Saturday, February 28, 2015

General Budget 2015-16

Deficits, GDP growth, Inflation, Disinvestment
  1. Fiscal Deficit - will meet the target of 4.1 % of GDP in 2014-15. Set a target of 3.9 % of GDP for 2015-16 fiscal year. And a final goal of 3 % of GDP (as set by FRBM Act)
  2. Current Account Deficit (CAD) - below 1.3 %
  3. Revenue Deficit seen at 2.8 % of GDP
  4. GDP growth for 2015-16 will rise to 8 - 8.5 %, and double-digit in subsequent years (new GDP method). GDP growth for 2014-15 is 7.4 % and 2013-14 is 6.9 %
  5. Consumer Inflation (CPI) to remain close to 5 % by March, opening room for more monetary policy easing. Objective of keeping inflation below 6 %
  6. Disinvestment target of Rs. 410 billion from stake sales in companies in 2015-16

  1. Income-Tax (I-T) No change in I-T slab. Deduction limit raised to Rs. 4,44,200 a year for an individual (meaning an individual tax payer can claim tax benefits for up to the deduction limit in addition to the tax exemption, which is unchanged)*
  2. Wealth tax is abolishedwhereas additional 2 % surcharge for the super rich with income of over Rs. 1 crore, and firms with income of over Rs. 10 crore
  3. Corporate tax to be reduced to 25 % (from 30 %) over next 4 years (aiming to up employment generation)
  4. 100 % exemption for contribution to 'Swachh Bharat', apart from Corporate Social Responsibility (CSR)
  5. Service Tax and Education cess increased to 14 % (from 12.36 %)
  6. General Anti-Avoidance Rules (GAAR) deferred by 2 years (GAAR framed to minimize tax avoidance)

Financial Sector Reforms
  1. Forward Markets Commission (FMC) (commodity market regulator) to be merged with SEBI
  2. NBFCs (registered with RBI) having minimum asset size of Rs. 500 crore to be considered as 'Financial Institutionsunder SARFAESI Act, 2002 - enabling them to fund Small and Medium Scale Enterprises (SMEs) and mid-corporate businesses.
  3. New bankruptcy code
  4. To amend RBI Act and provide for a Monetary Policy Committee
  5. To establish an Autonomous Bank Board Bureau to improve management of Public Sector Banks (PSBs)

  1. Rural Infrastructure Development Bank - Rs. 25,000 crore
  2. Micro Irrigation Programme - Rs. 5,300 crore
  3. Farmer's credit - target of Rs. 8.5 lakh crore

  1. Investment in Infrastructure sector - Rs. 70,000 crore
  2. Plans to set up National Investment Infrastructure Fund (NIIF)
  3. Tax-free Bonds for projects in rail, road and irrigation
  4. Atal Innovation Mission to be established to draw on expertise of entrepreneurs and researchers to foster scientific innovations - allocated Rs. 150 crore
  5. Government proposes to set up 5 "Ultra Mega" Power projects - each of 4,000 MW
  6. Will need to build additional 1,00,000 km of road
  7. Ports in public sector will be encouraged to corporatise under Companies Act

  1. AIIMS Jammu and Kashmir, Punjab, Tamil Nadu, Himachal Pradesh, Bihar, Assam (total 6)
  2. IIT - Karnataka; Indian School of Mines (ISM) in Dhanbad to be upgraded to IIT (total 2)
  3. IIM - Jammu and Kashmir, Andhra Pradesh (total 2)
  4. PG Institute of Horticulture - Amritsar in Punjab
  5. University of Disability Studies - Kerala
  6. Center of film production, animation and gaming - Arunachal Pradesh

  1. Allocation of Rs. 2,46,726 crore (increased by 9.87 % from last year)
  2. Focus on Make in India for quick manufacturing of Defense equipment

Welfare Schemes
  1. Swachh Bharat Abhiyan - 50,000 toilets
  2. Goods and Services Tax (GST) - to be implemented by April 2016
  3. JAM Trinity - Jan Dhan Yojana, Aadhar, Mobile - for Direct Benefit Transfer (DBT) to better serve poor and reduce leakage of subsidiesDBT will be further expanded from 1 crore to 10.3 crore
  4. National Skills Mission to enhance employability of rural youth
  5. MUDRA bank - will refinance micro-finance organizations to encourage first generation SC/ST entrepreneurs
  6. Housing for all - by 2020
  7. Atal Pension Yojana - government will contribute 50 % of the premium limited to Rs. 1,000 a year
  8. Universal Social Security system - for all Indians
  9. Senior Citizens Fund - government to use Rs. 9,000 crore unclaimed funds in PPF/EPF
  10. MGNREGA - Rs. 5,000 crore additional allocation
  11. New scheme for physical aids and assisted living devices for people aged over 80
  12. Upgradation of 80,000 secondary schools

  1. Development schemes for - Goa churches and convents, Hampi, Elephanta caves, Rajasthan forests, Leh palace, Varanasi, Jalianwala Bagh, Qutb Shahi tombs at Hyderabad
  2. Visa on Arrival - increased to 150 countries (from 43 countries) in a phase-wise manner

Renewable Energy
  1. Electric cars production - Rs. 75 crore
  2. Renewable energy (RE) target for 2022 total 1,75,000 MW (including 1,00,000 MW of solar power, 60,000 MW of wind power, 10,000 MW of biomass energy, 5,000 MW from small hydroelectric projects) - (currently, India has capacity of 33,000 MW clean energy)

  1. Sovereign Gold Bond - as an alternative to purchasing gold metal
  2. New scheme - for depositors of gold to earn interest and jewellers to obtain loans on their metal accounts
  3. To develop an Indian Gold Coin - which will carry the Ashoka Chakra on its face, to reduce the demand for foreign coins and recycle the gold available in the country

Claim Tax Benefits -

  1. Deductions under Section 80C - Rs. 1.5 lakh
  2. Deductions under Section 80CCD for contribution to NPS - Rs. 50,000
  3. Interest on house property loan - Rs. 2 lakh
  4. Exemption with new transportation allowance of Rs. 1,600 per month - Rs. 19,200
  5. New deductible Health Insurance premium - Rs. 25,000
Total = Rs. 4,44,200

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National Income - Part I

National Income is the total value of all the new goods and services produced as final output of a country in a year.

First try to understand how a product is manufactured and sold.

Typically, goods are produced in several stages. At one stage, raw materials are converted by firms, and then sold to another firms for next stage. Value is added at each intermediate stages. At the final stage, a retail selling price is tagged with the final product. Note that the retail price reflects the value added in terms of all the resources used in all the previous stages of production.

Final goods
To avoid the problem of double counting, only the value at the final stage, i.e., the retail price of the final good is included (not the value added in all the intermediate stages - the cost of production and profit)

Therefore, while considering National Income, the value of all the final goods (and services) produced in a year in a country is calculated.

For example, suppose a car has a retail price of Rs. 5 lakh. This retail price includes Rs. 2.5 lakh for componentsRs. 50,000 for assembly of components, and Rs. 1 lakh for marketing purpose, and also a Profit of Rs. 1 lakh.
To avoid double-counting, the national income accounts only the value at the final stage (in this case Rs. 5 lakh, i.e, the selling price of the car)

Methods of calculating National Income
Consider the following example first -
Suppose, you bought a book worth Rs. 100. It means, your expenditure is Rs. 100income of the bookseller is Rs. 100, and the value of the book is Rs. 100.
Therefore, the transaction involves elements -

  • Expenditure by purchaser
  • Income of seller
  • Value of goods
All of the transactions can be looked at in the same way, making 3 methods of calculating National Income -

  1. Production Method - This method is based on the total production of a country during a year. The combined value of the new and final output produced in all sectors of the economy (including foreign income of production) is considered to determine the national income.
  2. Income Method - This method adds all incomes received by the factors of production generated in the economy during a year. It includes wages from employment, profits to firms, interests to lenders, rents to landlords, and income from abroad.
  3. Expenditure Method - This method adds all spending in the economy by households and firms on final goods and services and spending by government.

to be continued..

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Thursday, February 26, 2015

Clean Note Policy

Problems to deal with

  • Stapling on note bundles
  • Writing number of note pieces in loose packets on watermark windows, disfiguring the watermark impression and rendering it difficult for easy recognition
  • Banks do not sort notes into - Re-issuables and Non-issuables - while issuing to public
  • Issuing Soiled notes to public
- Therefore to address these problems of currency handling, RBI came up with its 'Clean Note Policy'

Clean Note Policy
  • No stapling of any note packet and instead secure note packets with paper bands
  • Banks should sort notes into - Re-issuables and Non-issuables
  • Banks should forthwith stop writing of any kind on watermark window of bank notes
  • Issue only Clean Notes to public

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Tuesday, February 24, 2015

Soiled and Mutilated Notes

Soiled Notes
Soiled notes are those notes - 
  • became dirty
  • slightly cut
  • in the denomination of Rs. 10 and above, which are in two pieces. However, the cut should not pass through the number panels
Soiled notes can be exchanged at -
  • counters of public sector bank (PSB) branch
  • currency chest branch of a private sector bank
  • Issue office of RBI
Note that, there is no need to fill any type of form to exchange Soiled Notes. Also note that the exchange is in full value, meaning you will get the whole amount of the soiled note in exchange.

Mutilated Notes
Mutilated notes are those notes -
  • are in pieces (more than two)
  • essential portions are missing. Essential portions are - name of issuing authority, guarantee, promise clause, signature, Ashoka Pillar emblem / portrait of Mahatma Gandhi, water mark
Mutilated notes are exchanged at the same places described above (for Soiled notes), without filling any type of form

However, note that the exchange value can be in full or part, according to RBI (Note Refund) Rules. (depending on the mutilation of the notes, you will get the value)

Also, there is another exchange facility for mutilated notes, referred to as Triple Lock Receptacle (TLR). (Put the mutilated notes in a TLR cover along with details, and deposit it in the TLR box at RBI Issue Office. Amount will be returned by means of a bank draft or pay order). 

Excessively Soiled, Brittle, Burnt Notes
Notes which have become excessively soiled, brittle, or burnt can be exchanged only at Issue Office of RBI. (need to approach to the Officer-in-charge of the Claims Section, Issue Department of RBI).

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