure forecasting. It facilitates the management in making of the long-term plans an assists in the formulation of general policy. It studies the impact of capital investment on the revenue expenditure of the firm such as depreciation, insure and there fixed assets.

CHAPTER-3 Capital Receipts

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"Capital receipts" are the other type of receipts, which accounting methods differentiate from revenue receipts. Capital receipts refer to nonrecurring sources of money that a business rarely uses. A company could create a capital receipt by selling an asset for cash, but the most common transaction 29

is the sale of equity. Businesses sell shares of ownership in their entities to investors in the form of stock. Investors buy the stock based on market value, creating capital receipts for a business.

2. Definition 3.
"Revenue receipts" refer to all money the business makes through its operations. This is a type of recurring profit that comes from repeat transactions with customers, which the business needs to survive. The business makes these repeat transactions to generate enough revenue to continue operations. Without revenue receipts, businesses fail. Sources o Revenue receipts are called a "collection of receipts" because each business transaction generates revenue that the business is owed, or revenue filed under accounts receivable until customers pay it. Manufacturers create revenue receipts when they sell products. Financial companies create them when they sell services. Banks earn receipts through interest when they make loans. The method of earning this revenue varies by industry. Discounts and other special deals may lower revenue receipts from their customary amounts.
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Receipts vs. Payments

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Revenue receipts do not always match revenue payments, especially in businesses with large revenue receipts. The customer may pay only half of the price in a transaction and make the balance payment in installments later on. This causes the revenue receipt to reflect an inaccurate amount of profit, especially if the customer never pays the full amount.

Revenue Receipts Revenue receipts are divided into tax and non-tax revenues. Tax revenues consist of the proceeds of taxes and other duties levied by the central government. Tax revenues, an important component of revenue receipts, comprise of direct taxes which fall directly on individuals (personal income tax) and firms (corporation tax), and indirect taxes like excise taxes (duties levied on goods produced within the country), customs duties (taxes imposed on goods imported into and exported out of India) and service tax Excise taxes are the single largest revenue earner contributing 35.7 per cent of total tax revenue in 2003-04. Other direct taxes like wealth tax, gift tax and estate duty (now abolished) have never been of much significance in terms of revenue yield and have thus been referred to as paper taxes. Two new taxes the fringe benefits tax (on those benefits enjoyed collectively by the employees) and on cash withdrawals from banks over a certain threshold in a day were introduced in the budget for 2005-06. The share of direct taxes in gross tax revenue has increased from 19.1 per cent in 1990-91 to 41.3 per cent in 2003-04. There has been a reduction in the share of indirect tax revenue, 30

falling from 78.4 per cent in 1990-91 to 57.9 per cent in 2003-04. The redistribution objective is sought to be achieved through progressive income taxation, in which higher the income, higher is the tax rate. Firms are taxed on a proportional basis, where the tax rate is a particular proportion of profits. With respect to excise taxes, necessities of life are exempted or taxed at low rates, comforts and semi-luxuries are moderately taxed, and luxuries, tobacco and petroleum products are taxed heavily. Non-tax revenue of the central government mainly consists of interest receipts (on account of loans by the central government which constitutes the single largest item of non-tax revenue), dividends and profits on investments made bythe government, fees and other receipts for services rendered by the government. Cash grants-in-aid from foreign countries and international organisations are also included. The estimates of revenue receipts take into account the effects of tax proposals made in the Finance Bill.

Capital receipts The internal debt constitute the main sources of capital receipts 78.84 percent of total capital receipts in 2008-09(A/C), 95.66 percent in 2009-10 RE and 89.00 percent in 2010-11. Loans and advances from the Central Government the second major source constitute 20.92percent of total capital receipts in 2008-09(A/C) decreased to 11.55 percent in 200910(RE) and in 2010-11(BE) the contribution from this source decreased to 10.48 percent. Loans and advances repaid to UT Govt.(Recoveries) which constitute 1.11 percent of Capital Receipts in 2008-09 decreased to its importance percent in 2009-10(RE) and in 2010-11(BE). Capital Disbursements: Capital outlay which constitute major share of Capital disbursement increases from 67.51 percent of total capital disbursement in 2008-09 to 76.20 percent in 2009-10(RE) and 83.38 percent in 2010-11(BE).Repayment of Loans and advances to Central Government, the second major share of capital disbursement decreased from 31.68 percent in 2008-09(A/C),23.41percent in 2009-10 (RE) and 16.29 percent in 2010-11(BE). The share of disbursement of loans and advances by the Govt. has decreased from 0.74 percent in 2008-09 to 0.33 percent in 2010-11 The Table - 11 presents item-wise allocation of Capital Expenditure for Development and NonDevelopment Services.

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Table 3.1 Sl .no.

Capital Budget Items Revised Estimates (2009-10) 88728.00* 84882.00 74638.00 10244.00 520.00

(Rs in Lakhs) Budget Estimates (2010-11) 116400.00 115800.00 103600.00 12200.00 600.00

A. I. 1.

2. II.

RECEIPTS Consolidated Fund Public Debt i. Internal debt ii.Loans and advances from GOI Loans and advances repaid to State Government

III.

Public Account 1 Small Savings, Provident fund etc. 2 Reserve fund 3 Deposits and advances 4 Suspense and miscellaneous 5 Remittances Gross Capital Receipts(I+II+III)

733190.15 19375.00 1200.00 10948.27 612242.88 0 821918.15

814487.81 21400.00 500.00 12024.31 670567.50 0 930887.81

IV.

B. Sl.no.

CAPITAL DISBURSEMENT Items Revised Estimates (2009-10) 56015.41 42684.09 13114.07 0 13114.07 217.25 0 0 Budget Estimates (2010-11) 217.25 75614.80 14770.00 0 14770.00 305.04 0 0

Consolidated Fund Capital Outlay Discharge of Public Debt i) Internal Debt ii) Repayment Of Loan And Advances to GOI Loans and advances by the State Government Appropriation to Contingency fund Contingency Fund

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Public Account Small Savings, Provident fund etc. Reserve fund Deposits and advances Suspense and miscellaneous Remittances

623194.38 16720.00 0 8415.00 598059.38 0

678290.21 18242.00 0 9182.00 650866.21 0 768980.05

Gross Capital Disbursements (I+II+III)

679209.79

* Includes Rs.3326.00 lakhs as miscellaneous Capital Receipts.

The Capital Expenditure Survey

The mandate of the Capital Expenditure (CAPEX) Survey is to measure annual intentions and realized capital expenditures. The survey provides, on a calendar year, a series of annual estimates of investment in or expenditures on fixed capital in Canada. Fixed capital is produced capital that is used in the process of economic production, generally over a period of years. The survey consists of two survey cycles. In the spring, a questionnaire is sent to respondents with investment questions concerning the preceding year (actual data). In the fall, our questionnaire consists of two parts: the first part contains questions for the year that is just ending (preliminary data) and the second part requires data for the upcoming year (intentions data). This is the only major Statistics Canada survey relating to a period in advance of its release date. The Capital Expenditure Survey is a Unified Enterprise Survey and, as such, shares concepts and methodology with the rest of the UES surveys. The survey is establishmentbased and its sample selection is co-ordinated with the UES program. The main output of the CAPEX program is the publication, Private and Public Investment in Canada , Intentions. In addition, Capital Expenditures by Type of Asset and Foreign and Domestic Investment in Canada , are also published. All the data in these publications are available on CANSIM (Canadian Socio-Economic Information Management System).

Objectives and uses of the CAPEX Survey

The object of the Survey is to collect accurate and timely measures of current investment. Besides collecting data on capital construction and capital machinery and equipment, the

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Survey also collects and distributes information on the following: capacity utilization repairs service lives disposals (selling price, age, book value) land investment put in place by own work force versus contractors reasons for change in investment work in progress assets acquired for lease to others percentage of investment directed at improving productivity purchases of used assets. The program has two prime internal clients: the System of National Accounts (SNA) and the Investment and Capital Stock Division (ICSD) itself. In the SNA, the program estimates are the particular industries. This is in part because capital expenditures account for a large and highly variable proportion of gross domestic product, and also because of the role of capital in economic production. These series are a direct input into the provincial equalization payments formula for the revenue base. CAPEX supplies series on machinery and equipment, repairs, cost of materials and government sector construction. These series are all used directly in the formula.In addition, with particular reference to the intentions phase of the survey, information on the relative size of the planned Capital Expenditures Program, both in total and for individual industries, gives an indication of the views business management hold on the future market demands in relation to present productive capacity. The information is used by federal and provincial governments and agencies, trade associations, universities and international organizations for policy development and as a measure of regional activity.

Coverage and sample selection

The survey frame consists of all organizations in Canada that could invest in fixed capital. A probability sample is selected annually from the Business Register. Each of the CAPEX surveys is sent to 30,000 sample establishments (out of a universe of approximately 2 million), for a total of Full text than 60,000 questionnaires each year. The sampling unit selected for the Capital Expenditure Survey is the establishment, which best corresponds to the gathering and disclosure of investment data. Before sampling begins, all units from the private sector not in the mining and manufacturing industries are grouped together using the following method: all establishments operating in the same province, in the same six-digit-code industrial sector and under the same enterprise are grouped together in a single super-establishment. The income of the super-establishment is the sum of all income for the establishments that comprise it, while the remaining information is taken from the head of the group, either the head office, where possible, or the establishment with the highest income, where

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applicable. For the public sector, all the units are in the sample. Once the new universe is constructed with the new super-establishments, all units with income of less than a certain limit are eliminated from the frame unless they constitute head offices or laboratories, in which case the units are chosen with certainty. This procedure is instituted to avoid 'losing' these units, which generate practically no income, but might account for substantial investment. The sample is then stratified by geographic location, industrial classification and also by Country of Control. The geographic division is based on the 13 provinces and territories, with no other refinement. Nine Countries of Control were considered in the stratification: Canada, USA, Germany, Japan, France, Great Britain, Sweden, Italy and Netherlands. The remaining countries were grouped together. For the industrial stratification, the 1997 NAICS is used at the level required for estimation purposes. If, for example, for a certain industry, the most disaggregated level published corresponds to the 3-digit NAICS, this will be the stratification level. Once the initial stratification has been introduced, we compute the coefficient of variation (CV) to be targeted using the revenue variable to reach the CV set for the most disaggregated publication levelin our case, by province and different industrial classification levels. For the take-some strata, selection is based on a simple random process under the constraints of minimizing the overlap with the UES. In the take-all strata, all units are sampled with certainty.

Other data sources and analysis

The data from the surveys are analysed and the final actual investment figures are augmented by data taken from other sources: building permits, trade journals, press releases and company reports. This is done to include investment from new organizations that may not yet have appeared in the Statistics Canada business survey frames, or from non-sampled organizations that are making very large investments. In addition to our direct survey of establishments, the Capital Expenditures Program obtains data from other parts of Statistics Canada and other federal departments on capital expenditures for the following sectors:

agriculture from the Agriculture Division; municipal governments from the Public Institutions Division; residential construction from the Current Investment Indicators Section of ICSD; oil and gas extraction (the actual investment) from the Manufacturing, Construction and Energy Division; and mining from Natural Resources Canada.

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The data are cross-tabulated for Canada, the provinces and the territories by industrial sector for the various components of investment (construction and machinery and equipment, by type of asset) and for the two categories: private and public. Our newest initiative is the production of investment data by country of control. It should also be noted that all of these data are released on a calendarized basis in order to facilitate easy integration into the national accounts and eliminate any discrepancies with other calendar-based indicators of capital.

CHAPTER-4 Outsourcing Trend Analysis Methods to O2I

Get the competitive advantage with Outsource2indias Trend Analysis methods. Get significant insights into customers and markets to guide your companys marketing, investment, andadministration objectives. "With the past, we can see trajectories into the future - both catastrophic and creative projections." John Ralston Saul.

Importance of Trend Analysis

Data analysis including Trend Analysis is essential for a firms competitive intelligence program.The ability to accurately gauge customer response to changes in business and otherenvironmental parameters is a powerful competitive advantage. Trend Analysis Methods are essential to running an organizations value chains and in acquiring and consolidating corporate success. It allows business users to make analytical decisions about those business processes that maximize revenue from core customers. With the information explosion, an incredible amount of information is available to organizations. However, raw data by itself does not provide much information. It is the conversion of this raw data into significant facts, relationships, trends and patterns, that could otherwise go unobserved. This makes Trend Analysis Methods an essential part of running an organizations value chains and in acquiring and consolidating corporate success. It allows business users to make analytical decisions about what direction the business should target its resources on and to focus on those processes that maximize revenue from core customers.

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What does Trend Analysis include? Trend Analysis Proper -Allows you to plot aggregated response data over time. This
is pecially valuable, if you are conducting a long running survey and would like to measure differences in perception and responses over time. Thus Trend Analysis provides an insight into the following:
o o

Changes and trends in customer needs and behavior, and shifts in the customers perception of value Trend in price change and cost drivers for the industry and/or specific segments Change and evolution of the industry in terms of new entrants, and competition, threat of substitutes and relationship with buyers and suppliers Upcoming business models and changing best practices of the industry and related emerging sectors In depth analysis of long term industry, domestic and global economic cycles and trends

o o o

2. Market Basket Analysis - insight into services and product purchasing trend patterns 3. Market Segmentation - analyzes common characteristics of a consumer base 4. Customer Churn -identifying those consumers who are most likely to discontinue that service or product 5. Fraud Detection - predetermining those transactions that are most likely to be fraudulent, taking into account previous trend analyses 6. Direct and Interactive (web-based) Marketing - predicting in advance the products or services a person is most likely to use based on past and present trends Outsource2indias Trend Analysis provides business decision makers with the ability to direct the focus of an organization and facilitate the continued success of the enterprise. What are the benefits of Trend Analysis? 1. Detailed Trend Analysis - to predict the threat of new entrants and allows management to develop competitive strategies thus enabling industry position as well as pursuit of leadership. 2. It provides security of strategic investments and protection of assets. 3. Enables crucial decisions on mergers and acquisitions as well as the ability to develop alliances and partner relationships.

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4. Trend Analysis data can be further used for various cost/benefit analyses. And can be extremely valuable as an early warning indicator of probable issues with product line and service level changes. 5. Trend Analysis enables a business to view strategies from a long-term perspective with respect to effective asset and investment deployment and can safeguard against costly errors in relationship management and strategic positioning.

The Trend Analysis advantage

The ability to accurately gauge customer response to changes in business and other environmental parameters is a powerful competitive advantage. Furthermore Outsource2indias trend analysis includes the process of studying data to gain insights into long-term trends such as failure patterns that can be applied to incident and problem management as well as capacity management. Internal and external users can apply Trend Analysis to determine weaknesses and strengths. This will enable internal users to enhance administration efficiency of the company when necessary and external users to form valuation models of the company based on how well the company is managed. Outsource2india has the infrastructure and skill sets to support and facilitate your needs O2I has recruited people with an extensive amount of industry experience. Computer Science Engineers and statisticians with doctoral degrees contribute to accurate data analytical services. Technical analysts and data entry operators provide support and have the skills to provide required technical assistance. The overall cohesiveness and high talent level of our team make them work as a unit thus allowing effective communication with your organization. Outsource2india has the required bandwidth and state-of-the-art facilities to allow creation of scalable databases, enabling of Trend Analysis and Pattern Detection while staying within the ambit of security and web-enabled framework security requirement

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