Reactions to Union Budget 2012,
A Vellayan, Chairman, Murugappa Group

At the outset, this appears to be a modest budget which ExpectationsFromUnionBudget

attempts to recognize the need for consolidating the

current financial status of the country and provide stability to the economy.

There are some welcome moves:

  1. Agriculture sector:
  • There is a continued focus on agriculture, which can be seen from the following measures
    • The total plan outlay has increased to Rs 20208 crores, a raise of 18%
    • Moves to encourage self-sufficiency in urea production within India in 5 years
    • Measures to encourage use of single super phosphate
    • Greater outlay of funds to improve micro-irrigation
  • There is an attempt to put more money into the farmers’ hands, by means of increasing the agriculture credit from Rs 4.75 lakh crores to Rs 5.75 lakh Crores.
  1. Infrastructure
  • There is a focus on improving all-round infrastructure in the form of power, roads, ports, civil aviation etc with a huge outlay
  • This is being funded through higher mobilization through Infrastructure bonds of Rs 60,000 crores (from the earlier Rs 30,000 crores)
  1. Increased liquidity in the system
  • Re-capitalisation of PSU banks to the extent of Rs 15800 crores
  • Greater access to ECBs at lower rates
  1. Revenue generation to the Exchequer
  • The requirement of large funds for implementing the above initiatives, will be addressed through significant increase in indirect taxes to the tune of approx Rs 41,000 Crores
  1. Measures to curb import of unproductive assets like gold, will have a positive impact

However, there are some areas to wait and watch:

  1. Containment of inflation will need to be observed, because of the overall impact of increased Service Tax and Excise duties on total costs
  2. The growth of manufacturing sector looks difficult because of these increased costs. We will have to see whether the GDP growth target of 7.6% is achievable. It will then have to be supported by growth in other sectors like Service sector and Agriculture sector
  3. We will have to wait and see whether the fiscal deficit of 5.1% (down from revised estimate of 5.9%) can be achieved
  4. We will have to wait and see the Government’s progress in implementation of reforms such as GST and DTC this year
  5. At an individual level, there appears to be very little concession by way of Direct Taxes, taken n the context of increased inflation