http://budget-opinion.blogspot.com/2011/02/rkannan.html
Tuesday, February 22, 2011R.Kannan
India is in a best position to do very well in the world economy today. The growth momentum in the last two years need to be continued. This is the time Indian Industries and Services require the continued boost for development. There is a need to continue the stimulus in the budget this year and increase the planned and non planned expenditure by at least 15% this year. The schemes relating to Rural and Urban poor should be continued . A minimum GDP growth of 9% could be set as the minimum target for growth. To meet the increased expenditure, there will be a need to mobilize more resources. The borrowing by government could be kept at last years’ level and interest rate expectations on the borrowing should be kept at the present levels which would help to moderate the inflationary expectations. To bridge the funding gap, innovative methods for mobilizing funds from non conventional sources including Capitalisation of land bank ( which US government has identified as one of the sources of funding in this budget ), additional collection from Telecom operators and mining licenses. Sectors like Agriculture including milk production have become profitable now and there is a need to review the subsidy to this sector and target the subsidies. A specific fund could be created for removing the bottlenecks in Infrastructure sector to use the available capacities in a optimal manner. A specific fund could be created for developing an organisation, systems and procedures to remove the mismatch in Demand and Supply of Agricultural commodities. Commercial Banks could be allowed to raise Infrastructure bonds and interest from these bonds could be exempt from tax.
Monday, March 7, 2011
Tuesday, March 1, 2011
Union Budget – F 12
Union Budget – F 12
The budget was much better than the expectations of various stake holders in the Economy. There was a concern that the Stimulus given would be withdrawn by the government.
Government had seen the benefits of reducing the excise duty which has resulted in above average growth in the industries where the stimulus was very effective. The stimulus has been continued which should help to maintain the industry growth at high levels. The higher growth rates in the industry would compensate the lower excise duty.
In terms of revenue, the collection on account of taxes is likely to go up by Rs.1 trillion and the same level of reduction has been assumed in non tax revenues. Higher taxes would come from higher level of industrial , services growth, higher average crude price during the fiscal 2012 compared to fiscal 2011 and additional duties on mining. It is quite possible, the government would be able to raise additional Rs.50000 cr to Rs.75000 cr on account of non tax revenues which is possible through various sources.
The government has kept the overall expenditure growth rate target at 3.4%. This would be possible since there is no effect of sixth pay commission and there is an apparent strategy to control costs including the subsidy through better targeting of beneficiaries, the government should be able to control costs. The oil prices could play spoilsport in achieving the targets. The oil price is not likely to go below $ 70 this year and in the short term it might reach the historical peaks and will subside to reasonable levels during F 12.
Increasing the limits for investments from abroad in Corproate bonds , Infrastructure bonds and Mutual funds is likely to attract more investments from abroad and give a good impetus for Industrial and Infrastructure growth and there will be a multiplier effect on the Economy as well as the stock markets. Higher capitalization of Public Sector Banks would increase the lending capacity of these institutions. Inflow of funds into India will also help to mobilize the large untapped domestic savings for Infrastructure and Capex of corporate.
Government borrowing has been kept at the low levels which has removed the fears of crowding of government papers in the market and the inflationary expectations are lessened on account of this budgeted target.
Agriculture has been given a good boost. The credit target for agriculture has been enhanced. Several schemes were announced which would help to optimally utilize the agricultural inputs and resources. This should also help to reduce the bottlenecks in the supply chain of Agri products and should result in reasonable prices of agri commodities. With a good management, it should be possible to achieve a growth of more than 6% agriculture since our productivity levels of crops are still much below the best yields in the world.
Strategy documents have been prepared for various ministries and systematic approach to managing the economy has been put in place. This will result in improvement of systems and procedures adopted by various ministries and help to achieve the desired expense targets.
The outlay for Rural development has been kept at the same level and 22 lakh Anganwadi workers has been given a good increase in wages. Coupled with the stimulus for agriculture this should help to increase the growth of the rural economy.
There is an increased allotment for Urban development and JNNURM which should help to accelerate the growth in the urban areas.
Apart from the specific measures in the budget, there was a mention about the various bills to be passed in parliament. By taking into confidence the opposition parties, the government would be in a position to pass these bills which will provide further opportunities for increasing the economic growth rate and revenue streams for the government.
Overall, considering the present global economic scenario this is an attractive budget which should interest the investors from India, NRI’s and MNC’s from abroad.
The budget was much better than the expectations of various stake holders in the Economy. There was a concern that the Stimulus given would be withdrawn by the government.
Government had seen the benefits of reducing the excise duty which has resulted in above average growth in the industries where the stimulus was very effective. The stimulus has been continued which should help to maintain the industry growth at high levels. The higher growth rates in the industry would compensate the lower excise duty.
In terms of revenue, the collection on account of taxes is likely to go up by Rs.1 trillion and the same level of reduction has been assumed in non tax revenues. Higher taxes would come from higher level of industrial , services growth, higher average crude price during the fiscal 2012 compared to fiscal 2011 and additional duties on mining. It is quite possible, the government would be able to raise additional Rs.50000 cr to Rs.75000 cr on account of non tax revenues which is possible through various sources.
The government has kept the overall expenditure growth rate target at 3.4%. This would be possible since there is no effect of sixth pay commission and there is an apparent strategy to control costs including the subsidy through better targeting of beneficiaries, the government should be able to control costs. The oil prices could play spoilsport in achieving the targets. The oil price is not likely to go below $ 70 this year and in the short term it might reach the historical peaks and will subside to reasonable levels during F 12.
Increasing the limits for investments from abroad in Corproate bonds , Infrastructure bonds and Mutual funds is likely to attract more investments from abroad and give a good impetus for Industrial and Infrastructure growth and there will be a multiplier effect on the Economy as well as the stock markets. Higher capitalization of Public Sector Banks would increase the lending capacity of these institutions. Inflow of funds into India will also help to mobilize the large untapped domestic savings for Infrastructure and Capex of corporate.
Government borrowing has been kept at the low levels which has removed the fears of crowding of government papers in the market and the inflationary expectations are lessened on account of this budgeted target.
Agriculture has been given a good boost. The credit target for agriculture has been enhanced. Several schemes were announced which would help to optimally utilize the agricultural inputs and resources. This should also help to reduce the bottlenecks in the supply chain of Agri products and should result in reasonable prices of agri commodities. With a good management, it should be possible to achieve a growth of more than 6% agriculture since our productivity levels of crops are still much below the best yields in the world.
Strategy documents have been prepared for various ministries and systematic approach to managing the economy has been put in place. This will result in improvement of systems and procedures adopted by various ministries and help to achieve the desired expense targets.
The outlay for Rural development has been kept at the same level and 22 lakh Anganwadi workers has been given a good increase in wages. Coupled with the stimulus for agriculture this should help to increase the growth of the rural economy.
There is an increased allotment for Urban development and JNNURM which should help to accelerate the growth in the urban areas.
Apart from the specific measures in the budget, there was a mention about the various bills to be passed in parliament. By taking into confidence the opposition parties, the government would be in a position to pass these bills which will provide further opportunities for increasing the economic growth rate and revenue streams for the government.
Overall, considering the present global economic scenario this is an attractive budget which should interest the investors from India, NRI’s and MNC’s from abroad.
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