When Mr. Pranab Mukherjee quoted from Shakespeare’s ‘Hamlet’ to joke about the tough job FM has towards ensuring the interest of a range of stakeholders – one couldn’t help but think of the “har friend zaroori hai, yaar” reference and empathize with the challenge involved in leading this mammoth task. Given slowing growth of the economy and rising inflation, the Finance Minister has had a difficult job of devising the country’s economic plans for FY2012-13. Despite challenges, the Government has been able to deliver a practical and inclusive budget for the next fiscal – one that reinforces the treatment of the Union Budget as a process and not an event.
The FM’s strategy towards fiscal consolidation will play an eminent role in containing challenges faced by the economy and contribute towards 7.6% GDP growth projection for 2012-13. With ongoing long term focus on planned fiscal deficit reduction, the budget proposes noteworthy reforms across manufacturing and infrastructure which should boost employment. Reforms announced are expected to add thrust to agriculture and power sector growth and should contribute towards revival of the aviation industry. Enhanced focus on Governance as evident in measures like UID funding will surely enhance the disposable income in the rural areas and prevent leakages within the system. Reduction in subsidy is a welcome move, but the process of implementation needs to be detailed out further. Other laudable effort lies in definite move towards, Direct Tax Code, GST regime, FDI in multi-brand retail – but it will be meaningful to set a deadline for the same.
The telecom sector is already burdened with multiple and high tax levies which account for 30% of the telecom services revenue. The rise in Service Tax from 10% to 12% will increase cost of services to customers and impact the P&L of telecom companies. As a highly taxed industry, this will certainly have a further impact on the consumer. We see proposals on mobile based fertilizer subsidy tracking and heightened IT enablement as factors that will as opportunities to drive the growth of ICT. Additionally, FM’s recommendation for gap funding of telecom towers, cables and optic fibres should lead to reduction in cost of capital for telecom infrastructure. Reduction on duties on mobile parts should enhance affordability and stimulate demand for mobile services across the country.”
However we must keep in mind that the life of the telecom sector does not wholly depend on the budget pronouncement only the sentiment needs to be positive. We hope this budget will be a harbinger of a healthy telecom policy, which would be inclusive and enable viability of the industry at large.
Below you can Read Finance Minister Pranab Mukherjee’s full speech regarding Union Budget 2012:
Budget 2012 Pranab Mukherjee Speech
Highlights of the Union Budget 2012-13 :
- Up-to Rs.2 Lakh: No Tax (Income tax exemption limit raised from Rs 1,80,000 to Rs 2,00,000)
- Rs.2 Lakh to Rs.5 Lakh: 10% Tax
- Rs.5 Lakh to Rs.10 Lakh: 20% Tax
- Above Rs.10 Lakh: 30% Tax
- Savings bank account interest up to Rs 10,000 exempted from tax.
- No change in corporate tax rate
- Service tax rate raised from 10 per cent to 12 percent
- Large cars, imported bicycles, cigarettes, bidis and some imported jewellery to cost more
- Branded silver jewellery may get cheaper.
- Securities Transaction Tax on cash delivery reduced by 25 per cent to 0.1 percent
- A new Rajiv Gandhi Equity Saving Scheme to allow income tax deduction to retail investors in stocks.
- Import duty on equipment for iron ore mining reduced from 7.5 to 2.5 per cent.
- Allocation of Rs.200 crore for research on climate change.
- Irrigation and water resource company to be operationalised.
- National mission on food processing to be started in cooperation with state governments.
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- Integrated Child Development Scheme to be strengthened and restructured with allocation of Rs.15,850 crore.
- Allocation of Rs.14,000 crore for rural water supply and sanitation.
- Infusion of Rs.15,888 crore in public sector banks, regional rural banks and NABARD in 2012-13.
- Infrastructure will require Rs.50 lakh crore in 12th Plan, half of this from the private sector.
- Completion of highway projects 44 per cent higher than in previous fiscal.
- External commercial borrowing of up to $1 billion permitted for airline sector.
- External commercial borrowings permitted to low-cost housing sector.
- From 2012-13, full subsidies for providing food security; in other sectors to the extent the economy can bear this.
- Hope to raise Rs.30,000 crore from disinvestments.
- New equity savings scheme to provide for income tax deduction of 50 per cent for those who invest Rs.50,000 in equity and whose annual income is less than Rs.10 lakh.
- Corporate market reforms to be initiated.
- Bills on micro-finance institutions, national land bank and public debt management among those to be introduced in 2012-13.
- Addressing malnutrition, black money and corruption in public life among five priorities in year ahead.
- India’s inflation structural, driven largely by agricultural constraints.
- Current account deficit 3.6 per cent in 2011-12; this put pressure on exchange rate.
- Growth in 2012-13 estimated at 7.6 per cent; expect inflation to be lower.
- Better monitoring of expenditure on government schemes.
- Fiscal 2011-12 year of recovery interrupted; reality turned out to be different.
- GDP growth in 2011-12 estimated at 6.9 per cent; had to battle double digit inflation for two years.
- Good news: agriculture and services continued to perform well; economy is now turning around; recovery in core sectors.
- Now at juncture where it is necessary to take hard decisions; have to accelerate pace of reforms