PINC Research has come out with its report on sectoral impact of union budget 2012-13.
• Contrary to the expectation, Union Budget 2012 was less severe on the industry despite its focus on revenue mobilisation.
• FY12 performance has been completely off the target with government missing its fiscal targets. For FY13, it has set 5.1% as fiscal deficit target as against estimate of 5.9% for FY12.
• Across the board hike in service tax and excise duty rates is inflationary and is likely to delay the interest rates cut.
• Amendment in The Income Tax Act to widen the definition of Income deemed to accrue from India with retrospective effect is a big setback to foreign investments in the Indian economy.
• Mobilisation from tax-free Infrastructure bonds has been doubled to Rs600bn.
• Increase in customs duty on Gold is a right step to channelise domestic savings in productive assets.
• Success of government in containing the subsidy burden within the targets will be crucial. For FY13, subsidy burden is kept at Rs1,900bn, a decline of 12%.
Total planned outlay has been increased by 18% from Rs171bn in FY12 to Rs202bn in FY13
• Agriculture estimated to grow at 2.5% in FY12.
• Interest subvention scheme for providing short term crop loans to farmers at 7% interest per annum extended to FY13. Additional subvention of 3% to continue for prompt payment.
• To allocate Rs100bn to NABARD for refinance of RRBs enhancing their capacity to disburse short term crop loans.
• The total allocation to Rashtriya Krishi Vikas Yojana (RKVY) is being increased from Rs78.6bn in FY12 to Rs 92.2bn in FY13.
• With the “Bringing Green Revolution to Eastern India” (BGREI) generating positive results, the allocation for this scheme increased from Rs4bn to Rs10bn in FY13.
• It has been proposed to start a new centrally sponsored scheme titled ‘National Mission on Food Processing” to boost the food processing sector.
• Target of bank credit to agriculture increased to Rs5,750bn from Rs4,750bn.
Banking and Financial Reforms
• Introduction of amendments to the FRBM Act as part of Finance Bill, 2012 – Medium‐term expenditure framework to set forth a three‐year rolling target for expenditure indicators.
• Endeavour to limit central subsidies under 2% of GDP in FY13; to be further brought down to 1.75% of GDP over next 3 years.
• Proposes to provide Rs159bn for capitalisation of Public Sector Banks, Regional Rural Banks and other financial institutions including NABARD.
• Examining the possibility of creating a financial holding company which will raise resources to meet the capital requirements of Public Sector Banks.
• Proposes to move various bills in the Budget Session of the Parliament related to Micro Finance, National Housing Bank, SIDBI, NABARD, Regional Rural Banks, Indian Stamp etc. This attempts to roll forward the process of financial sector legislative reforms.
• Target for agricultural credit raised by Rs1,000bn to Rs5,750bn in FY13.
• Interest subvention scheme for providing short term crop loans to farmers at 7% interest p.a. to be continued in FY13. Additional subvention of 3% available for prompt paying farmers.
• DTC to be enacted at the earliest while GST is still at a discussion stage between state and centre.
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