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Budget 2012: Live Blog

This was a live blog. Excuse the mistakes.  

12:45 PM: Cigarettes and Bidi excise duties go up 2% everywhere. 

Titan down 2% on the gold news? Gold duties have been doubled, remember.

Ok if I get something wrong, I’m sorry. I can hardly understand the long sentences.

Revenue gain of just 27,000 cr. for indirect taxes. That’s PEANUTS. 

To give you an idea, it means total taxes go up approximately 2% of total revenue of the government. How are you going to reduce the deficit, Mr. FM?

End of story.

12:30 PM: Service tax goes up to 12%! this is very big. Will give 19K cr. more (ST in FY 12 was 80 lakh cr.)

Nifty at 5357, fully disappointed now. 

Standard Excise Duty up to 12% from 10%. This is just a return to the old zone before eco crisis.

2021 10 yr bond goes to 8.40%. No one’s buying the deficit figures. 

Coal exempted from customs duty (from 5%). Aircraft parts exempted from customs duty. 

 Excise up to 12%, Service tax up to 12% + on everything. These are the biggest announcements till now.

Excise duty on matches from 10% down to 6%. Cycles will see 30% reduction in customs duty. 

Excise duty on all soya food products reduced to 6%.

GOLD bar duty increased to 4% and 10% – has been doubled.

12:15 PM: “The life of a finance minister is not easy.” Reply: “Our life also, is not easy”. (Laughter). Such humour. 

Part B begins. “I must be cruel, only to be kind”. This does not augur well.

DTC rates as original. Limits:

– Nil for upto 2,00,000 

– 10% for 200K to 500K 

– 20% tax slab from 500K to 10 lakhs.

– 30% tax above 10 lakh

Upto 10,000 bank interest tax-free.

Corp tax: no changes.

ECB withholding tax limits from 20% down to 5% for certain sectors. (Power, Fertilizers etc.)

VC limits from only 9 sectors removed!

Wted deduction of 200% of investment in research in Fy13. Power sector 100% deductions of profits for 10Ex yrs: extended to Mar 31, 2013.

WoWWW! Sale of residential property exempted from capital gains if invested in equity or equipment of an SME.

 STT on delivery cut to 0.1% from 0.25%. 

Lots of restrictions on cash transactions on many ways, share premium above market value etc. Lots of anti evasion proposals, will be visible only in the actual budget. We’ll lose 4,800 cr. on revenues.

Service Tax: All services will be taxed. Except those in a 17-item negative list. Neg list: Govt services, school education, renting of residences, public transport, animal husbandry, agri produce. Exemptions: Healthcare, charities, sportsmen, car-parking.

Nifty jumps up to above 5400. but it’s confused.

Masti. “From Raja Harishchandra to Ra-One”. Some tax exemption for cinema production types.

12:00 PM: IDFC goes up 3.8% after all the gyan on infra by FM. 

Social Assistance program to get 8,000 cr. – a 37% increase. Monthly pension from Rs. 200 to Rs. 300 for (some) yojana. Can now also buy cups of chai.

Around 300 cr. is being given for water and  agri research institutions. 

Defense has been given 1.93 lakh cr. This year will be more than 2 lakh cr. More if required. 

Nifty falls below 5400. No good news = bad news.

White paper on black money to be tabled (meaning, nothing now). Prosecution of Indians with accounts abroad + undeclared income to happen this year.

Budget estimates: 19.5% increase to 10.6 lakh cr. Tax to GDP will be 10.5%. Expenditure is 14 odd lakh cr., 18% higher. Non-plan expenditure up another 18% – mostly from labour subsidy(?). Direct tax stopped short by 32,000 cr. We lost 48,000 cr. by reducing fuel taxes. Fiscal deficit is 5.9%. (if you’re lucky, Pranab-da).

Fiscal Deficit for FY 13 at 5.1% (5.3 lakh cr.). Revenue deficit for FY13: 1.85 lakh cr or 1.8% of GDP. 

11:45 AM: Prompt paying farmings will get 3% interest subvention. Warehouser farmers too. Another 10,000 cr. to NABARD for credit through RRBs.

Water: Govt owned irrigation company will finance micro-irrigation. Another govt. black hole?

National Mission in Food Processing to be created. Nearly 15,000 cr. for UID. Rajiv Gandhi Scheme for Panchayats.

5,000 cr. allocated to create warehouses. Credit guarantee for education loans. NRHM to be expanded to stop Goitre, will be give 20,800 cr., a 10% increase.

Women’s self help fund to get 200 cr. for corpus. Women’s self help groups to get loans at 7% upto 3 lakhs. If they pay up, they get the loans at 4% instead.

11:30 AM: 16,800 cr. for public sector banks and NABARD. Moves ahead with Microfinance bill.  SKS goes up 3.5%. 

Swabhimaan scheme extended to more towns. 

NHAI to get 10,000 cr, 5,000 cr. for SIDBI etc. : 60,000 cr. for infra sector. Through bonds.

Road projects awarded will do 8,800 kilometers in total by next year. Airlines can borrow abroad to fund working capital (ECB allowed).

Extends interest rate subvention for housing for priority sector. 

 Agriculture: Green revolution in east India = lot more paddy. Additional 7 million tons in paddy. Increase allocation of 400 to 1000 cr.

11:15 AM: Direct transfer of subsidy, including fertilizer subsidy in 2012! Watch fert stocks. LPG transparency portal for transparency. Might sell LPG at market prices, provide subsidies through bank account. Subsidies in 2012-13 will be less than 2% of GDP. 

Does he know what that means? GDP was 80 trillion. It’ll grow, say, to 92 trillion at 15% nominal growth. 2% of GDP is 184,000 cr. Just Fertilizer, oil and NREGA are more than that. What will they cut?

Govt will own 51% of PSUs, but  disinvest upto 30,000 cr. Multi-brand retail FDI is being worked on – no budget announcement.

Whoa. Some DTC provisions to be brought forward. Advance Pricing Mechanism to be brought forward. This is about arms-length pricing of captives of foreign companies in India. 

Some members ask for rollback of the speech. Haha.

50K deduction for new direct equity retail investors for income less than 10 lakh ? Whoa. Need to read speech.

Two way fungibility of Indian IDRs. This can be interesting.

Corporate bond market and IPOs 

 

11:00 AM: The budget is being presented by the FM. Lots of noise, and eventually everyone else shuts up. 2011-12 was bad, he says. Growth was 6.9% in 2011-12, with a 9.4% increase in services. Headline inflation was high for most of the year. The Nifty is up about 1% at 5425 in the early part of the day. BHEL is up over 2% on expectations that power equipment import duty will be up, and banks are up over 1% on the feeling that the budget will be good.

 

  • Siva says:

    Hi Deepak,
    If the service tax collected for FY12 @ 10% was 80 Lakh crore, then increase it to 12% (20% increase) should increase it by 20%, ie, 16 Lakh crore. I don’t understand why the increase is mentioned as 19K crore. Am I missing something?
    Regards,
    Sivasekar

    • Not all services will pay ST. For instance for earners less than 10 lakhs a year, there is no service tax applicable. We collected only 80,000 cr. in FY12 for all the services in the GDP. (Also, only 59% of the GDP is services, the rest is other stuff)