The Union Budget of India, is the Annual Financial Statement

[1]

in Article 112 of the Constitution of India,is

presented each year on the last working day of February by the Finance Minister of India in Parliament. The budget has to be passed by the House before it can come into effect on April 1, the start of India's financial year.

The Union Budget 2011-12 presented by the Finance Minister seems balanced and growth oriented. Agriculture, Infrastructure and Social sector have been the focus areas. The budget has sought to promote growth with an inclusive agenda. Consequently, substantial plan outlay has been devoted to social and rural development. The Finance Minister expressed his concern over the problem of generation and circulation of black money in the Budget Session and announced the implementation of a Five Fold Strategy to deal with the problem. Proposed increased exemption limit was in-line with market expectations. Investment reforms for FIIs and FDIs came in as a surprise which has been a major cause of concern in recent months.

Highlights of Budget 2011-12 for the Banking Sector

IN ECONOMY

The Government is to infuse Rs.6,000 Crore in Andhra Bank, Dena Bank, Oriental Bank of Commerce, Bank of Baroda & Union Bank of India. More Equity issues by PSUs (Public Sector Unit) on the way as the government aims to raise Rs.40,000 Crore Interest subsidy of 1% extended to Home loans up to Rs.15 Lakh & Property Worth up to Rs.25 Lakh The government & Small Industries Development Bank of India (SIDBI) to float Rs.100 Crore fund to capitalize Small Micro Finance Institutions (MFI) Banks told to lend more to Minority Community Borrowers at the target of 6% of total PSU Bank loans Banks will have to lend Rs.1 Lakh Crore more to Farmers, where the total loans to touch Rs.4.75 Lakh Crore New company will guarantee Home Loans taken by Poor Borrowers Reserve Bank of India (RBI) to sell stakes in National Bank for Agriculture and Rural Development (NABARD), National Housing Bank (NHB) to Government for Rs.1,430 Crore & Rs.450 Crore

I-T exemption limit raised to Rs 1.80 lakh from Rs 1.60 lakh.

Exemption for senior citizens raised to Rs 2.5 lakh Tax under women slab unchanged. Tax exemption raised to Rs 5 lakh for senior citizens of 80 years. Excise and customs duty proposals to result in the net gain of Rs 7,300 crore. Export duty rates on iron ore unified and kept at 20% ad valorem. Basic customs duty on agricultural machinery reduced to 4.5% from 5% Basic customs duty on raw silk reduced from 30 to 5 per cent Excise and customs duty proposals to result in the net gain of Rs 7,300 crore Nominal one per cent central excise duty on 130 items entering the tax net. Basic food and fuel and precious stones, gold and silver jewellery will be exempted. Standard rate of central exercise duty maintained at 10%. Central government debt in proportion to GDP will be 44.2% in 2011-12. 20% export duty on all grades of iron ore. No change in service tax rate of 10%. No change in central excise duty. Plan to levy 1% on 130 consumer items. Revenue deficit fixed at 2.3 per cent in revised estimates of 201011 and 1.8 per cent in 201112, Total plan expenditure will go up 100 per cent in nominal terms in the next year 15% tax on dividend for Indian cos from foreign unit.

Direct Tax proposals result in expenditure of Rs 11,500 cr. To reduce surcharge on domestic companies to 5% from 7.5% MAT rate hiked to 18.5% from 18%. MAT on developers in SEZs to be levied. Fiscal deficit revised to 5.1% from 5.5% for FY11 Total expenditure raised by 13.4% at Rs 12.57 lakh cr over budget estimates Gross tax receipts estimated at 9.32 lakh cr for FY 2011-12 Bill to amend India Stamp Act soon. Budget allocation of Rs 100 cr for Ladakh and Rs 150 cr for Jammu for implementation of projects identified by taskforce Old age pension to persons of over the age of 80 raised from Rs 200 to Rs 500 Health allocation up by 20% to R 27,600 cr. Rs 9- lakh ex-gratia for defence personnel for 100% disability fighting Left-wing extremism. To set up 15 more mega food parks. Remuneration of anganwadi workers raised from Rs 1,500 to Rs 3,000 per month. Helpers to get Rs 1,500 from Rs 750 Tax free bonds of Rs 30,000 cr to be issued for infrastructure development. This will cover Warehousing Corporation, NHAI, IRFC and Hudco. Allocation under Rashtriya Krishi Vikas Yojana to be raised from Rs 6,755 crore in the current year to Rs 7,860 crore. Rs 50 cr grant to Aligarh Muslim University centres in Murshidabad in West Bengal and Malappuram in Kerala.

Rs 200 cr for environmental remediation programme. Age for pension eligibility reduced from 65 years to 60 years under Indira Gandhi Yojana scheme To move insurance, pension and banking bills in Parliament Rs 500-cr for National Development Fund. Rs 400-cr as one-time grant for IIT-Kharagpur.

Allocation to education sector raised to Rs 52,000 cr

Increase in remuneration for Anganwadi workers from Rs 1,500 to Rs 3,000 per month. Plan 17% increase in social sector spending. To introduce Food Security Bill Tax free bonds of Rs 30,000 cr to be issued for infrastructure development. This will cover Warehousing Corporation, NHAI, IRFC and Hudco. Fertiliser industry to be included under infrastructure category. GoM to be set up to deal with corruption Five-fold strategy to deal with black money. Existing interest subvention scheme on short term farm loans at 7 % interest to continue. Self-assessment in customs to be introduced. Credit flows to farmers raised from Rs 3.75 lakh crore to Rs 4.75 lakh crore. Constitution Amendment Bill for introduction of GST in this session. Goods and Services Tax Bill this year. Direct Taxes Code Bill likely to be passed by Parliament next financial year after getting Standing Committee report. Public Debt Management Agency Bill in the next fiscal. Indian mutual funds to get direct access to foreign markets; FIIs to be allowed to invest in MFs. To extend infra tax breaks to fertiliser sector.

To set up microfinance equity fund. Government to move towards direct cash transfer of cash subsidy as regards kerosene, LPG and fertilisers from March 2012 for BPL in view of large diversion 3% interest subvention to farmers who repay in time. NABARD capital base to be increased by infusing Rs 10,000 cr Rural housing fund increased to Rs 3,000 cr Banks asked to step up lending to agriculture. Allocation under Rashtriya Krishi Vikas Yojana to be raised from Rs 6,755 crore in the current year to Rs 7,860 crore. Budget proposes to raise housing loan limit from Rs 20 lakh to Rs 25 lakh for priority sector lending. Allocation for farm development hiked to Rs 7,860 cr. Rs 300 cr proposed to promote production of cereals. Indian micro-finance equity with SIDBI to be formed at Rs 100 crore. Rs 6,000 cr to be given to public sector banks to maintain capital-to-risk assets ratio norms RBI to bring in new guidelines for banking licences. Aiming Fiscal deficit of 3% by fiscal 2014 FII investment limit for infra corporate bonds hiked to $40 billion. Microfinance equity fund of Rs 100 cr proposed. Govt committed to hold 51% in PSUs. Rs 3,000 cr to Nabard for handloom societies. Women self-help group development fund to be set up.

Goods and Services Tax Bill to be introduced in Parliament this year. Direct Tax Code Bill likely to be passed by Parliament next financial year after getting Standing Committee report. Disinvestment target at Rs 40,000 cr. Direct Tax Code from April 2012. SEBI-registered MFs to be allowed direct access to foreign funds. Public Debt Management Agency Bill to be introduced next financial year. Current account deficit and average inflation in 2011-12 likely to be less than current year. Economic growth in 2011-12 likely to be 9 per cent. Debt management bill to be introduced. Constitutional Amendment Bill on GST to be introduced. Expect agri sector to grow at 5.4% in 2011. GDP estimated growth at 8.6% in real terms. Total food inflation down from 20.2 per cent last year to 9.3 per cent in Jan.
No hike in passenger fare and freight rates. Highest ever Plan outlay of Rs. 57, 630 crore proposed for Railways. Rs. 9,583 crore provided for new lines. 1300 km new lines, 867 km doubling of lines and 1017 km gauge conversion targeted in 2011-12. 56 new Express Trains, 3 new Shatabdis and 9 Duronto trains to be introduced. New Super AC Class to be introduced. A new portal for e-ticketing to be launched shortly. Booking charges will be cheaper with a charge of only Rs. 10 for AC classes and Rs.5 for others. Pan-India multi-purpose smart card Go India to be introduced. 236 more stations to be upgraded as Adarsh Stations. 47 additional suburban services in Mumbai and 50 new suburban services proposed for Kolkata.