Highlights of Annual Monetary Policy, 2012/13

Amidst the rising inflation worries, the much awaited key policy rate cut in the annual monetary policy has been announced. After a gap of three years, Reserve Bank Governor D Subbarao on April 17 slashed short term lending rate, a move that will reduce the cost of home, auto and corporate loans.
.The followings are the highlights of the Annual Monetary Policy for 2012-13 announced by Reserve Bank of India (RBI) Governor D Subbarao on Tuesday:

MAIN HIGHLIGHTS
* Repo rate cut 50 bps to 8.00 percent with immediate effect
* Reverse repo rate adjusts 50 bps lower to 7.00 percent
* Marginal standing facility rate adjusts 50 bps lower to 9.00 percent
* Cash Reserve Ratio unchanged at 4.75 percent
* Bank Rate adjusts to 9 percent with immediate effect
* MSF borrowing cap raised to 2 percent vs 1 percent of banks’ NDTL
* Banks can access MSF even if they hold excess SLR
* FY13 GDP growth projected at 7.3 percent
* March 2013 inflation projected at 6.5 percent

STANCE* Stance guided by slowdown in growth, fall in inflation
* Growth expected to have recovered slightly in Jan-Mar
* Economy clearly operating below post-crisis growth trend
* Headline, core inflation moderated significantly by March
* In Dec-Jan, inflation fell due to decline in food prices
* In Feb-Mar, fall in inflation rate was driven by core components
* Easing core components of inflation reflect demand slowdown
* Stance aimed at adjusting policy rates with growth moderation
* Stance to resist risk of inflation pressures re-emerging
* Stance aimed to give more liquidity cushion to financial system
* Limited space for further reduction in policy rates
* See policy steps stabilising growth near post-crisis trend
* Expect policy steps to contain risk of inflation
* See policy steps to contain resurge of inflation expectations
* See policy steps boosting liquidity cushion available to system
* To announce mid-quarter review of policy on Jun 18
* To announce first quarter review of FY13 policy on Jul 31

INFLATION* Upside risks to inflation persist
* Not much room for policy easing without adding inflation risk
* March inflation at 6.9 percent close to 7.0 percent projection
* Inflation scenario stays challenging going forward
* Food inflation has risen after a seasonal decline
* Inflation in protein-based items remains in double digits
* Crude oil prices expected to remain high
* Pass-through of global oil prices incomplete
* Element of suppressed inflation in coal, electricity
* Core inflation seen contained on effect of past rate hikes
* Companies’ performance shows pricing power has reduced
* Limited risk of administered prices translating to inflation
* Will condition perception of inflation in 4.0-4.5 percent
* Pricing power in the economy currently abating
* Need to up fuel prices to reflect cost of production
* For macroeconomic stability, need to link fuel prices to costs
* Food inflation likely to remain under pressure
* Headline inflation has moderated significantly below 7 percent
* Consumer price inflation shows price pressure still high
* Core inflation below 5 percent for first time in 5 years
GROWTH* Cut repo rate as growth below post-crisis trend rate
* Cut rate as growth decelerated significantly in Oct-Dec
* Slowing growth contributed to fall in core inflation
* Deviation of growth from trend is modest
* FY12 GDP growth of 6.9 percent close to RBI’s projection of 7.0 percent
* Assuming normal monsoon, FY13 farm growth seen near trend
* Industry expected to perform better in FY13 vs FY12
* Leading indicators suggest turnaround in IIP growth
* Trend rate of growth has declined from pre-crisis peak
* Economy may revert to post-crisis trend growth in FY13
* Supply bottlenecks main reason for trend growth decline
* Strategy to focus on supply constraints is imperative
* Crude oil price major risk to FY13 growth projection
* Fiscal situation risk to FY13 growth projection
* Current account deficit very high, unsustainable
* Financing current account deficit will pose major challenge
* Large government borrowing can crowd out credit to private sector
LIQUIDITY* Liquidity conditions moving towards RBI comfort one
* MSF limit hike to provide more liquidity comfort
* Will take proactive steps on liquidity, if required
BANKS* Banks’ penetration in rural areas has increased manifold
* To mandate SLBCs to chart roadmap to cover un-banked areas
* Need brick-mortar bank back up for financial inclusion initiatives
* Studying feedback on Nair report on priority sector loans
* Sets up panel to review short-term co-op credit structure
* To issue norms on new urban co-op bank licences end-Jun
* IBA group studying pending Damodaran panel recommendations
* Banks cannot levy prepayment fee on floating rate home loans* Banks must have board-approved policy on deposit pricing
* Wide variations in retail-bulk deposit rates* Variation in bulk-retail deposit rates must be minimal
* High bulk deposit rates unfair to retail depositors
* Banks must start providing unique customer identification code
* Banks must offer basic savings accounts under financial inclusion
* Final Basel-III capital norms implementation by end-April
* To issue final Basel-III risk management norms by end-May
* Cut banks’ exposure cap to gold loan NBFCs to 7.5 percent vs 10 percent
* Banks must have internal aim for loans to gold loan NBFCs
* Sets up working group to study NBFCs lending against gold
* Working group on gold loan NBFCs to submit report July
* To issue norms on early non performing assets identification soon
* Banks must have board level policy on unclaimed deposits
* Draft norms on NBFC regulatory framework by end-June
* Panel on bank supervision to submit report end-July
* Final norms on securitisation by end-April
* Witnessed significant increase in gold loans by NBFCs
* To issue draft norms on overseas investment by core investment companies April
* Working group to study more long-term loan rate products by banks
* Banks loan recast working panel to submit report end-July
* Report of working group on credit pricing by end-July
* Panel to study feasibility of long-term fixed rate loan products

Highlights of Railway Budget 2012-13

Union Railway Minister Dinesh Trivedi presented the Railway Budget in Parliament on March 14 2012.

The highlights of Railway Budget 2012

1. 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.
2.   Minimum fare and platform tickets to cost Rs 5.
3.  50 per cent concession in fare in AC-2, AC-3, Chair Car and Sleeper classes to patients suffering from ‘Aplastic Anaemia’ and ‘Sickle Cell Anaemia’.
4.  Extending the facility of travel by Rajdhani and Shatabdi trains to Arjuna Awardees.
5.  Travel distance under ‘Izzat Scheme’ to increase from 100 kms to 150 kms.
6.  SMS on passenger mobile phone in case of e-ticket to be accepted as proof of valid reservation.
7.  Introduction of satellite based real time train information system (SIMRAN) to provide train running information to passengers through SMS, internet, etc.
8.  On board passenger displays indicating next halt station and expected arrival time to be introduced.
9.  Installation of 321 escalators at important stations of which 50 will be commissioned in 2012-13.
10.  Introduction of regional cuisine at affordable rates; launching of Book-a-meal scheme to provide multiple choice of meals through SMS or email.
11.  Introduction of coin/currency operated ticket vending machines.
12.  Upgradation of 929 stations as Adarsh Stations including 84 stations proposed in 2012-13; 490 stations have been completed so far.
13.  Specially designed coaches for differently-abled persons to be provided in each Mail/Express trains.
14.  Introduction of Rail Bandhu on-board magazines on Rajdhanis, Shatabdis and Duronto trains.
15.  Setting up of AC Executive lounges at important stations
16.  75 new Express trains to be introduced.
17.  21 new passenger services, 9 DEMU services and 8 MEMU services to be introduced.
18.  Run of 39 trains to be extended.
19.  Frequency of 23 trains to be increased.
20.  75 additional services to run in Mumbai suburban; 44 new suburban services to be introduced in Kolkata area, 50 new services to be introduced in Kolkata Metro; 18 additional services in Chennai area.
21.  725 km new lines, 700 km doubling, 800 km gauge conversion and 1,100 km electrification targeted in 2012-13.
22.  Rs 6,872 cr provided for new lines, Rs 3,393 cr for doubling, Rs 1,950 cr for gauge conversation, Rs 828 cr for electrification
23.  Highest ever plan outlay of Rs 60,100 cr
24.  Rae Bareli coach factory manufactured 10 coaches in 2011-12; phase-II of the factory would be commissioned in 2012-13.
25.  A wagon factory to be set up at Sitapali (Ganjam District of Odisha)
26.  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.
27.  Setting up of a factory at Shyamnagar in West Bengal to manufacture next generation technology propulsion system for use in high power electric locomotives.
28.  Creating Missions as recommended by Pitroda Committee to implement the modernization programme.
29.  Setting up of Railway Tariff Regulatory Authority to be considered.
30.  New Board Members for Safety/Research and PPP/Marketing to be inducted.
31.  Rail-Road Grade Separation Corporation to be set up to eliminate level crossings.
32.  Indian Railway Station Development Corporation to be set up to redevelop stations through PPP mode.
33.  Logistics Corporation to be set up for development and management of existing railway goods sheds and multi-modal logistics parks.
34.  National High Speed Rail Authority to be set-up.
35.  Pre-feasibility studies on six high speed corridors already completed; study on Delhi-Jaipur-Ajmer-Jodhpur to be taken up in 2012-13.
36.  Introduction of a ‘Green Train’ to run through the pristine forests of North Bengal.
37.  Setting up of 200 remote railway stations as ‘green energy stations’ powered entirely by solar energy.
38.  Providing solar lighting system at 1,000 manned level crossing gates.
39.  2,500 coaches to be equipped with bio toilets.
40.  Setting up of 72 MW capacity windmill plants in Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and West Bengal.
41.  Installation of Integrated Security System at all 202 identified stations to be completed in 2012-13.
42.  Escorting of trains by RPF/GRP extended to 3,500 trains.
43.  Integration of RPF helpline with the All India Passenger Helpline.
44.  Setting up of a Railway Safety Authority as a statutory regulatory body as recommended by Kakodkar Committee
45.  Three ‘Safety Villages’ to be set up at Bengaluru, Kharagpur and Lucknow for skill development for disaster management.
46.  Over one lakh persons to be recruited in 2012-13 ��” backlog of SC/ST/OBC and other categories to be wiped off.
47.  Introduction of a wellness programme for railway staff at their work places.
48.  Ensuring proper rest for skilled and technical staff including the running crew.
49.  Institution of ‘Rail Khel Ratna’ Award for 10 rail sports-persons every year.
50.  New coaching terminal at Naihati, the birth place of Rishi Bankim Chandra Chattopadhyay commemorating him on 175th Birth Anniversary.
51.  Project to connect Agartala with Akhaura in Bangladesh to be taken up in 2012-13.
52.  Freight loading of 1,025 MT targeted; 55 MT more than 2011-12
53.  Passenger growth targeted at 5.4 per cent.

Highlights of Annual Financial Statement 2012-13, delivered by union finance minister of India.

Following are some of the key highlights of the Union Budget 2012-13, presented by Finance Minister Pranab Mukherjee in the Parliament on March 16 2012.
Tax burden for individuals to come down: Income tax exemption limit raised from Rs 1,80,000 to Rs 2,00,000; 10 per cent tax for 2-5 lakh income; 20 per cent for 5-10 lakh and 30 per cent beyond Rs 10 lakh; Savings bank account interest up to Rs 10,000 exempted from tax.
Many services and goods to cost more: No change in corporate tax rate, but standard rate of excise duty, as also service tax rates, raised from 10 per cent to 12 per #162 No change in peak customs duty of 10 per cent on non-agri goods.
Large cars, imported bicycles, cigarettes, bidis and some imported jewellery to cost more; branded silver jewellery may get cheaper.
Boost for capital markets: Securities Transaction Tax on cash delivery reduced by 25 per cent to 0.1 per #162 A new Rajiv Gandhi Equity Saving Scheme to allow income tax deduction to retail investors in stocks.
Economy expected to gain ground: GDP growth rate pegged at 7.6 per cent in 2012-13; Subsidy Expenditure to be checked and higher tax revenues targetted; Rs 30,000 crore to be raised from disinvestment.
Capital boost to financial and infrastructure sectors: Rs 15,888 crore to be provided for capitalisation of public sector banks and financial institutions; Infrastructure investment of Rs 50 lakh crore in 12th period, with half from private sect#8744 Tax free bonds of Rs 60,000 crore to be allowed for financial infrastructure projects.
Fight against black money: White paper on black money in current session of Parliament; Introduction of compulsory reporting requirement for assets held abroad; tax collection at source on high-value cash purchase of bullion, jewellery, immovable property and trading in coal, lignite and iron ore.
Greater scrutiny of closely-held companies for funds; Taxation of unexplained money, credits, investments, expenses at highest rate of 30 per cent irrespective of income slab.
Tax reforms: Direct Taxes Code (DTC) at earliest; GST network to be operational by August 2012; Central Excise and Service Tax being harmonized. A General Anti-Avoidance Rule (GAAR) to be introduced to counter aggressive tax avoidance.
Attracting foreign funds: Efforts on to allow FDI in multi-brand retail and permitting foreign airlines invest in domestic players; External borrowings to the extent of USD one billion for aviation companies; Qualified Foreign Investors to get access to corporate bond market.
Tax relief for stressed sectors: Sectors like agriculture, infrastructure, mining, railways, roads, civil aviation, manufacturing, health and nutrition, and environment to get duty relief; Turnover limit for compulsory tax audit for SMEs raised from Rs 60 lakh to Rs 1 crore.
Farming for growth: Target for agricultural credit raised to Rs 5,75,000 crore; Interest subvention for short-term crop loans to farmers at 7 per cent interest continues; additional 3 per cent for prompt paying farmers.
Financial Highlights of Budget 2012-12:

• Direct proposals to give in net revenue loss of Rs 4,500 crore and net gain of Rs 45,940 crore from indirect taxes, resulting into a net gain of Rs 41,440 crore.
• Fiscal deficit targetted at 5.1 per cent of GDP in 2012-13, down from 5.9 per cent in 2011-12; Central Government debt at 45.5 per cent of GDP.
• Total expenditure budgeted at Rs 14,90,925 crore; plan expenditure at Rs 5,21,025 crore, 18 per cent higher than 2011-12 budget; non-plan expenditure at Rs 9,69,900 crore.
• Gross Tax Receipts estimated at Rs 10, 77,612 crore, 15.6 per cent higher than original budget estimates and 19.5 per cent over the revised estimates for 2011-12.
• Net tax to the Centre in 2012-13 estimated at Rs 7,71,071 crore; Non-Tax Revenue Receipts estimated at Rs 1,64,614 crore and Non-debt Capital Receipts at Rs 41,650 crore.
• Total expenditure for 2012-13 budgeted at Rs 14,90,925 crore, including Rs 5,21,025 crore of Plan Expenditure and Rs 9,69,900 crore as Non-Plan Expenditure.
• Defence services get Rs 1,93,407 crore; any further requirement to be met.