Highlights: Union Budget 2012-13

Mr Pranab Mukherjee has presented the budget keeping in mind the five focus area:

• Revival of domestic consumption

• Achieve an enabling environment for revival of high growth

• Remove supply bottlenecks

• Intervene decisively to address malnutrition

• Expedite improvement in delivery systems and address black money

As per the Union Budget 2012-13, the growth in FY 2011-12 has slowed due to the global crisis with the Indian economy expected to grow at 6.9% with agricultural sector growing at 5.4% and services sector growing at 9.6% in financial year 2011-12 and the GDP growth expected during FY 2012-13 at 7.85%. The fiscal deficit is 5.1% of the GDP for the fiscal year 2013.

We have summarized below the key highlights of the Union Budget 2012-13 as tabled in the Lok Sabha earlier today:

1. Number of measures proposed to deter generation and use of unaccounted money

2. Dedicated information cells to track black money with an introduction of white paper on black money

3. National population registry project to be completed in the next two years

4. Additional interest subvention 3% on loans upto Rs. 3 lakhs to women self help groups

5. National Rural Livelihood Mission to provide self employment

6. External Commercial Borrowings (ECB) allowed to part finance rupee debt of power projects

7. ECB for working capital requirement of aviation industry for a period of 1 year with an upper cap of USD 1 billion

8. FDI in aviation sector is under consideration

9. India opportunity venture fund to be launched

10. Tax free infra bonds to be raised to Rs. 60,000 crore

11. Telecom towers eligible for viability gap funding

12. QFIs would be allowed to access corporate bonds

13. Plan to incorporate financial holding company for bank capitalization

14. Plan to bring subsidy to 1.7% in 3 years

15. Goods and Service Tax Bill (GST Bill) proposed to be operational by August 2012

16. Service tax rates proposed to be hiked from 10 percent to 12 percent

17. Excise duty proposed to be hiked to 12 percent

18. Negative list introduced for Service tax exempting 17 specified services which includes school education

19. Efforts on for consensus with states on FDI in multi-brand retail

20. Infrastructure investment in 12th Plan to go up to Rs. 50 lakh crore; half of it to come from private sector

21. Corporate market reforms to be initiated

22. Bills on micro-finance institutions, national land bank and public debt management among those to be introduced in 2012-13

23. New equity savings scheme to provide for income tax deduction of 50% for those who invest Rs.50,000 in equity and whose annual income is less than Rs. 10 lakhs

The FM in his efforts to align the Income-tax Act, 1961 to the Direct Taxes Code has proposed the following amendments in the Budget:

1. Basic exemption limit for general tax payers has been raised from Rs. 180,000 to Rs. 200,000.

2. Individual will have to pay 10 per cent tax on income between Rs. 2 lakh and Rs. 5 lakh; 20 per cent between Rs. 5 lakh and Rs. 10 lakh; and 30 per cent for above Rs. 10 lakh.

3. Interest on savings account exempt upto Rs. 10,000

4. Reduction in STT rate by 20% from 0.125% to 0.1%

5. Turnover limit for compulsory tax audit for SMEs raised from Rs. 60 lakh to Rs. 1 crore

6. Withholding tax of 5% would apply for interest on overseas borrowings

7. To encourage forex inflow, the rate of taxation for foreign dividend has been maintained at 15% for Indian companies

8. General Anti Avoidance Rule being introduced to counter aggressive tax avoidance

9. New revised income tax return form ‘Sugam’ to be introduced for small tax payers

10. Minimum alternate tax raised from 18% to 18.5% of book profits

11. Introduction of Advance pricing arrangement

12. Removal of specified sectors for investment by domestic venture capital fund

13. Time limit for reopening of assessment raised to 16 years

RBI Cuts CRR More Than Expactation

RBI cuts CRR before monetary policy which comes on 15th march but here all expectation is 50 bps but RBI cut it 75 bps to 4.75% and surprised to all. By this action industry get at least 48K crore in system. I think this is the right time to cut CRR because most of financial sector suffer to pay advance tax because of liquidity and they borrow money at higher rate. They all are relax by CRR cut.

Market expert welcome RBI decision it also help to market boost a new level i hope market touch at least 18800 level very fast by CRR cut because it is more than expectation.

Banking Sector Looks Outperform

 It seems that risk-returns are more favorable in select private banks (Axis, ICICI and Yes Bank) over PSU banks.
 Asset quality and NIM (net interest margin) are expected to be under pressure for PSU banks as the macro environment is challenging.
 In these areas, private banks are expected to perform better due to their better ability in managing these issues.
 PSU banks NIM is expected to be weak due to tight liquidity and lack of loan demand inducing lending rate cut while deposit costs remain stickier. In this situation, PSU banks NIM is expected to drop by 40-45bps in FY13 while private banks are expected to manage margin drop in the range of 15-20 bps.
 Largest drop in margins of PSU banks are expected in 1HFY13 whereas the average yoy drop may be lower.
 Going forward, critical variables affecting banking sector are government’s efforts in kickstarting infrastructure investment, RBI’s credit policy and the budget and fiscal assumptions therein, which would give a sense of the extent of fiscal consolidation that the government wants to achieve.
 It is expected that RBI would cut CRR by 50 bps on March 15 for easing liquidity conditions and also to prepare the ground for banks to start reducing lending rates.
 After the recent rally in stock prices, it appears that valuations of PSU banks are fair on FY13 basis.
 Considering pressures on margins, asset quality and restructuring pressures of PSU banks, private banks with higher capital base and improving RoE are preferred from the investment angle.

World Market worried about Greece

U.S market down very sharply first time in 2012 and shut at lover level after touch a higher level because of Greece worried.

Industrial Average slipped 1.57% or Dow Jones203.66 points at 12759.15. Nasdaq Composite was down 1.36% or 40.16 points at 2910.32. Standard & Poor's 500 shed 1.54% or 20.97 points at 1343.36.

Now today Indian market suffer very bad because in U.P government change because of that recent UPA government don't take free decision on their pending programme than market react very negative and go down very sharply. Technically 20% correction made from top so market support at 15680.

Tax structure on Budget

I hope finance minister retain tax structure or increase tax benefit under 80c for high growth because all world facing financial crises if money comes in market some problem solve automatically.

India have good growth story if tax structure retain and some extra benefit gives in this budget foreign investor comes in india just because of that india become super power i think this is best chance to take command of all world.