Union Budget 2011 was presented by the Finance minister Pranab Mukherjee on 28th February 2011 in Parliament. Budget calculates an increase of approximately 24 per cent, Rs 9,32,440 crore for 2011-12 projects. An increase of 13.4%, Rs 12,57,729 crore, is estimated for expenditure in 2011-12. Revenue deficit is fixed at 1.8% in 2011-12 and 2.3% in revised estimates of 2010-11. With reference to inflation, the finance minister started his speech, saying that food inflation has been decreased to half over the last one year, from 20.2% last year to 9.3% in January 2011 but the figure is still one of the matters of worry.
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An apparent roadmap for the sustainable growth of the financial system is provided by annual budget 2011. The challenge in front of the leaders is to reconcile ecological anxieties with development ambitions; to accept and provision for the worldwide developments, simultaneously building future resilience by extenuating outside risks; and also to hit equilibrium between the hopes of the common man and the booming entrepreneurs.
A business plan had been set for the growth of rural infrastructure under Bharat Nirman by the government. One of the main intentions is to make sure broadband coverage to all 2.5 lakh panchayats pan India, and to attain rural teledensity of 40% by 2014. Both “physical” and “virtual” communications require to be grown hand in hand, if this is to be achieved. A distinct focus on the development of virtual infrastructure is provided by the Budget 2011.
The major momentum of the Budget is to get better the growth rate to 9 percent in the near term and to a double digit rate in the medium to longer term. Infrastructure expansion, especially in rural India, and humanizing governance by shoring up systems and carrying stricter control on institutes are the other two areas of focus.
Renowned economist Jayati Ghosh said in her review of the budget, “The theatrical increase in all the stock markets indices, once investors had absorbed the implications of the Budget announcements, already says it all. This is a Budget with very strong income distribution implications: very clearly favoring the upper income categories of the population, and likely to reduce the real incomes of wage earners and self-employed”.
More modernized taxation system is being debated. Small tax payers can file their returns easily by a new form called 'SUGAM'. For tax payers, a miniscule hike of Rs 20,000 in the exemption limit has been introduced. FM Pranab Mukherjee has not proposed any change in tax slabs. For general category, the tax exemption limit has been elevated from Rs. 1,60,000 to Rs. 1,80,000. For women tax exemption limit has not been changed. For infrastructure bonds, deduction of Rs 20,000 has been retained.
The finance minister has reduced the income tax "senior citizen" definition from age 65 to age 60 therefore the older citizens, who are born between 1946 and 1951, can feel happy by getting a big benefit. The tax exemption limit for older citizens will be Rs 2,50,000. A higher limit will be given to those who survive all the hardships of life and live to be over 80. The tax exemption limit for people, whose age is over 80, will be Rs 5,00,000.
For the agriculture sector, the allotment under Rashtriya Krishi Vikas Yojana will be elevated from Rs 6755 crore in the current year to Rs 7860 crore. Agriculture credit that flows to farmers will be raised from Rs 3.75 lakh crore to Rs 4.75 lakh crores. For Vegetable initiative, special focus on vegetables is in the form of Rs 300 crore. To promote pulses cultivation in rain-fed areas, Rs 300 crore will be provided and to promote farm product cultivation, another Rs 300 crore will be provided.
Anganwadi workers can enjoy due to their payment is elevated from Rs. 1500 to Rs. 3,000 per month. Also, anganwadi helpers will get increased income Rs 1,500 from Rs 750. Old age pension to persons over the age of 80 will be elevated from Rs 200 to Rs 500.
The finance minister has suggested to focus on reducing production and distribution bottlenecks since ineffective allocation has been found to be the offender for the sky rocketing of food prices. Total food inflation is down from 22.2% to 9.3 %. Vegetables, food, meat, etc. will show an easing of prices in the medium term future. High food prices are the subject of concern, food prices were high for cereals, and there was a spurt in prices of onions and milk.
For the education sector, a higher allocation of funds in the form of more than 24% hike as compared to last year. Rs. 50 crore allowances are being assigned to Aligarh Muslim University centers in Murshidabad in West Bengal and Malappuram in Kerala. The government has decided to assign Rs. 200 crore to IIT Kharagpur. The allocations of human resource development (HRD) ministry have been increased to Rs 52,057 crore from last year's Rs 43,836 crore.
Allocations that have been aligned with the Sarva Shiksha Abhiyan were hiked from Rs 15,000 crore to Rs. 21,000 crore to get the objects of the Right to Education (RTE). This is intentioned at strengthening elementary education. At present, "vocationalisation" of secondary education is the key point of the Center; by this, students will be enabled to pursue job-oriented courses at the plus two levels.
20 percent hike in health budget for 2011-2012 has been announced by Finance minister. Treatment in air-conditioned private hospitals, air travel and lawyer fees will be charged more from now with the proposed changes in the service tax band. For treatment in private hospitals that have the capacity of more than 25 beds and air conditioning facility, individuals, insurance firms and business houses will have to pay an effective tax of the 5% under the service tax. Service tax on health check-ups will be increased. Vaccines those are not included in National Immunization Program will also register a rise as a concessional duty of one per cent without CENVAT credit facility will be attracted by them.
For defense, Rs. 1.64 lakh crore has been allocated by the finance minister, defense allocation is increased 11%. For defence personnel and central paramilitary forces for permanent disability and on being discharged from service, disability compensation is Rs. 9 lakh. Service tax is increased on air travel, for domestic travel, it is increased Rs 50 and for international travel in economy class, it is increased Rs. 250. It will be 10% flat on higher classes.
Service tax is increased Rs 1,000 per day on hotel accommodation, A/C restaurants serving liquor, some category of hospitals, diagnostic tests. The average rate of central exercise duty will be maintained at 10%. Basic food, fuel, precious stones, gold, and silver jewellery will be exempted with no change in CENVAT rates. On 130 items that are entering the tax net, central excise duty is 1%.
For infrastructure development tax-free bonds of Rs. 30,000 crore will be issued to cover Warehousing Corporation, NHAI, IRFC and HUDCO. Pranab has predicted growth patterns over the next fiscal and said, “The overall economic growth in the current fiscal was expected at 8.6 %, agriculture growth at 5.4 %, industry at 8.1 % and services 9.3 %. In the next fiscal, economic growth was likely to be 9%.” He added, “India raised foreign institutional investor limit in 5-year corporate bonds for investment in infrastructure by $20 billion.”
In 2011-12, Rs 201.5 billion capital infusion will be provided in state-run banks and Rs 3 billion for 60,000 hectares under palm oil plantation. A Women Self Help Group development fund is planned to be created with a corpus of Rs 500 crore by the government. Direct transfer of subsidies in kerosene and LPG is allowed for such individuals, who are below Poverty Line. There is also a scheme to raise rural housing fund to Rs 3,000 crore.
Pranab also said that country's development is continuously interrupted by corruption that has to be battled widely. Rs 10,000 crore will be provided to NABARD capital as short term credit fund to strengthen it. The formation of Indian micro finance equity has been announced with SIDBI at Rs. 100 crore. To maintain capital-to-risk assets ratio norms, public sector banks will get Rs. 6,000 crore. Taskforce identified implementation of projects for which, a budget allotment of Rs. 100 crore has been made for Ladakh and Rs. 150 crore for Jammu.
Full tax rebate on developing such projects under a notified scheme is proposed by the government. The ceiling of one per cent interest subsidy on home loans is increased upto Rs. 15 lakh from the current Rs 10 lakh. 100% tax deductions on capital expenditure are proposed to develop affordable houses under government scheme by finance minister Pranab Mukherjee in the Budget for 2011-12. Therefore promoting builders are focusing more on such homes.
Finance minister Pranab Mukherjee said, "Considering the importance of housing, I propose investment linked deduction to businesses, which develop affordable housing under a notified scheme". A housing project for slum re-development and rehabilitation is incentivised with 100% tax exemption under the section 35AD of the Income Tax Act.
Video of Union Budget 2011: FM on inputs and input services from youtube:
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