Karela Fry

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Union Budget 2012-2013

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The union budget of 2012-13 gives a sense of deja vu. Very little has changed since the previous year. Given that the GDP growth has been the lowest in 8 years, essentially due to a slowdown in manufacturing, this indicates that the government believes that fundamentally everything is in place, and a continuing emphasis on infrastructure building will carry the country past the current low.

Pranab Mukherjee before the budget presentation: 2012

Total expenses budgeted for are INR 14,90,925 crores. This is 13% more than last year. 34.4% of this will be financed by borrowings.

  1. Interest payments take INR 3,19,759 crores, ie, 21% of the total; the same as last year. Debt repayment takes away INR 1,24,302 crores. Between the two, 30% of the budget is accounted for. This is almost the same fraction as last year.
  2. Defence gets INR 1,93,408 crores, which is 13% of the budget. In fractional terms this is marginally more than last year. But because the budget has increased this is an increase of 18% over last year’s outlay, and therefore is an actual increase even allowing for inflation.
  3. Total plan expenses are INR 5,21,025 crores, ie, 35% of the total; exactly the same as last year.
    • The health outlay remains unchanged in real terms. The plan outlay is INR 30,477 crores, ie, 2.0% of the budget. This is 14% up from last year’s outlay of INR 26,760 crores, so stable against inflation.
    • The education budget remains unchanged in real terms. The plan expense is INR 61,427 crores, ie, 4.1% of the budget, compared to 4% of the budget last year.
    • Science and technology gets INR 5,975, space gets INR 5,615, and atomic energy gets INR 11,673. Together this is 1.6% of the budget. This is fractionally less than last year in percentage terms, so the outlay is stable against inflation.
    • Air India gets an equity injection of INR 4,000 crores!

Tax revenue is estimated to be 82.4% of the net revenue, and 51.7% of the budget outlay. 34.4% of the budget will be covered by borrowings and other liabalities, up from 31% last year. So this is more of a populist budget than last year. Social spending remains a stable small fraction of the budget.

The Hindu Business Line is critical of the government’s revenue model:

The Budget’s revenue projections also reaffirm the reversal of the overall post-reform trend of a steady increase in the contribution of direct taxes to the Centre’s revenue kitty. The contribution of direct taxes had grown from less than a fifth in 1990-91 to almost 59 per cent in 2010-11. Since then there has been steady decline and in 2012-13, this share is budgeted at 52.39 per cent of total revenues.

The emphasis on indirect taxes for additional revenue mop up is perceptible, given that Mr Mukherjee expects the indirect tax proposals to result in a net revenue gain of Rs 45,940 crore during next financial year.

Direct tax proposals are likely to result in loss of Rs 4,500 crore, said Mr Mukherjee in his Budget speech.

The increased reliance on indirect taxes is seen as regressive as taxes on goods are paid by the rich and poor alike, while taxes on income and corporate profits are viewed as more egalitarian. Taxing individuals and corporates rather than production and trade would result in less stifling of economic activity, according to economists.

The union budget of 2011-12 can be viewed here.


5 Responses

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  1. […] The final budget exposed the government’s lack of committment. Spending on science remained static. Science magazine reports: The announcement of India’s maiden mission to Mars is doing little to cheer Indian scientists disappointed with proposed spending increases for research in a new government budget plan. The annual budget proposal presented to India’s parliament on 16 March by Finance Minister Pranab Mukherjee calls for the operating budgets for science to rise, on average, by about 5% in 2012-2013—less than what many scientists had expected. […]

  2. […] INR 833,000 crores but a government assistance of INR 1,38,500 crore. The government assistance is about 10% of the union budget, and that is 84% more assistance than […]

  3. […] crores (converted from USD at the rate of INR 55 per USD, which is more appropriate for 2012). The union budget for 2012-13 is INR 14,90,925 crores. So the scale of government funding is around 10-15% of the GDP. About a […]

  4. […] If you want to compare this with the last year’s projected budget, you could take a look at the post on the union budget of 2012. […]

  5. […] did show the same concern during his tenure as finance minister: the budgets of 2010, 2011, 2012 did show year-by-year increase in rupees. As a fraction of the annual budget, it has remained […]

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