Friday, April 4, 2014
Saturday, March 16, 2013
The Budget allocates *Rs.2.03 trillion, including Rs.867.4 billion capital expenditure to Defence in 2013-14 *Rs.801.9 billion to rural development *Rs.270.5 billion for agriculture *Rs.140 billion capital infusion in state-run banks in 2013-14 *Rs 100 billion for incremental cost for National Food Security Bill over and above food subsidy
The Budget proposes *No revision of personal income tax slabs; relief in first bracket through tax credit of Rs.2000 for earnings up to Rs.0.5 million to benefit 1.8 crore people *Home loans upto Rs.2.5 million to be allowed an additional deduction of Rs 1 lakh. *Surcharge of 10% on income exceeding Rs.10 million a year; only 42,800 people have declared such income *No change in basic customs duty rate of 10% and service tax rate of 12% *Surcharge of 5% to 10% on domestic companies whose taxable income exceeds Rs.100 million *Capital allowance of 15% to companies on investments of more than Rs.1 billion *STT on equity futures to be reduced to 0.01% from 0.017 % *CTT on non-agriculture futures contracts to be introduced at 0.01% * Zero customs duty for electrical plants and machinery *TDS at the rate of 1% on the value of the transfer of immovable properties where consideration exceeds Rs.5 million; agricultural land to be exempted *a 20% final withholding tax on profits distributed by unlisted companies to shareholders through buyback of shares *to raise import duty on certain luxury items (cars) and certain other items to boost domestic manufacturing *to issue inflation-indexed bonds *to move to revenue-sharing from profit-sharing policy in oil and gas sector *to allow FIIs to use investments in corporate, government bonds as collateral to meet margin requirements *to allow insurance, provident funds to trade directly in debt segments of stock exchanges *to allow FIIs to hedge forex exposure through exchange-traded derivatives *to treat foreign investors with stake of 10% or less as FIIs; any stake more than 10% will be treated as FDI *to make mutual fund equity schemes eligible for RGESS.
Get detailed highlights with our March-2013 issue of E-Updates.
Thursday, January 31, 2013
Monday, October 15, 2012
Monday, September 3, 2012
Challenges for India’s policymakers on the rise as India records worst 1st quarter growth in a decade and key debt and deficit indicators rise
Get regular updates on Growth, Inflation and other Indian & Global Macro-Financial indicators/data with E-UpDates—A Monthly Statistical Bulletin by Ecofin-Surge.
Tuesday, June 19, 2012
Sunday, April 29, 2012
Monday, March 19, 2012
The budget mostly promised to reduce the nation’s fiscal deficit and rein in costly subsidies and bring in critical reforms, but for the moment given the political situation garnering the necessary revenue has been done through increases in indirect taxation. Though allocation to critical sectors has been increased there is no immediate focus on putting the economy on a high growth trajectory.
Some Measures and Effects: Tax burden for individuals to come down slightly; income tax exemption limit has been raised. Small savers to benefit from exemptions for investments in equity and bank fixed deposits up to a limit. Inflationary in the short-run; no change in corporate tax rate, but standard rate of excise duty, as also service tax rates, raised from 10 per cent to 12 %. Capital markets get a boost; securities transaction tax (STT) on cash delivery reduced by 25 % to 0.1 %. A new equity saving scheme to allow income tax deduction to small retail investors in stocks. Corporate debt market has been opened up for qualified foreign investors (QFIIs). Provision for re-capitalising public sector banks and FIs. To tackle slowdown and supply-side bottlenecks; additional capital has been provisioned to boost agriculture, agricultural research, fertilizer industry, irrigation, infrastructure and energy. External commercial borrowing has been allowed in sectors like airlines, power projects and low-cost housing. Tax relief for stressed sectors; agriculture, infrastructure, mining, railways, roads, civil aviation, manufacturing, health and nutrition, and environment have been provided with duty relief. Social sector is a focal point; higher allocation for education, health and financial inclusion. Several legislative reforms have also been proposed in the budget. The cut down in oil subsidy bill shows intentions of increased oil-price pass-throughs.
Some Budget Numbers: Total expenditure in 2012-13 seen to be up by 29 %. Gross Tax Receipts estimated at 15.6 per cent higher than original budget estimates and 19.5 per cent over the revised estimates for 2011-12. Fiscal deficit targeted at 5.1 per cent of GDP in 2012-13, to be reduced from 5.9 per cent in 2011-12. Aim to keep subsidies under 2 % of GDP in 2012-13. Central Government debt is at 45.5 per cent of GDP.
Some Hidden Numbers: Revenue foregone on custom duties constitute over 40% of total revenue foregone on account of exemptions and special rates; the items which account for the major amount of customs duty foregone are Gold & Diamonds (mainly for export promotion) followed by Crude & Mineral Oils, which together with Fertilisers make up of almost 25% of customs duty foregone. Revenues foregone for customs and excise duties are nearly 150% of revenue collections on those accounts. With corporate tax rate held at 30%, effective tax rates for corporates have risen from around 20% in 2006-07 to 24.1% in 2010-11, due to phasing out of exemptions.
Monday, March 12, 2012
January’s IIP has beaten all expectations, growing at 6.8 per cent compared with December’s tepid 1.8 per cent, and driven by the manufacturing sector growing at 8.5 per cent. However, a closer look does not speak too well about fundamentals. In terms of industries, just thirteen out of the twenty two industry groups (as per 2-digit NIC-2004) in the manufacturing sector have shown positive growth during the month of January 2012. Categories that are pointers to the health of the economy such as capital goods, intermediate goods and consumer durables have all registered negative numbers. A huge 42 per cent gain in consumer non-durables is primarily powered by chewing tobacco! It is time for policy makers to undertake a more careful diagnosis of the health of the economy.
Get regular updates on Inflation and other Indian & Global Macro-Financial indicators/data with E-UpDates—A Monthly Statistical Bulletin by Ecofin-Surge.
Monday, February 13, 2012
The advance estimate of national income for 2011-12, released recently by the Central Statistical Organisation, points to a decline in India’s GDP growth rate, from 8.4 per cent last year, to 6.9 per this fiscal. Hurt by high inflation and decline in demand in interest-sensitive sectors, private final consumption expenditure, the largest component of aggregate demand, is expected to moderate to 6.5 per cent in 2011-12 from 8.1 per cent in 2010-11. Pace of capital formation is also expected to slip to crisis levels of 5.6 per cent. Indeed, even the latest industrial production figures with a meager 1.8 per cent growth for December, confirm the slowdown, with a worrisome de-growth of -16.5 per cent in the capital goods sector. While such moderation can in principle be tackled through demand augmenting policies, it leads to a strong possibility of reemergence of inflationary pressures once pent up demand from both consumers and industry show up. The service sector has again emerged as the prime mover; all the three broad groups under which the tertiary sector is classified in the national accounts statistics — trade, hotels, etc; finance, insurance etc; and community, social and personal services — are instrumental in pulling the real GDP up. Deceleration in the manufacturing and agricultural sectors, combined with a services sector growth is definitely inflationary. GDP deflator, a broad measure of inflation that includes services, has been estimated at 8.66 per cent, higher than the government/RBI’s estimate of 7 per cent WPI inflation by the end of March. Global food prices as per the FAO rose 1.9 per cent in January demonstrating the volatility in the international food markets; worries about weather conditions affecting 2012 crops in several major producing regions point to a further increase in February. Back home the agriculture, forestry and fishing sector is expected to record growth of just 2.5 per cent in its GDP during 2011-12, as against the previous year’s growth rate of 7.0 per cent. Within agriculture, the value of food grains production is expected to slow to 2.3 per cent as compared to 12.2 per cent in the previous agriculture year despite a record harvest of foodgrains, with new peaks in both rice and wheat production. This does not augur well for the supply-side. The Indian central bank has battled inflation through a high interest rate policy during the past fiscal and does not have much fire power left this time to tackle another surge in prices; indeed its rate reversal cycle may coincide with another bout of high global food price inflation. A production augmenting budget (and central bank policy) even if inflationary, is necessary for longer term development; this has to be backed-up by extremely prudent rationalisation and channelisation of subsidies to achieve the dual objectives of fiscal consolidation as well equitable distribution.