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Monday, February 28, 2011

India’s Union Budget 2011 Highlights



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 living below 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.

People’s ownership of PSUs

    * Overwhelming response to public issues of Central Public Sector Undertakings during current year.
    * Higher than anticipated non-tax revenue has led to reschedulement of some disinvestment issues planned for current year.
    * Rs. 40,000 crore to be raised through disinvestment in 2011-12.
    * Government committed to retain at least 51 per cent ownership and management control of the Central Public Sector Undertakings.

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