2.  Budget Basics
 Components of Budget
 Sources of Revenue
 Fiscal Highlights
 Plan & Non Planned Expenditure
 Major Issues
 Tax Collection
 Positives & Negatives of Budget
 Doubt Session

3.  old French word “bougette” meaning “purse”.
 planned expenses and revenues
 plan for saving and spending
Purpose Of Making Budget
 Budget forecast the revenues and the expenses
 helps in control as it gives the actual position with respect to the
forecast

4.  Government has several policies to implement in
the overall task of performing its functions to meet
the objectives of social & economic growth.
 For implementing these policies, it has to spend
huge amount of funds on
defence, administration, and development, welfare
projects & various other relief operations.
 It is therefore necessary to find out all possible
sources of getting funds so that sufficient revenue
can be generated to meet the mounting
expenditure.

5. Budgets are the mechanism by which management control of an
organization becomes possible.
Budgets Performance
Plan Action Results
Revise Remedy
Comparison of actual results to budget variance

6.  Revenue Deficit = Revenue Receipts – Revenue Expenditure
 Budget Deficit = Total Receipts – Total Expenditure
 Fiscal Deficit = (Total Receipts – Borrowings) – Total Expenditure
 Primary Deficit = Fiscal Deficit – Interest Payments

8. Dividend
Distribution
Tax
Commodities
Income
Transaction
Tax
Tax
Direct Indirect
Banking
Cash
Taxes Wealth Taxes
Transaction Tax
Tax
Centre State Local
Securities Fringe
Transaction Benefit
Tax Tax
Sales
Customs Octroi
Tax/VAT
Profession Property
Excise
Tax Taxes
Service Stamp User
Tax Duty Charges

9.  Revenue Receipts ↓
i. Tax Revenue
ii. Non-Tax Revenue
1. Fees
2. Fines and penalties
3. Profits from public sector enterprises
4. Gifts and grants
5. Special assessment duty

10.  Revenue Expenditure ↓
1. Consumption of goods and services.
2. Agricultural and industrial development, scientific
research, education, health and social services.
3. Defence and civil administration.
4. Exports and external affairs.
5. Grants given to State governments even if some of
them may be used for creation of assets.
6. Payment of interest on loans taken in the previous
year.
7. Subsidies.

11.  Capital Receipts ↓
1. Loans raised by the government from the public
through the sale of bonds and securities. They are
called market loans.
2. Borrowings by government from RBI and other
financial institutions through the sale of Treasury bills.
3. Loans and aids received from foreign countries and
other international Organisations like International
Monetary Fund (IMF), World Bank, etc.
4. Receipts from small saving schemes like the National
saving scheme, Provident fund, etc.
5. Recoveries of loans granted to state and union territory
governments and other parties.

12.  Capital Expenditure ↓
Any projected expenditure which is incurred
for creating asset with a long life is capital
expenditure.
Thus, expenditure on
land, machines, equipment, irrigation
projects, oil exploration and expenditure by
way of investment in long term physical or
financial assets are capital expenditure.

17.  What is fiscal deficit??
When a government's total expenditures exceed
the revenue that it generates (excluding money
from borrowings).

18.  The biggest surprise in the budget has been the
fiscal deficit target for FY12 set by the
Government which is encouraging for global
investors.
 Fiscal deficit is expected to come down to an
impressive 4.6% of GDP in FY12 as compared
to 5.1% in FY11.
 The rolling targets for fiscal deficit are placed at
4.1% for 2012-13, and 3.5% for 2013-14.
 The targets do look ambitious, but a roadmap
to achieve these targets is still to be watch out.

19. FISCAL:
 The Gross Tax Receipts estimated at Rs.
9,32,440 cr in FY12.
 The Non Tax Revenue Receipts estimated at Rs.
1,25,435 cr.
 Total expenditure at Rs. 12,57,729cr in the
2010-11, an increase of 13.4% over last year.
 Plan and Non Plan expenditures in 2010-11
estimated at Rs. 4,41,547cr and Rs.8,16,182cr
respectively.

20.  There are two components of expenditure -
plan and non-plan.
Of these, plan expenditures are estimated after
discussions between each of the ministries
concerned and the Planning Commission.
 Plan expenditure forms a sizeable proportion
of the total expenditure of the Central
Government

21.  Non-plan revenue expenditure is accounted for by
interest payments, subsidies (mainly on food and
fertilisers), wage and salary payments to government
employees, grants to States and Union Territories
governments, pensions, police, economic services in
various sectors, other general services such as tax
collection, social services, and grants to foreign
governments.
Non-plan capital expenditure mainly includes
defence, loans to public enterprises, loans to
States, Union Territories and foreign governments.

27.  Economic growth
 Control inflation
 Fiscal consolidation

28.  It is only after tightening monetary policy over the
year to contain demand side inflationary pressures
and removal of supply side constraints that govt.
was able to contain the food inflation.
 Consumer price index for 2011 is 9.08%.
 food inflation was -3.36% during the 1st week of
January .

30.  In the third quarter of 2011 consumer spending grew
at a weaker pace of 59.5 percent.
 Aggressive rate increases by the Reserve Bank of
India over the past 20 months to cool inflation have
crimped industrial expansion, a 5.1% contraction in
October.
 Government spending rose 10.7 percent, almost
steady compared to the prior quarter.

31.  Govt. has estimated a fiscal deficit of Rs 4.12 lakh
crore or 4.6% of GDP during 2011-12.
 fiscal deficit has risen to Rs 3.07 lakh crore, or 74
per cent of the Budget estimates, in the first seven
months of 2011-12.

32.  The food subsidy alone will cost the exchequer Rs 95,000 crore to
start with.
 If one counts other parts of the Bill and associated set-up, etc, to
get this moving through the existing channel of public distribution
system, the Bill may touch an expenditure of anywhere between
Rs 1,25,000 crore and Rs 1,50,000 crore.
 Three major issues need to be considered:
 the true financial requirement of the Bill, at least for next three
years
 its operational rollout through the existing leaking and
squeaking Food Security Complex of Procurement, Stocking and
Distribution.
 what it does to the remaining food economy when state takes over
literally half the marketed surplus of the main staples away from
market.

33.  Implementation of Direct Tax Code (DTC), Goods
and Services Tax (GST) from 1 april,2012.
 While DTC will simplify, reduce exemptions, which
will widen the tax base, and lower tax
rates, introduction of GST will ensure unified tax
rates across the country.
 structural reforms in the subsidy systems.
 government institutions, banks and companies
including LIC will be allowed to buy government
stake in Central Public Sector Enterprises (CPSEs)
with the help of bulk sales.

34.  Cash-rich PSUs like NTPC, BHEL, SAIL, ONGC and IOC
will also be permitted to go for share buybacks.
 But, in no case would the government stake in any CPSEs
be allowed to go below 51 per cent.
 Department of Divestment (DoD) officials are of the view
shares would sell at a premium through this mode, as against
discounted sales through the market route.

37.  SEBI is likely to allow the promoters of companies
to sell shares by auctioning securities through
stock exchanges. This process will be quicker and
more efficient than a full-fledged public offering of
shares.
 The government has been able to garner Rs
1,144.55 crore (Rs 11.445 billion) this year from
Divestment in Power Finance Corporation.
 The option of getting additional or special
dividend from cash-rich CPSEs may also be
considered this year for improving revenue
realization from the government stake.

38.  Gloomy growth prospects and the government's
commitment to fiscal consolidation is likely to crimp
resource availability for the next Five-year Plan.
 Aggregate resources for the Centre will decline from
14.01% of GDP in 2011-12 (BE) to 13.11% of GDP in
2016-17 .
 The working group has assumed
 better targeting of subsidies
 market-linked pricing of petroleum products and diesel
will bring down non-plan expenditure from 9.09% of GDP
during the base year of the 12th plan (2011-12) to 7.36%
of GDP in the final year.

39.  The North Block has instructed all
departments and ministries to use resources
judiciously.
 ministries should identify savings from within
grants, including
 re-appropriation from low-priority items,
 to provide for items of high priority.
But fiscal prudence cannot be at the cost of
development.

41.  Despite the economic slowdown, indirect tax
collections have touched 72% of the budgeted Rs
3.97 lakh crore for the current fiscal.
 Direct tax collections, which have, after
refunds, grown just over 7% in the first eight
months of the fiscal.
 Industrial production growth slumping into negative
in October and government cutting import duty on
crude and petroleum products to cushion the impact
of rising crude prices.

42.  Excise duty, a tax levied at the factory gate and a
leading indicator of production of goods, bounced back
strongly in December indicating a revival in
manufacturing growth after a 5.1% contraction in
October.
 Overall indirect tax collections rose 16.1% in the first
three quarters, against the year-ago period, just short of
the 17.3% rise needed to meet the Rs 3.97 lakh crore
target.
 Customs duty collections rose 4.1% to Rs 12,608 crore
in December from Rs 12,109 crore in the same month a
year ago.

43. Positives
 For automobile industry, budget is in neutral gear,i.e. there is no
change,hence cars will be less expenisve.
 Senior citizens are benefited by the hike in exemption limit.
 Basic customs duty on agricultural machinery reduced to 4.5 per cent from
5 per cent.
 Government has cut many import duties to check inflation.
 Excise duty to be reduced from 10% to 5% on parts of specified machinery.
 Surcharge for companies cut to 5 per cent, from 7.5 per cent.
 Priority sector lending for housing raised from Rs.20 lakh to Rs.25 lakh.

44. Negatives
 Health Check-Ups in Private hospitals to become expensive.
 Both International Air Travel and Domestic Air Travel become expensive.
 Tax on life insurance service providers could be negative for insurance
companies.
 Travel, Healthcare to become expensive due to increased service tax.
 Lack of FDI in retail, a disappointment.
 New service tax to hurt companies in hospitality.
 Hike in export duty on Iron Ore. Branded clothes may cost more.
 Rise in MAT from 18% to 18.5%.

45.  Equity markets – were up by 3% mid day but ended with modest gains
of about 0.5%.
Top 5 NIFTY Gain Reason
gainers (%)
ITC 8.13% Much expected increase in excise duty on
tobacco and tobacco products not announced.
IDFC 5.18% Impetus to infrastructure.
Reliance 4.66% Banking licenses to private sector.
Capital
M&M 3.45% No roll back of excise stimulation.
Fuel cell, hydrogen cell technology, hybrid
vehicles granted concessions.
Maruti Udyog 3.38% No roll back of excise stimulation.

46. Top 5 NIFTY losers Loss (%) Reason
Sesa Goa -7.54% Increase in excise duty to 20%.
Ambuja Cement -5.23% Rationalization in excise duty.
Reliance Infrastructure -4.35% MAT on SEZ developers.
Ranbaxy -3.23% No specific reason, as appears from the
Budget Speech.
Jaiprakash Associates -3.20% MAT on SEZ developers.
Rationalization in excise duty on
cement.

48.  Why subsidy given to the sector is not in line with input cost?
 Why farm loan limit through Kisan credit card remains same, ie Rs. 300,000
despite inflation being around 10%?
 While additional interest subvention is welcome, however, if the farmer delays
loan repayment even by 1 day (after six months grace period), he has to pay double
interest, ie 14%.
 In Budget speech, FM endorsed that soil fertility has decreased through the use
of chemical fertilizers. He proposed steps to increase organic agriculture in the
country. But in the same speech, he talked about giving subsidy to chemical
fertilizers and exemption from tax for any investment in chemical fertilizer sector.
 In India, more than 60% farmland irrigated by rain water. Sufficient steps have
not been taken to ameliorate the situation.
 One funny but good argument given by a Kisan – While a car loan is cheaper
than a tractor loan…… he has nothing to do with the car on his farm.
Mildly positive for Agriculture but negative for Kisan.