On February 28, 2011, Union Finance Minister Pranab Mukherjee presented to parliament the Union Budget for the coming financial year 2011-12 beginning from April 1.
Combating concerns ranging from fiscal deficit to food inflation to tax subsidies and exemptions, Finance Minister has presented a reform-oriented budget for FY 2011-12, focusing equally on containing inflation while promoting growth in a challenging environment. The Budget clearly indicates that the Finance Minister has chosen to stay on the course of fiscal prudence and tried to make the economy even more resilient from a long-term perspective.
As highlighted in the recently published ‘Economic Survey 2010-11’, the Gross Domestic Product (GDP) of India is estimated to have grown at 8.6 per cent in 2010-11 in real terms. In 2010-11 agriculture is estimated to have grown at 5.4 per cent, industry at 8.1 per cent and services at 9.6 per cent.
The Finance Minister expressed confidence as the Indian economy is expected to grow at 9 per cent with an outside band of +/- 0.25 per cent in 2011-12. He has targeted fiscal deficit of 4.6% of gross domestic product during 2011-12, which is a big positive, provided the Government is able to control the expenditure to the desired extent.
Key features of the Budget are: gross market borrowing for 2011-12 seen at Rs 4.17 lakh crore , lower-than-expected net government borrowing at Rs 3.43 lakh crore, a disinvestment target of Rs 40,000 crore for 2011-12.
Bank licenses to new private sector players and speeding up of various pending financial sector bills were some of the highlights of the Budget.
Besides encouraging figures on GDP growth and fiscal deficit front, the FY12 union budget has many positives which include foreign investment into MFs, push for supply reforms in the agriculture/storage sector, hike in ceiling for FII investment in corporate debt to US$ 40bn and talks of FDI in retail sector.
In addition to these, the roadmap in Budget for clearing of reform legislation such as Direct Tax Code/Goods and Services Tax, public debt and many others points towards action oriented approach of the Government.
What can be termed as intent to move towards the DTC structure which is soon to come in effect (may be 2012), on personal income tax front, relief has been given to individuals as the basic tax exemption limit for men is up to Rs 1.8 lakhs (up by Rs 20000). The limit for women remains unchanged at Rs 1.9 lakhs. However, a great attention is paid to senior citizens where age is reduced from 65 to 60 years for tax benefits (Exemption limit enhanced to Rs. 2.5 lakh from earlier 2.4 lakh).
Higher exemption limit of Rs.500,000 has been recommended for Very Senior Citizens, who are 80 years or above.