Key Features of Central Budget 2011-12
OPPORTUNITIES
Swift and broad based growth in 2010-11 has put the economy back to its pre-crisis growth trajectory. Fiscal consolidation has been impressive.
Significant progress in critical institutional reforms that would set the pace for double-digit growth in the near future.
Dynamism in the rural economy due to scaled up flow of resources to the
rural areas.
CHALLENGES
Structural concerns on inflation management to be addressed by improving supply response of agriculture to the expanding domestic demand and through stronger fiscal consolidation.
Implementation gaps, leakages from public programs and the quality of outcomes pose a serious challenge.
Impression of drift in governance and gap in public accountability is misplaced.
Corruption as a problem to be fought collectively. Government to improve the regulatory standards and administrative practices.
Inputs from colleagues on both sides of House are important in the wider national interest.
Budget 2011-12 to serve as a transition towards a more transparent and result oriented economic management system in India.
OVERVIEW OF THE ECONOMY
Gross Domestic Product (GDP) estimated to have grown at 8.6 per cent in 2010-11 in real terms. Economy has shown remarkable resilience.
Continued high food prices have been principal concern this year.
Consumers denied the benefit of seasonal fall in prices despite improved availability of food items, revealing shortcomings in distribution and marketing systems.
Monetary policy measures taken expected to further moderate inflation in coming months.
Exports have grown by 29.4 per cent, while imports have recorded a growth of 17.6 per cent during April to January 2010-11 over the corresponding period last year.
Indian economy expected to grow at 9 per cent with an outside band of +/- 0.25 per cent in 2011-12.
Average inflation expected lower next year and current account deficit smaller.
SUSTAINING GROWTH
Fiscal consolidation
Fiscal consolidation targets at Centre and States have shown positive effect on macro economic management of the economy.
Amendment to Centre’s FRBM Act, 2003 laying down the fiscal road map for the next five years to be introduced in the course of the year.
Proposal to introduce the Public Debt Management Agency of India Bill in the next financial year.
Tax Reforms
Direct Taxes Code (DTC) to be finalised for enactment during 2011-12. DTC proposed to be effective from April 1, 2012.
Areas of divergence with States on proposed Goods and Services Tax (GST) have been narrowed. As a step towards roll out of GST, institution Amendment Bill proposed to be introduced in this session of Parliament.
Significant progress in establishing GST Network (GSTN), which will serve as IT infrastructure for introduction of GST.
Expenditure Reforms
A Committee already set up by Planning Commission to look into the extant classification of public expenditure between plan, non-plan, revenue and capital. Subsidies
Nutrient Based Subsidy (NBS) has improved the availability of fertiliser; Government actively considering extension of the NBS regime to cover urea.
Government to move towards direct transfer of cash subsidy to people living below poverty line in a phased manner for better delivery of kerosene, LPG and fertilisers. Task force set up to work out the modalities for the proposed system.
People’s ownership of PSUs
Overwhelming response to public issues of Central Public Sector Undertakings during current year.
Higher than anticipated non-tax revenue has led to reschedulement of some disinvestment issues planned for current year.
Rs 40,000 crore to be raised through disinvestment in 2011-12.
Government committed to retain at least 51 per cent ownership and management control of the Central Public Sector Undertakings.
INVESTMENT ENVIRONMENT
Foreign Direct Investment
Discussions underway to further liberalise the FDI policy.
Foreign Institutional Investors
SEBI registered mutual funds permitted to accept subscription from foreign investors who meet KYC requirements for equity schemes.
To enhance flow of funds to infrastructure sector, the FII limit for investment in corporate bonds issued in infrastructure sector being raised.
Financial Sector Legislative Initiatives
To take the process of financial sector reforms further, various legislations proposed in 2011-12.
Amendments proposed to the Banking Regulation Act in the context of additional banking licences to private sector players.
Public Sector Bank Capitalisation
` 6,000 crore to be provided during 2011-12 to enable public sector banks to maintain a minimum of Tier I CRAR of 8 per cent.
Recapitalisation of Regional Rural Banks ` 500 crore to be provided to enable Regional Rural Banks to maintain a CRAR of at least 9 per cent as on March 31, 2012.
Micro Finance Institutions
“India Microfinance Equity Fund” of ` 100 crore to be created with SIDBI. Government considering putting in place appropriate regulatory framework to protect the interest of small borrowers.
“Women’s SHG’s Development Fund” to be created with a corpus of ` 500 crore.
Rural Infrastructure Development Fund
Corpus of RIDF XVII to be raised from ` 16,000 crore to ` 18,000 crore.
Micro Small and Medium Enterprises
` 5,000 crore to be provided to SIDBI for refinancing incremental lending by banks to these enterprises.
` 3,000 crore to be provided to NABARD to provide support to handloom weaver co-operative societies which have become financially unviable due to non-repayment of debt by handloom weavers facing economic stress.
Public sector banks to achieve a target of 15 per cent as outstanding loans to minority communities under priority sector lending at the earliest.
Housing Sector Finance
Existing scheme of interest subvention of 1 per cent on housing loan further liberalised.
Existing housing loan limit enhanced to Rs 25 lakh for dwelling units under priority sector lending.
Provision under Rural Housing Fund enhanced to ` 3,000 crore.
To enhance credit worthiness of economically weaker sections and LIG households, a Mortgage Risk Guarantee Fund to be created under
Rajiv Awas Yojana.
Central Electronic Registry to prevent frauds involving multiple lending on the same immovable property to become operational by March 31, 2011.
Financial Sector Legislative Reforms Commission
Financial Sector Legislative Reforms Commission set up to rewrite and streamline the financial sector laws, rules and regulations.
Companies Bill to be introduced in the Lok Sabha during current session.
AGRICULTURE
Removal of production and distribution bottlenecks for items like fruits and vegetables, milk, meat, poultry and fish to be the focus of attention this year.
Allocation under Rashtriya Krishi Vikas Yojana (RKVY) increased from
Rs 6,755 crore to ` 7,860 crore.
Bringing Green Revolution to Eastern Region
To improve rice based cropping system in this region, allocation of
Rs 400 crore has been made.
Integrated Development of 60,000 pulses villages in rainfed areas
Allocation of ` 300 crore to promote 60,000 pulses villages in rainfed areas.
Promotion of Oil Palm
Allocation of ` 300 crore to bring 60,000 hectares under oil palm plantations.
Initiative to yield about 3 lakh Metric tonnes of palm oil annually in five years.
Initiative on Vegetable Clusters
Allocation of Rs 300 crore for implementation of vegetable initiative to provide
quality vegetable at competitive prices.
Nutri-cereals
Allocation of Rs 300 crore to promote higher production of Bajra, Jowar, Ragi and other millets, which are highly nutritious and have several medicinal properties.
National Mission for Protein Supplement
Allocation of ` 300 crore to promote animal based protein production through livestock development, dairy farming, piggery, goat rearing and fisheries.
Accelerated Fodder Development Programme
Allocation of ` 300 crore for Accelerated Fodder Development Programme to benefit farmers in 25,000 villages.
National Mission for Sustainable Agriculture
Government to promote organic farming methods, combining modern technology with traditional farming practices.
Agriculture Credit
Credit flow for farmers raised from ` 3,75,000 crore to ` 4,75,000 crore in 2011-12.
Interest subvention proposed to be enhanced from 2 per cent to 3 per cent for providing short-term crop loans to farmers who repay their crop loan on time.
In view of enhanced target for flow of agriculture credit, capital base of NABARD to be strengthened by ` 3,000 crore in phased manner.
` 10,000 crore to be contributed to NABARD’s Short-term Rural Credit fund for 2011-12.
Mega Food Parks
Approval being given to set up 15 more Mega Food Parks during 2011-12.
Storage Capacity and Cold Chains
Augmentation of storage capacity through private entrepreneurs and warehousing corporations has been fast tracked.
Capital investment in creation of modern storage capacity will be eligible for viability gap funding of the Finance Ministry.
Agriculture Produce Marketing Act
In view of recent episode of inflation, need for State Governments to review and enforce a reformed Agriculture Produce Marketing Act.
Infrastructure and Industry
Allocation of Rs 2,14,000 crore for infrastructure in 2011-12. This is an increase of 23.3 per cent over 2010-11. This also amounts to 48.5 per cent of total plan allocation.
Government to come up with a comprehensive policy for further developing
BLACK MONEY
Five fold strategy to be put into operation to deal with the problem of generation and circulation of black money.
Membership of various international fora engaged in anti money laundering, Financial integrity and Economic development, Exchange of information for tax purposes and transparency, secured.
Various Tax Information Exchange Agreements (TIEA) and Double Taxation Avoidance Agreements (DTAA) concluded. Foreign Tax Division of CBDT has been strengthened to effectively handle increase in tax information exchange and transfer pricing issues.
Enforcement Directorate strengthened three fold to handle increased number of cases registered under amended Money Laundering Legislation.
Finance Ministry has commissioned study on unaccounted income and wealth held within and outside the country.
Comprehensive national policy to be announced in near future to strengthen controls over prevention of trafficking on narcotic drugs.
STRENGTHENING INCLUSION
National Food Security Bill (NFSB) to be introduced in the Parliament during the course of this year.
Allocation for social sector in 2011-12 (` 1,60,887 crore) increased by 17 per cent over current year. It amounts to 36.4 per cent of total plan allocation.
Bharat Nirman
Allocation for Bharat Nirman programme proposed to be increased by Rs 10,000 crore from the current year to Rs 58,000 crore in 2011-12.
Plan to provide Rural Broadband Connectivity to all 2,50,000 panchayats in the country in three years.
MGNREGA
In pursuance of last years budget announcement to provide a real wage of ` 100 per day, the Government has decided to index the wage rates notified under the MGNREGA to the Consumer Price Index for Agricultural Labour. The enhanced wage rates have been notified by the Ministry of Rural Development on January 14, 2011.
From 1st April, 2011, remuneration of Anganwadi workers increased from Rs 1,500 per month to Rs 3,000 per month and for Anganwadi helpers from Rs 750 per month to Rs 1,500 per month.
Scheduled Castes and Tribal Sub-plan
Specific allocation earmarked towards Schedule Castes Sub-plan and Tribal Sub-plan in the Budget.
Allocation for primitive Tribal groups increased from ` 185 crore in 2010-11 to ` 244 crore in 2011-12.
Education
Allocation for education increased by 24 per cent over current year.
Sarva Shiksha Abhiyan
` 21,000 crore allocated, which is 40 per cent higher than Budget for 2010-11.
Pre-matric scholarship scheme to be introduced for needy SC/ST students studying in classes IX and X.
National Knowledge Network
Connectivity to all 1,500 institutions of Higher Learning and Research through optical fiber backbone to be provided by March, 2012.
Innovations
National Innovation Council set up to prepare road map for innovations in India.
Special grant provided to various universities and academic institutions to recognise excellence.
Skill Development
Additional ` 500 crore proposed to be provided for National Skill Development Fund during the next year.
An international award with prize money of ` 1 crore being instituted for promoting values of universal brotherhood as part of National celebrations of 150th Birth Anniversary of Gurudev Rabindranath Tagore.
Health
Plan allocations for health stepped-up by 20 per cent.
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Highlights of Union Budget for the F.Y 2011-12
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