Global poverty on the decline: World Bank

The rate of poverty, based on the number of people living on less than $1.5 a day, declined across the developing world between 2005 and 2008, according to a World Bank report.

Around 1.29 billion people lived below the defined poverty line in 2008, which was equivalent to 22 per cent of the population of the developing world. By contrast, 1.94 billion belonged to this extreme poverty category in 1981. The updated figures were available from surveys carried out in nearly 130 countries.

However, the nearly 663 million people who moved above the poverty line over the years are still poor by the standards of middle and high-income countries. “This bunching up just above the extreme poverty line is indicative of the vulnerability facing a great many poor people in the world. And at the current rate of progress, around one billion people would still live in extreme poverty in 2015', says Mr Martin Ravallion, Director of World Bank Research Group.

The report notes that recent post-2008 analysis revealed that global poverty overall kept falling, although food, fuel and financial crises over the past four years had sometimes sharp negative impacts on vulnerable populations and slowed down the rate of poverty reduction in some countries.

Preliminary survey-based estimates for 2010 indicated that the $1.25-a-day poverty rate had declined to under half of its 1990 value, which meant that the first Millennium Development Goal of halving the extreme poverty level from 1990 has been achieved before the 2015 deadline.

The $1.25 poverty line is the average for the world's poorest 10-20 countries. A higher $ 2-a-day line revealed less progress than the $ 1.25-a-day cut-off mark. In this case, there was only a modest drop between 1981 and 2008, from 2.59 billion to 2.47 billion.

Poverty Estimates for 2009-10

The Tendulkar Committee for the first time recommended use of implicit prices derived from quantity and value data collected in household consumer expenditure surveys for computing and updating the poverty lines. Tendulkar Committee developed a methodology using implicit prices for estimating state wise poverty lines for the year 2004-05. Using these poverty lines and distribution of monthly per capita consumption expenditure based on mixed reference period (MRP), the Tendulkar Committee estimated poverty ratios for the year 2004-05.In its Report, Tendulkar Committee recommended a methodology for updating 2004-05 poverty lines derived by it.

2.         Accordingly, implicit price indices (Fisher Price Index) have been computed from the 66^th Round NSS (2009-10) data on Household Consumer Expenditure Survey. As per Tendulkar Committee recommendations, the state wise urban poverty lines of 2004-05 are updated for 2009-10 based on price rise during this period using Fisher price indices. The state wise rural-urban price differential in 2009-10 has been applied on state specific urban poverty lines to get state specific rural poverty lines.

3.         The head count ratio (HCR) is obtained using urban and rural poverty lines which are applied on the MPCE distribution of the states. The aggregated BPL population of the states is used to obtain the final all-India HCR and poverty lines in rural and urban areas. Some of the key results are:

o       The all-India HCR has declined by 7.3 percentage points from 37.2% in 2004-05 to 29.8% in 2009-10, with rural poverty declining by 8.0 percentage points from 41.8% to 33.8% and urban poverty declining by 4.8 percentage points from 25.7% to 20.9%.

o       Poverty ratio in Himachal Pradesh, Madhya Pradesh, Maharashtra, Orissa, Sikkim, Tamil Nadu, Karnataka and Uttarakhand has declined by about 10 percentage points and more.

o       In Assam, Meghalaya, Manipur, Mizoram and Nagaland, poverty in 2009-10 has increased.

o       Some of the bigger states such as Bihar, Chhattisgarh and Uttar Pradesh have shown only marginal decline in poverty ratio, particularly in rural areas.

·         Poverty ratio for Social Groups:

o       In rural areas, Scheduled Tribes exhibit the highest level of poverty (47.4%), followed by Scheduled Castes (SCs), (42.3%), and Other Backward Castes (OBC), (31.9%), against 33.8% for all classes.

o       In urban areas, SCs have HCR of 34.1% followed by STs (30.4%) and OBC (24.3%) against 20.9% for all classes.

o       In rural Bihar and Chhattisgarh, nearly two-third of SCs and STs are poor, whereas in states such as Manipur, Orissa and Uttar Pradesh the poverty ratio for these groups is more than half.

·         Among religious groups:

o       Sikhs have lowest HCR in rural areas (11.9%) whereas in urban areas, Christians have the lowest proportion (12.9%) of poor.

o       In rural areas, the HCR for Muslims is very high in states such as Assam (53.6%), Uttar Pradesh (44.4%), West Bengal (34.4%) and Gujarat (31.4%).

o       In urban areas poverty ratio at all India level is highest for Muslims (33.9%). Similarly, for urban areas the poverty ratio is high for Muslims in states such as Rajasthan (29.5%), Uttar Pradesh (49.5%), Gujarat (42.4%), Bihar (56.5%) and West Bengal (34.9%).

·         For occupational categories: 

o       Nearly 50% of agricultural labourers and 40% of other labourers are below the poverty line in rural areas, whereas in urban areas, the poverty ratio for casual labourers is 47.1%.

o       As expected, those in regular wage/ salaried employment have the lowest proportion of poor. In the agriculturally prosperous state of Haryana, 55.9% agricultural labourers are poor, whereas in Punjab it is 35.6%.

o       The HCR of casual laborers in urban areas is very high in Bihar (86%), Assam (89%), Orissa (58.8%), Punjab (56.3%), Uttar Pradesh (67.6%) and West Bengal (53.7%).

·         Based on the Education level of head of the household:

o       In rural areas, as expected, households with ‘primary level and lower’ education have the highest poverty ratio, whereas the reverse is true for households with ‘secondary and higher’ education. Nearly two third households with ‘primary level & lower’ education in rural areas of Bihar and Chhattisgarh are poor, whereas it is 46.8% for UP and 47.5% for Orissa.

o       The trend is similar in urban areas.

·         For categories by age and sex of head of the household:

o       In rural areas, it is seen that households headed by minors have poverty ratio of 16.7% and households headed by female and senior citizen have poverty ratio of 29.4% and 30.3% respectively.

o       In urban areas, households headed by minors have poverty ratio of 15.7% and households headed by female and senior citizen have poverty ratio of 22.1% and 20.0% respectively against overall poverty ratio of 20.9%.

4.                  State wise details of poverty lines for 2009-10, poverty ratios for 2009-10 and poverty ratios for 2004-05 are given in Table 1, Table 2 and Table 3 respectively.

Click here to see Tables

New Schemes of the Ministry of Minority Affairs in the 12th Five Year Plan

Based on the recommendations of the National Advisory Council (NAC) the Ministry of Minority Affairs has proposed to implement the following new schemes in the 12th Five Year Plan towards inclusive development to empower the minorities:

(i) Interest subsidy on educational loans for overseas studies scheme for the students belonging to minority communities with the objective of providing financial assistance by way of extending interest subsidy on education loans to students of  minority communities for pursuing higher studies abroad;

(ii) Free bicycle for Girl Students of Class IX with the objective of retention of minority girl students from Class IX onwards;

(iii) Support for students clearing Prelims Conducted by UPSC/SSC, State Public Service Commission (PSC) etc. with the objective to support candidates from the minority   communities who qualify at the preliminary Examinations conducted by Union  Public Service Commission (UPSC), Staff Selection Commission (SSC), State             Public Service Commissions (PSCs) etc. to improve their representation in    government services;

(iv) Scheme for promotion of education in 100 minority concentration towns/cities  having substantial minority population, for empowering the minorities. This would be in the form of providing infrastructure for various levels of schools, including teaching aids and also for up-gradation and construction of infrastructure for   skill and vocational education along with hostel facility;

(v) Village development programme for villages not covered by minority concentration blocks (MCBs)/ minority concentration  districts(MCDs) to address the development needs for 1000 villages inhabited by minority communities but falling outside the  selected minority concentration districts. The main objective of the scheme is to provide infrastructure for socio-economic development and basic amenities;

(vi) Support to Districts Level institution in MCDs to give financial support for setting up and running district level institutions for minority welfare in Minority Concentration Districts; and

(vii) Skill Development Initiatives to enhance employment and livelihood skills of  minorities by providing skills and skills up-gradation to the minority communities.

Earlier, the National Advisory Council had submitted its  report titled “Towards Inclusive Development to Empower Minorities” with the following major recommendations:

(i)   For implementation of the Multi sectoral Development Programme (MsDP) and Prime Minister’s New 15 Point Programme, rural and urban areas with a high concentration of minorities  should be the Unit of Planning with focus on access to basic services such as ICDS services, clean drinking water, individual sanitation, sewerage and drainage;

(ii) Formal engagement of non- governmental organizations (NGOs) in all the Minority Concentration Districts for monitoring and mandatory social audits;

(iii)  Substantially enhancing allocation for MsDP in 12th Plan;

(iv)  Revision of MsDP guidelines to ensure that need based proposals have synergy with the 15- Point Programme rather than duplication;

(v)  Establishment of a credible data bank on an urgent basis for operationalisation of the Assessment and Monitoring Agency;

(vi) Expansion of the 15 Point Programme to include schemes such as small and medium industries, youth affairs, agriculture;

(vii) Scholarships  Schemes: a) Make  the Pre-Matric scholarships a 100% Centrally Sponsored Scheme ; b) Make the Pre- matric and Post- matric scholarship Schemes   demand – driven and universal schemes; c) Increase the scholarship amount for Post- Matric scholarships with rationalized and differing scholarship structure for different categories (10+2, Basic Degree Courses, Professional Degree Courses); d) Increase amount and number of Merit-cum- means and Maulana Azad National Fellowships; e) Ensure a radical simplification of procedures at all levels to make schemes accessible to those who need them most; and

(viii) Establish residential social welfare hostels for minority children from class VI to XII and residential schools in minorities blocks and towns/cities.

Case for new models of funding infra projects

With the country facing severe infrastructure constraints and slow pace of implementation of mega projects, the Economic Survey called for putting in place new models of financing the infra sector to meet the funding requirement of $1 trillion in the XII Plan.

“In view of the massive requirement of funds, all efforts need to be made to attract big-ticket long-term investors such as strategic investors, private equity funds, pension funds, and sovereign funds,''' the Survey says.

“There is a need for introducing more innovative schemes to attract large-scale investment into infrastructure.

“Strengthening domestic financial institutions and development of a long-term bonds market may be critical,'' it states.

Stating that 50 per cent of the projected investment will come from the private sector in the next Five Year Plan, the Survey says, financing infrastructure will, therefore, be a big challenge in the coming years and will require some innovative ideas and new models of financing.

Taking a cue from the realisation of investment targets for infrastructure during the current Plan, the survey expresses hope that financing of the ambitious XII Plan investment target will be possible.

According to the Survey, bank credit to projects in the sector had witnessed a healthy growth of 48.4 per cent annually during 2006-11, increasing from Rs.30,286 crore during 2006-07 to Rs.1,46,767 crore during 2010-11. However, credit growth has turned negative in the current financial year and at Rs.70,155 crore, net credit to the infrastructure sector during April-December, 2011, was nearly 61 per cent lower than the same period of last fiscal, it noted. 

Private participation

The Survey also calls for creating a conducive environment for private sector participation with a transparent and credible regulatory mechanism for financing the infrastructure projects to reduce the pressure on public-sector funding.

Emphasising that the performance in core infrastructure sectors is still to a large extent dependent on public sector projects, the Survey says, in the next Five Year Plan, the public sector investment will need to increase to over Rs.22.50 lakh crore, a rise of over 71 per cent than the current Plan.

Union Budget 2012-13 Summary

The Union Budget 2012-13 presented by the Finance Minister ShriPranab Mukherjee in LokSabha today identifies five objectives to be addressed effectively in the ensuing fiscal year.   They include focus on domestic demand driven growth recovery; create conditions for  rapid revival of high growth in private investment;  address  supply bottlenecks  in agriculture, energy and transport sectors  particularly in coal, power, national highways , railways and civil aviation; intervene decisively  to address the problem of malnutrition  especially in the 200 high-burden districts and  expedite coordinated implementation of decisions being taken to improve delivery systems , governance, and transparency;  and address the problem of black money and corruption in public life. 

ShriPranab Mukherjee said that India’s GDP growth in 2012-13 is expected to be 7.6 per cent +/-0.25 per cent.  He said that in 2011-12, India’s GDP is estimated to grow at 6.9 per cent after having grown at the rate of  8.4 per cent in each of the  two preceding years.  He said though the global crisis  had affected India, it still remains among  the front runners in economic growth.  Shri Mukherjee said the slowdown is primarily due to deceleration in industrial growth.  Stating that the headline inflation remained high for most part of the year, the Finance Minister expressed hope that it will moderate further in the next few months and remain stable thereafter.

            Shri Mukherjee laid emphasis on striking a balance between fiscal consolidation and strengthening macroeconomic fundamentals.  He announced introduction of amendments to the Fiscal Responsibility and Budget Management Act, 2003 (FRBM Act) as part of the Finance Bill 2012.  He said that concept of “Effective Revenue Deficit” and “Medium Term Expenditure Framework” statement are two important features of Amendment to FRBM Act in the direction of expenditure reforms.  This statement shall set forth a three year rolling targets for expenditure indicators.

            The Finance Minister called for a need to have a close look at the growth of revenue expenditure, particularly, on subsidies.  He announced that from 2012-13  while subsidies related to food and for administering the Food Security Act will be fully provided for,  all other subsidies would be funded to the extent that they can be borne by the economy without any adverse implications.  He said that the Government will endeavor to restrict the expenditure on central subsidies under 2 per cent of GDP in 2012-13and over the next three years, it would be further brought down to 1.75 per cent of GDP.Shri Mukherjee said that based on recommendations of the Task Force headed by ShriNandanNilekani, a mobile-based Fertilizer Management System has been designed to provide end-to-end information on movement of fertilizers and subsidies which will be rolled out nation-wide during 2012.  He said that transfer of subsidy to the retailer and eventually to the farmers will be implemented in subsequent phases which will benefit 12 crore farmer families. 

            On the tax reforms, the Finance Minister said that the  Direct Taxes Code (DTC) Bill will be enacted at the earliest after expeditious examination of the report of the Parliamentary  Standing Committee.  He said drafting of  model  legislation for Centre and State Goods and Services Tax (GST) in concert with States is under progress.  He added that the GST network will be set up as a  National Information Utility and will become operational by August 2012.

            On the disinvestment policy, Shri Mukherjee said that the Central Public Sector Enterprises (CPSEs) are being given a level playing field vis-à-vis private sector with regard to practices like buy-backs and  listing at stock exchange.  Stating that while in 2011-12, the Government will raise about Rs.14,000crore  from disinvestment as against a target of  Rs.40,000 crore,  the Finance Minister proposed to raise  Rs.30,000 crore through disinvestment in  2012-13.  He said at least 51 per cent ownership and management of CPSEs will remain with the Government.

            Calling for strengthening investment environment, Shri Mukherjee said that efforts are on to arrive at a broad-based consensus in respect of decision to allow FDI in multi-brand retail up to 51 per cent.  He proposed to introduce a new scheme  called Rajiv Gandhi Equity Savings Scheme  to allow for income tax deduction of 50 per cent to new retail investors who invest up to  Rs.50,000 directly in equities and whose annual income is below Rs.10 lakh.  The scheme will have a lock-in period of 3 years.  Regarding capital markets, the Finance Minister  proposed to allow Qualified Foreign  Investors (QFIs) to access Indian Corporate Bond market.  He also  proposed simplifying  the process of Initial Public Offer  (IPO).

            ShriPranab Mukherjee said that the Government is committed to protect the financial health of  Public Sector Banks and Financial Institutions.    He proposed to provide Rs. 15,888 crore for capitalization of Public Sector Banks, Regional Rural Banks and other financial institutions  including NABARD.  He added that a Central Know Your Customer (KYC) depositary will be developed in 2012-13 to avoid multiplicity  of registration and data upkeep.

            The Finance Minister informed that out of 73,000 identified habitations that were to be covered under “Swabhimaan” campaign for providing banking facilities by March 2012, about 70,000 habitations have been covered while the rest are likely to be covered by March 31, 2012.    He added that as a next step Ultra Small Branches are being set up at these habitations.  In 2012-13, Swabhimaan campaign will be extended to more habitations. 

            Emphasizing on infrastructure and industrial development, Shri Mukherjee said that during the 12^th Plan, infrastructure investment will go up to Rs.50 lakh crorewith  half of this expected from private sector.  Stating  that in 2011-12 tax free bonds for Rs.30,000 crore were announced for financing infrastructure projects, he proposed to double it to raise Rs.60,000 crore in 2012-13.  The Minister proposed to allow External Commercial Borrowings (ECB) to part finance Rupee debt of existing power projects. 

            The Finance Minister ShriPranab Mukherjee announced a  target of covering  8,800 km. under NHDP next year and increase in allocation of the Road Transport and Highways Ministry  by   14 per cent to Rs.25,360 crore in 2012-13.  He proposed to permit ECB for working capital requirements of the Airline Industry for a period of one year, subject to a total ceiling  of US dollar  1 billion to address the immediate financial concerns of the Civil Aviation Sector.   He added that a proposal  to allow foreign airlines to participate up to  49 per cent in the equity  of an air transport undertaking is under active consideration.

            Expressing concern over shortage in housing sector, the Finance Minister proposed  various measures to address the shortage of housing for low income groups in major cities and towns including ECB for low cost housing projects and setting up of a Credit Guarantee Trust Fund. 

            Regarding textile sector, the Finance Minister announced setting up of two more mega clusters, one to cover Prakasam and Guntur districts in Andhra Pradesh and other for Godda and neighboring districts in Jharkhand in addition to 4 mega handloom clusters already operationalized.  He also proposed setting up of three Weavers Service Centres, one each in Mizoram, Nagaland and Jharkhand.  The Minister proposed  aRs. 500 crore pilot scheme in twelfth plan for promotion and application of Geo-textiles in the North East.   A powerloom Mega Cluster  will be set up in  Ichalkaranji in Maharashtra.

            The Finance Minister proposed to set up a Rs.5000 croreIndia  Opportunities Venture Fund with SIDBI to enhance availability of equity to Micro, Small and Medium Enterprises. 

            Stating that agriculture will continue to be a priority for Government,  Shri Mukherjee proposed  an increase  by 18 per cent to Rs. 20,208 crore in the total Plan Outlay for the Department of Agriculture and Cooperation in 2012-13.  He said that the outlay for RashtriyaKrishiVikasYojana (RKVY) is being increased to  Rs. 9217 crore in 2012-13. 

            Underlining importance of timely access to affordable credit for farmers, the Finance Minister proposed to raise the target for  agricultural credit to Rs.5,75,000 crore, which represents an increase of Rs. 1,00,000 crore over the target for the current year..   He said that a short term RRB Credit  Refinance Fund is being set up to enhance the capacity of Regional Rural Banks to disburse short term crop loans to the small and marginal farmers.  He added that Kisan Credit Card Scheme will be modified to make it a smart card which can be used at ATMs.

            The Financed Minister said that in order to have a better out reach of the food processing sector, a new centrally sponsored scheme titled National Mission on Food Processing will be started in cooperation with the States in 2012-13. 

            The Finance Minister proposed an increase of 18 per cent to  Rs.37,113crore for Scheduled Castes Sub Plan and  an increase of 17.6 per cent to Rs.21,710 crore for Tribal Sub Plan during 2012-13. 

            Regarding food security, Shri Mukherjee said that National Food Security Bill 2011 is before Parliamentary Standing Committee.   He said a multi-sectoralprogramme to address maternal and child malnutrition in selected 200 high burdened districts is being rolled out during 2012-13.  He further  said that an allocation of Rs.15,850 crore has been made for ICDS scheme which is an increase of 58% and Rs.11,937 crore for  National Programme of Mid-Day Meals in schools for the year 2012-13.  He added that an allocation of Rs.750 crore is proposed for Rajiv Gandhi Scheme for Empowerment of Adolescent Girls, SABLA. 

            The allocation for rural drinking water and sanitation is proposed to be increased by over 27 per cent to Rs. 14,000 crore and for PradhanMantri Road SadakYojana by 20 per cent to Rs. 24,000 crore in 2012-13.  He proposed to enhance the allocation under Rural Infrastructure Development Fund to  Rs. 20,000 crore with  Rs.5,000 crore exclusively earmarked for .creating warehousing facilities.

            The Finance Minister proposed an  increase in  allocation by 21.7 per cent  for Right to Education – SarvaShikshaAbhiyan to Rs.25,555 crore and by 29 per cent  for RashtriyaMadhyamikShikshaAbhiyan to Rs. 3,124 crore,   He proposed to set up a Credit Guarantee Fund to ensure better flow of funds to students.

            Regarding health sector  he proposed an increase in allocation for NRHM to Rs.20,822 crore in 2012-13.  He also said that National Urban Health Mission is being launched.

            The Finance Minister said that Mahatma Gandhi National Rural Employment Guarantee Scheme has had a positive impact.  He proposed an allocation of Rs.3915 crore for National Rural Livelihood Mission (NRLM) which represents an increase  of 34 per cent. He proposed to provide Rs.200 crore to enlarge the corpus to Rs.300 crore of the Women’s SHG’s Development Fund.  He said the fund will also support the objectives of  Aajeevika i.e.  NRLM and will empower  women  SHGs to access bank credit. He also proposed to establish a Bharat Livelihoods Foundation of India through Aajeevika which will support and scale up civil society initiatives and interventions particularly in the tribal regions covering around 170 districts.

            Allocation under National Social Assistance Programme (NSAP) is proposed to be raised by 37 per cent to Rs. 8447 crore.  Under the Indira Gandhi National Widow Pension Scheme and Indira Gandhi National Disability Pension Scheme for BPL beneficiaries, the monthly pension amount per person is being raised from Rs. 200 to Rs.300.

            The Finance Minister announced a provision of Rs.1,93,407crore for Defence Services including Rs.79,579 crore for capital expenditure.  He said the allocation is based on present needs and any further requirement would be met.

           

Addressing Governance related issues, Shri Mukherjee said adequate funds are proposed to be allocated to complete enrolments of another 40 crore persons under UID Mission. Outlining the steps taken by the Government to address the issue of black money, the Minister proposed to lay a White Paper  on Black Money in the  current session of Parliament.

In the Budget Estimates for 2012-13, the Gross Tax Receipts are estimated at Rs.10, 77,612 crore which is an increase of 15.6 per cent over the Budget Estimates and 19.5 per cent over the revised estimates for 2011-12.  After devolution to States, the net tax to the Centre in 2012-13 is estimated at Rs. 7,71,071crore.  The Non Tax Revenue Receipts are estimated at Rs.1,64,614crore and Non-debt Capital Receipts  at Rs.41,650 crore.  The total expenditure for 2012-13 is budgeted  at Rs.14,90,925 crore.  Of this Rs.5,21,025crore is the Plan Expenditure while Rs.9,69,900 crore is budgeted as Non Plan Expenditure.

            The tax proposals are guided by the need to move towards the Direct Tax Code(DTC) in the case of direct taxes and Goods & Services Tax (GST) in the case of indirect taxes.

            Individual income upto Rs.2 lakh will be  free from income tax; income upto Rs.1.8 lakh was exempt in 2011-12.  Income above  Rs.5 lakh and upto Rs.10 lakh now carries tax at the rate of 20 per cent; the 20% tax slab was from Rs.5 lakh to Rs.8 lakh in 2011-12.  A deduction of upto Rs.10,000 is now available for interest from savings bank accounts. Within the existing limit for deduction allowed for health insurance, a deduction of upto  Rs.5000 is being allowed for preventive health check-up.  Senior citizens not having income from business will now not need to pay advance tax.

            While no changes have been made in corporate taxes, the budget proposes a number of measures  to promote investment in specific sectors.  In order to provide low cost funds  to some stressed infrastructure sectors, withholding tax on interest payments on external borrowings (ECBs) is being reduced from 20 percent to 5 per cent for 3 years.  These sectors are - power, airlines, roads and bridges, ports and shipyards, affordable housing, fertilizer, and dam.

            Investment linked deduction of capital expenditure in some businesses is proposed to be provided at 150 per cent as against the current rate of 100 per cent.  These sectors include cold chain facility, warehouses  forstoring food-grains, hospitals, fertilizers and affordable housing.   Bee keeping, container  freight and warehousing  for storage of sugar will now also be eligible for investment linked deduction.  

The budget also proposes weighted deduction for R&D expenditure, agri-extension services and expenditure on skill development in the manufacturing sector.

            For small and medium enterprises (SMEs) the turnover limit for compulsory tax audit of accounts as well as for presumptive taxation is proposed to be raised from Rs. 60 lakh to Rs. 1 crore. In order to augment funds for SMEs,  sale of residential property will be exempt from capital  gains tax, if the proceeds are used for purchase of plant and machinery, etc. 

            A General Anti-Avoidance Rule (GAAR) is being introduced in order to counter aggressive tax avoidance. Securities transaction tax (STT) is being reduced by 20 per cent on cash delivery transactions, from 0.125% to 0.1%.  Alternative Minimum Tax is proposed to be levied from all persons, other than companies, claiming profit linked deductions.

            The Finance Minister has  proposed a series of measures to deter the generation and use of unaccounted money. In the case of assets held abroad, compulsory reporting is being introduced and assessment upto 16 years will now be allowed to be re-opened.  Tax will be collected at source on trading in coal, lignite and iron ore; purchase of bullion or jewellery above Rs. 2 lakh in cash; and transfer of immovable property (other than agricultural land) above a specified threshold.  Unexplained money, credits, investments, expenditures etc. will be taxed at the highest rate of 30 per cent irrespective of the slab of income.

            The Finance Minister has made an effort to widen the service tax base, strengthen its enforcement and bring it as close as possible to the central excise. A common simplified registration form and a common return are being introduced for central excise and service tax.

            All services will now attract service tax, except those in the negative list.  The negative list  has 17 heads and includes  specified services provided by the government or local authorities, and services in the fields of education, renting of residential dwellings, entertainment and amusement,   public transportation, agriculture and animal husbandry.  A number of other services including health care, and services provided by charities, independent journalist, sport persons, performing artists in folk and classical arts, etc are exempt from service tax.  Film industry also gets tax exemption on copyrights relating to recording of cinematographic films.

Service tax rate is being increased from 10 per cent to 12 per cent, with consequential change in rates for services that have individual tax rates. The standard rate of excise duty for non-petroleum goods is also being raised from 10 per cent to 12 per cent. No change is proposed in peak rate of customs duty of 10 per cent on non-agricultural goods.

The Budget offers relief to different sectors of economy, especially those under stress.  Import of equipment for fertilizer projects are being fully exempted from basic customs duty of 5 per cent for 3 years.  Basic customs duty is also being lowered for a number of equipment used in agriculture and related areas.  

In the realm of infrastructure, customs relief is being given to power, coal and railways sectors.  While steam coal gets full customs duty exemption for 2 years (with the concessional counter-veiling duty of 1 per cent), natural gas, LNG and certain uranium fuel get full duty exemption this year.  Different levels of duty concessions are being provided to help mining, railways, roads, civil aviation, manufacturing, health and nutrition and environment.  So as to help modernization of the textile industry, a number of equipment are being fully exempted from basic customs duty, and lower customs duty is being proposed for some other items used by the textile industry. 

Customs duty is being raised for gold bars and coins of certain categories, platinum and gold ore.  Customs duty  is to be imposed on coloured gem stones.  Excise duty on certain categories of cigarettes and bidis, pan masala and chewing tobacco is being increased.  Customs duty is being increased  on completely built large cars/ SUVs/ MUVs of value exceeding $40,000. 

Silver jewellery will now be fully exempt from excise duty. Unbranded  precious metal jewellery will attract excise duty on the lines of branded jewellery. Operations are being simplified and measures taken to minimize impact of this provision on small artisans and goldsmiths.

While direct tax proposals in the Budget will result in a net revenue loss of Rs.4,500crore, indirect taxes will result in a net revenue gain of Rs.45,940 crore.  Thus, the tax proposals will lead to a net gain of Rs.41,440crore. 

Union Budget 2012-13 Highlights

·         Budget identifies five objectives relating to  growth recovery, private investment, supply bottlenecks, malnutrition and governance matters

·         GDP growth to be 7.6 per cent (+ 0.25 percent) during 2012-13

·         Amendment to the FRBM Act proposed  as part of Finance Bill.  New concepts of “Effective Revenue Deficit” and “Medium Term Expenditure Framework” introduced

·         Central subsidies to be kept under 2 per cent of GDP; to be further brought down to 1.75 per cent of GDP over the next 3 years.

·         Proposed: Mobile based fertilizer management system; LPG transparency portal; scaling up and rolling out of Aadhar enabled payment for government schemes in at least 50 districts.

·         Rs. 30,000 crore to be raised through disinvestment

·         Efforts to reach broadbased consensus on FDI in multi-brand retail

·         Rajiv Gandhi Equity Saving Scheme: to allow income tax deduction to retail investors on  investing in equities

·         Rs. 15,888 crore to be provided for capitalization of public sector banks and financial  institutions

·         A central  “Know Your Customer” depository to be developed

·         Swabhimaan: remaining habitations to be covered; to be extended to more habitations; ultra small branches to be set up in Swabhimaan habitations

·         Investment in 12^th Plan in infrastructure to go uptoRs. 50,00,000 crore; half of this is expected from private sector

·         Tax Free Bonds of Rs. 60,000 crore to be allowed for financial infrastructure projects

·         Allocation of Road Transport and Highways Ministry enhanced by 14 per cent to Rs. 25,360 crore

·         Financial package of Rs. 3,884 crore for waiver of loans to handloom weavers and their cooperative societies; mega handloom clusters in Andhra, Jharkhand; weaver service centres in Mizoram, Nagaland and Jharkhand ; powerloom mega cluster in Maharashtra; Rs. 500 crore pilot schemes for geo-textiles in North-Eastern region

·         Rs. 5,000 crore India Opportunities Venture Fund to help small enterprises

·         Allocation to agriculture enhanced; RKVY gets Rs. 9,217 crore; BGREI gets Rs. 1,000 crore; Rs.2242 crore project to improve dairy productivity; Rs. 500 crore for coastal aquaculture

·         Various other agricultural activities merged into 5 missions

·         Target for agricultural credit raised to Rs. 5,75,000 crore

·         Interest subvention for short-term crop loans to farmers at 7 per cent interest continues; additional 3 per cent for prompt paying farmers

·         Rs. 200 crore for awards to incentivise agricultural research

·         Provisions under rural housing fund increased to Rs. 4,000 crore from Rs. 3,000 crore

·         Interest subvention of 1 percent on housing loans uptoRs. 15 lakh extended for one more year

·         AIBP allocation raised by 13 per cent to Rs. 14,242 crore

·         National Mission on Food Processing to be started in cooperation with State Governments

·         Scheduled Caste Sub Plan allocation increases by 18 per cent to Rs. 37,113 crore; Tribal Sub Plan by 17.6 per cent to Rs. 21,710 crore

·         Multi-sectoralprogramme to address maternal and child malnutrition in 200 high burden districts

·         58 per cent rise in allocation to ICDS, at Rs. 15,850 crore

·         Rural drinking water and sanitation gets 27 per cent rise in allocation to Rs. 14,000 crore; PMGSY gets 20 per cent rise to Rs. 24,000 crore

·         Projects covering length of 8800 km to be awarded under NHDP against 7,300 km during 2011-12

·         RTE-SSA gets Rs. 25,555 crore allocation, showing an increase of 21 per cent; 6000 schools to be set up at block level as model schools in the 12^th Plan; Credit Guarantee Fund to be set up for better flow of credit to students

·         National Urban Health Mission is being launched

·         34 per cent increase in allocation to National Rural Livelihood Mission, to Rs. 3915 crore

·         Rs. 1000 crore allocated for National Skill Development Fund

·         Bharat Livelihood Foundation to be established to support livelihood interventions particularly in  tribal areas

·         Widow pension and disability pension raised from Rs. 200 to Rs. 300 per month

·         Grant on death of primary breadwinner of a BPL family in the age group 18-64 years doubled to Rs. 20,000

·         Defence services get Rs. 193407 crore; any further requirement to be met

·         4000 residential quarters to be constructed for Central Armed Police Forces

·         UID-Aadhar to get adequate funds for enrolment of 40 crore persons, in addition to the 20 crore persons already enrolled

·         White Paper on Black Money to be laid in the current session of Parliament

·         Tax proposals mark progress in the direction of movement towards DTC and GST

·         Income tax exemption limit raised from Rs.1,80,000 to Rs.2,00,000; upper limit of 20 per cent tax slab raised from Rs.8 lakh to Rs.10 lakh

·         Interest from savings bank accounts deductible upto Rs.10,000; deduction of upto Rs.5,000 for preventive health check-up

·         Senior citizens without business income exempt from advance tax

·         Investment linked deduction of capital expenditure enhanced for certain businesses; new sectors eligible for investment linked deduction

·         Turnover limit for compulsory tax audit for SMEs raised from Rs.60 lakh to Rs.1 crore

·         STT on cash delivery reduced by 20 per cent to 0.1%

·         General Anti Avoidance Rule being introduced to counter aggressive tax avoidance

·         A number of measures proposed to deter generation and use of unaccounted money

·         All services to attract service tax except those in the negative list

·         Central Excise and Service Tax being harmonized

·         Standard rate of excise duty raised from 10 per cent to 12 per cent; service tax rates raised from 10 per cent to 12 per cent; no change in peak customs duty of 10 per cent on non-agricultural goods

·         Relief in indirect taxes to sectors under stress; agriculture, infrastructure, mining, railways, roads, civil aviation, manufacturing, health and nutrition, and environment get duty relief

·         Certain cigarettes and bidis attract higher excise duty; large cars attract higher customs duty

·         Excise imposed on unbranded jewellery also; measures to minimize impact on small artisans  and goldsmiths; branded silver jewellery exempted from excise duty

·         Net gain of Rs.41,440 crore due to taxation proposals

·         Total expenditure budgeted at Rs. 14,90,925 crore; plan expenditure at Rs. 5,21,025 crore – 18 per cent higher than 2011-12 budget; non plan expenditure at Rs. 9,69,900 crore

·         Fiscal deficit targeted at 5.1 per cent of GDP, as against 5.9 per cent in revised estimates for 2011-12

·         Central Government debt at 45.5 per cent of GDP as compared to Thirteenth Finance Commission target of 50.5 per cent

·         Medium-term Expenditure Framework Statement to be  introduced; will set forth 3-year rolling target for expenditure indicators

Rajiv Gandhi Equity Savings Scheme Launched

A new scheme called Rajiv Gandhi Equity Savings scheme is proposed in the Union Budget 2012-13 to encourage flow of saving in financial instruments and improve the depths of domestic capital market.

The Union Finance Minister ShriPranab Mukherjee in his Budget speech in LokSabha today said that the scheme allows for income tax deduction of 50 per cent to new retail investors, who invest up to Rs 50,000 directly in equities and whose annual income is below Rs 10 lakhs. The scheme will have lock-in period of three years. The details will be announced in due course.

Budget Aims at Creating Enabling Atmosphere for All Sections

Presenting the Union Budget 2012-13 in the LokSabha , the Union Finance Minister ShriPranab Mukherjee has proposed to increase the duty-free baggage allowance for eligible passengers of Indian origin from Rs.25,000 to Rs. 35,000 and for children upto 10 years from Rs.12,000 to Rs.15,000. The baggage allowance was last revised in 2004.

The Finance Minister Shri Mukherjee said in his Budget Speech that the current year was a challenge for Indian economy but India has thrived under such challenges and will continue to do so. He said that the aim of his budget is to create an enabling atmosphere for corporates, farmers, entrepreneurs and workers to take initiatives for robust growth. He further said that the budget also aims to ensure that the benefits of growth reach all sections of population.

Health and Nutrition Gets Major Boost in the Budget 2012-13

The Union Finance Minister ShriPranab Mukherjee, while presenting the Union Budget for 2012-13, has proposed to extend concessional basic customs duty of 5 per cent with full exemption from excise duty/ CVD to six specified life-saving drugs/ vaccines in this year’s budget. He proposed to reduce basic customs duty on soya protein concentrate and isolated soya protein to 10 per cent from the present 30 per cent or 15 per cent respectively. Basic customs duty and excise duty reduced on iodine from 6 per cent to 2.5 per cent. On probiotics, the basic customs duty is now 5 per cent reduced from 10 per cent.

ECB for Working Capital Allowed in Civil Aviation

Presenting the General Budget 2012-13 in LokSabhatoday, the Union Finance Minister,  Pranab Mukherjee proposed permission of External Commercial Borrowings (ECB) for working capital requirement of the airline industry for one year subject to total ceiling of US $ 1 billion. The Finance Minister said that this was to address the immediate financing concerns of the Civil Aviation sector, which is facing financial crisis.

In order to reduce the cost of Aviation Turbine Fuel (ATF), which largely contributes to the high operating cost of the civil aviation sector, the Finance Minister stated that the Government has permitted direct import of ATF by Indian Carriers, as actual users.

Shri Mukherjee informed that a proposal to allow 49% equity participation by foreign airlines engaged in operation of scheduled in non-scheduled air transport services is under active consideration of the Government.

Highlights of Economic Survey 2011-12

Following are the highlights of Economic Survey 2011-12:

1. Rate of growth estimated to be 6.9%. Outlook for growth and stability is promising with real GDP growth expected to pick up to 7.6% in 2012-13 and 8.6% in 2013-14.

2. Agriculture and Services sectors continue to perform well. 2.5 % growth in Agro sector forecast. Services sector grows by 9.4 %, its share in GDP goes up to 59%.

3. Industrial growth pegged at 4-5 percent, expected to improve as economic recovery resumes.

4. Inflation on WPI was high but showed clear slow down by the year-end; this is likely to spur investment activities leading to positive impact on growth.

5. WPI food inflation dropped from 20.2% in February 2010 to 1.6% in January 2012; calibrated steps initiated to rein-in inflation on top priority.

6. India remains among the fastest growing economies of the world. Country’s sovereign credit rating rose by a substantial 2.98 percent in 2007-12.

7. Fiscal consolidation on track - savings & capital formation expected to rise.

8. Exports grew @ 40.5% in the first half of this fiscal and imports grew by 30.4%. Foreign trade performance to remain a key driver of growth. Forex reserves enhanced - covering nearly the entire external debt stock.

9. Central spending on social services goes up to 18.5% this fiscal from 13.4% in 2006-07.

10. MNREGA coverage increases to 5.49 crore households in 2010-11.

11. Sustainable development and climate change concerns on high priority.

Economic Survey Pegs Industrial Growth at 4-5% in the Current Financial Year

The Economic Survey 2011-12 tabled in the Lok Sabha ON mARCH 15 by the Finance Minister, Shri Pranab Mukherjee has projected the industrial-sector growth during the current financial year to be between 4 to 5%. At this rate, says the Survey the annual growth rate will be less than the annual growth rates achieved in the recent past and far below the potential growth rate.

The Survey has said that the challenge for the sector in the short term would be to shore up of business sentiments, spur investment in productive activities and identify bottlenecks that can be removed in a reasonably short period of time. With the easing of headline inflation, moderation in commodities prices in the international market, and revival of manufacturing performance in recent months in the major economies, India’s industrial sector is expected to rebound during the next financial year.

According to the Survey, the long term average annual growth of industries comprising mining, manufacturing and electricity has in general remained aligned with the overall GDP growth rate during the post reform period between 1991-92 and 2011-12, averaging 6.7% as against GDP growth of 6.9%. The share of industry (including construction) and manufacturing in GDP remained generally stable at 28% and in the 14-16% range respectively during this period. The share of industry in total employment, however, increase from 16.2% in 1999-2000 to 21.9% in 2009-10 largely on account of expansion of employment opportunity in the construction sector from 17.5 million in 1999-2000 to 44.2 million in 2009-10.

The Survey has highlighted that the industrial growth, measures in terms of Index of Industrial Production (IIP) during April-December 2011 reached 3.6% compared to a growth of 8.3% in the corresponding period of previous year. There was a contraction in production in the mining sector, particularly in the coal and natural gas segments. The electricity sector witnessed and improvement in its growth in the current year. Growth also moderated in the manufacturing sector from 9.0% in April-December 2010 to 3.9% in April-December 2011. The Survey also points out that the basic goods and non-durables goods had a relatively better growth at 6.1% compared to the growth in the corresponding period of previous year. There was a moderation in growth in other segments of IIP and negative growth was observed in capital goods and intermediates segments.

As per the Economic Survey 2011-12, the share of Gross Capital Formation (GCF) in industry as percent to the overall GCF, after peaking to a level of 54.9% in 2007-08, moderated to 48.3% in 2010-11 the manufacturing GCF growth rate declined to 7% in 2010-11 from 42% in 2009-10. In the current year, the rate of growth of banking sector credit flow to industries moderated significantly. On year-on-year basis, credit growth to industry decelerated to 19.8% in December 2011 from 31.6% in December 2010. Moderation in rate of growth of credit was particularly large for the infrastructure and manufacturing sectors.

The Survey has stated that in medium to long term several challenges remains for the sector. The Planning Commission has projected growth rates of 9.8% and 11.5% in manufacturing sector required to achieve 9 % and 9.5% economy growth respectively. Commenting on the National Manufacturing Policy (NMP) which has envisaged even higher growth of 14% per annum so as to take the share of manufacturing in GDP to 25% and increase the absorption of labour in this sector from 50 million as of today to more than 150 million by 2022. The Survey notes that to achieve this policy objectives, several policy measures will have to be pursued simultaneously such as resolving issues of land availability and infrastructure for the proposed national investment and manufacturing zones (NIMZs); strengthening backward and forward linkages of manufacturing sector with agriculture and services sectors respectively; acquiring depth in manufacturing sector by focusing on high value addition industries; and prompting FDI to fill the saving-investment gap etc.