Key Features of Budget 2012-2013 - part1

  Key Features of Budget 2012-2013

APPROACH TO THE BUDGET

1.For Indian economy, recovery was interrupted this year due to intensification of debt crises in Euro zone, political turmoil in Middle East, rise in crude oil price and earthquake in Japan.

2.GDP is estimated to grow by 6.9 per cent in 2011-12, after having grown at 8.4 per cent in preceding two years.

3.India however remains front runner in economic growth in any cross-country comparison.

4.Monetary and fiscal policy response for better part of past 2 years aimed at taming domestic inflationary pressure.

5.Growth moderated and fiscal balance deteriorated due to tight monetary policy and expanded outlays.

6.Indicators suggest that economy is turning around as core sectors and manufacturing show signs of recovery.

7.At this juncture, it is necessary to take hard decision to improve macroeconomic environment and strengthen domestic growth drivers.

8.Twelfth Five Year Plan to be launched with the aim of “faster, sustainable and more inclusive growth”. Five objectives identified to be addressed effectively in ensuing fiscal year.

9.If India can build on its economic strength, it can be a source of stability for world economy and a safe destination for restless global capital.

OVERVIEW OF THE ECONOMY

1.GDP growth estimated at 6.9 per cent in real terms in 2011-12. Slowdown in comparison to preceding two years is primarily due to deceleration in industrial growth.

2.Headline inflation expected to moderate further in next few months and remain stable thereafter.

3.Steps taken to bridge gaps in distribution, storage and marketing systems have helped in more effective management of inflation.

4.Developments in India’s external trade in the first half of current year have been encouraging. Diversification in export and import market achieved.

5.Current account deficit at 3.6 per cent of GDP for 2011-12 and reduced net capital inflow in the 2nd and 3rd quarters put pressure on exchange rate.

6.India’s GDP growth in 2012-13 expected to be 7.6 per cent +/- 0.25 per cent.

7.Deterioration in fiscal balance in 2011-12 due to slippages in direct tax revenue and increased subsidies.

FRBM ACT

1.Introduction of amendments to the FRBM Act as part of Finance Bill, 2012.

2.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.

3.Effective Revenue Deficit is the difference between revenue deficit and grants for creation of capital assets. This will help in reducing consumptive component of revenue deficit and create space for increased capital spending.

4. “Medium-term Expenditure Framework” statement will set forth a three-year rolling target for expenditure indicators.

5.Recommendations of the Expert Committees to streamline and reduce the number of centrally sponsored schemes and to address plan and non-plan classification to be kept in view while implementing Twelfth Plan.

6.Central Plan Scheme Monitoring System to be expanded for better tracking and utilization of funds.

SUBSIDIES

1.Some subsidies, while being inevitable, may become undesirable if they compromise the macroeconomic fundamentals of economy.

2.Subsidies related to administering the Food Security Act will be fully provided for.

3.Endeavour to keep central subsidies under 2 per cent of GDP in 2012-13. Over next 3 year, to be further brought down to 1.75 per cent of GDP.

4.Based on recommendation of task force headed by Shri Nandan Nilekani, a mobile-based Fertilizer Management System has been designed to provide endtoend information on movement of fertilisers and subsidies. Nation-wide roll out during 2012.

5.All three public sector Oil Marketing Companies have launched LPG transparency portals to improve customer service and reduce leakage.

6.Endeavour to scale up and roll out Aadhaar enabled payments for various government schemes in atleast 50 districts within next 6 months.