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June 2012
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Key Features of Budget 2011-2012

Key Features of Budget 2011-2012
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 programmes 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, Constitution 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 livingbelow 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.

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 licenses 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.

Recapitalization of Regional Rural Banks

500 crore to be provided to enable Regional Rural Banks to maintain a CRARof at least 9 per cent as on March 31, 2012.


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