Indian Budget 2016-17 .. Main Thread ..
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DesiGuy1403
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One of the less talked about initiatives is the direct transfer of money.
This single step would a game changer.
already leakages in the gas subsidy has come down drastically.
The neem coated urea is a great concept.
Now the talk of bringing Farmers under this scheme is absolutely. Not only will the money reach the needy, it will cut down huge leakages and reduce corruption.
I have read that NREGA would be brought into this as well. Any one know anything about this?
This single step would a game changer.
already leakages in the gas subsidy has come down drastically.
The neem coated urea is a great concept.
Now the talk of bringing Farmers under this scheme is absolutely. Not only will the money reach the needy, it will cut down huge leakages and reduce corruption.
I have read that NREGA would be brought into this as well. Any one know anything about this?
Sorry imma bhakt and all myself but this one was really a dud
Booting out the suit: Jaitley’s third budget loses an opportunity to reboot the economy - TOI Blogs
PARIKRAMA
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Budget 2016: Big Corporate Winners And Losers
Volatile stock markets ended 0.6 per cent lower on Monday, though rupee staged its best rally in three weeks on Budget announcements. Arun Jaitley's third Union Budget was focused on boosting investment in the farm and infrastructure sectors, but investors heaved a sigh of relief as the finance minister retained FY17 fiscal deficit target at 3.5 per cent of GDP.
The following sectors/companies will benefit or be hurt by the Budget proposals:
Winners:
1) Agriculture: Mr Jaitley said Rs. 35,984 crore would be set aside for farmers' welfare for the year starting April 2016. The government will also launch aid schemes intended to help double farmers' incomes by 2022. Mr Jaitley also raised the agricultural credit target for FY17 to a record Rs. 9 trillion, amid rising rural distress after a series of droughts in the country. Companies such as Jain Irrigation, Mahindra and Mahindra, Monstanto India that supply agricultural equipment and seeds are likely to benefit.
2) Infrastructure: Mr Jaitley plans to allocate Rs. 55,000 crore for developing roads and highways. Capital expenditure on development of roads, highways and railways has been set at Rs. 2.18 lakh crore for the year. The higher infrastructure spending bodes well for companies such as IRB Infrastructure Developers, L&T and Gammon Infrastructure Projects.
3) New manufacturing companies incorporated on or after March 1, 2016 will be given an option to be taxed at a reduced rate of 25 per cent plus surcharge and cess, provided they do not claim profit-linked or investment-linked deductions and do not use the investment allowance and accelerated depreciation.
4) Real Estate: Dividends from a special purpose vehicle to a Real Estate Investment Trust (REIT) and an Infrastructure Investment Trust (InvIT) will not be subjected to the Dividend Distribution Tax, Mr Jaitley said, resolving a major hurdle for listing of REITs. That would help companies, including DLF, Prestige Estates Projects, and Sobha, which have been waiting to list REITs. Mr Jaitley's plans to provide tax incentives for affordable housing are likely to benefit builders of low-cost homes, including Mahindra Lifespace Developers and Housing Development and Infrastructure.
5) Asset Reconstruction Companies: The government said it would allow so-called sponsors of asset reconstruction companies (ARCs), which buy bad loans from banks, to own 100 per cent of the company. Foreign investors can fully own Indian ARCs without having to seek prior approval from the government. The moves will help ARCs including Edelweiss ARC, JM Financial ARC and ARCIL raise more capital.
Losers:
6) Cars: The Budget proposed an infrastructure cess of 1 per cent on small petrol, LPG, CNG cars, of 2.5 per cent on diesel cars of certain capacity, and of 4 per cent on other higher engine capacity vehicles and SUVs. The Budget also called for tax to be deducted at source at the rate of 1 per cent for purchases of luxury cars exceeding a price of Rs. 10 lakh. India's largest automobile maker Maruti Suzuki and SUV-makers Mahindra and Mahindra and Tata Motors are likely to be hurt.
7) Retail and textile: Excise duty on readymade garments with a retail price of Rs. 1,000 or more has been raised to 2 per cent without input tax credit, or 12.5 per cent with input tax credit. Apparel retailers such as Aditya Birla Nuvo, Future Retail, and Shopper's Stop along with textile manufacturers such as Arvind are likely to be hurt.
8) Tobacco: Excise duties on various tobacco products have been raised by about 10 per cent to 15 per cent. Cigarettte makers such as ITC and VST Industries are likely to be affected.
9) Oil explorers: Mr Jaitley in his Budget changed the so-called Oil Industries Development Cess on locally produced crude oil from Rs. 4,500 per tonne to 20 per cent of the value of the commodity. Industry had however expected a much lower tax rate, traders said. This affects companies such as Oil and Natural Gas Corp, Cairn India and Oil India.
Story first published on: February 29, 2016 20:43 (IST)
Budget 2016: Big Corporate Winners And Losers – NDTV Profit
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FM unveils fire-fighting Budget to placate voters,sustain growth
Finance Minister Arun Jaitley's third Budget marked a strategic shift by addressing rural distress in a country of 1.3 billion, where two-fifths of families rely on farming and are reeling from two years of drought.
The government unveiled a fire-fighting Budget on Monday that seeks to win back support among rural voters for Prime Minister Narendra Modi's government and sustain growth against a grim global backdrop - all without borrowing more.
At the same time it hiked public investment in India's woeful infrastructure by 22.5 percent, while taking further steps to revive corporate investment that Modi needs to create new jobs for India's burgeoning workforce.
"We have a shared responsibility to spend prudently and wisely for the people, especially for the poor and downtrodden," the 63-year-old finance minister told lawmakers in his 100-minute address.
India holds several state elections this year, including in the farming state of West Bengal, with the country's most populous state, Uttar Pradesh, going to the polls in 2017. A strong showing will be vital to Modi's chances of a second term.
Despite commanding a large majority in parliament's lower house, Modi's government has failed to pass several key measures since sweeping to power almost two years ago, raising doubts over the impact of its reform agenda.
Jaitley called Asia's third-largest economy a bright spot in a gloomy global landscape, and reiterated a forecast that it would grow by 7.6 percent in the fiscal year that is drawing to a close.
But, despite hefty commitments on rural welfare and health, Jaitley managed to stick to his fiscal deficit target of 3.5 percent of gross domestic product for the 2016/17 fiscal year that starts on April 1 - a pledge that may open the way for an early interest rate cut by the Reserve Bank of India.
"At first sight, it's a good Budget, a fire-fighting Budget," said Amitabh Dubey, director of India research at Trusted Sources.
"Rural demand is weak, private investment is dead in the water and, of course, we have a banking crisis," he added. "They've announced some ease-of-doing-business-measures that are positive. But, in other ways, it's a classic tax-and-spend Budget."
INDIA SHINING?
Modi's change of course seeks to prevent a repeat of the fate of the last government led by his nationalist Bharatiya Janata Party (BJP), whose relentless optimism - summed up by its "India Shining" slogan - grated with voters who dispatched it after one term in 2004.
Jaitley reeled off a list of USD16 billion in measures targeted at the countryside, including spending on a job creation scheme, farmers' welfare and building of rural roads.
He also targeted a total of USD130 billion in credit to farmers.
"These steps will help our millions of farmers recover from the rough patch they have been going through," said Yoginder K. Alagh, a farm expert and former planning official.
The government will also allocate USD32 billion for infrastructure development in 2016/17, an increase of 22.5 percent from last year, building 10,000 km of new national highways and upgrading another 50,000 km.
Those spending pledges leave scant cash over to recapitalise a state banking sector weighed down with bad loans to a corporate sector that itself is struggling under a heavy debt burden.
Jaitley announced a capital injection of just USD3.6 billion into public sector banks in the coming fiscal year - a fraction of total needs that his economic adviser, Arvind Subramanian, estimated at USD26 billion in his pre-Budget report.
"The banking sector has a major role to play in spurring private investment, which is lacking and without which an all-round economic revival is not a possibility," said Milind Kothari, head of direct tax at BDO India in Mumbai.
Jaitley promised a one-time disputes resolution process for back-tax claims that have hit foreign investors like Vodafone. But he also hiked taxes on new cars and tobacco products, and imposed a new tax on large dividend payments - all measures that will hit India's growing middle class.
"Despite our disappointment on the tax on cars, I see no reason for the mayhem in the market," Anand Mahindra, chairman of Mahindra Group said on Twitter.
"The call for a shift to investment in general infrastructure such as highways has also been answered. And fiscal targets have been maintained."
Financial investors gave Jaitley's Budget a cautious thumbs up, with the rupee, bonds and stocks buoyant. Ratings agencies also gave their cautious backing to a spending package that produced no nasty surprises on the borrowing side.
"What we've heard is largely in line with the current rating and the current outlook," said Atsi Sheth, Associate Managing Director, Sovereign Risk Group, Moody's Investors Service, which rates India at "Baa3", its lowest investment grade rating.
FM unveils fire-fighting Budget to placate voters,sustain growth
+++
Budget 2016: Big Corporate Winners And Losers
Volatile stock markets ended 0.6 per cent lower on Monday, though rupee staged its best rally in three weeks on Budget announcements. Arun Jaitley's third Union Budget was focused on boosting investment in the farm and infrastructure sectors, but investors heaved a sigh of relief as the finance minister retained FY17 fiscal deficit target at 3.5 per cent of GDP.
The following sectors/companies will benefit or be hurt by the Budget proposals:
Winners:
1) Agriculture: Mr Jaitley said Rs. 35,984 crore would be set aside for farmers' welfare for the year starting April 2016. The government will also launch aid schemes intended to help double farmers' incomes by 2022. Mr Jaitley also raised the agricultural credit target for FY17 to a record Rs. 9 trillion, amid rising rural distress after a series of droughts in the country. Companies such as Jain Irrigation, Mahindra and Mahindra, Monstanto India that supply agricultural equipment and seeds are likely to benefit.
2) Infrastructure: Mr Jaitley plans to allocate Rs. 55,000 crore for developing roads and highways. Capital expenditure on development of roads, highways and railways has been set at Rs. 2.18 lakh crore for the year. The higher infrastructure spending bodes well for companies such as IRB Infrastructure Developers, L&T and Gammon Infrastructure Projects.
3) New manufacturing companies incorporated on or after March 1, 2016 will be given an option to be taxed at a reduced rate of 25 per cent plus surcharge and cess, provided they do not claim profit-linked or investment-linked deductions and do not use the investment allowance and accelerated depreciation.
4) Real Estate: Dividends from a special purpose vehicle to a Real Estate Investment Trust (REIT) and an Infrastructure Investment Trust (InvIT) will not be subjected to the Dividend Distribution Tax, Mr Jaitley said, resolving a major hurdle for listing of REITs. That would help companies, including DLF, Prestige Estates Projects, and Sobha, which have been waiting to list REITs. Mr Jaitley's plans to provide tax incentives for affordable housing are likely to benefit builders of low-cost homes, including Mahindra Lifespace Developers and Housing Development and Infrastructure.
5) Asset Reconstruction Companies: The government said it would allow so-called sponsors of asset reconstruction companies (ARCs), which buy bad loans from banks, to own 100 per cent of the company. Foreign investors can fully own Indian ARCs without having to seek prior approval from the government. The moves will help ARCs including Edelweiss ARC, JM Financial ARC and ARCIL raise more capital.
Losers:
6) Cars: The Budget proposed an infrastructure cess of 1 per cent on small petrol, LPG, CNG cars, of 2.5 per cent on diesel cars of certain capacity, and of 4 per cent on other higher engine capacity vehicles and SUVs. The Budget also called for tax to be deducted at source at the rate of 1 per cent for purchases of luxury cars exceeding a price of Rs. 10 lakh. India's largest automobile maker Maruti Suzuki and SUV-makers Mahindra and Mahindra and Tata Motors are likely to be hurt.
7) Retail and textile: Excise duty on readymade garments with a retail price of Rs. 1,000 or more has been raised to 2 per cent without input tax credit, or 12.5 per cent with input tax credit. Apparel retailers such as Aditya Birla Nuvo, Future Retail, and Shopper's Stop along with textile manufacturers such as Arvind are likely to be hurt.
8) Tobacco: Excise duties on various tobacco products have been raised by about 10 per cent to 15 per cent. Cigarettte makers such as ITC and VST Industries are likely to be affected.
9) Oil explorers: Mr Jaitley in his Budget changed the so-called Oil Industries Development Cess on locally produced crude oil from Rs. 4,500 per tonne to 20 per cent of the value of the commodity. Industry had however expected a much lower tax rate, traders said. This affects companies such as Oil and Natural Gas Corp, Cairn India and Oil India.
Story first published on: February 29, 2016 20:43 (IST)
Budget 2016: Big Corporate Winners And Losers – NDTV Profit
+++
+++
FM unveils fire-fighting Budget to placate voters,sustain growth
Finance Minister Arun Jaitley's third Budget marked a strategic shift by addressing rural distress in a country of 1.3 billion, where two-fifths of families rely on farming and are reeling from two years of drought.
The government unveiled a fire-fighting Budget on Monday that seeks to win back support among rural voters for Prime Minister Narendra Modi's government and sustain growth against a grim global backdrop - all without borrowing more.
At the same time it hiked public investment in India's woeful infrastructure by 22.5 percent, while taking further steps to revive corporate investment that Modi needs to create new jobs for India's burgeoning workforce.
"We have a shared responsibility to spend prudently and wisely for the people, especially for the poor and downtrodden," the 63-year-old finance minister told lawmakers in his 100-minute address.
India holds several state elections this year, including in the farming state of West Bengal, with the country's most populous state, Uttar Pradesh, going to the polls in 2017. A strong showing will be vital to Modi's chances of a second term.
Despite commanding a large majority in parliament's lower house, Modi's government has failed to pass several key measures since sweeping to power almost two years ago, raising doubts over the impact of its reform agenda.
Jaitley called Asia's third-largest economy a bright spot in a gloomy global landscape, and reiterated a forecast that it would grow by 7.6 percent in the fiscal year that is drawing to a close.
But, despite hefty commitments on rural welfare and health, Jaitley managed to stick to his fiscal deficit target of 3.5 percent of gross domestic product for the 2016/17 fiscal year that starts on April 1 - a pledge that may open the way for an early interest rate cut by the Reserve Bank of India.
"At first sight, it's a good Budget, a fire-fighting Budget," said Amitabh Dubey, director of India research at Trusted Sources.
"Rural demand is weak, private investment is dead in the water and, of course, we have a banking crisis," he added. "They've announced some ease-of-doing-business-measures that are positive. But, in other ways, it's a classic tax-and-spend Budget."
INDIA SHINING?
Modi's change of course seeks to prevent a repeat of the fate of the last government led by his nationalist Bharatiya Janata Party (BJP), whose relentless optimism - summed up by its "India Shining" slogan - grated with voters who dispatched it after one term in 2004.
Jaitley reeled off a list of USD16 billion in measures targeted at the countryside, including spending on a job creation scheme, farmers' welfare and building of rural roads.
He also targeted a total of USD130 billion in credit to farmers.
"These steps will help our millions of farmers recover from the rough patch they have been going through," said Yoginder K. Alagh, a farm expert and former planning official.
The government will also allocate USD32 billion for infrastructure development in 2016/17, an increase of 22.5 percent from last year, building 10,000 km of new national highways and upgrading another 50,000 km.
Those spending pledges leave scant cash over to recapitalise a state banking sector weighed down with bad loans to a corporate sector that itself is struggling under a heavy debt burden.
Jaitley announced a capital injection of just USD3.6 billion into public sector banks in the coming fiscal year - a fraction of total needs that his economic adviser, Arvind Subramanian, estimated at USD26 billion in his pre-Budget report.
"The banking sector has a major role to play in spurring private investment, which is lacking and without which an all-round economic revival is not a possibility," said Milind Kothari, head of direct tax at BDO India in Mumbai.
Jaitley promised a one-time disputes resolution process for back-tax claims that have hit foreign investors like Vodafone. But he also hiked taxes on new cars and tobacco products, and imposed a new tax on large dividend payments - all measures that will hit India's growing middle class.
"Despite our disappointment on the tax on cars, I see no reason for the mayhem in the market," Anand Mahindra, chairman of Mahindra Group said on Twitter.
"The call for a shift to investment in general infrastructure such as highways has also been answered. And fiscal targets have been maintained."
Financial investors gave Jaitley's Budget a cautious thumbs up, with the rupee, bonds and stocks buoyant. Ratings agencies also gave their cautious backing to a spending package that produced no nasty surprises on the borrowing side.
"What we've heard is largely in line with the current rating and the current outlook," said Atsi Sheth, Associate Managing Director, Sovereign Risk Group, Moody's Investors Service, which rates India at "Baa3", its lowest investment grade rating.
FM unveils fire-fighting Budget to placate voters,sustain growth
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Viper0011.
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The numbers announced for 2016 on defense are misleading (for a purpose obviously). The actual defense budget is 22.75% (Estimated) higher than what's announced. So that takes it to north of $ 70 billion. Don't ask me how I know
Lonely Hermit
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Yes I will trust the guy who doesn't understand the difference between Compound Interest & Simple Interest.The numbers announced for 2016 on defense are misleading (for a purpose obviously). The actual defense budget is 22.75% (Estimated) higher than what's announced. So that takes it to north of $ 70 billion. Don't ask me how I know
MilSpec
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jaunty
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PARIKRAMA
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As promised i will put in the analysis as per experts.
The following is taken from Care Ratings D R Dogra.. It will be in multiple slides.. So please bear with me.. Its a bit big but i will try to cover all sectors so that we can have a good detailed view..
POST 1
MACRO ECONOMIC BACKGROUND
Economic Survey for the year 2015-16 shows that India’s economic growth has been steady and robust in 2015-16 as in 2014- 15, despite being faced with a volatile and weak external environment. The country’s economy is seen to be amongst the most stable and amongst the best performing, helped by the moderation in inflation, government’s fiscal consolidation measures and expenditure incurred towards building infrastructure. The survey although optimistic about the economic potential and opportunities, brings to the fore the challenges faced by the country in sustaining growth in a worsening global economic landscape. It also calls attention to the need for planning for the risks that could impact growth viz. currency re-adjustment in Asia and capital controls that could be undertaken to curb outflows from emerging markets.
The survey sees the long term growth potential of the country at 8-10%, that can be achieved by promoting competition,
investing in health and education to reap the benefits of India’s demographics and focus on the agriculture sector.
The key highlights of the survey in terms of performance, initiatives undertaken, challenges & proposed strategy and prospects have been summarized here
(A) Macroeconomic and Fiscal Performance
(E)Outlook and Prospects
POST #2
UNION BUDGET 2016-17
The Union Budget for 2016-17 lays down the governments long term growth agenda for the country, emphasizing structural changes and improvements across segments that would transform the nation and its economy. This is to be achieved while exercising fiscal prudence and adhering to the fiscal consolidation targets laid down in the last budget. The adherence to the fiscal deficit roadmap,despite the challenges of higher expenditure that is to be incurred on account of higher wages & pensions and public investments, shows that the government has envisaged a sustainable growth path for the economy which could be devoid of any significant increases in growth in the near term.
The budget highlights the continued thrust on growth given the increases and pattern of spending and reform & policies
undertaken. An inclusive growth strategy has been adopted with the farm and rural sector, social sector, infrastructure sector, employment generation and recapitalization of the banks along with the vulnerable sections being priority areas for expenditure for the government.
With the borrowing being restricted, there would be no undue pressure on liquidity in the system. All this paves the way for the RBI to ease its monetary policy by way of additional rate cuts, which could further stimulate growth.
Key Highlights
The 2016-17 Union Budget is based on 9 pillars. The key announcements under each have been included here.
(1) Agriculture and Farmers Welfare:
(2) Rural Sector:
(3) Social Sector including Healthcare:
(4) Education, Skills and Job Creation
(6) Financial Sector Reforms
(7) Governance and Ease of Doing Business
(8) Fiscal Discipline
(9) Tax Reforms
The Tax Reforms in the FY15 Union Budget were developed on nine categories namely, Relief to small tax payers, measures to boost growth and employment generation, incentivizing domestic value addition to help Make in India, measures for moving towards a pensioned society, measures for promoting affordable housing, additional resource mobilization for agriculture, rural economy and clean environment, reducing litigation and providing certainty in taxation, simplification and rationalization of taxation and use of Technology for creating accountability.
The following is taken from Care Ratings D R Dogra.. It will be in multiple slides.. So please bear with me.. Its a bit big but i will try to cover all sectors so that we can have a good detailed view..
POST 1
MACRO ECONOMIC BACKGROUND
Economic Survey for the year 2015-16 shows that India’s economic growth has been steady and robust in 2015-16 as in 2014- 15, despite being faced with a volatile and weak external environment. The country’s economy is seen to be amongst the most stable and amongst the best performing, helped by the moderation in inflation, government’s fiscal consolidation measures and expenditure incurred towards building infrastructure. The survey although optimistic about the economic potential and opportunities, brings to the fore the challenges faced by the country in sustaining growth in a worsening global economic landscape. It also calls attention to the need for planning for the risks that could impact growth viz. currency re-adjustment in Asia and capital controls that could be undertaken to curb outflows from emerging markets.
The survey sees the long term growth potential of the country at 8-10%, that can be achieved by promoting competition,
investing in health and education to reap the benefits of India’s demographics and focus on the agriculture sector.
The key highlights of the survey in terms of performance, initiatives undertaken, challenges & proposed strategy and prospects have been summarized here
(A) Macroeconomic and Fiscal Performance
• GDP growth in FY16 is projected to increase to 7.6%, from 7.2% in 2014-15, mostly driven by growth in the industry and the sustained high growth in the services sector.
• Agricultural growth, although likely to be low for the 2nd year in a row is estimated to be better than that of last year.
• Industry has shown significant improvement on account of acceleration in manufacturing.
• Low levels of inflation have come to prevail owing to the decline in commodity prices viz. crude oil and confidence in price stability has improved. WPI has turned negative in this fiscal to register growth at -2.8% declining from 2% in FY15. CPI inflation has halved in the last three years to decline from high levels of 10.2% in FY13 to 4.9% in FY16 (until Jan’16).
• Despite falling exports, a declining import bill helped trade deficit decrease to $ 106.8 billion in Apr-Jan’16 period this fiscal.
• The Current Account Deficit (CAD) has declined to 1.4% of GDP (Apr-Sep’15) and foreign exchange reserves have risen to US$ 351.5 billion in early February, 2016.
• Indian trading environment has seen substantial improvement with FTAs doubling to 42 since mid -2000s and several mega-regional trading agreements with world’s largest traders (USA, Japan, EU)
• Saving and investment have not shown improvements
• The rupee has depreciated vis-à-vis the US dollar, like most other currencies in the world, although less so in magnitude and at the same time appreciated against a number of other major currencies.
• On the fiscal side –
(B) Policy Initiatives• Agricultural growth, although likely to be low for the 2nd year in a row is estimated to be better than that of last year.
• Industry has shown significant improvement on account of acceleration in manufacturing.
• Low levels of inflation have come to prevail owing to the decline in commodity prices viz. crude oil and confidence in price stability has improved. WPI has turned negative in this fiscal to register growth at -2.8% declining from 2% in FY15. CPI inflation has halved in the last three years to decline from high levels of 10.2% in FY13 to 4.9% in FY16 (until Jan’16).
• Despite falling exports, a declining import bill helped trade deficit decrease to $ 106.8 billion in Apr-Jan’16 period this fiscal.
• The Current Account Deficit (CAD) has declined to 1.4% of GDP (Apr-Sep’15) and foreign exchange reserves have risen to US$ 351.5 billion in early February, 2016.
• Indian trading environment has seen substantial improvement with FTAs doubling to 42 since mid -2000s and several mega-regional trading agreements with world’s largest traders (USA, Japan, EU)
• Saving and investment have not shown improvements
• The rupee has depreciated vis-à-vis the US dollar, like most other currencies in the world, although less so in magnitude and at the same time appreciated against a number of other major currencies.
• On the fiscal side –
• Improvements have been recorded in indirect tax collection efficiency, quality of spending and fiscal consolidation.
• The government tax revenues for 2015-16 are expected to be higher than budgeted levels.
• Capital expenditure has increased by 0.6% in 2015-16 at both the state and central level.
• In commitment to the fiscal consolidation path laid out by the government it is estimated to contain Fiscal deficit at 3.9% as mentioned in the budget estimates.
• The government tax revenues for 2015-16 are expected to be higher than budgeted levels.
• Capital expenditure has increased by 0.6% in 2015-16 at both the state and central level.
• In commitment to the fiscal consolidation path laid out by the government it is estimated to contain Fiscal deficit at 3.9% as mentioned in the budget estimates.
• FDI has been liberalized across the board and vigorous efforts have been undertaken to ease the cost of doing business.
• Settlement of the Minimum Alternate Tax (MAT) imposed on foreign companies aimed at restoring stability and
predictability in tax system.
• Major public investment has been undertaken to strengthen the country’s infrastructure.
• Major crop insurance programme has been instituted.
• Creation of bank accounts for over 200 million people under Pradhan Mantri Jan DhanYojan (PMJDY) the world’s largest direct benefit transfer programme in case of LPG with about 151 million beneficiaries receiving Rs.29,000 crore in their bank accounts and the infrastructure being created for extending the JAM (Jan DhanAadhar Mobile) agenda to other Government programmes and subsidies.
• Changes made in the power sector in the last two years - addition of record generation capacity (of 26.5 GW compared to the average annual addition of around 19 GW over the past five years), moves towards one market in power, reform of discoms and development of renewable energy .Capacity enhancements have brought down the peak electricity deficit to its lowest ever level of 2.4%
(C) Challenges and Proposed Strategy• Settlement of the Minimum Alternate Tax (MAT) imposed on foreign companies aimed at restoring stability and
predictability in tax system.
• Major public investment has been undertaken to strengthen the country’s infrastructure.
• Major crop insurance programme has been instituted.
• Creation of bank accounts for over 200 million people under Pradhan Mantri Jan DhanYojan (PMJDY) the world’s largest direct benefit transfer programme in case of LPG with about 151 million beneficiaries receiving Rs.29,000 crore in their bank accounts and the infrastructure being created for extending the JAM (Jan DhanAadhar Mobile) agenda to other Government programmes and subsidies.
• Changes made in the power sector in the last two years - addition of record generation capacity (of 26.5 GW compared to the average annual addition of around 19 GW over the past five years), moves towards one market in power, reform of discoms and development of renewable energy .Capacity enhancements have brought down the peak electricity deficit to its lowest ever level of 2.4%
• The most critical short term challenges confronting the Indian economy are the twin balance sheet problem – the impaired financial positions of the Public Sector Banks (PSBs) and some corporate houses. This has been impeding private investment and economic progress.Comprehensively resolving this challenge would require 4 Rs : Recognition, Recapitalization, Resolution, and Reform
• The ‘Chakravyuha’ Problem - the efficiency in the economy needs to be improved by undertaking several initiatives such as new bankruptcy law, reviving stalled investment projects, considering PPP. The exit problem faced majorly by ‘public enterprises’ can be addressed through strong institutional framework, create independent sector regulators, transparent privatisation of public enterprises.
• JAM(Jan Dhan, Aadhar, Mobile) Trinity Problem - Improve financial inclusion by establishing mobile networks in rural areas. Increasing the spread of JAM by providing financial connectivity at the last level(rural households). Focus on schemes such as BAPU (Biometrically Authenticated Physical Uptake) to lower leakages and ensure funds reach the poor.
• Health and Education - Investment in human capital by focusing on quality of education in both public and private sector with the need for good and well-trained teachers. Adoption of technology platforms and innovative models to help improve service delivery.
• Service delivery - The increased decentralisation of power between centre and state requires clear definition of roles between centre and state. Focus of centre to be on strengthening regulatory institutions, and facilitating co-operative and competitive federal structure.Focus of states to be to mobilize resources, improve efficiency in bettering service delivery.
• Agriculture - need to create a self-sustaining system with reduced vulnerability to erratic monsoons, market shocks and variable productivity.
(D) Medium Term Fiscal Framework:• The ‘Chakravyuha’ Problem - the efficiency in the economy needs to be improved by undertaking several initiatives such as new bankruptcy law, reviving stalled investment projects, considering PPP. The exit problem faced majorly by ‘public enterprises’ can be addressed through strong institutional framework, create independent sector regulators, transparent privatisation of public enterprises.
• JAM(Jan Dhan, Aadhar, Mobile) Trinity Problem - Improve financial inclusion by establishing mobile networks in rural areas. Increasing the spread of JAM by providing financial connectivity at the last level(rural households). Focus on schemes such as BAPU (Biometrically Authenticated Physical Uptake) to lower leakages and ensure funds reach the poor.
• Health and Education - Investment in human capital by focusing on quality of education in both public and private sector with the need for good and well-trained teachers. Adoption of technology platforms and innovative models to help improve service delivery.
• Service delivery - The increased decentralisation of power between centre and state requires clear definition of roles between centre and state. Focus of centre to be on strengthening regulatory institutions, and facilitating co-operative and competitive federal structure.Focus of states to be to mobilize resources, improve efficiency in bettering service delivery.
• Agriculture - need to create a self-sustaining system with reduced vulnerability to erratic monsoons, market shocks and variable productivity.
a. Focus on reducing consolidated government debt to GDP ratio from 67% by following a path of aggressive fiscal consolidation
b. The government is constrained to reduce its deficit by two key factors:
b. The government is constrained to reduce its deficit by two key factors:
i. Implementing the 7th Pay Commission award would increase government wage bill by 0.5% of GDP.
ii. Increased public expenditure towards infrastructural development.
ii. Increased public expenditure towards infrastructural development.
(E)Outlook and Prospects
• GDP growth not likely to pick up significantly in 2016-17 and is likely to be in the range of 7.0% - 7.75%. There exists a downside risks to this projection that could arise from the weakness in the global economy and financial markets and an unexpected increase in oil prices that could impact consumption.
• Foreign demand is likely to be weak, which requires the country to find and activate domestic sources of demand to
prevent the growth momentum from weakening.
• The increase in wages and benefits recommended by the 7th pay Commission are not likely to destabilize prices and will have little impact on inflation. Inflation likely to remain in the range of 4.5-5% for 2015-16.
• CAD to be limited to 1-1.5% of GDP for 2015-16
• Foreign demand is likely to be weak, which requires the country to find and activate domestic sources of demand to
prevent the growth momentum from weakening.
• The increase in wages and benefits recommended by the 7th pay Commission are not likely to destabilize prices and will have little impact on inflation. Inflation likely to remain in the range of 4.5-5% for 2015-16.
• CAD to be limited to 1-1.5% of GDP for 2015-16
POST #2
UNION BUDGET 2016-17
The Union Budget for 2016-17 lays down the governments long term growth agenda for the country, emphasizing structural changes and improvements across segments that would transform the nation and its economy. This is to be achieved while exercising fiscal prudence and adhering to the fiscal consolidation targets laid down in the last budget. The adherence to the fiscal deficit roadmap,despite the challenges of higher expenditure that is to be incurred on account of higher wages & pensions and public investments, shows that the government has envisaged a sustainable growth path for the economy which could be devoid of any significant increases in growth in the near term.
The budget highlights the continued thrust on growth given the increases and pattern of spending and reform & policies
undertaken. An inclusive growth strategy has been adopted with the farm and rural sector, social sector, infrastructure sector, employment generation and recapitalization of the banks along with the vulnerable sections being priority areas for expenditure for the government.
With the borrowing being restricted, there would be no undue pressure on liquidity in the system. All this paves the way for the RBI to ease its monetary policy by way of additional rate cuts, which could further stimulate growth.
Key Highlights
The 2016-17 Union Budget is based on 9 pillars. The key announcements under each have been included here.
(1) Agriculture and Farmers Welfare:
• There has been a significant increase in the allocations towards agriculture and irrigation.
• Allocation of Rs. 35,984 crore towards Agriculture and Farmers’ welfare.
• 28.5 lakh hectares will be brought under irrigation and fast tracking of 89 irrigation projects.
• Long Term Irrigation Fund to be created in NABARD with an initial corpus of about Rs.20,000 crore.
• Unified Agricultural Marketing e-Platform to provide a common e- market platform for wholesale markets.
• Rs.15,000 crore towards interest subvention.
• Incentives are being given for enhancement of pulses production. Rs.500 crore under National Food Security Mission has
been assigned to pulses.
• The target for agricultural credit in 2016-17 will be an all-time high of Rs.9 lakh crore.
• Rs.5,500 crore towards Crop Insurance Scheme.
• Allocation of Rs. 35,984 crore towards Agriculture and Farmers’ welfare.
• 28.5 lakh hectares will be brought under irrigation and fast tracking of 89 irrigation projects.
• Long Term Irrigation Fund to be created in NABARD with an initial corpus of about Rs.20,000 crore.
• Unified Agricultural Marketing e-Platform to provide a common e- market platform for wholesale markets.
• Rs.15,000 crore towards interest subvention.
• Incentives are being given for enhancement of pulses production. Rs.500 crore under National Food Security Mission has
been assigned to pulses.
• The target for agricultural credit in 2016-17 will be an all-time high of Rs.9 lakh crore.
• Rs.5,500 crore towards Crop Insurance Scheme.
(2) Rural Sector:
• Rs.87,765 crore allocation for the rural sector.
• Rs.2.87 lakh crore will be given as Grant in Aid to Gram Panchayats and Municipalities. as per the recommendations of the
14th Finance Commission.
• Rs.38,500 crore allocated for MGNREGS.
• 100% village electrification by 1st May, 2018.
• National Land Record Modernisation Programme has been revamped.
• Every block under drought and rural distress to be taken up as an intensive Block under the DeenDayalAntyodaya Mission.
• Rs.9,000 crore allocation for Swachh Bharat Abhiyan.
• Rs.2.87 lakh crore will be given as Grant in Aid to Gram Panchayats and Municipalities. as per the recommendations of the
14th Finance Commission.
• Rs.38,500 crore allocated for MGNREGS.
• 100% village electrification by 1st May, 2018.
• National Land Record Modernisation Programme has been revamped.
• Every block under drought and rural distress to be taken up as an intensive Block under the DeenDayalAntyodaya Mission.
• Rs.9,000 crore allocation for Swachh Bharat Abhiyan.
(3) Social Sector including Healthcare:
• Rs. 1,51,581 crore allocation for social sector including education and health care.
• Rs. 2,000 crore allocated for initial cost of providing LPG connections to BPL families.
• New health protection scheme to provide health cover upto Rs.1 lakh per family and an additional Rs.30,000 top-up
package for senior citizens.
• ‘National Dialysis Services Programme’ to be started under National Health Mission through PPP mode.
• “Stand Up India Scheme” to benefit at least 2.5 lakh entrepreneurs.
• Set up of National Scheduled Caste and Scheduled Tribe Hub in partnership with industry associations.
• Rs. 2,000 crore allocated for initial cost of providing LPG connections to BPL families.
• New health protection scheme to provide health cover upto Rs.1 lakh per family and an additional Rs.30,000 top-up
package for senior citizens.
• ‘National Dialysis Services Programme’ to be started under National Health Mission through PPP mode.
• “Stand Up India Scheme” to benefit at least 2.5 lakh entrepreneurs.
• Set up of National Scheduled Caste and Scheduled Tribe Hub in partnership with industry associations.
(4) Education, Skills and Job Creation
• 62 new Navodaya Vidyalayas will be opened.
• Higher Education Financing Agency to be set-up with initial capital base of Rs.1000 crores.
• Digital Depository for School Leaving Certificates, College Degrees, Academic Awards and Mark sheets to be set-up.
• Rs. 1804 crore allocation for skill development.
• 1500 Multi Skill Training Institutes to be set-up.
• National Board for Skill Development Certification to be setup in partnership with the industry and academia.
• GoI will pay contribution of 8.33% for of all new employees enrolling in EPFO for the first three years of their employment. Rs.1000 crore allocated for this scheme.
• Model Shops and Establishments Bill to be circulated to States.
• Deduction under Section 80JJAA of the Income Tax Act will be available to all assesses who are subject to statutory audit under the Act as an employment generation incentive.
(5) Infrastructure and Investment• Higher Education Financing Agency to be set-up with initial capital base of Rs.1000 crores.
• Digital Depository for School Leaving Certificates, College Degrees, Academic Awards and Mark sheets to be set-up.
• Rs. 1804 crore allocation for skill development.
• 1500 Multi Skill Training Institutes to be set-up.
• National Board for Skill Development Certification to be setup in partnership with the industry and academia.
• GoI will pay contribution of 8.33% for of all new employees enrolling in EPFO for the first three years of their employment. Rs.1000 crore allocated for this scheme.
• Model Shops and Establishments Bill to be circulated to States.
• Deduction under Section 80JJAA of the Income Tax Act will be available to all assesses who are subject to statutory audit under the Act as an employment generation incentive.
• Rs. 2,21,246 crore total outlay for infrastructure
• Rs. 97,000 crore of total investment in the road sector to be undertaken in 2016-17.
• To approve nearly 10,000 kms of National Highways in 2016-17.
• Allocation of Rs. 55,000 crore in the Budget for Roads.
• Rs.15,000 crore to be raised by NHAI through bonds.
• Amendments of Motor Vehicles Act to open up the road transport sector in the passenger segment.
• Reforms in FDI policy in the areas of Insurance and Pension, Asset Reconstruction Companies, Stock Exchanges.
• 100% FDI to be allowed through FIPB route in marketing of food products produced and manufactured in India.
• Comprehensive plan, spanning next 15 to 20 years, to augment the investment in nuclear power generation to be
formulated.
• Steps to re-vitalise PPPs - guidelines for renegotiation of PPP Concession Agreements and introduction of Public Utility (Resolution of Disputes) Bill.
• Rs. 97,000 crore of total investment in the road sector to be undertaken in 2016-17.
• To approve nearly 10,000 kms of National Highways in 2016-17.
• Allocation of Rs. 55,000 crore in the Budget for Roads.
• Rs.15,000 crore to be raised by NHAI through bonds.
• Amendments of Motor Vehicles Act to open up the road transport sector in the passenger segment.
• Reforms in FDI policy in the areas of Insurance and Pension, Asset Reconstruction Companies, Stock Exchanges.
• 100% FDI to be allowed through FIPB route in marketing of food products produced and manufactured in India.
• Comprehensive plan, spanning next 15 to 20 years, to augment the investment in nuclear power generation to be
formulated.
• Steps to re-vitalise PPPs - guidelines for renegotiation of PPP Concession Agreements and introduction of Public Utility (Resolution of Disputes) Bill.
(6) Financial Sector Reforms
• Rs. 25,000 crore allocated towards recapitalisation of Public Sector Banks.
• Amendments in the SARFAESI Act 2002 - enable the sponsor of an ARC to hold up to 100% stake in the ARC and permit non
institutional investors to invest in Securitization Receipts.
New derivative products will be developed by SEBI in the Commodity Derivatives market.
• Enactment of a comprehensive law to deal with resolution of financial firms
• Financial Data Management Centre to be set up.
• RBI to facilitate retail participation in Government securities.
• Statutory basis for a Monetary Policy framework and a Monetary Policy Committee.
• General Insurance Companies owned by the Government to be listed in the stock exchanges.
• Amendments in the SARFAESI Act 2002 - enable the sponsor of an ARC to hold up to 100% stake in the ARC and permit non
institutional investors to invest in Securitization Receipts.
New derivative products will be developed by SEBI in the Commodity Derivatives market.
• Enactment of a comprehensive law to deal with resolution of financial firms
• Financial Data Management Centre to be set up.
• RBI to facilitate retail participation in Government securities.
• Statutory basis for a Monetary Policy framework and a Monetary Policy Committee.
• General Insurance Companies owned by the Government to be listed in the stock exchanges.
(7) Governance and Ease of Doing Business
• Bill for Targeted Delivery of Financial and Other Subsidies, Benefits and Services by using the Aadhar framework to be
introduced.
• Direct Benefit Transfer for fertilizer
• Automation facilities will be provided in 3 lakh fair price shops by March 2017.
• Amendments in Companies Act to improve enabling environment for start-ups.
• Price Stabilisation Fund with a corpus of Rs.900 crore to help maintain stable prices of Pulses.
introduced.
• Direct Benefit Transfer for fertilizer
• Automation facilities will be provided in 3 lakh fair price shops by March 2017.
• Amendments in Companies Act to improve enabling environment for start-ups.
• Price Stabilisation Fund with a corpus of Rs.900 crore to help maintain stable prices of Pulses.
(8) Fiscal Discipline
• Fiscal deficit targets retained: 2015-16(Revised Estimate) at 3.9% and 2016-17(Budget Estimate)at 3.5%.
• Revenue Deficit reduced to 2.5% in 2015-16(RE) from 2.8%.
• Total expenditure projected at Rs.19.78 lakh crore- Plan expenditure of Rs.5.50 lakh crore and Non-Plan expenditure of Rs.14.28 lakh crore.
• 1500 Central Plan Schemes rationalised and restructured into nearly 300 Central Sector and 30 Centrally Sponsored Schemes.
• Revenue Deficit reduced to 2.5% in 2015-16(RE) from 2.8%.
• Total expenditure projected at Rs.19.78 lakh crore- Plan expenditure of Rs.5.50 lakh crore and Non-Plan expenditure of Rs.14.28 lakh crore.
• 1500 Central Plan Schemes rationalised and restructured into nearly 300 Central Sector and 30 Centrally Sponsored Schemes.
(9) Tax Reforms
The Tax Reforms in the FY15 Union Budget were developed on nine categories namely, Relief to small tax payers, measures to boost growth and employment generation, incentivizing domestic value addition to help Make in India, measures for moving towards a pensioned society, measures for promoting affordable housing, additional resource mobilization for agriculture, rural economy and clean environment, reducing litigation and providing certainty in taxation, simplification and rationalization of taxation and use of Technology for creating accountability.
• As a part of relief to small tax payers, the government proposes for individuals with income less than 5 lakh, the ceiling of tax rebate under section 87A to be increased from Rs.2,000 to Rs.5,000. The government also proposes to increase the limit of deduction in respect of rent paid under section 80GG to Rs.60,000 p.a
• In order to boost growth and employment generation, the government proposed to reduce corporate tax in a phased manner, incentives provided for new manufacturing companies and SMEs in the form of lower corporate tax, 100% deduction of profits for 3 out of 5 years for start-ups set up during April 2016 to March 2019, implementation of GAAR from April 2017 and complete pass through of income tax to securitization trusts including trusts of ARCs.
• In order to promote make in India, suitable changes in customs and excise duty rates on certain inputs, raw materials, intermediaries and components and certain other goods and simply procedures to reduce costs and improve competitiveness of the domestic industry
• In an attempt to move towards a pensioned society, the government proposes to exempt from service tax the Annuity services provided by NPS and services provided by EPFO to employees
• To promote affordable housing, the government proposes to give deduction to first time home buyers for additional interest of Rs.50,000 p.a for loans up to Rs.35 lakh sanctioned during FY17 for value of house less than Rs.50 lakh, exempt service tax on construction of affordable houses up to 60 square metres under any scheme of the centre or state government including PPP schemes
• Rate of securities transaction tax in case of options proposed to increase from 0.17% to 0.05%, imposing of cess called KrishiKalyan cess @0.5% on all taxable services, levying of infrastructure cess of 1% on small petrol, LPG, CNG cars, 2.5% on diesel cars of certain capacity and 4% on other higher engine capacity vehicles and SUVs, increasing excise duty on various tobacco products from 10% to 15%
• In an attempt to remove black money from the economy, the government proposes no penalty in respect to income tax cases with disputed tax up to Rs.10 lakh will be levied, cases with disputed tax exceeding Rs.10 lakh subjected to 25% of the minimum of the imposable penalty for both direct and indirect taxes. The penalty for concealing of income to be 50% of tax in case of underreporting of income and 200% of tax where there is misreporting of facts
• As a part of rationalising of tax reforms, the government proposes to abolish 13 cesses, levied by various Ministries in which revenue collection is less than Rs.50 crore in a year
• In matters pertaining to Income-tax Act, Government will pay interest at the rate of 9% p.a against normal rate of 6% p.a in case there is delay in giving effect to Appellate order beyond ninety days. The government also proposes to change the procedure to provide for a shift from physical control to record based control for customs bonded warehouses, supported by sophisticated IT systems
• In order to boost growth and employment generation, the government proposed to reduce corporate tax in a phased manner, incentives provided for new manufacturing companies and SMEs in the form of lower corporate tax, 100% deduction of profits for 3 out of 5 years for start-ups set up during April 2016 to March 2019, implementation of GAAR from April 2017 and complete pass through of income tax to securitization trusts including trusts of ARCs.
• In order to promote make in India, suitable changes in customs and excise duty rates on certain inputs, raw materials, intermediaries and components and certain other goods and simply procedures to reduce costs and improve competitiveness of the domestic industry
• In an attempt to move towards a pensioned society, the government proposes to exempt from service tax the Annuity services provided by NPS and services provided by EPFO to employees
• To promote affordable housing, the government proposes to give deduction to first time home buyers for additional interest of Rs.50,000 p.a for loans up to Rs.35 lakh sanctioned during FY17 for value of house less than Rs.50 lakh, exempt service tax on construction of affordable houses up to 60 square metres under any scheme of the centre or state government including PPP schemes
• Rate of securities transaction tax in case of options proposed to increase from 0.17% to 0.05%, imposing of cess called KrishiKalyan cess @0.5% on all taxable services, levying of infrastructure cess of 1% on small petrol, LPG, CNG cars, 2.5% on diesel cars of certain capacity and 4% on other higher engine capacity vehicles and SUVs, increasing excise duty on various tobacco products from 10% to 15%
• In an attempt to remove black money from the economy, the government proposes no penalty in respect to income tax cases with disputed tax up to Rs.10 lakh will be levied, cases with disputed tax exceeding Rs.10 lakh subjected to 25% of the minimum of the imposable penalty for both direct and indirect taxes. The penalty for concealing of income to be 50% of tax in case of underreporting of income and 200% of tax where there is misreporting of facts
• As a part of rationalising of tax reforms, the government proposes to abolish 13 cesses, levied by various Ministries in which revenue collection is less than Rs.50 crore in a year
• In matters pertaining to Income-tax Act, Government will pay interest at the rate of 9% p.a against normal rate of 6% p.a in case there is delay in giving effect to Appellate order beyond ninety days. The government also proposes to change the procedure to provide for a shift from physical control to record based control for customs bonded warehouses, supported by sophisticated IT systems
PARIKRAMA
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POST #3
BUDGET FINANCIALS
Receipts
The government has been experiencing slowdown in the growth rate of total receipts. Over the years, the growth in total
receipts of the Centre has moderated from 11.9% in FY14 to 5.3% in FY15 and 7.3% in FY16 (RE). The same is expected to increase to 10.8% in FY17 (BE). There has been a moderate shift in the composition of the overall Receipts Budget over the last few years. While the share of revenue receipts rose from 58% in FY12 to 66% in FY16 (RE) that of capital receipts has declined from 44% in FY12 to 36% in FY16 (RE).
It needs to be noted that although the growth rates have moderated, the government collected higher receipts in FY16 than it budgeted for owing to higher revenue receipts viz. tax collections.
Gross Tax Revenue/ GDP
The ratio of Gross Tax Revenue to GDP has been in the range of 10 – 10.5% till FY15. The same is expected to increase to 10.8% in FY16. The government plans to increase this ratio by improving efficiency of tax collections.
Major Non-Tax Revenue
Overall, non-tax revenue is projected to increase by 24.9% in FY17 (BE) from 30.7% growth recorded in FY16 (RE) and a negative growth of 6.9% in FY15. For FY16, there has been significant increase in all the major heads, barring the interest receipts which declined by 2.8% to Rs.23,142 crore. While FY17 (BE) is expected to witness significant increase (28%) in interest receipts; Dividend from RBI, Nationalized Banks and financial Institutions is projected to decline by 5.4% to Rs.69,897 crore.
Spectrum Sale
The Government in FY13, FY14 and FY15 could not meet the target to be earned through Spectrum sale. The actual figures stood markedly lower than the budgeted estimates. However, in FY16 the government surpassed its budget estimates. The Centre earned Rs.57,384 crore in FY16 (RE) while it had budgeted for Rs.42,866 crore.
The Government has projected a total of Rs.98,995 crore to be garnered through the Spectrum sale in FY17.
Disinvestment
The Disinvestment target for FY17 is set at Rs.56,500 crore, of which Rs.20,500 crore is to be collected through strategic
disinvestments. However, in the past years it is seen that the Centre has been unable to meet the budgeted disinvestment target. In FY16, the revised figures indicate that the government was only able to achieve 36% of the projected target at the start of the year. It remains to be seen if the optimistic target is realized in FY16.
However, the government has got in place a new policy for management of Government investment in PSEs, including
disinvestment and strategic sale. The NITI Aayogwill identify the CPSEs for strategic sale. The government also plans to adopt
a comprehensive approach for efficient management of Government investment in CPSEs by addressing issues such as capital restructuring, dividend, bonus shares, etc.
Gross Borrowing Programme
The Gross Borrowing Programme for FY17 is expected to increase by 2.5% in FY17(BE) with the Government projected to borrow Rs.6,00,000 crore. However, there is a 4.5% decline in repayments on part of the government thereby taking the net borrowing programme to Rs.4.25 lakh crore.
Expenditure
Total Budget expenditure is projected to increase by 10.7% in FY17 compared to that in FY16 (RE).
Total Plan expenditure has seen a steep rise of 15.3% for FY17(BE) in comparison to FY16(RE). Although non-plan expenditure accounts for more than 70% of total expenditure, it is only 9.2% higher in FY17 (BE) vis-à-vis FY16 (RE). Consequently, the share of non-plan expenditure declined in FY17 (BE).
In terms of revenue and capital accounts, the share of revenue account in total expenditure continues to remain more than 87% since last five years. The growth in total revenue expenditure has doubled for FY17(BE) at 11.9% compared with 5.5% growth in FY16(RE).
This has only led to increasing share of revenue expenditure in total expenditure. The substantial increase in revenue expenditure can be in part be attributed to the centre’s expenditure towards fulfilling 7th Pay Panel recommendations and disbursements towards defence personnel’s (OROP scheme).
Capital expenditure, on the other hand has seen its growth rate decline from 20.9% in FY16(RE) to a mere 3.9% in FY17(BE). This has led to a further decline in share of capital expenditure from 13% in FY16(RE) to 12.5% FY17(BE).
BUDGET FINANCIALS
Receipts
The government has been experiencing slowdown in the growth rate of total receipts. Over the years, the growth in total
receipts of the Centre has moderated from 11.9% in FY14 to 5.3% in FY15 and 7.3% in FY16 (RE). The same is expected to increase to 10.8% in FY17 (BE). There has been a moderate shift in the composition of the overall Receipts Budget over the last few years. While the share of revenue receipts rose from 58% in FY12 to 66% in FY16 (RE) that of capital receipts has declined from 44% in FY12 to 36% in FY16 (RE).
It needs to be noted that although the growth rates have moderated, the government collected higher receipts in FY16 than it budgeted for owing to higher revenue receipts viz. tax collections.
Gross Tax Revenue/ GDP
The ratio of Gross Tax Revenue to GDP has been in the range of 10 – 10.5% till FY15. The same is expected to increase to 10.8% in FY16. The government plans to increase this ratio by improving efficiency of tax collections.
Major Non-Tax Revenue
Overall, non-tax revenue is projected to increase by 24.9% in FY17 (BE) from 30.7% growth recorded in FY16 (RE) and a negative growth of 6.9% in FY15. For FY16, there has been significant increase in all the major heads, barring the interest receipts which declined by 2.8% to Rs.23,142 crore. While FY17 (BE) is expected to witness significant increase (28%) in interest receipts; Dividend from RBI, Nationalized Banks and financial Institutions is projected to decline by 5.4% to Rs.69,897 crore.
Spectrum Sale
The Government in FY13, FY14 and FY15 could not meet the target to be earned through Spectrum sale. The actual figures stood markedly lower than the budgeted estimates. However, in FY16 the government surpassed its budget estimates. The Centre earned Rs.57,384 crore in FY16 (RE) while it had budgeted for Rs.42,866 crore.
The Government has projected a total of Rs.98,995 crore to be garnered through the Spectrum sale in FY17.
Disinvestment
The Disinvestment target for FY17 is set at Rs.56,500 crore, of which Rs.20,500 crore is to be collected through strategic
disinvestments. However, in the past years it is seen that the Centre has been unable to meet the budgeted disinvestment target. In FY16, the revised figures indicate that the government was only able to achieve 36% of the projected target at the start of the year. It remains to be seen if the optimistic target is realized in FY16.
However, the government has got in place a new policy for management of Government investment in PSEs, including
disinvestment and strategic sale. The NITI Aayogwill identify the CPSEs for strategic sale. The government also plans to adopt
a comprehensive approach for efficient management of Government investment in CPSEs by addressing issues such as capital restructuring, dividend, bonus shares, etc.
Gross Borrowing Programme
The Gross Borrowing Programme for FY17 is expected to increase by 2.5% in FY17(BE) with the Government projected to borrow Rs.6,00,000 crore. However, there is a 4.5% decline in repayments on part of the government thereby taking the net borrowing programme to Rs.4.25 lakh crore.
Expenditure
Total Budget expenditure is projected to increase by 10.7% in FY17 compared to that in FY16 (RE).
Total Plan expenditure has seen a steep rise of 15.3% for FY17(BE) in comparison to FY16(RE). Although non-plan expenditure accounts for more than 70% of total expenditure, it is only 9.2% higher in FY17 (BE) vis-à-vis FY16 (RE). Consequently, the share of non-plan expenditure declined in FY17 (BE).
In terms of revenue and capital accounts, the share of revenue account in total expenditure continues to remain more than 87% since last five years. The growth in total revenue expenditure has doubled for FY17(BE) at 11.9% compared with 5.5% growth in FY16(RE).
This has only led to increasing share of revenue expenditure in total expenditure. The substantial increase in revenue expenditure can be in part be attributed to the centre’s expenditure towards fulfilling 7th Pay Panel recommendations and disbursements towards defence personnel’s (OROP scheme).
Capital expenditure, on the other hand has seen its growth rate decline from 20.9% in FY16(RE) to a mere 3.9% in FY17(BE). This has led to a further decline in share of capital expenditure from 13% in FY16(RE) to 12.5% FY17(BE).
PARIKRAMA
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POST #4
Interest Payments
Interest payments account for around 25% of the total expenditure and 35% of non-plan expenditure.Growth in Interest
payments declined from 19.5% in FY14 to 7.5% in FY15 but has been increasing constantly since then. They are expected to increase by 11.3% in FY17(BE) over 10% in FY16(RE). The Effective interest rate defined interest payments to outstanding liabilities.
Subsidies
The expenditure on major subsidies is projected to decline from 2% of GDP in FY15 to 1.8% of GDP in FY16(RE) and further to 1.5% of GDP in FY17(BE) with focused subsidy reforms. Subsidy bill for FY17(BE) is expected to decline by 2.86%,attributed in part to the lower petroleum and fertilizer subsidy bill.A substantial decline of 50.2% was seen in petroleum subsidy for FY16(RE). Although, the subsidies are still falling, it has moderated to 10.2% for FY17(BE).
Food subsidy attributes to more than 50% of government’s total subsidy bill. It is estimated that subsidy towards this end is expected to fall by 3.3% in FY17(BE).
Fertilizer Subsidy is also expected decline by 3.4% in FY17(BE) with successful implementation of ‘Nutrient Based Subsidy’ regime. Interest subsidies account for 6.2% of the total subsidy bill is expected to increase by 12.4% in FY17(BE) after having increased by 81% in FY16(RE) . The high interest subsidy may be attributed towards government’s initiatives to ease loan burden of farmers through interest subvention.
Defence Expenditure
Defence Expenditure which accounts for nearly 13% of the expenditure since FY13 is expected to increase by sharp 11% in FY17(BE). The increased defence expenditure comes in line with abolishment of custom duties on goods imported for Defence purposes by the Central and State governments.
Total expenditure which is expected to increase by Rs.192,669 crore in FY17(BE) over FY16(RE) is heavily directed towards agriculture sector , social schemes, welfare of Scs/STs and minorities, women and child development, employment generation and revival of banking system through recapitalization of public banks.
The focus of the government is pro-poor as it introduces Crop Insurance schemes for farmers , increases allocation towards MNREGA and initiate developing Rurban clusters. The government has given emphasis to tapping the demographic dividend of the country by allocating increasing sums towards education, skill development and focus on job creation. Addressing the need for developing roads and railways which would help boost both agricultural and manufacturing segment of the country an allocation of Rs.21.8 lakh crore has been made out of government’s capital expenditure towards this end.
DEBT
Public debt for FY17 is estimated to increase by 9.2% to Rs.6,029,869 crore lower than 11.8% growth in FY16 (RE). Of the total public debt, the internal debt accounts for more than 96% at Rs. 5,801,776crore. The share of external debt has been moderating gradually from 5% in FY12 to 3.8% in FY16(RE). In FY17, the outstanding external debt stock is estimated to grow by 9.1% to Rs.228,093 crore. The other liabilities are estimated to increase by 2.7% to Rs.1,408,613 crore in FY17(BE). The debt to GDP ratio has been increasing gradually over the past few years, rising to a high 47.6% in FY16(RE). It is targeted to decline marginally to 47.1% in FY17 (BE) with an expectation of improving Gross domestic product.
Bond Markets
The budget had provided a boost to the domestic corporate bond markets. Various measures have been announced to deepen and strength the corporate bond markets. These measures will make the bond market an attractive alternate source of funding and investment at a time when the formal banking sector is stressed.
Interest Payments
Interest payments account for around 25% of the total expenditure and 35% of non-plan expenditure.Growth in Interest
payments declined from 19.5% in FY14 to 7.5% in FY15 but has been increasing constantly since then. They are expected to increase by 11.3% in FY17(BE) over 10% in FY16(RE). The Effective interest rate defined interest payments to outstanding liabilities.
Subsidies
The expenditure on major subsidies is projected to decline from 2% of GDP in FY15 to 1.8% of GDP in FY16(RE) and further to 1.5% of GDP in FY17(BE) with focused subsidy reforms. Subsidy bill for FY17(BE) is expected to decline by 2.86%,attributed in part to the lower petroleum and fertilizer subsidy bill.A substantial decline of 50.2% was seen in petroleum subsidy for FY16(RE). Although, the subsidies are still falling, it has moderated to 10.2% for FY17(BE).
Food subsidy attributes to more than 50% of government’s total subsidy bill. It is estimated that subsidy towards this end is expected to fall by 3.3% in FY17(BE).
Fertilizer Subsidy is also expected decline by 3.4% in FY17(BE) with successful implementation of ‘Nutrient Based Subsidy’ regime. Interest subsidies account for 6.2% of the total subsidy bill is expected to increase by 12.4% in FY17(BE) after having increased by 81% in FY16(RE) . The high interest subsidy may be attributed towards government’s initiatives to ease loan burden of farmers through interest subvention.
Defence Expenditure
Defence Expenditure which accounts for nearly 13% of the expenditure since FY13 is expected to increase by sharp 11% in FY17(BE). The increased defence expenditure comes in line with abolishment of custom duties on goods imported for Defence purposes by the Central and State governments.
Total expenditure which is expected to increase by Rs.192,669 crore in FY17(BE) over FY16(RE) is heavily directed towards agriculture sector , social schemes, welfare of Scs/STs and minorities, women and child development, employment generation and revival of banking system through recapitalization of public banks.
The focus of the government is pro-poor as it introduces Crop Insurance schemes for farmers , increases allocation towards MNREGA and initiate developing Rurban clusters. The government has given emphasis to tapping the demographic dividend of the country by allocating increasing sums towards education, skill development and focus on job creation. Addressing the need for developing roads and railways which would help boost both agricultural and manufacturing segment of the country an allocation of Rs.21.8 lakh crore has been made out of government’s capital expenditure towards this end.
DEBT
Public debt for FY17 is estimated to increase by 9.2% to Rs.6,029,869 crore lower than 11.8% growth in FY16 (RE). Of the total public debt, the internal debt accounts for more than 96% at Rs. 5,801,776crore. The share of external debt has been moderating gradually from 5% in FY12 to 3.8% in FY16(RE). In FY17, the outstanding external debt stock is estimated to grow by 9.1% to Rs.228,093 crore. The other liabilities are estimated to increase by 2.7% to Rs.1,408,613 crore in FY17(BE). The debt to GDP ratio has been increasing gradually over the past few years, rising to a high 47.6% in FY16(RE). It is targeted to decline marginally to 47.1% in FY17 (BE) with an expectation of improving Gross domestic product.
Bond Markets
The budget had provided a boost to the domestic corporate bond markets. Various measures have been announced to deepen and strength the corporate bond markets. These measures will make the bond market an attractive alternate source of funding and investment at a time when the formal banking sector is stressed.
•The RBI is to issue guidelines to encourage large borrowers to access a certain portion of their financing needs through the bond markets. Assuming large exposures are Rs.100 crore and above, even if 10% of these are to migrate to the corporate bond markets , the incremental funds raised in the bond markets would be Rs.4 lakh crore over a period of time.
• Recognizing the peculiar requirements and quantum of funds for infrastructure, the budget has announced the development of a new credit rating system for infrastructure projects that would enable arriving at an appropriate pricing cost that is beneficial for both lenders and borrowers. Also, LIC of India is to set up a dedicated fund to provide credit enhancement to infrastructure projects. These funds will help in raising the credit rating of bonds floated by infrastructure companies and facilitate investment from long term investors. During the period Apr-Jan 2015-16, around Rs.75,000 crore of bonds were raised by infrastructure projects, assuming that 10% of these get a credit enhancement, this market could be of the size of Rs.7,500 crore.
• Indicating the governments growing reliance on the bond markets for financing infrastructure, in FY17, Rs.31,300 crore of funds for infrastructure projects is to be raised by government agencies such as NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority.
• To attract foreign portfolio investments, the investment basket of these investors will be expanded to include unlisted debt securities and pass through securities issued by securitisation SPVs.
• For dissemination of information pertaining to the corporate bond markets, a complete information repository for
corporate bonds, covering both primary and secondary market segments will be developed jointly by RBI and SEBI.
• Also, a framework for an electronic platform for repo market in corporate bonds will be developed by RBI.
• Recognizing the peculiar requirements and quantum of funds for infrastructure, the budget has announced the development of a new credit rating system for infrastructure projects that would enable arriving at an appropriate pricing cost that is beneficial for both lenders and borrowers. Also, LIC of India is to set up a dedicated fund to provide credit enhancement to infrastructure projects. These funds will help in raising the credit rating of bonds floated by infrastructure companies and facilitate investment from long term investors. During the period Apr-Jan 2015-16, around Rs.75,000 crore of bonds were raised by infrastructure projects, assuming that 10% of these get a credit enhancement, this market could be of the size of Rs.7,500 crore.
• Indicating the governments growing reliance on the bond markets for financing infrastructure, in FY17, Rs.31,300 crore of funds for infrastructure projects is to be raised by government agencies such as NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority.
• To attract foreign portfolio investments, the investment basket of these investors will be expanded to include unlisted debt securities and pass through securities issued by securitisation SPVs.
• For dissemination of information pertaining to the corporate bond markets, a complete information repository for
corporate bonds, covering both primary and secondary market segments will be developed jointly by RBI and SEBI.
• Also, a framework for an electronic platform for repo market in corporate bonds will be developed by RBI.
PARIKRAMA
SENIOR MEMBER
- Joined
- Jan 5, 2014
- Messages
- 4,871
- Reaction score
- 185
- Country
- Location
Now onwards sectoral coverage
Post #5
AIRLINES - Positive
Industry Snapshot:
Impact on Companies
AIRPORTS - Positive
Industry Snapshot:
AUTO ANCILLARIES - Neutral
Industry Snapshot:
The automobile component sales grew by 11 per cent on year-on-year basis in FY15 to Rs.2.34 lakh crore, largely on account of improvement in two/three wheeler and passenger vehicle segments post subdued period across the segments over FY12-FY14.
The auto component industry contributes around 3.8% to the country’s GDP providing direct employment to 1.5 million people. The revival is likely to continue albeit at slower pace in FY16 on account of increase in demand of commercial
vehicles and a reasonable uptick in sales of passenger cars which are the key demand drivers for auto components from
automobile manufacturers.
Additionally, the increase in localisation levels in the vehicles manufactured in India is likely to reduce costs thereby auguring well for auto component manufacturers. The demand from the replacement market is expected to remain weak for the organized sector since the replacement market is dominated by the counterfeit auto parts from unorganised sector and cheap imports. With the likely adoption of new standards of emission norms, the substantial investment shall be required by auto ancillaries segment to complement the Original Equipment Manufacturers (OEMs).
Duty Structure
Proposal and Impact
Impact On Companies
Post #5
AIRLINES - Positive
Industry Snapshot:
- Currently Air India, Jet Airways, Spice Jet, GoAir, Indigo, Air Costa, Air Asia, Vistara, Air Pegasus and Trujet together control the domestic air travel market in India.
- As per DGCA, in CY15, Indigo had a market share of 36.7% in the domestic air travel (in terms of passenger carried) followed by Jet Airways which commanded 22.5% market share, while Air India and Spice Jet had a market share of 16.4% and 11.6%, respectively in CY15.
- The total air passenger traffic(including domestic and international passenger)for FY15 on a y-o-y basis showed a jump of 12.5% and the same for April 2015-November 2015 period showed a jump of 17.04%
Impact on Companies
AIRPORTS - Positive
Industry Snapshot:
- The airport sector has been opened to private sector in the last decade. This has fuelled growth in passenger and cargo handling capacity. Total passenger handling capacity of airports increased from 72 mn in FY06 to 272 mn in FY15 and the total cargo handling capacity of airports was at 6.2 mn tonnes per annum in FY15.
- As per the Twelfth Five-Year Plan (2012-2017), total investment in the airport sector is expected to be Rs.87,714 crore, which is expected to further augment airport infrastructure across the country.
- The total air passenger traffic (including domestic and international passenger) for FY15 on a y-o-y basis showed a jump of 12.5% for April 2015-November 2015 period showed a jump of 17.04%.
AUTO ANCILLARIES - Neutral
Industry Snapshot:
The automobile component sales grew by 11 per cent on year-on-year basis in FY15 to Rs.2.34 lakh crore, largely on account of improvement in two/three wheeler and passenger vehicle segments post subdued period across the segments over FY12-FY14.
The auto component industry contributes around 3.8% to the country’s GDP providing direct employment to 1.5 million people. The revival is likely to continue albeit at slower pace in FY16 on account of increase in demand of commercial
vehicles and a reasonable uptick in sales of passenger cars which are the key demand drivers for auto components from
automobile manufacturers.
Additionally, the increase in localisation levels in the vehicles manufactured in India is likely to reduce costs thereby auguring well for auto component manufacturers. The demand from the replacement market is expected to remain weak for the organized sector since the replacement market is dominated by the counterfeit auto parts from unorganised sector and cheap imports. With the likely adoption of new standards of emission norms, the substantial investment shall be required by auto ancillaries segment to complement the Original Equipment Manufacturers (OEMs).
Duty Structure
Proposal and Impact
Impact On Companies
PARIKRAMA
SENIOR MEMBER
- Joined
- Jan 5, 2014
- Messages
- 4,871
- Reaction score
- 185
- Country
- Location
Post # 6
AUTOMOBILES - Neutral
Industry Snapshot:
The Indian auto industry is one of the largest in the world with an annual production of 23.37 million vehicles in FY15 ie growth of 8.68 per cent over the last year. During FY15, two-wheeler segments and passenger vehicle contributed to the overall growth. Besides, India is also a prominent auto exporter and growth was also on account of increase in export to certain extent.
The auto industry contributes around 7.1% to country’s GDP providing employment to 29 million people and contributes 13% to excise revenue for the Government. The overall growth in FY16 is likely to remain flat with the exception of few segments such as commercial vehicle which is likely to witness uptick on account of expected improvement in the overall macroeconomic conditions. Besides, the investment in order to develop vehicles with the improved emission
standards and competitive market is likely to pose challenge for the players.
Duty Structure
Proposal and Impact
Impact on Companies
Banking & Financial Services - Neutral
Industry Snapshot:
BANKS
The Indian economy grew by 7.3% in FY15 as compared to 6.9% in FY14. As per advanced estimates, the GDP growth for FY16 stood at 7.6%. As on March 20, 2015, the y-o-y growth in advances (non-food credit) and deposits were weak at 9.4% (FY14: 14.5%) and 10.9% (FY14: 14.6%), respectively.
As on February 5, 2016, the y-o-y growth in advances (non-food credit) and deposits stood at 11.1% and 10.6% respectively. Slowdown in economy, relatively high interest rates in the banking system, capital concerns for some banks, higher NPAs and challenge of restructured assets all contributed for low advances growth.
Corporates also resorted to mobilising funds from the commercial paper market instead of banks in FY15 which also played a role in subdued credit growth. Asset quality pressure is continuing in FY16 leading to increased provisioning
and lower profitability for the banking sector. Under the Indradhanush scheme, the Government has announced a capital
infusion of Rs.70,000 crore for PSU banks during FY16 - FY19.
Going forward, the banks especially public sector banks would need additional equity in order to meet Basel III norms and manage the challenge of asset quality stress. Advances and deposits are expected to grow in the range of 11-12% in FY16.
Proposal and Impact
Banking & Financial Services HOUSING FINANCE - Positive
Industry Snapshot:
Over the last decade, housing finance in India has emerged as one of the most secured asset class with low delinquencies.
As a result, housing finance continued to be a focus segment for both banks as well as housing finance companies and has witnessed robust CAGR growth of roughly 19% during the last three years (2013-2015), higher than the overall bank credit growth.
Over the last few years many new HFCs with a focus on affordable housing have started operations. The government’s thrust on providing housing to all by 2022 coupled with significant housing shortages in the low cost and affordable housing is likely to fuel credit growth in the segment.
In addition, various NHB schemes and tax incentives provided to individuals on housing loans continue to remain positive for the sector. HFCs are expected to maintain their good profitability on the basis of strong business growth and stable asset quality over the medium term.
Proposal and Impact
Banking & Financial Services - ASSET RECONSTRCUTION COMPANIES - Positive
Industry Snapshot:
Asset Reconstruction Companies (ARCs) were setup under the SARFAEST Act, 2002 to relieve banks and financial institutions of the burden of NPAs. Major trigger for this came in November 2013 when RBI asked the banking system to clean up its stressed portfolio. With the RBI directing banks to clean up their balance sheets by March 2017 and with stressed assets of the Indian banking industry having risen to 11-12% of gross advances, the sale of bad loans from banks to ARCs is expected to increase going forward.
Proposal and Impact
AUTOMOBILES - Neutral
Industry Snapshot:
The Indian auto industry is one of the largest in the world with an annual production of 23.37 million vehicles in FY15 ie growth of 8.68 per cent over the last year. During FY15, two-wheeler segments and passenger vehicle contributed to the overall growth. Besides, India is also a prominent auto exporter and growth was also on account of increase in export to certain extent.
The auto industry contributes around 7.1% to country’s GDP providing employment to 29 million people and contributes 13% to excise revenue for the Government. The overall growth in FY16 is likely to remain flat with the exception of few segments such as commercial vehicle which is likely to witness uptick on account of expected improvement in the overall macroeconomic conditions. Besides, the investment in order to develop vehicles with the improved emission
standards and competitive market is likely to pose challenge for the players.
Duty Structure
Proposal and Impact
Impact on Companies
Banking & Financial Services - Neutral
Industry Snapshot:
BANKS
The Indian economy grew by 7.3% in FY15 as compared to 6.9% in FY14. As per advanced estimates, the GDP growth for FY16 stood at 7.6%. As on March 20, 2015, the y-o-y growth in advances (non-food credit) and deposits were weak at 9.4% (FY14: 14.5%) and 10.9% (FY14: 14.6%), respectively.
As on February 5, 2016, the y-o-y growth in advances (non-food credit) and deposits stood at 11.1% and 10.6% respectively. Slowdown in economy, relatively high interest rates in the banking system, capital concerns for some banks, higher NPAs and challenge of restructured assets all contributed for low advances growth.
Corporates also resorted to mobilising funds from the commercial paper market instead of banks in FY15 which also played a role in subdued credit growth. Asset quality pressure is continuing in FY16 leading to increased provisioning
and lower profitability for the banking sector. Under the Indradhanush scheme, the Government has announced a capital
infusion of Rs.70,000 crore for PSU banks during FY16 - FY19.
Going forward, the banks especially public sector banks would need additional equity in order to meet Basel III norms and manage the challenge of asset quality stress. Advances and deposits are expected to grow in the range of 11-12% in FY16.
Proposal and Impact
Banking & Financial Services HOUSING FINANCE - Positive
Industry Snapshot:
Over the last decade, housing finance in India has emerged as one of the most secured asset class with low delinquencies.
As a result, housing finance continued to be a focus segment for both banks as well as housing finance companies and has witnessed robust CAGR growth of roughly 19% during the last three years (2013-2015), higher than the overall bank credit growth.
Over the last few years many new HFCs with a focus on affordable housing have started operations. The government’s thrust on providing housing to all by 2022 coupled with significant housing shortages in the low cost and affordable housing is likely to fuel credit growth in the segment.
In addition, various NHB schemes and tax incentives provided to individuals on housing loans continue to remain positive for the sector. HFCs are expected to maintain their good profitability on the basis of strong business growth and stable asset quality over the medium term.
Proposal and Impact
Banking & Financial Services - ASSET RECONSTRCUTION COMPANIES - Positive
Industry Snapshot:
Asset Reconstruction Companies (ARCs) were setup under the SARFAEST Act, 2002 to relieve banks and financial institutions of the burden of NPAs. Major trigger for this came in November 2013 when RBI asked the banking system to clean up its stressed portfolio. With the RBI directing banks to clean up their balance sheets by March 2017 and with stressed assets of the Indian banking industry having risen to 11-12% of gross advances, the sale of bad loans from banks to ARCs is expected to increase going forward.
Proposal and Impact
- Status
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