BUDGET SPECIAL ISSUE 24th MARCH [SATURDAY]

EDITOR’S DESK - POOJA DALAL

EDITOR 1 OPINION 5 FOCUS 8

COVER 2 BRAND 6 MARKET 9

FAST-TRACK 3 QUICK BITES 7

COVER STORY– UNION BUDGET - KAPIL OTWSAL & KRITIKA SETHI The Union Budget 2012- 13 was presented by the Finance Minister Mr. Pranab Mukherjee- Mr.

Workaholic. In his speech he said “The life of a Finance Minister is not easy” and I totally agree

with him. I can say this because when I started writing this article, I was so confused about what

all should I include and what not. The challenge lies in bringing the various stakeholders of the

economy such as corporate, policy makers, government and public to a common ground and still

pursuing the structural changes required in the system. Through this article I try to analyze the

union budget 2012-13 with my all empathies towards Mr. Mukherjee on this exhaustive job. In

the wake of a challenging business environment and weak global economic conditions Mr.

Pranab Mukherjee presented the Union Budget 2012-13 on the 16 march 2012. Main challenges

faced by Indian economy in year 2011-12 were continued slowdown in Indian GDP growth,

high inflation rate, high deficits and low investor confidence. Still India managed to achieve

6.9% of GDP growth rate.

The focus of this year‟s budget is on addressing the issue of decreasing foreign investments, sup-

ply chain management of agriculture produce, stagnating manufacturing sector and problems of

malnutrition, black money and corruption. In previous years the increase in the central subsidy

burden has been major reason for the fiscal deficit, for year 2012-13, finance minister has made

attempt to restrict the central subsidies to less than 2% of the GDP which will bring down the

fiscal deficit to 5.1% from 5.9% last year. Although time will tell whether this target is

achieved, part of fiscal imbalance is proposed to be filled through the INR 30,000 crore of disin-

vestment in public sector enterprises. Net market borrowing requirement of INR 4.79 lakh crore

is still a cause of worry.

In this budget there is no notable announcement on allowing FDI in multi-brand retail up to 51%

though the Finance minister has recognized the need for boasting the investor confidence.

Government continues to focus on the infrastructure development. For this Finance minister has

doubled the limit for the Tax free infrastructure bond from INR 30,000 to 60,000 per person.

Additional investment of 50 Lakh crore in infrastructure sector is proposed by the government.

Before turning to the tax proposals in his speech Finance minister said “I must be cruel only to

be kind” which I think is very apt in today‟s scenario.

In his direct tax proposals corporate tax rates remains unchanged at 30% for domestic companies

and 40% for the foreign companies. Rate of Minimum Alternate Tax (MAT) and ATM also re-

mains unchanged. Marginal increase in income tax slabs for Individuals is proposed which is as

following:

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The challenge lies in bring-

ing the various stakeholders

of the economy such as cor-

porate, policy makers, gov-

ernment and public to a

common ground and still

pursuing the structural

changes required in the sys-

tem.

Before turning to the tax

proposals in his speech Fi-

nance minister said “I must

be cruel only to be kind”

which I think is very apt in

today‟s scenario.

Income Slab (INR) Tax Rate

0 – 2,00,000 Nil

2,00,001-5,00,000 10%

5,00,001-10,00,000 20%

Above 10,00,000 30%

COVER STORY– UNION BUDGET (CONT..) Direct Tax Code (DTC) has not been introduced this year but Finance minister reaffirmed that

the government intends to legislate it shortly after the careful examination of the report of the

parliamentary Standing committee.

On in direct taxes, Finance minister did not give any fix dates for the GST legislation but indi-

cated that it is being drafted in concert with states. Peak rate of excise duty and service tax has

been increased from 10% to 12% while the scope of service tax has been widened by introduc-

tion of a negative list. CST rate has been reduced from 4 % to 2% providing stimulus to supply

chain restructurings.

Looking at the political scenario it is the best what Mr. Pranab Mukherjee can present to India.

But in my opinion for reforms we need to take tough decisions which was lacking in the budget.

On the whole it is a directionary budget not a reformist budget. In this budget Finance Minister

clearly conveyed the message that we intend to bring reforms but right now we can‟t due to po-

litical pressures.

Budget Financials

(figs. In Crore)

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On in direct taxes, Finance

minister did not give any fix

dates for the GST legisla-

tion but indicated that it is

being drafted in concert with

states.

But in my opinion for re-

forms we need to take tough

decisions which was lacking

in the budget. On the whole

it is a directionary budget

not a reformist budget.

FY 2010-11 FY 2011-12 FY 2011-12 FY 2012-13

Particulars Actual

Budget

Estimates Revised

Estimates

Budget Es-

timates

1 Revenue Receipts 788,471 789,892 766,989 935,685

2 Capital Receipts 402,428 467,837 576,395 555,240

3 Total Receipts (1 + 2) 1,190,899 1,257,729 1,343,384 1,490,925

4 Non Plan Expenditure 818,299 816,182 892,116 969,900

5 Plan Expenditure 379,029 441,547 426,604 521,025

6 Total Expenditure (4 + 5) 1,197,328 1,257,729 1,318,720 1,490,925

7 Revenue Expenditure 1,040,723 1,097,162 1,161,940 1,286,109

8 Capital Expenditure 156,605 160,567 156,780 204,816

9 Revenue Deficit (7 - 1) 252,252 307,270 394,951 350,424

10 Fiscal Deficit [6 - (1 + Re-

coveries of Loans +

Other Receipts)

373,592 412,817 521,980 513,590

11 Primary Deficit (10 - In-

terest Payments)

139,569 144,831 246,362 193,831

COVER STORY– RAILWAY BUDGET The issue which has created buzz everywhere and has become cause of concern is rail budget.

Union Railway Minister Dinesh Trivedi presented the Railway Budget in Parliament on

Wednesday. It sets ambitious targets for FY13 (revenue) and 4x increase in capital outlay 12th

five year plan to Rs7350bn. Aims to achieve sharp improvement in operating ratio

The highlights of Railway are:

Passenger fares increased marginally. The increase will be by 2 paise per km for suburban

and ordinary second class; 3 paise per km for mail/express second class; 5 paise per km for

sleeper class; 10 paise per km for AC Chair Car, AC 3 tier and First Class; 15 paise per km

for AC 2 tier and 30 paise per km for AC I.

Minimum fare and platform tickets to cost Rs 5.

50 per cent concession in fare in AC-2, AC-3, Chair Car and Sleeper classes to patients suf-

fering from 'Aplastic Anaemia' and 'Sickle Cell Anaemia'.

Extending the facility of travel by Rajdhani and Shatabdi trains to Arjuna Awardees.

Travel distance under 'Izzat Scheme' to increase from 100 kms to 150 kms.

SMS on passenger mobile phone in case of e-ticket to be accepted as proof of valid reserva-

tion.

Introduction of satellite based real time train information system (SIMRAN) to provide train

running information to passengers through SMS, internet, etc.

On board passenger displays indicating next halt station and expected arrival time to be in-

troduced.

Installation of 321 escalators at important stations of which 50 will be commissioned in 2012

-13.

Introduction of regional cuisine at affordable rates; launching of Book-a-meal scheme to pro-

vide multiple choice of meals through SMS or email.

Introduction of coin/currency operated ticket vending machines.

Upgradation of 929 stations as Adarsh Stations including 84 stations proposed in 2012-13;

490 stations have been completed so far.

Specially designed coaches for differently-abled persons to be provided in each Mail/Express

trains.

Introduction of Rail Bandhu on-board magazines on Rajdhanis, Shatabdis and Duronto

trains.

Setting up of AC Executive lounges at important stations

75 new Express trains to be introduced.

21 new passenger services, 9 DEMU services and 8 MEMU services to be introduced.

Run of 39 trains to be extended.

Frequency of 23 trains to be increased.

75 additional services to run in Mumbai suburban; 44 new suburban services to be intro-

duced in Kolkata area, 50 new services to be introduced in Kolkata Metro; 18 additional ser-

vices in Chennai area.

725 km new lines, 700 km doubling, 800 km gauge conversion and 1,100 km electrification

targeted in 2012-13.

Rs 6,872 cr provided for new lines, Rs 3,393 crore for doubling, Rs 1,950 cr for gauge con-

versation, Rs 828 cr for electrification

Highest ever plan outlay of Rs 60,100 crore

Rae Bareli coach factory manufactured 10 coaches in 2011-12; phase-II of the factory would

be commissioned in 2012-13.

A wagon factory to be set up at Sitapali (Ganjam District of Odisha)

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Passenger fares increased

marginally. The increase

will be by 2 paise per km

for suburban and ordinary

second class; 3 paise per

km for mail/express second

class; 5 paise per km for

sleeper class; 10 paise per

km for AC Chair Car, AC

3 tier and First Class; 15

paise per km for AC 2 tier

and 30 paise per km for

AC I.

75 additional services to run

in Mumbai suburban; 44

new suburban services to be

introduced in Kolkata area,

50 new services to be intro-

duced in Kolkata Metro; 18

additional services in Chen-

nai area.

COVER STORY– RAILWAY BUDGET (CONT..) A rail coach factory with the support of Government of Kerala to be set up at Palakkad; two

additional new manufacturing units for coaches to be established in the Kutch area in Gujarat

and at Kolar in Karnataka with active participation of the State Governments.

Setting up of a factory at Shyamnagar in West Bengal to manufacture next generation tech-

nology propulsion system for use in high power electric locomotives.

Creating Missions as recommended by Pitroda Committee to implement the modernization

programme.

Setting up of Railway Tariff Regulatory Authority to be considered.

New Board Members for Safety/Research and PPP/Marketing to be inducted.

Rail-Road Grade Separation Corporation to be set up to eliminate level crossings.

Indian Railway Station Development Corporation to be set up to redevelop stations through

PPP mode.

Logistics Corporation to be set up for development and management of existing railway

goods sheds and multi-modal logistics parks.

National High Speed Rail Authority to be set-up.

Pre-feasibility studies on six high speed corridors already completed; study on Delhi-Jaipur-

Ajmer-Jodhpur to be taken up in 2012-13.

Introduction of a „Green Train‟ to run through the pristine forests of North Bengal.

Setting up of 200 remote railway stations as „green energy stations‟ powered entirely by so-

lar energy.

Providing solar lighting system at 1,000 manned level crossing gates.

2,500 coaches to be equipped with bio toilets.

Setting up of 72 MW capacity windmill plants in Andhra Pradesh, Karnataka, Kerala, Tamil

Nadu and West Bengal.

Installation of Integrated Security System at all 202 identified stations to be completed in

2012-13.

Escorting of trains by RPF/GRP extended to 3,500 trains.

Integration of RPF helpline with the All India Passenger Helpline.

Setting up of a Railway Safety Authority as a statutory regulatory body as recommended by

Kakodkar Committee

Three 'Safety Villages' to be set up at Bengaluru, Kharagpur and Lucknow for skill develop-

ment for disaster management.

Over one lakh persons to be recruited in 2012-13" backlog of SC/ST/OBC and other catego-

ries to be wiped off.

Introduction of a wellness programme for railway staff at their work places.

Ensuring proper rest for skilled and technical staff including the running crew.

Institution of 'Rail Khel Ratna' Award for 10 rail sports-persons every year.

New coaching terminal at Naihati, the birth place of Rishi Bankim Chandra Chattopadhyay

commemorating him on 175th Birth Anniversary.

Project to connect Agartala with Akhaura in Bangladesh to be taken up in 2012-13.

Freight loading of 1,025 MT targeted; 55 MT more than 2011-12

Passenger growth targeted at 5.4 per cent.

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Setting up of a factory at

Shyamnagar in West Ben-

gal to manufacture next

generation technology pro-

pulsion system for use in

high power electric locomo-

tives.

Setting up of a Railway

Safety Authority as a

statutory regulatory body as

recommended by Kakodkar

Committee

Three 'Safety Villages' to

be set up at Bengaluru,

Kharagpur and Lucknow

for skill development for

disaster management.

COVER STORY– SECTORWISE ANALYSIS -SAMEER JHANJI

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SECTOR Budget proposal

(2012)

Impact Companies af-

fected

BANKING AND FINANCIAL SECTOR

Rajiv Gandhi equity saving

Scheme to allow for income

tax deduction of 50% to

new retail investors, who

invest upto Rs. 50000 di-

rectly in equities.

Rs. 15888 crores capital

support proposed to public

sector banks and financial

institutions.

Tax free bonds of Rs 60000

crores to be allowed for

financing infrastructure

sectors.

Investment in infrastructure

sector to go upto Rs 50

lakhs crores, half of which

is expected from private

sector.

Govt. owned financial institu-

tions will get capital infusion

of $ 3 billion which is largely

seen as insufficient to capital-

ize state run banks such as

state bank of India, Punjab

National Bank, Bank of India

and Bank of Baroda. Indian

banks will also be under pres-

sure to achieve the target of

5.75 trillion rupees for farm

credit, where bad loans are

relatively higher.

HSBC, SBI, BOI,

ICICI, HDFC, Bajaj

Capital, LIC (and

other banking insti-

tutions in the coun-

try).

CEMENT SECTOR

Allocation of Road Trans-

port and Highways Ministry

enhanced by 14% to Rs.

25360 crores.

Projects covering length of

8800 km to be awarded

under NHDP.

Rs.1185 crores to be allo-

cated for construction of

nearly 4000 residential

quarters for Central Armed

Police forces.

Rs. 3280 crores allocated

for construction of office

building of Central Armed

Police forces.

The impact on cement indus-

try is somewhat positive even

though excise duty has in-

creased from 10 to 12% but

the proposal to exempt the

non- coking coal from basic

custom duty will have a posi-

tive impact on operating prof-

its of the company. The ce-

ment industry is dependent on

this imported coal as it consti-

tutes one fourth of the total

requirement.

Ultratech, Ambuja,

ACC, JK Cement,

Jaypee Cement,

Century, Grasim

Birla

REAL ESTATE SECTOR

Decision on FDI‟s in multi

brand retail upto 51% still

pending.

Service tax increased from

10 to 12%.

1% tax rebate for home

loans upto Rs 15 lakhs on

homes costing upto Rs. 25

lakhs.

Exempting proceeds from

sale of a residential property

from capital gains tax if

they are invested in equity

or equipment of SME.

Allowing ECB for afford-

able housing.

The increase in service tax

will increase the cost of pro-

duction for developers when

input costs are already high,

thus the burden will be passed

to the end users.

Allowing ECB in the sector is

expected to increase the vol-

umes and make it more attrac-

tive to the investors. The dis-

appointment was the post-

ponement of FDI in multi

brand retail segment. So over-

all it was a mixed bag for the

real estate sector this time

around.

DLF, L&T, Ambuja

realty group, Sun

City projects, Merlin

Group

COVER STORY– SECTORWISE ANALYSIS -DEVANSHI PODDAR

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SECTOR Budget proposal (2012) Impact Companies

affected

POWER SECTOR Custom duty on imported fuel to

be removed.

External commercial borrowings

to part finance rupee debt of exist-

ing power projects.

Increase in quantum of tax-free

bonds limit from Rs. 5000 to Rs.

10000.

Cut in withholding tax on ECBs

from 20% to 5%.

Reinforcement of intentions to

introduce DTC and GST in the

near future.

Increase the import of fuel

and make sufficient fuel sup-

ply for the companies to in-

crease the production.

NTPC, Coal In-

dia, Powergrid

TELECOM SECTOR There is a 2% increase in the ser-

vice tax i.e from 10% to 12%

which will increase the bills of the

customers. Companies are waiting

for the NATIONAL TELECOM

POLICY (NTP) scheduled to be

announced in June.

Any correct prediction can

be made only after the an-

nouncement of NTP.

BSNL, Bharti

Airtel, Vodafone-

Essar, Uninor,

Reliance commu-

nications, TATA

IT SECTOR

The Minimum Alternative Tax

imposed on SEZ has not been

abolished.

Improving consumption through

the Rs. 14233 Crore UID projects

and its use in the Public Distribu-

tion System.

Transfer Pricing introduced.

Number of areas in the negative

list exempted from service tax.

Relief to the sector from liti-

gations.

Areas in the negative list will

be a relief for the inflows

Infosys, Wipro,

TCS, Cognizant,

Accenture, IBM,

HP, HCL, Patni,

Mphasis, Cisco,

Polaris

COVER STORY– SECTORWISE ANALYSIS -RAJ AGARWAL

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SECTOR Budget proposal (2012) Impact Companies

affected

PHARMACEUTICAL SECTOR Likely to allocate a modest 13%

-15 % jump in this year's Union

Budget due to a resource

squeeze caused by slowing

growth.

Will lead to wider health-

care coverage and ensure

better medical facilities in

the country.

Hospitals: For-

tis, Apollo hos-

pital.

Pharmaceutical:

L u -

pin, Sunpharma,

Dr Reddy, Ran-

baxy.

FMCG SECTOR Provision and funds for agricul-

ture schemes and rural schemes

an increase of 18 % in plan lay-

o u t .

Incentives for food parks,

warehousing and storage would

h e l p i n s u p p l y c h a i n

Hike in excise duty by 1% and

2 %

Hike in service tax by 2%

If a uniform GST comes

into play, it will mean

doing away with multiple

other taxes like octroi,

central sales tax, value

added tax and entry tax.

This could make con-

sumer goods cheaper and

boost demand for the FMCG sector.

I T C , H U L ,

Marico, Godrej,

Dabur, Nestle,

Marico, Britan-

nia, P&G

AUTOMOBILE SECTOR Government has decided to hike

the excise duty by 2 percent. Import duty increased from

50% to 75% for cars priced

above 20 lakhs. Extra tax removed from diesel

car

Earlier the critics had

made a prediction espe-

cially for the luxury car

market that The sales per-

centage of these cars will

see a 6% increase from 22

to 16% but instead the

duty has been increased

by 24% and thus the cost

of the cars is set to rise up,

that may decrease demand

(but it is relatively inelas-

tic). Whereas small cars

segment may experience

an increased demand (the

one‟s running on diesel

especially)

TATA, Ford,

Mahindra &

Mahindra, Ma-

ruti, Hero, Bajaj,

Ashok Leyland

FAST-TRACK NEWS -ANKITA AGNIHOTRI & SUHANI GUPTA

Timing of key reforms implementation remains uncertain Global rating agencies declare the budget proposals fail to give timeline on GST and DTC. According to Stan-

dard and poor‟s although the financial minister had announced various fiscal reforms but the timings of key

reforms like GST and DTC remains uncertain. S&P said India's deficit in the next fiscal is expected to remain

high, and the results of uncertainty might lead to subsidy consolidation and lowering fiscal vulnerability to

volatile commodity prices.

Several companies to get adversely affected by federal budget 2012 The companies that will be hurt by the federal budget 2012 are ONGC, Oil India and Cairn India, Gold loans

providers such as Muthoot Finance and Manappuram Finance Ltd , Gold loans providers such as Muthoot Fi-

nance and Manappuram Finance Ltd, Indian power equipment makers, Indian banks will also be under pressure

to achieve the target of 5.75 trillion rupees for farm credit, Indian banks will also be under pressure to achieve

the target of 5.75 trillion rupees for farm credit, Indian engineering exporters such as Larsen & Toubro and Punj

Lloyd.

India’s exports much lesser than Imports from china According to a survey done by Nasscom, out of the 2.7 million people in India‟s IT services industry just

16,000 are in China. Nontariff trade barriers such as requirements to obtain security clearances before doing

business with government-backed companies etc are some problems faced by Indian companies in China. Ac-

cording to Nasscom President, Som Mittal. “The markets are really closed,” and he wants Indian officials to

make improved access a priority in talks with Chinese leaders.

Apple shares shows an increase of 100$ in less than a month Apple has added about $92 billion to its market capital in less than a month. Apple is just $14 billion away from

being bigger than the entire U.S. retail sector. These days, Apple had seen about 4.2 times sales and by the end

of 2011 was earning about $14 a share. Today, it trades at 16.8 times its earnings for the previous 12 months.

Tata Steel, Wipro in world's most ethical Survey Ethisphere's annual list of the World's Most Ethical Companies (WME) recognises the companies that go be-

yond making statements and conduct their business ethically. There are 145 companies across the world which

stood out for setting high standards of employee behaviour and conduct. And these are the only two Indian

companies to have featured in the 2012 list of World's Most Ethical Companies prepared by US-based

Ethisphere Institute. "It is a great honour for Tata Steel to be recognised under such an important and prestig-

ious parameter. Ethical business principles and practices have been the key differentiators of Tata Group and

Tata Steel since inception," said H M Nerurkar, managing director of Tata Steel.

Deutsche Bank brings Rs 455 cr to India The German banking leader Deutsche Bank has increased the capital base Rs 455 crore in order to fund growth

plans. This step will result in Deutsche Bank AG's capital base to over Rs 5,500 crore, depicting the bank's

strong focus on this market. It might happen that the Frankfurt-based lender may nominate Anshu Jain, head of

the investment banking, as the next chief executive. The India branch's PAT stood at Rs 630 crore in 2011,

growing with a compounded average growth rate of 38 percent over the last five years.

World’s Fourth richest Politician Sonia Gandhi is declared to be the world‟s fourth richest politician by Business Insider. As per the report

Sonia‟s wealth is measured to be Rs.1, 17, 70,468 of movable assets and Rs.20, 24,300 of immovable prop-

erty.

Pradhan Mantri Swasthya Suraksha Yojana- PMSSY is the program for improving the health of the people. 7

more government medical colleges will be started under this program.

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Four-wheeler luxury will be costlier Car companies announced price increments following the duty hike in the Budget ranging from Rs 15 lakh on

the imported Audi A8 sedan to Rs 4200 -5900 on Al to f rom Marut i .

Big trucks and buses manufacturing companies have also said prices for customers will go up as the govern-

ment levied a 3% excise duty on the chassis against the current flat rate of Rs 10,000. "We have no option but

to pass on the new rates to the market," Audi India Michael Perschke said. As the Government raised cus-

toms duty from 60% to 75%, along with a 5% increase in countervailing duty that is levied in lieu of local

taxes imported models would bear most of the burden.

Common recruitment test for RRBs Institute of banking personal selection (IBPS) will be conducting the common recruitment test for filling up

vacancies in the various regional rural banks (RRBs). According to the Director of IBPS, M Balachandran

told PTI, they are working out details for conducting exams for both officers and clerks for 82 RRBs. Na-

tional Bank for Rural and Agriculture Development (NABARD) will supervise the whole selection process of

CWE of IBPS.

Many people mourn Egypt’s Coptic Pope Shenouda III Thousands of Egyptian Coptic Christians spent the night outside St Mark's Cathedral to mourn the death of

their spiritual Leader Pope Shenouda III. He was 88 when he expired and he held the church for four decades.

The government had declared three days off to prepare for his funeral. The successor of Pope is still not de-

cided.

Gaddafi spy chief arrested in Mauritania Muammar Gaddafi's ex-spy chief, Abdullah al-Senussi was arrested in Mauritania.Senussi for decades in-

spired fear and hatred in Libyans and he has charges for crimes against humanity by the international court of

Hague. Libya demanded that he should be brought back to the country for trial for which the y have sent an

extradition request to Mauritania but ICC and France want to conduct the trial because he is also accused in

the case of the 1989 bombing of an airliner over Niger in which 54 French nationals died.

Akhilesh yadav takes Oath Akhilesh yadav was sworn in as the youngest Chief Minister of Uttar Pradesh on 15th march , Thursday

along with other 47 ministers. He kept fifty departments under him. Raja Bhaiya having 8 criminal cases

against him will be the head of U.P‟s prison Department along with food and civil supply

100’s of 100 At last the day arrived when the God of Cricket hit his 100th International century. The history was created

against Bangladesh in Mirpur in Asia Cup on 16th march 2012, Friday. Tendulkar's century came off 138

balls and was full of 10 fours and a six. This was a delight for all the Indian fans. The game ended by Bangla-

desh winning the match by chasing the score of 290 runs (again). Especially his performance in overseas

matches can be hardly matched by any player," Sehwag told reporters at a promotional event here.

Customs Duty- Customs duty is a kind of indirect tax which is realized on goods of international trade. It is lev-

ied upon the imported and exported goods.

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OPINION FORUM– –AVLEEN KAUR SARNA & POOJA DALAL

VIEW A PRACTICAL PLAN- KEEPING FINGERS CROSSED!!

Rightly or wrongly, expectations had risen after the presentation of the railway budget that the

finance minister Pranab Mukherjee would bite the bullet and present a bold national budget.

However, under the present circumstances he has presented a practical plan. The Union Budget

2012-13 presented in the Lok Sabha has identified five main objectives to be addressed effec-

tively in the ensuing fiscal year. These include the focus on domestic demand driven growth re-

covery, creating conditions for rapid revival of high growth in private investment, address sup-

ply bottlenecks in agriculture, energy and transport sectors particularly in coal, power, national

highways, railways and civil aviation , intervene decisively to address the problem of malnutri-

tion especially in the 200 high-burden districts and expedite coordinated implementation of deci-

sions being taken to improve delivery systems , governance, transparency and address the prob-

lem of black money and corruption in public life.

Adding to its credit, despite strong pressures the budget emphasizes the government‟s long-term

objective to control and eventually reduce subsidies i.e in 2012-13 the budget hopes to keep the

overall subsidies under 2% of GDP. While the food subsidy target looks achievable, the fuel and

fertilizer subsidy target can be achieved only if the government increases retail end-product

prices sharply. Also, given the quantum of fiscal deficit and the government‟s higher gross bor-

rowing programme for the year, the pressure on inflation is likely to be maintained because the

government has overshot its fiscal deficit target for 2011-12 by a wide margin, even more than

the most pessimistic estimates. However, it has reiterated its commitment to fiscal consolidation

and has forecasted a lower fiscal deficit of 5.1% of gross domestic product (GDP) in 2012-13.

Now how credible is this target?

It is considered that this target is based on what we believe the unrealistic growth projections and

an ambitious target on subsidies, hence most probably the fiscal deficit is likely to be closer to

5.5% of GDP during 2012-13 and thus with the manufacturing on the cusp of a revival, Finance

Minister is betting more on redoubling the focus on domestic demand driven growth recovery

and creating conditions for a revival in private investment in the coming year to spur growth

headline inflation, which is expected to moderate further in the next few months and remain sta-

ble thereafter as it is expected to aid the rebound in growth.

So, the government‟s primary concern now is to advance the economy‟s productivity and im-

prove income distribution. Thus while the finance minister can be taken to task on parts of the

tax changes, he has made a definite effort to offer tax concessions to encourage investments and

bridge the rapidly growing infrastructure deficit as the shortage of power, roads, ports and other

infrastructure has begun to retard economic growth.

Similarly, he has declared his intent to move ahead with the goods and services tax (GST) by

promising that the information technology network to drive this reform will be in place by Au-

gust and as it goes about the task of rapid fiscal consolidation, along with the aim of keeping in-

flation down, the major task on hand for the Centre is to raise the tax-GDP ratio and cutting

down wasteful expenditures.

Excise Duty- An excise or excise tax is commonly referred to as an inland tax on the sale, or production for sale,

of specific goods; or, more narrowly, as a tax on a good produced for sale, or sold, within a country or licenses for spe-

cific activities.

THE IBS TIMES

While the food subsidy tar-

get looks achievable, the fuel

and fertilizer subsidy target

can be achieved only if the

government increases retail

end-product prices sharply.

Thus while the finance

minister can be taken to

task on parts of the tax

changes, he has made a

definite effort to offer tax

concessions to encourage

investments and bridge the

rapidly growing infra-

structure deficit as the

shortage of power, roads,

ports and other infrastruc-

ture has begun to retard

economic growth.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

OPINION FORUM (CONT..) Now how important is this subtle yet important change in approach? The political economy of

the UPA government has revolved around entitlements, subsidies, consumption-spending and

reforms inertia. The strategy worked as long as strong economic growth yielded ample tax reve-

nues, but it unraveled after 2008 to result in a toxic combination of growth trending downwards

while inflation trending up. The Reserve Bank of India has already hinted at the structural prob-

lems when it said that the growth rate India can sustain without fanning high inflation is 7%.

Thus what India needs right now is a dose of supply-side economics, especially initiatives to get

private sector investment back on track soon as well as coherent policies to overcome significant

medium-term constraints such as food, energy, water, logistics and infrastructure and also fiscal

consolidation to raise the national savings rate while the economic reforms to improve business

confidence are also central to these policy challenges at this juncture when India seems to be in

the midst of a structural rather than the cyclical slowdown. Yet, it has to be conceded that the

Finance Minister has struggled in unenviable conditions to make some sense out of the helpless

situation in which he has been placed by his party and government.

COUNTERVIEW The Downside

While one of the main objective of the Budget remains-„to bring down inflation‟, the increase in

service tax from 10 to 12 percent and the widening of the service tax net has not done quite so, at

least for the end consumers. Though it has been done to cover the increased expenditure on sub-

sidies to industries, the change has been very predictable, not to mention „not at all helpful in

correcting the structural problems in the economy.‟ From the general public‟s point of view,

there is no respite from high inflation and increasing cost of living. „Travelling, eating out, tele-

phone bill - all these have become dearer. It's also going to be difficult for frequent flyers.‟ Only

the personal tax exemption limits have been raised, but considering the growing inflation, it

seems to be just a cosmetic correction rather than an actual relief.

„It‟s more directed at maintaining a status quo rather than providing that much required thrust to

take forward the reforms agenda.‟ No decision has yet been passed on FDI in retail and aviation.

Even the growth is pegged to be low. FICCI President R.V. Kanoria said: "It is a big non-event.

It is not going to stimulate growth in economy." Nothing mentioned in the budget managed to

excite the investor‟s and this may well become a long term norm. But if just the reforms stated

by Finance Minister come to pass, it would be worth the inflation and restricted growth that this

budget is going to result into. We wouldn‟t know it for sure yet, as the budget had made some

tall promises, but not yet revealed the math behind it.

All in all the budget seems to have been made under political pressure, where the finances could

have gone down better for the country, if only the ruling party trusted the voting audience to un-

derstand the brighter side. Guess it didn‟t.

RTE-SSA- Right to education has been implemented since 1st April 2010, through SSA that is the Sarva Shiksha

Abhiyan. Finance minister Pranab Mukherjee has given Rs. 25555 crore for RTE-SSA in Union Budget 2012-13.

THE IBS TIMES

The Reserve Bank of India

has already hinted at the

structural problems when it

said that the growth rate

India can sustain without

fanning high inflation is

7%.

if just the reforms stated

by Finance Minister come

to pass, it would be worth

the inflation and restricted

growth that this budget is

going to result into.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

OPINION FORUM– RAILWAY BUDGET „Bold and futuristic‟ I would call the budget that was ordered to be rolled back by Didi, just be-

cause it didn‟t have her blessings. India has not seen fare raises for quite a decade now. It would

be mostly because burning a bigger hole into the „aam aadmi‟s‟ pocket usually means losing

polls in the next elections. But here was a man who was bold enough to announce to the public,

that the largest employer in the world that is giving salary hikes needs to save its balance sheet

too. It too needs a money inflow growth. But as we know now, you lose your office for being so

bold.

The increase in train fares would have given the much needed cash to Railways to expand its

operations, endure safety in transport and at the same time, increase the welfare of its employees.

The efficiency of the railways should have been tested as a bases for further funds requirement

but at the same time, attacking the complete budget just on the bases of it being unfair to the

masses seems to illogical. But put in the political parlance- any profit made by the corporation (it

is usually a state owned corporation that is accused of it) is at the expense of the public. Mr.

Dinesh Trivedi had drawn out a brilliant plan of connecting our nation better. Connecting Mum-

bai to its suburbs better (as well as some other faraway places), upgrade railway station infra-

structure, setup factories to manufacture more couches. And none of this could have been done

without the availability of the funds. As state is on a fiscal deficit slimming drive, the aforesaid

funds were denied in the form of investment or subsidy to the corporation. This left but only one

choice with the rail minister- fare hike.

But looking at it after the Union Budget from „aam aadmi‟s‟ lens, the actual fare hike would

have seemed cruel. With an already inflationary budget underway, the end consumer is already

paying more even for small luxuries of life like dining out. And this would get worst on the con-

sumer confidence of the country as all the services are set to become costlier. Thus the impact

would have been large on the public and adverse. But there are no free lunches in this world. If

the corporation has to progress (very few state owned organisations do), the people have to share

the burden of growth. For availing better facilities and better infrastructure, people have to bear

the monster of inflation. And with the exemption limit for tax increased and no more direct tax

levied, shouldn‟t have the consumers‟ nagging.

Only time will tell whether, the conservative politics will pay off or we will repent firing Trivedi

forever.

Securities Transaction Tax- STT, introduced in 2004, is levied on the sale and purchase of equities and according

to estimates it accounts for 51 per cent of the transaction cost in stock markets. The Budget has proposed a reduction in

Securities Transaction Tax (STT) from 0.125 per cent to 0.1 per cent on cash delivery transactions.

THE IBS TIMES

The increase in train fares

would have given the much

needed cash to Railways to

expand its operations, en-

dure safety in transport and

at the same time, increase

the welfare of its employees.

But looking at it after the

Union Budget from „aam

aadmi‟s‟ lens, the actual

fare hike would have

seemed cruel. With an

already inflationary budget

underway, the end con-

sumer is already paying

more even for small luxuries

of life like dining out.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

BRAND TRACK—BRAND CONGRESS-HIDING BEHIND THE LONG LOST GLORY! -ATREYEE SENGUPTA Behind the scenes is something that has always captured my fancy so when the common man is

still busy balancing his life‟s income statement I am on a reality check spree. Indian National

Congress-the sole decider of “democratic” India‟s fate has a very good branding exercise to

give us all. Well unrealistic melodrama can serve a good platter for entertainment but the reality

can get far worse. Sometimes the stakes are at the expense of the hapless naïve while the intelli-

gentsias are busy diving into their hollow inexplicable dogmas in vain. Sad but true!

Ever since India and Britain had a mutual break up agreement signed, Congress stood strong

with its head held high up in the air symbolizing a secular State for one and all. And thereafter

came into power the Nehru-Gandhi dynasty thus giving the party a high recall power for every

Indian. The brand equity further increased when every possible scheme generated by Congress

bore the name of one of the assassinated high command protagonists of the party be it Indira

Gandhi or Rajiv Gandhi. In fact when NREGA (National Rural Employment Guarantee

Scheme) was a flop the prefix of Mahatma Gandhi simply widened its spectrum. Nevertheless

the glory remained intact and congress came up with redoubled load of renewed enthusiasm in

2004 and 2009 General Elections and why not

when a whopping 150-200 crores was attached with

its campaigns mostly handled by Perfect Relations

that has been a part of it right since the golden era

of Rajiv Gandhi. Even the “Jai Ho” track and slo-

gans like “Aam Aadmi ke badte kadam” had a

gleam that faded even the “Shining India” cam-

paigns led by BJP. The common man was more

than happy to absorb the overfriendly ads and wait

for their change of development. Now that

“change” stood for what only the recent times can

tell.

The never ending scams have led the Tihar Jail

brimming with politicians than criminals now of course both the professions are interchange-

able in terms of usage. Our so called youth icon Mr. Rahul Gandhi faced a sharp defeat in UP

elections despite his door to door assurances of Changing India which has of course threatened

the command of INC since UP being a major state no party can gain majority if lost here. Again

Pranab Sir‟s budget speech didn‟t have any bold reforms or major tax cuts which were mainly

to handle or attain the fiscal discipline but it‟s however beyond the scope of understanding of

the common man. The high profile Rail-Budget drama has put a big question mark on the trans-

parency level of the Government and the will to stick to righteous instead of the powerful.

Team Anna has suddenly vanished and the present status of Jan Lokpal Bill is completely alien

to the masses. A generous amount of 16 crore has been kept aside for the protection of the most

high profile criminal Ajmal Kasab. The victims of Bhopal Gas tragedy still await justice be-

cause the Parliament is busy prioritizing the nuclear liability bill with the US. And as if this

were not all India is the home to fourth richest politician in the world Sonia Gandhi. Wonder

how long will the country take to reach that stature?

Well the blame game cannot simply be passed on to one political party alone at least not that

bears an entity of being a witness to some of the most glorious years in the past and whose reins

were or are at least handled by the best of educated men. The question over here is about ac-

countability. A good product does not automatically sell for itself even that needs to be build up

on a high stratum of brand management. So what congress is expected is to come up with a well

drafted game plan so as to re-assure the support of its voters for it is high time that the so called

visionaries put things in the right place because evil succeeds only when good men do nothing!

THE IBS TIMES

Our so called youth icon

Mr. Rahul Gandhi faced a

sharp defeat in UP elections

despite his door to door

assurances of Changing

India which has of course

threatened the command of

INC since UP being a

major state no party can

gain majority if lost here.

Congress-the sole decider of

“democratic” India‟s fate

has a very good branding

exercise to give us all. Well

unrealistic melodrama can

serve a good platter for

entertainment but the reality

can get far worse.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

FOCUS OF THE WEEK– PRANAB MUKHERJEE -ANKIT SHARMA

DTC- Direct Tax Code- DTC rates proposed to be introduced for personal income tax. Exemption limit for the

general category of individual taxpayers proposed to be enhanced from Rs 1,80,000 to Rs 2,00,000 giving tax relief

of Rs 2,000. Upper limit of 20 per cent tax slab proposed to be raised from Rs 8 lakh to Rs 10 lakh.

THE IBS TIMES

Pranab Kumar Mukherjee is the current Finance Minister of India and leader of the current

(15th) Lok Sabha.

He was born on 11 December 1935, in West Bengal, India. His father Kamada Kinkar Mukher-

jee was a member of AICC and West Bengal Legislative Council (1952–64) and President Dis-

trict Congress Committee Birbhum (WB). He attended the Suri Vidyasagar College Suri

(Birbhum), which was then affiliated with the University of Calcutta and holds a Master of Arts

degree in History and Political Science & also has a degree in law from the University of Cal-

c u t t a .

He has a parliamentary career of over four decades, which began as a member of Rajya

Sabha (upper house) from the Congress Party in 1969 and was re-elected in 1975, 1981, 1993

and 1999. In 1973, he joined the cabinet as Union Deputy Minister of Industrial Development.

He rose through a series of cabinet posts to become the Finance Minister of India from 1982 to

1989. His term was noted for India not withdrawing the last billion installment of an IMF

loan. It was Dr. Manmohan Singh who was serving Reserve Bank of India as Governor during

Pranab's term as Finance Minister. He was not included in Rajiv Gandhi's cabinet after Lok

Sabha election held subsequent to Indira Gandhi's assassination. He was pushed out of the Con-

gress party for a brief period, and during this period he formed his own political party Rashtriya

Samajwadi Congress, but later merged it with Con-

gress party in 1989 after settlement with Rajiv Gan-

dhi. His political career revived when P.V. Nara-

simha Rao chose to appoint him as deputy chairman

of the planning commission and subsequently as a

union cabinet minister. He served as External Af-

fairs Minister for the first time from 1995 to 1996 in

Rao‟s cabinet. In 1997 he was voted as an

„Outstanding Parliamentarian‟.

He was the President of the West Bengal state unit

of Congress since 1985, but resigned in July 2010 due to work-load and was succeeded by Ma-

nas Bhunia. In 2004, when the Congress formed a government at the head of a coalition the

new Congress Prime Minister Manmohan Singh was only a Rajya Sabha MP. So Pranab Muk-

herjee was made Leader of the House in the Lok Sabha when he won the Lok Sabha elections

for the first time from Jangipur (Lok Sabha constituency). He also has the distinction of being a

Minister for various high profile Ministries including Defence, Finance, External Affairs, Reve-

nue, Shipping, Transport, Communication, Economic Affairs, Commerce and Industry. He also

heads the Congress Parliamentary Party and the Congress Legislative Party which consists of

all the Congress MPs and MLAs in the country apart from being Leader of the House in Lok

Sabha, Bengal Pradesh Congress Committee President and the Union Cabinet Minister of Fi-

nance in the Council of Ministers under Prime Minister Manmohan Singh in the Congress-led

Government. Pranab played a crucial role in steering the Cabinet pre-Lok Sabha elections when

the Prime Minister underwent by-pass surgery by taking additional charges as chairman of the

Cabinet Committee of Political Affairs and Union Minister in Finance Ministry despite already

being Union Minister of External Affairs.

Pranab Mukherjee married Suvra Mukherjee on July 13, 1957 and has two sons, Abhijit and

Indrajit and a daughter.

He attended the Suri Vid-

yasagar College Suri

(Birbhum), which was then

affiliated with the Univer-

sity of Calcutta and holds a

Master of Arts degree in

History and Political Sci-

ence & also has a degree in

law from the University of

Calcutta.

He also has the distinction

of being a Minister for

various high profile Minis-

tries including Defence,

Finance, External Affairs,

Re v e n u e , Sh i pp i n g ,

Transport, Communication,

Economic Affairs, Com-

merce and Industry.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

MARKET WATCH - SWATI VERMA

The Finance Minister this week did not leave any opportunity to disappoint the common man in In-

dia. The Budget could not deliver the much awaited relief expected out of it. Apart from raising the

tax exemption limit to 2 lakh from the existing 1.8 lakh, there was nothing much to look forward to

(to should be removed).

Over the last few weeks, investors were hoping that the Union Budget could set the direction of the

stock markets for some time to come but it failed to bring about the reforms that we all had been

hoping for. The dull budget from the Finance Minister resulted in the markets ending on a lower

note. The markets were down by 0.2% for the week ended March 16, 2012 and ended at 17466.20

down 209.65 points from the previous trading session, Nifty closed at 5317.90, down 62.60 points.

However, the new Rajiv Gandhi Equity Savings scheme that would allow for some tax benefits on equity investments by first time investors

could be positive for the Indian stock markets in the longer run. It could help in bringing (help bringing) in more domestic investor money into

the stock markets for long term.

The Movers & Shakers of the Week

Earlier during the week, Reserve Bank of India (RBI) kept the key rates of repo, reverse repo and cash reserve ratio unchanged during its mid-

quarter policy. The central bank however hinted at further lowering of interest rates but refused to give a time frame for the

same. Pharma major Ranbaxy declared that it has opened a new production facility in Morocco. This will help Ranbaxy in having a direct pres-

ence in the North African pharma (pharmacy) market. The facility has been successfully audited by the Moroccan Health Authorities. It may be

noted here that Moroccan phrama (pharmacy) market is pegged at US$ 1 billion. In some more news from the PSU banking space, in his budget

statement, the Finance Minister proposed setting up of a company to hold the government's stake in banks. This will help in overcoming the

problem of periodic capital investment in such PSU banks by the government that disturbs its fiscal calculations. It may be recollected here that

the government has to often rely on LIC for funding these public sector enterprises. It had injected around Rs 80 billion in such banks to ensure

that they had sufficient capital with them.

Global Cues: The world stock markets except China closed the week on a positive note. The European markets in particular showed a very positive perform-

ance after investor (investors‟) focus shifted from Greece to global growth. In the US too, markets posted their biggest gains of year during the

course of the week. Federal Reserve's announcement regarding improving of (improvement of) the economy along with continued fall in unem-

ployment triggered positive investor sentiments. China (down by 1.4%) was the only stock market to close the week in the red. European mar-

kets in particular showed positive performance led by Germany (up by 4%) and France (up by 3.1%).

SURGES %Change DOWNFALLS %Change

VOLTAS 9 NMDC LTD 16.4

JET AIRWAYS 8.5 TECH MAHINDRA 11.3

CESC LTD 8 BIOCON LTD 10.9

THE IBS TIMES

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

MARKET WATCH

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Disclaimer- This newsletter is just a compilation of news from various sources. Thus, readers are expected to cross-check the facts before

relying upon them. Though much care has been taken to present the facts without error, still if errors creep in, necessary feed

back will be always welcomed. Editors will not be responsible for any undertakings. The newsletter is not meant for sale and

hence, no part of the newsletter should be used without the prior permission of the editorial team.

Sources- The Economics Times, The Hindu Business Line, Times of India, Business Standard, Financial Ex-press, Financial Times,

Business Week, Business World, The Economist, Wall Street Journal, Bloomberg, Reuters, Moneycontrol.com, Vccircle.com,

yahoofinance.com, Business Today, India Today, Investopedia.com, Wikipedia.com, DNA, The Deccan Chronicle, The Hindu,

The Tele-graph.

EDITORIAL TEAM-

ABHIGYAN SHARMA, ANKIT SHARMA, ANKITA AGNIHOTRI, ATREYEE SENGUPTA, AVLEEN KAUR SARNA, DEVANSHI PODDAR, KAPIL OTSWAL, KRITIKA SETHI, POOJA DALAL, RAJ AGARWAL, SAMEER JANJHI, SUHANI GUPTA, SWATI VERMA

BUDGET JARGONS BY– ABHIGYAN SHARMA

12 MARCH

2012

13 MARCH

2012

14 MARCH

2012

15 MARCH

2012

16 MARCH

2012

Sensex 17,813.62 17,919.30

17,675.85

17,466.20 17,466.20

Nifty 5,359.55 5,429.50 5,463.90 5,380.50

5,317.90

DJIA 12,959.71

13,177.68 13,194.10 13,252.76

13,232.62

HangSeng 21,134.18

21,339.70 21,307.89 21,353.53 21,317.85

FTSE100 5,892.75

5,955.91 5,945.43

5,940.72 5,965.58

Gold ($/oz.) 1704.40 1676.90 1646.30 1661.70 1660.10

Crude($/bl) 123.88 124.59 124.29 123.03 -

INR v/s USD 49.33 49.93 50.43 50.84 51.10

INR v/s EURO 64.71 65.50 66.21 66.36 66.69

Goods and Services Tax (GST) -The implementation of GST will lead to the abolition of other taxes such as oc-

troi, Central Sales Tax, State-level sales tax, entry tax, stamp duty, telecom licence fees, turnover tax, tax on con-

sumption or sale of electricity, taxes on transportation of goods and services, et cetera, thus avoiding multiple layers of

taxation that currently exist in India.

THE IBS TIMES

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

- FIGURES NOT AVAILABLE