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BUDGET ANALYSIS 20122013

(Gdp growth, fiscal consolidation, inflation)

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Prof. to editArora subtitle style Click Rashi Master

G.S. College of Commerce & Economics,

Some of the Objectives

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Focus on domestic demand driven growth recovery. Create conditions for rapid revival of high growth in private investment. Address supply bottlenecks in agriculture, energy and transportation sectors.

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Target Areas for Analysis

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Economic Growth Fiscal Deficit Inflation

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Brief Overview of the target areas.

Economic Growth: 7.6%(real) in 2012-13. Fiscal Deficit: Target of 5.1% Inflation: Hovering around 6 to 7%

Prof. Rashi Arora Rashi Arora

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I) GDP Growth of 7.6%

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India 6.9 China 8.% Us 1.8 EU 0.2 Fourth fastest growing economy in the world.

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Comparison between targets earmarked by Different Agencies

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In the given trajectory 7.6% growth of GDP hard to attain?

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Difficult Task

Task Possible

With fiscal deficit to go down at 5.1% from 5.9% of GDP.

High excise and service tax could Rashi Arora mean inflation. It

Increase in customs duty on gold is a step to channelize domestic savings in productive assets.
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Agriculture Sector
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Total planned outlay has been increased by 18%. Agriculture estimated to grow at 2.5% in FY12. To allocate Rs100bn to NABARD for refinance of RRBs enhancing their capacity to disburse short term crop loans. GR in north east.
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II)Fiscal ConsolidationDeficit down to 5.1% from 5.9%

By increasing revenue and reduction in expenditure. It gives rise to additional needs to borrow from the market. Unfeasibility is also since the trade deficit of India as of now stands at 180billion dollars.
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Proposal To Increase Revenue

The budget proposes to raise tax revenue. Additional revenue measures have been taken through indirect taxes - Rs. 45940 crores. Direct tax give away is - Rs. 4500 crores Net gain of Rs.41,440 crore
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1. Tax
q

q q

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2. DI of PSUs to the tune of Rs. 30000 crores. 3. Sale of Spectrum crores. Rs.40000 -------------Rs. 1,11,440 ------------- Rashi Arora Rashi Arora

18-03-2012 1% change to GDP of around 100 lakh

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Tax Proposals to Decrease Expenditure

Reduction of subsidies to 2% of GDP and in 3 years 1.75%. On food items to continue. To go down on Petrol.

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DI proceeds of 40000 crores lacks credibility?

Last year government could actualize barely 12000-14000 crores of DI. Therefore, raising of Rs.40000 as foreseen in this yr budget seems impossible. There may not be takers. This year equity sale of ONGC was a damp squib.
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Reduction of S worth 25000 cr

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Oil Price Hike and Deregulation of Diesel?

To meet the high prices of oil internationally prices may go up. Remote hope can be in smoothening of middle east crisis. Almost 80% of crude oil of India imported from middle east. Deregulation of diesel the policy for
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Fiscal Deficit wrapping up

A daunting taskwith tax revenue growth of 15.6%, lower than the 18.4% from last yr whereas expenditure is expected to grow at 18%. For 2012, RBI has forecasted a fiscal deficit 7.4% for a target of 7.6-7.7 GDP growth.
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III)Inflation-Hovering around 6to 7%.

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With increase in service tax & excise duties.

Reduction in Fiscal Deficit reduction in inflationary forces. Policies to increasing agriculture productivity would have soothing effect on the food prices.

With increase in railway freight and subsequently increase in prices of agricultural goods.

Subsequent increase in fuel prices

Efforts to remove SS bottlenecks.

Rashi Arora Cost push Inflation

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RBI on Budget
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Reserve Bank welcomed the Budget proposal to bring down fiscal deficit to 5.1%. Finance Minister Pranab Mukherjee's Budget proposal to raise excess revenue from indirect taxes rather than touching the direct taxes is a smart move, as it does not require a Parliamentary approval, Reserve Bank has said.
18-03-2012 It, however, said this will not have any

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Sentiments of India Inc

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"...for the industry and the corporate sector all negatives...it is understandable but not acceptable," Bajaj Auto Chairman Rahul Bajaj said. Godrej Group Chairman Adi Godrej, Biocon CMD Kiran Mazumdar Shaw and J K Organisation Director Harsh Pati Singhania felt that increase in all-round taxes would lead to further inflation.
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Ficci President R V Kanoria "It is not going to stimulate the economy," he said. CII President B Muthuraman said he was expecting much more and the exciserelated proposals would push up prices.
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Not a Big Bang Budget

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Though there are some reforms like companies bill, tax free bonds, custom on gold, venture capital policy, tax reduction on R&D, infrastructure debt fund, etc. However, it is berest of major reforms like GST, DTC, Multi brand Retailing.
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Will Hamlet be spared??

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FM said must be cruel only to be kind". Cannot question policy making dynamics and credibility . It is the application process that will decide will be or will be not. Finally, office of budget responsibility becomes necessary to hold G accountable of expectations and claims made.
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Thank You

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