Budget 2012-2013: A mixed bag!

It has been a mixed bag when it comes to assessing how the budget for FY 2012-2013 is. From a broader picture perspective, such steps were deemed to be necessary to be implemented to get the economy going and tackle the inflationary pressures. But it always leaves one side unhappy.

Finance Minister Pranab Mukherjee set the tone for the budget right in the beginning by mentioning about the fact that the year had been meant for recovery had the Euro debt crisis not happened. He also mentioned that although as the FM of the country, those cannot be excuses to address the issues internally as also impact of global issues in the country’s economy cannot be overlooked.

India’s GDP was estimated to grow at 6.9% in 2011-2012. There is a visible slowdown in the progress of the economy, but Mukherjee said that some sectors also show signs of recovery. Coal, cement, fertilisers and electricity sectors show progress and since they are core ones, he claimed that Indian manufacturing industry might be on the ‘cusp of revival’.

Resultantly, the budgeted expenditure for the Centre is aimed at Rs. 14, 90,925 crore for FY 2012-2013. The expenses would be covered up by tax receipts round about 52% and some of them via borrowings with a share of almost 34%.

The gross tax receipts for FY 2012-2013 i.e. total revenue via taxes are seen at Rs. 10, 77, 612 crore which has seen a sharp increase of over 15.6% with respect to the revised estimates for 2011-2012. It was seen at Rs. 9, 32, 440 crores in the previous year. Service tax for major goods has been increased from 10% to 12.5%.  

Here’s a break up of major revenues in this sector:

• Revenues from income tax were at Rs. 19, 231 crore
• The government managed to raise Rs. 14, 000 crore via disinvestments against a target of Rs. 40, 000 crore. Revised targets for the same have been set at Rs. 30, 000 crore.

The expenditures of the government have been an area of concern though.

A break up of the complete expenditure can be seen as follows:

• Revenue expenditures valued at Rs. 12, 86, 109 crores
• Capital expenditures valued at Rs. 2, 04, 816 crores

Defence budget for this year has seen a substantial increase of 17% with an allotment of Rs. 1, 93, 408 crores as opposed to an allotment of Rs. 1, 66, 415 crores for FY 2011-2012. Hostile neighbours and China’s increased allocation to their defence budget can be seen as one of the reasons for such measures.

Another area of concern in the mounting expenses is the subsidies. While the FM advocated for the fact that subsidies was a need of the hour for food, fertilisers and petroleum products, such expenses are inevitable to sustain development, he said.

With the introduction of the Food Security Bill and its placement in the Parliamentary Standing Committee, subsidies would be given completely for all these three sectors (commodities).  Expenses close to Rs. 1, 90, 015 crores have been recorded.

With all these statistics, naturally the deficits have been a huge concern for the nation. Fiscal deficit which was foreseen at 4.6% in the FY 2011-2012 has shown an increase of 0.5 percentage point and has been seen at 5.1% this year i.e. at Rs. 5, 13, 590 crores. The current account deficit is likely to be around 3.6% with respect to the GDP.

The income tax slabs is the only thing that comes as a relief. Exemption limit for general category of individual taxpayers has been increased to Rs. 2, 00, 000 from Rs. 1, 80, 000.

Here’s an explanation of the new slabs and the subsequent tax rates:

Income Limit	Taxation rate
Upto Rs. 2, 00, 000	Nil
Above Rs. 2, 00, 001 upto Rs. 5, 00, 000	10%
Above Rs. 5,00,001 upto Rs. 10, 00, 000	20%
Above Rs. 10, 00, 001	30%

Overall the budget looks to address serious issues related to the slowdown in the economy and boost industrial production, but most analysts believe that the budget could have been far more credible and better when it came to handling issues such as the fiscal deficit. 

Life in this metro!

Consistency and quality form one of the best combinations or businesses to prosper. In fact, capital investment and revenues can take a backseat (when it comes to planning) if these aspects are planned and executed well. Be it the Tatas or the Godrejs or Ambanis for matter, this combination has been a common link between all. 

Something similar was observed in case of Metro Laundry, one of the oldest and consistent businesses in Kalina area of the city.

Started by Mr. Bageshwar Kanojia, a migrant of Uttar Pradesh, the laundry commenced its operations with an initial investment of Rs. 2500 in the 1960s. Today, they boast of offering the best services in the vicinity despite tough competition from almost 13 other laundry services there.

“We try to be a blend of quality and honesty. If any customer comes to me for a dry cleaning service, we tell it to him/her that there might be chances of the cloth’s colour fading but results are assured. That ensures my customers that atleast the job would be well done despite the minor risk involved” says Ramvilas, son of Kanojia, who now runs the business for over thirty years.

Their services range from washing, dry cleaning, rolls press and the most commonly known, ironing clothes. People using these services, ideally, should be going up now, but it isn’t.

When Ramvilas took over the reins in the 80s, he says that a lot of people had just tried to open up to such services.  Increased standard of living amongst people post 90s, led to a steep increase in their business activities which went on for a decade. That is when this sector saw increased professionalism. “We divided the work into different departments [who did different works such as washing, drying etc.]. Workers tried to be specialised in what they did” he says.

The labourers involved to perform tasks come under the ambit of the labour laws and are entitled to stipulated stipend by the owners. For instance, the ironing men are entitled to a minimum salary of Rs. 2500 per month. Abiding by the laws also became one of the primary things for establishing this business.

During this boom, another thing that was done in anticipation of the times to come was to have higher service rates than the others in the area. “The idea being that quality comes along with such measures. Plus we anticipated prices to go up in the times to come” says Ramvilas.

And post 2000s, the sector stated declining. Self dependency increased. Home appliances witnessed a boom in their sales which led to lessened use of services provided by this sector. “Business started incurring losses post the new millennium. Now people only come for basic services as ironing. The rest has seen a fall, if not very huge, but to some extent” adds Ramvilas.

Kalina was also one of the worst affected during the deluge of 26^th July. But the shop was safe thanks to its placement on a higher altitude than others. Also, Ramvilas won a lot of accolades from the army and the state government for his rescue efforts in Air India school, despite lack of knowledge to swim. [Rescuing 167 people and fishing out 11 dead bodies].

As brave as that act was, another question stands unanswered for- the future. With the decline of the business in providing other services, the questions over its sustainability have been raised. “My son doesn’t want to take over. He has done his MBA and plans to start something else. As far as I am going to be here, this shop won’t shut. Only time will tell” concludes Ramvilas.