In India the budget is presented in parliament on a date fixed by president. Part A of budget deals with general economic survey of country while part B relates to taxation proposals.
- The finance minister is required to submit the budget in parliament usually on the last day of February so that the Lok Sabha has one month to review and modify the budget proposal.
- If by April 1, the beginning of the country's fiscal year, the parliament discuss on the budget is completed, then only the budget as proposed by the finance minister come into effect.
- The chief economic advisor assists the concerned department officer in the process.
- Work under department of economic affairs.
- Under the supervision of joint secretary.
- Supplementary and excess demand of state and union territories under the president rule.
- All issues relating to public debt market loan of the central government and the fixation of terms & conditions of lending.
- Matters relating to National Savings Organisation and Small Savings Schemes, Duties, Powers and Condition of Service of the Comptroller and Auditor General of India, Accounting procedures and Classification, dealing with issues relating to National Defence Fund, Railways Convention Committee and Central Road Fund.
- Account section
- Coordination section
- Demand section
- FRBM cell
- National saving-I
- National saving-II
- Public Debt section
- Report section
- State selection
- Supplementary Demand
- Ways and Means Section
- Budget Press
- Hindi section I to VI
Two Sides of Budget
- Internal and External budgetary Resources (IEBR).
- Assessing the revenues from different central taxes is the primary function of the department of revenue.
- Estimate of tax receipts by CBDT & CBEC in mid January based on collection figure up to 31st December.
- Estimate of dividends paid by the PSU s on the government share holdings.
- Capital receipts on account of the disinvestment.
External receipts on account borrowing from international agencies like World Bank, ADB etc to various ministries.
- Resources of the PSU including their operating surplus and the borrowings by them also constitute an important component of the gross budgetary resources.
- Estimate of earnings of PSUs done with chairman of PSUs and joint secretary MOF in august to September.
- Based on the inputs of different ministries revised estimate (RE) and additional fund for non plan expenditure is prepared because of over spending and under spending. (Finance adviser of each ministry+ Minister of Finance).
- Estimate of Planned expenditure for next year (Review meeting, Planning commission + ministries ->Minister Of Finance)
Suggestions of stakeholders
- Department of Economic Affairs + Trade Unions + Industry Chambers + Economists + Parliamentary committee
Finance Minister and his team
- Finance Minister with his team decides whether some new taxes should be levied to collect more tax, how to widen tax net in order to earn more revenue.
- Department of Expenditure and the Department of Economic Affairs sit to decide GDP assessment for next year. Generally a nominal growth in GDP is projected.
The Budget speech of FM
- Around 15th of February, some of the budget documents are almost ready and goes for printing to a press located in North Block itself. Security Agencies cordons off the press and entry is almost prohibited.
The D Day: FM delivers Budget Speech in Parliament
- On 28th of February, the Finance Minister delivers Budget speech in Lok Sabha. After which Budget documents are made available. These are also put on the website www.finmin.nic.in.
- In 2008 being a leap year, this time Budget was presented to Parliament on 29th February.
Information from budget and announcements
- Growth in Per capita Income in real term & savings rate, investment rate & their absolute figure
- Growth in bank credit,M3 expansion rate and inflation figure
- Report card of govt. flagship program
- Five year plan performance
- Increase in GBS and central plan
Sector wise allocation
- Education SSA, Mid day Meal, Scholarship
- Health sector
Polio, ICDS, HIV/AIDS, NHRM (Drinking water & Sanitation)
- NER specific fund/region specific fund/policy
- Farm credit
- Expansion rate & provision for interest rate
- Special grant
- Waiver for agriculture indebtedness
- Provision for Particular crop
- Accelerated Irrigation Benefits Programme
- Watershed scheme
- Water resource management
- Ground water recharge
- Training for farmer
- Fertilizer subsidy
- Agriculture insurance
- Grants and guarantees to NABARD
Rural infrastructure development fund (RIDF)
- Rural road
- Rural houses
- Village electrification
- Health/debility/death insurance to BPL families
- Jobs and income avenues
- Increase/decrease in GDCF, FDI, FII etc
- CPSEs investment
- Generation increase/decrease and proposed expansion
- Coal -policy major/direction and report card
- National Highways development and maintenance
- Road cum rail Bridges
- Funding for such development such PPP or etc
- Petroleum & Natural Gas
- Policy and progress
- Textiles-Grant for handlooms, textile parks
- Bank credit to SMEs
- Service sector- Policy and support to Foreign trade, Tourism
- Financial sector
- Banking - Policy, disinvestment, dilution of equity.
Regional Rural Banks (RRBs)
- Housing loans- Policy, support
- Insurance- policy, support
- Capital Market-Policy, Guideline
- Growth in tax revenue, direct tax, indirect tax
- Indirect Tax proposals-custom duties rate
- Hike/reduction/unchanged on
- Excise duty hike/reduction/unchanged on products
- Service Tax-Exemption limit
- Inclusion of services
- Exemption limit, deduction, and rate
- Corporate income tax rate, exemption, deduction etc.
- New taxes, estimated yield from new direct tax proposals
- Proposal regarding the cess on taxes
- Reduction or increase in custom duties (export/import)
- Reduction or increase in Excise duties
- Exemption limit for excise duty
- Service tax: exemption limit for small service provider, extension of service tax to various services
ANNUAL FINANCIAL STATEMENT
- Consolidated Fund
- Contingency Fund
- Public Accounts
- Revenue Receipt/Expenditure
- Capital Receipt / Expenditure
- Plan Expenditure
- Non Plan Expenditure
- Tax Revenue
- Direct/Indirect Tax
- Non Tax Revenue
IMPLICATIONS FOR THE MARKET
CHAIN OF EVENTS
Pre budget jitters
- At 11 AM Sensex up
- At 11.30 AM loses
- At 12.40 PM Sensex loses further
- At 1.00 PM SENSEX recovers a bit
- IT/HOUSEHOLD APPLIANCES
- MEDIA AND ENTERTAINMENT
- GEMS AND JEWELLERY
- AUTO AND AUTO ANCILLARY
- OIL AND GAS
- POWER AND POWER EQUIPMENT
- REAL ESTATE
- Customs duty on steel melting and aluminium melting scrap reduced from 5% to 0%
Reduction in excise duties in select segments of automobiles
- Excise duty has been reduced on: Small cars from 16% to 12%, Hybrid cars from 24% to 14%, Electric cars from 8% to nil
- Buses and other vehicle for transport of more than 13 persons from 16% to 12%
- Two-wheelers and passenger three-wheelers (upto 7 persons) from 16% to 12%
- PSU banks and regional rural banks (RRBs) to offer debt waiver on all agricultural loans disbursed up to March 2007 and due until the end of December 2007. The total value of relief to be offered to farmers is estimated at Rs 60,000 crore
- Advise commercial banks including RRBs, to add at least 250 rural household accounts every year at each of their rural and semi-urban branches
- Allow individuals such as retired bank officers, ex-servicemen etc to be appointed as business facilitator or business correspondent or credit counsellor
- BCTT being withdrawn with effect from April 1, 2009
- The cost of adding more rural households in their rural branches may increase the operating cost for the PSU banks
- Custom duty on iron or steel melting scrap cut from 5% to Nil
- Reduction in customs duty of aluminium scrap has been reduced from 5% to Nil
Oil & Gas (Negative)
- Ad valorem part of the excise duty on unbranded petrol and unbranded diesel being abolished and replaced by an equivalent specific duty of Rs.1.35 per litre. There will be only a specific duty of Rs.14.35 per litre on unbranded petrol and Rs.4.60 per litre on unbranded diesel; there will be no impact on retail prices
- Customs duty on crude and unrefined sulphur has been reduced from 5% to 2%
- Customs duty on phosphoric acid has been unified at 5% irrespective of its use
- Customs duty exemption presently available on naphtha for manufacture of specified polymers has been withdrawn
- Polymer industry will be negatively impacted
- Polymer is used in a host of downstream sectors such as plastics and paints which will face margin pressures
- Exemption from additional duty of customs of 4% levied has been withdrawn from power generation projects (other than mega power projects), transmission, sub-transmission, distribution projects and goods for high voltage transmission projects
- Fourth UMPP at Tilaiya to be awarded shortly; Chhattisgarh, Karnataka, Maharashtra, Orissa and Tamil Nadu urged to bring five more UMPPs to the bidding stage by extending the required support
- Rajiv Gandhi Grameen Vidyutikaran Yojana to be continued during the Eleventh Plan period with a capital subsidy of Rs.28,000 crore; allocation of Rs.5,500 crore for 2008-09
- Only negative factor- Removal of exemption of additional duty of customs of 4% from power generation projects
Real Estate (Neutral)
- Proposal to enhance the subsidy for new houses under Indira Awas Yojana from Rs.25,000 to Rs.35,000
- 5-year tax holiday for 2/3/4 star hotels in UNESCO declared 'World Heritage Sites'
- Extending 5-year tax holiday for setting up hospitals in non-urban cities
- No relief on service tax on rentals will continue to increase pricing pressure
Capital/Engineering Goods (Positive)
- Growth in capital goods is still very high at 20.2 %, indicating that industry continues to make huge capital investments and has a positive outlook about the future
- Rs.800 Crore allocated for the Accelerated Power Development and Reforms Project in 2008-09
- Thrust on power reforms augurs well for the sector
- Excise Duty on clinker increased to Rs 450/MT from Rs 350/MT
- Excise Duty on bulk cement at Rs 400/MT or 14% in proportion to the estimated value of the cement, whichever is higher
Telecom Sector (Positive)
- General rate of excise duty (CENVAT) has been reduced from 16% to 14%
- Excise duty has been fully exempted on Wireless data modem cards. CVD shall also be exempted on imported cards
- Customs duty on specified parts of set-top boxes has been reduced from 7.5% to Nil
- Reduction in the customs duty on convergence products from 10% to 5%
- Excise duty has been reduced from 16% to 8% on specified convergence products
Gem & Jewellery (Neutral)
- Reduction of duty of rough cubic zirconium and of polished cubic zirconium from 10% to 5%. Similar is the case of rough coral