Union Budget 2010-11

FM does the expected:

rollbacks, reductions and rationalization.

A Brief Analysis Report

(BAR)presentation of the voice of
1250 millions Indians on the
development of India.

ISHAN INSTIUTE OF MANAGEMENT AND TECHNOLOGY.

 2

Foreword

We are deeply indebted to our honorable Chairman

Dr.D.K.Garg, who assigned a new task to know exactly what
changes we have seen in this budget 2010-11 and how it
affects the 1250 millions Indians ?
Finally, We would like to appreciate
our Chairman Sir and Respected Faculty members, who is
giving us such a good opportunity to achieve the learning
motive of Annual Budget 2010-11.

THANKING YOU.
 3

UNION BUDGET 2010-11

Union budget is the financial statement of
government’s total revenues, total expenditure
and fiscal deficit of an economy for financial year.

According to Honorable FM Pranab Mukherjee

“Union budget cannot be mere a statement of
government accounts. It has to reflect the
government’ vision and signal the policies to come
in future.
 4

Annual Budget 2010-11 and Indian Economy.

• Indian economy is the 2nd fastest growing economy of
World after China.
• During global recession 2008, Indian economy grown
at 6.7% compare to negative growth in U.S., U.K. and
other developed countries.
• Two stimulus package worth Rs.2.5 trillions(approx),
strong domestic consumption, optimistic government
and corporate world hold the growth of economy,
before it could buried in the grave of recession.
 5

Annual Budget 2010-11 and Indian Economy

1200 1082 1050

Year 1000 India USA (Growth
(Growth rate)
800 rate) 756

600 582
442 467 474
400
2007 200 9.4% 2.1%
Financial Gross Domestic Product
year (in US$ BILLIONS)
2008 0 6.7% FY00 0.6%
FY98 FY02 FY04 FY06 FY08 FY09
2005-06 820
2009 5.3% -2.3% 2008-09 1200
2019-20 3000 (est. by PWC)
2010 (est) 6.9% 2.2%
2049-50
Column2 34000 (est. by PWC)
 6

The Indian Economy Reality bites.

Feel Proud 1250 million Indians.
• Indian car industry is estimated to sell 2 million units in FY10, It was
market of merely 30000 units in 1983.
• MF Industry ‘s AUM totaled Rs.8 lacs crores.
• Indian equity market joined $1 trillion club in term of market
capitalization and ranked 9th in world and number one in terms of number
of companies listed on BSE.
• US$1.24 billion, Delhi is spending on roads and infrastructure for
Commonwealth Games 2010.
• 1 of every 2 Indian owned mobile phone and entering soon
in 3G telecom technology.
• Industrial growth in Jan’10 is 16.7% compare to 1.0 in
previous year. Another achievement in recovery of nation.
• Total billionaires in India are 49 with combined wealth of
US$ 222.1 billions which is 17% of GDP topped with
Mukesh Ambani with $29 billion according to Fortune 2010
Billionaire list of 1010 billionaires
 7

The three Wants, Pranab Mukherjee and

1250 millions Indians.
Challenge1:Growth of Indian economy with 9% p.a. and then
find means to cross the double digit growth barrier.

Challenge 2:The overall social development and strengthen

food security, improve education opportunities and health
facilities at level of household, both in rural and urban areas.

Challenge 3:To re structure and strengthen the administration,

government system and institutions at different level of
governance like eradication of corruption in all levels of
public government relations.
 8

Union Budget FY11 - key themes

Strong consumption boost by way of higher disposable incomes;
sets the stage for accelerated economic growth in medium term

Continuous focus on infrastructure, agriculture and social sectors( health

and education)

Withdrawal of fiscal stimulus; increase in direct taxes at pre crisis levels.

Roadmap for fiscal consolidation to bring deficit to 4.1% in 3 yrs;

FY11 fiscal deficit target a tad ambitious - government banks heavily on
divestment proceeds & oil prices could play spoilsport

Inflation to inch up by 10% in near term, corporate tax measures an earning

dampener in near term.

Long term earnings of corporate remains strong; FM retain target 12 month of

SENSEX at 20000.
 The new India v/s Old India
THE [OLD] ECONOMIC ORDER THE [NEW] ECONOMIC ORDER
• Average cumulative tax burden • Average cumulative tax burden
of all indirect taxes: 22%. of all indirect taxes: 10-12%.
• Companies deal with tax laws • One tax law and system across
and officials of up to 28 states. India.
• Dozens of different taxes and
several products taxed at • Only two tax rates, one for the
different rates in different Center and another for all
states. states, applicable uniformly.
 The new India v/s Old India
THE [OLD] ECONOMIC ORDER THE [NEW] ECONOMIC ORDER
• Individual income above Rs 5 • Individual income above Rs. 25
lakh a year taxed at 33% lakh taxed at 30%.
(including cesses).
• Tax saving investment of up to • Tax saving investment of up to
Rs 1 lakh allowed every year. Rs 3 lakh allowed every year.
• As a market, India is • A strong common market with
fragmented and therefore weak. free movements of products
and services.
 The new India v/s Old India

THE [OLD] ECONOMIC ORDER THE [NEW] ECONOMIC ORDER

• India is one of the fast growing • India is one of the largest global
economies but a very toughest economies, and easier to do
place to do business. business with and in.

• Over 100 crore man hours and • Substantial reduction in time

Rs 3,35,000 crore lost in tax and money spent on tax
compliance. compliance and dispute
resolution.
 12

Budget at a glance: number crunchers.

Year TOTAL EXP. Year TOTAL Year GROSS
REVENUE BORROWINGS.
2006- 581637
07 2006-07 440814 2006- 142573
2007- 680521 07
08
2007-08 585759 2007- 126912
2008- 883956 08
09
2009- 1021546 2008-09 546964 2008- 336992
10 (RE) 09
2010- 1108749 2009-10 607506 2009- 414040
11 (RE) 10 (RE)
(BE)
2010-11 727341 2010- 381409
(BE) 11 (BE)

All figures are in Rs. Crores.

 13

Number Crunchers: The revenue generators for

Union
The rupee comes from.
Borrowing and other liablities Non debt capital receipts
Non tax revenue Service tax and other taxes
Union excise duties Customs
Corporation tax Income tax
9% 29%
23%

3%

9% 10% 11%

6%
 14

Number Crunchers: The expenditure creators for

Union
The rupees goes how?
State's share of taxes and duties Other non plan expenditure
Defence Interest Payment
Central plan Plan assistance to state and UT Govt.
Non plan assistance to state and UT'S

8% 4% 18%

23% 14%

21% 12%
 15

WHAT GOES UP AND COME DOWN?

• Deodants and perfumes set to cost 5% less.
• Cell phones prices will also fall due to 3G telecom
technology adoption by Govt.
• Exemption from special additional duty of 4% to goods
imported in pre packaged form for retail sale.
• Watches and readymade garments' prices will also reduce.
• Countervailing duty exemption on transfer right to use on
packaged software available leads to reduction in prices.
• Excise duty on goods covered under medicinal and toilet
preparation Act reduced from 16% to 10%.
 16

WHAT GOES UP AND COME DOWN?

• Tobacco and cigarettes products prices will go up.
• All auto cars like SUV, MUV and LCV will get hike in prices.
• Airfares prices will go up.
• Gold to Rs100 more after import duty hike.
• Hike in prices by Rs.500-1000 in LCD TV’S and Electronic items.
• Retail industry will affected due to implementation of service
tax.
• PSU banks will be affected due to High inflation to see rising G-
sec yields and decrease the NIM OF Banks.
• Real estate will hit in Near-term negative due to
implementation of service tax and increase in the interest rates
of bank.
 17

Annual Budget and Development of India

Improving Infrastructure

• Rs 1,73,552 crore provided for infrastructure

development which accounts for over 46 per cent
of the total plan allocation.
• Allocation for road transport increased by over 13
per cent from Rs. 17,520 crore to Rs 19,894 crore.
• Rs 16,752 crore provided for Railways, which is
about Rs.950 crore more than last year.
• IIFCL’s disbursements are expected to touch Rs
9,000 crore by end March 2010 and reach around
Rs 20,000 crore by March 2011.
 18

Annual Budget and Development of India

Improving Investment Environment

Foreign Direct Investment

• Number of steps taken to simplify the FDI regime.
• Methodology for calculation of indirect foreign investment in Indian companies has been clearly
defined.
• Complete liberalization of pricing and payment of technology transfer fee and trademark, brand
name and royalty payments.

Banking Licenses
• RBI is considering giving some additional banking licenses to private sector players.
• Non Banking Financial Companies could also be considered, if they meet the RBI’s eligibility criteria.
Public Sector Bank Capitalization
• Rs.16,500 crore provided to ensure that the Public Sector Banks are able to attain a minimum 8 per
cent Tier-I capital by March 31, 2011.

Recapitalization of Regional Rural Banks (RRB)

• Government to provide further capital to strengthen the RRBs so that they have adequate capital base
to support increased lending to the rural economy.
 19

Annual Budget and Development of India

Improving Agriculture Growth
• Banks have been consistently meeting the targets set for
agriculture credit flow in the past few years. For the year 2010-
11, the target has been set at Rs.3,75,000 crore.
• Rs. 400 crore provided to extend the green revolution to the
eastern region of the country comprising Bihar, Chhattisgarh,
Jharkhand, Eastern UP, West Bengal and Orissa.
• In addition to the ten mega food park projects already being set
up, the Government has decided to set up five more such parks.
 20

Allocation of funds for major development programmes.

• Defence allocation pegged at Rs 1,47,344 crore in 2010-11 against Rs

1,41,703 crore in the previous year. Of this, capital expenditure would
account for Rs 60,000 crore.
• Rs 1,73,552 crore provided for infrastructure.
• Rs 500 crore allocated for solar and hydro projects for Ladakh region.
• One-time grant of Rs 200 crore provided to Tirupur textile cluster in Tamil
Nadu
• Allocation for National Ganga River Basin Authority doubled to Rs 500 crore.
• Mega power plant policy modified to lower cost of generation; allocation to
power sector more than doubled to Rs 5,130 crore in 2010-11.
• Government to contribute Rs 1,000 per year to each account holder
• Government to provide Rs 300 crore to organize 60,000 pulse and oilseed
villages and provide integrated intervention of watershed and related
programme.
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Allocation of funds for major development programmes.

• Rs 200 crore provided for climate resilient agriculture initiative.

• Government to provide Rs 16,500 crore to public sector banks to maintain
tier-I capital.
• Allocation for women and child development hiked by 28 per cent.
• Government decides to set up National Social Security
• Fund with initial allocation of Rs 1000 crore to provide social security to
workers in unorganized sector.
• Rs 1,270 crore provided for slum development programme, marking an
increase of 700 per cent.
• Allocation for development of micro and small scale sector raised from Rs
1,794 crore to Rs 2,400 crore.
• Plan outlay for Ministry of Social Justice raised by 80 per cent to Rs 4,500
crore.
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Allocation of funds for major development

programmes.
• Road transport allocation raised by 13 per cent to Rs 19,894 crore, says FM.
• Allocation for urban development increased by 75 per cent to Rs 5,400
crore in 2010-11.
• Indira Awas Yojana scheme's unit cost raised to Rs 45,000 in plain area and
Rs 48,500 in hilly areas.
• Allocation for NREGA stepped up to Rs 40,100 crore in 2010-11.
• For rural development, Rs 66,100 crore have been allocated.
• Plan allocation for health and family welfare increased to Rs 22,300 crore
from Rs 19,534 crore.
• Plan allocation for school education raised from Rs 26,800 crore to Rs
31,036 crore in 2010-11.
• Plan allocation for Ministry of Minority Affairs raised from Rs 1,740 crore to
Rs 2,600 crore.
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MAJOR CHANGES AROUND YOU SOON

• A unique identity symbol would be provided to the
Indian Rupee in line with US Dollar, British Pound
Sterling, Euro and Japanese Yen.

• Income Tax department ready with two-page Saral-2

return forms for individual salaried assesses.

• GST and DTC can be introduced in April 2011.

• Focus shifts to non-governmental actors.

• Are you manufacturer, pay only GST. All the excise duties,
CENVAT, VAT, OCTROI, etc will be abolished.
 24

Seriousness Targets and its implications by FM

• Reduce the national debt worth Rs.34, 95, 152

crores rupees, which is 80% of the GDP
(includes state and nation), will be reduced to
68% of GDP till 2015.

• Cashing the disinvestment this FY11 worth Rs

40000 crores and use for development.

• 3G spectrum bidding and earn target amount

of Rs 35000 crores this year.
 CURRENT SCENARIO(PRE-STIMULUS) GST @ 12%

Factory cost Factory cost

3,00.000 3,00,000

●
Excise duty (14.42%): 43,260
●
Central GST (5%): 15,000
●
Misc. mfg cascading taxes (2%): 6,000
●
State GST (7%): 21,000

Value at factory of the Value at factory of

manufacturer manufacture 3,36,000
3,49,260

●
CST (2%): 6,985

Distributor cost
Distributor Cost 3,00,000
3,56,245
●
Distributor value addition (10%):
30,000
●
 CURRENT SCENARIO(PRE-STIMULUS GST @ 12%

Customer price excluding

Customer price excluding tax
tax 3,86,845
3,30,000

●
VAT (12.5%): 48,356 ●
CGST (5%): 16,500
●
SGST (7%): 23,100

FINAL PRICE TO CUSTOMER

INCLUSIVE TAXES 4,35,201 FINAL PRICE TO CUSTOMER
INCLUSIVE TAXES 3,69,600

TOTAL TAX 1,05,201

(CENTER + STATE) TOTAL TAX 39,600
(CENTER + STATE)
 27

Bibliography and contributors

• The Economic times (edition of 27th February
2010)
• Business Today (march 21, 2010)
• Business World ( march 8, 2010)
• Thanks to Bill Gates' innovation of MICROSOFT
PPT. (Almost 6 day left for trial version).
• HUGE CONTRIBUTION BY DELL PROJECTER.
• HUGE CONTRIBUTION BY ACER 4736 AND
COMPAQ 510.
 28
THANK YOU BY
ALL 1250
MILLIONS
INDIANS TO
RESPECTED FM.

Presented by:
VISHAL
ABHINEET PANJWANI