Infrastructure investment in 11th Plan to be close to $500 bn: Montek

The Planning Commission on Monday said investment in the infrastructure sector in the Eleventh Five-Year Plan (2007-12) will be close to the target of $500 billion, thanks to a better-than-expected show by the telecom sector.

“It does look as if we will achieve (investment in infrastructure sector) not fully, but very close to USD 500 billion…This will be primarily because of over achievement in telecom,” Planning Commission Deputy Chairman Montek Singh Ahluwalia said ahead of the government-sponsored meet on infrastructure, which will be chaired by Prime Minister Manmohan Singh.

The Commission had set a $500 billion target of investment in the infrastructure sector during the Eleventh Plan Period.

GDP

Replying to questions on growth prospects during the Eleventh Plan, Mr. Ahluwalia said it was likely to be 8.5 per cent in the next fiscal 2010-11 and nine per cent during 2011-12, the last year of the Eleventh Plan.

Following the global crisis, the growth rate during 2008-09 slipped to 6.7 per cent from over nine per cent during the three preceding years. It is estimated to be 7.2 per cent during the current fiscal.

The growth target for the plan period will be considered at a meeting of the full Planning Commission scheduled tomorrow evening chaired by the Prime Minister.

For the Eleventh Plan, the Commission had set a growth target of 9 per cent, which is not likely to be achieved mainly because of the impact of the global crisis on the country’s growth.

Infrastructure

Referring to the developments in the infrastructure sector, Mr. Ahluwalia said telecom sector has been doing exceedingly well and the performance would overshoot the target, both in urban and rural areas.

As far as the road sector is concerned, he said, the contracts for building 4,000 km would be awarded during the current fiscal, which would be twice the number of contracts given in the preceding two years.

Contracts for constructing 7,000 km roads are likely to be awarded during 2010-11, he said, adding the initial problems with regard to concession agreements have been sorted and the private investors have started showing interest in the sector.

One area which has not been doing as well as the other sectors is the port, Mr. Ahluwalia added.

The Plan panel chief further said the power sector, in terms of capacity addition, would do better than the Tenth Plan.

“We think we have a good chance to add 62,000 MW of capacity during the Eleventh Plan period, this could be more if very special efforts are made, but we are not taking credit for that,” Mr. Ahulwalia said.

“We think 62,000 is definitely lower than the target of 78,000 MW, but it is almost three time of what was actually created (21,000 MW) in the Tenth Five Year Plan (2002-07),” he said.

He pointed out, “It is the private sector capacity addition which exceeds target. The capacity expansion in private sector would be 120 per cent of the target whereas it would below the target in the public sector.”

The full Plan panel meeting tomorrow will also consider and approve the mid-term appraisal of the Eleventh Plan, the official sources said.

The approval of the mid-term appraisal is significant as after the full Plan panel’s nod, it would go to the National Development Council. The Council is expected to meet next month, sources said.

Relief to tax-payers in budget; Re.1 hike in petrol, diesel

The 2010-11 general budget on Friday provided considerable relief to income tax payers by raising the slabs at two levels but hiked the central excise duty on non-petroleum products across the board from 8 to 10 per cent and the basic duty on crude and petroleum products besides effecting an one-rupee increase per litre on petrol and diesel.

The entire opposition walked out of the Lok Sabha during the presentation of budget by Finance Minister Pranab Mukherjee, dubbing it “highly inflationary” as he partially rolled back the stimulus by hiking the ad valorem component of excise duty on large cars and multi-utility vehicles by two per cent to 22 per cent.

The budget also raised the specific rates of duty on portland cement and cement clinker. The basic duty of 5 per cent on crude petroleum, 7.5 per cent on diesel and petrol and 10 per cent on other refined products is being enhanced.

The central excise duty on petrol and diesel is being enhanced by Re. 1 per litre.

The proposals relating to customs and central excise are estimated to result in a net revenue gain of Rs. 43,500 crore for the year. The proposals for service tax, in which government plans to bring in some more services, will result in a net revenue gain of Rs 3,000 crore for the year.

While direct tax proposals are expected to result in a loss of Rs 26,000 crore for the year, those relating to indirect tax are estimated to result in a net revenue gain of Rs 46,500 crore.

Taking into account the concessions and measures to mobilise additional resources, the overall revenue gain is estimated to be Rs 20,500 crore for the year.

The basic threshold limit for income tax exemption will remain at Rs 1.60 lakh. Under the new proposal, 10 per cent tax will be levied between Rs 1,60,001 and Rs 5,00,000, 20 per cent on incomes between Rs 5,00,001 and Rs 8,00,000 and 30 per cent above Rs 8,00,000.

The present income tax slabs and rates are 10 per cent for income between Rs 1,60,001 and Rs 3,00,000, 20 per cent for income between Rs 3,00,001 and Rs 5,00,000 and 30 per cent for income above Rs 5,00,001.

Proportionately, similar changes have been made in the taxes related to women and senior citizens aged above 65 years.

Mr. Mukherjee also gave another relief to individual tax payers by raising the existing limit of Rs 1,00,000 on tax savings by an additional amount of Rs 20,000 for investments in long-term infrastructure bonds.

Contributions to Central Government Health Scheme (CGHS) have also been allowed as deductions within the overall ceiling for tax rebate besides contributions to health insurance schemes which are currently allowed as deductions under the Income Tax Act.

The budget also proposed a hike in defence expenditure from Rs 1,41,703 crore to Rs 1,47,344 crore, including Rs 60,000 for capital expenditure.

In the Budget Estimates for 2010-11, gross tax receipts are estimated at Rs 7,46,651 crore while the non-tax revenue receipts are estimated at Rs 1,48,118 crore.

Total expenditure is placed at Rs 11,08,749 crore, which is an increase of 8.6 per cent over the total expenditure in Budget Estimates of 2009-10. The plan and non-plan expenditures in Budget Estimates in 2010-11 are estimated at Rs 3,73,092 crore and Rs 7,35,657 crore respectively.

The fiscal deficit for 2010-11 has been pegged at 5.5 per cent and the rolling targets for 2011-12 and 2012-13 have been pegged at 4.8 per cent and 4.1 per cent respectively.

The fiscal deficit of 5.5 per cent of GDP in 2010-11 works out to Rs 3,81,408 crore. Taking into account various other financing items for fiscal deficit, the actual net borrowing of the government in 2010-11 would be of the order of Rs 3,45,010 crore.

In direct taxes, the Finance Minister proposed to reduce the current surcharge of 10 per cent on domestic companies to 7.5 per cent but at the same time raised the rate of Minimum Alternate Tax (MAT) from 15 per cent to 18 per cent of book profits.

In indirect taxes, Mr. Mukherjee made structural changes in the excise duty on cigarettes, cigars and cigarillos, coupled with some increase in rates. He also proposed to enhance excise duty on all non-smoking tobacco such as scented tobacco, snuff and chewing tobacco.

In addition, he proposed to introduce a compounded levy scheme for chewing tobacco and branded unmanufactured tobacco based on the capacity of pouch-making machines.

Attempting to pay focussed attention to agriculture and related sectors, the Finance Minister proposed to provide project import status with a concessional import duty of 5 per cent for setting up mechanised handling systems and pallet-racking systems in mandis and warehouses for foodgrain and sugar as well as full exemption from service tax for installation and commissioning of such equipment.

A similar status on customs duty with full exemption from service tax will also be extended to initial setting up and expansion of cold storage, cold room and processing units for such produce.

Extending his goodies in excise duties in certain sectors, he gave full exemption to toy balloons and reduction in basic customs duty on long pepper, asafoetida and excise duty on goods covered under Medicinal and Toilet Preparations Act.

The Service Tax net is being expanded to include domestic and international air journeys of all classes, health check-up undertaken by hospitals for employees of business entities and health services provided under health insurance schemes offered by insurance companies.

Mr. Mukherjee said the budget aimed at focussing on inclusive growth and ensuring food security. These concerns for ‘aam admi’ have gone hand in hand for credible measures for improving investment climate, strengthening infrastructure and fiscal consolidation.

As the country looks to “quickly revert” to high GDP growth path despite uncertain times, concerns for inclusive growth targeting the disadvantaged sections form the defining features of the budget, he said.

Many new initiatives have been introduced for sustained and inclusive growth. These include the setting up of Mahila Kisan Sashaktikaran Pariyojana (Women Agriculturist Empowerment Scheme), Financial Stability and Development Council, Gold Regulatory Authority, National Mission for Delivery of Justice and Legal Reforms and National Energy Fund.

As part of improving investment environment, the minister said a number of steps have been taken to simplify the foreign direct investment scheme by making it user-friendly by consolidating all regulations and guidelines into one comprehensive document.

Towards strengthening the banking system, the Budget provides for Rs 16,500 crore as Tier-I capital to ensure that PSU banks are able to attain a minimum eight per cent Tier-I capital by March 2011.

In agriculture, a four-pronged strategy would be followed to spur growth in the sector. The budget provides for Rs 400 crore for extending Green Revolution to eastern regions, including Bihar, Chhattisgarh, Jharkhand, eastern Uttar Pradesh, West Bengal and Orissa.

The budget provides Rs 1,73,552 crore for infrastructure, accounting for 46 per cent of the total plan allocation. The allocation for road transport is being raised by over 13 per cent from Rs 17,520 crore to Rs 19,894 crore.

The plan allocation for power sector is being more than doubled from Rs 2230 crore in 2009-10 to Rs 5130 crore in 2010-11.

Under inclusive development, the budget allocates Rs 1,37,674 crore, representing 37 per cent of the total outlay to be spent on social sector programmes.

Plan allocation for school education is being increased from Rs 26,800 crore to Rs 31,036 crore to support the children’s right to free and compulsory education. In addition, states will have an access to Rs 3,675 crore for elementary education under the Finance Commission grant for 2010-11.

Rs 66,100 crore have been provided for rural development.

NREGA gets Rs 40,100 crore and Bharat Nirman programme Rs 48,000 crore.

Indira Awas Yojana gets Rs 10,000 crore. The unit cost under this scheme is being raised to Rs 45,000 in plain areas and Rs 48,500 in hilly areas to cover the increase in cost of construction of houses.

India predicts economic growth at 7.2 p.c. for 2009-10

The per capita income in real terms is likely to expand 5.4 per cent to Rs.33,540

 India on Monday forecast its economic growth for this fiscal at 7.2 per cent, as against 6.7 per cent achieved in the previous fiscal, despite a 0.2 percent declined predicted in farm output.

The advance estimates of the country’s gross domestic product released by the Central Statistical Organisation (CSO) forecasts a growth of 9.9 percent in services and 8.9 percent in manufacturing — the highest among the eight broader economic activities.

Mining and quarrying comes next with an 8.7 percent expansion followed by 8.3 percent for trade, hotels, transport and communications, and 8.2 percent each for energy and water, and social and community services.

The per capita income in real terms is also likely to expand 5.4 percent to Rs.33,540 compared to Rs.31,821 in the previous fiscal, said a statement from the agency, under the ministry of statistics and programme implementation.

“These advance estimates are based on anticipated level of agricultural and industrial production, analysis of budget estimates of government expenditure and performance of key sectors like, railways, transport other than railways, communication, banking and insurance, available so far.”

The percentage growth under the eight categories of business activities for this fiscal is as under, with figures for previous fiscal in brackets:

— Overall gross domestic product: 7.2 (1.6)

— Agriculture, forestry and fishing: —0.2 (1.6)

— Mining and quarrying: 8.7 (1.6)

— Manufacturing: 8.9 (3.2)

— Electricity, gas and water supply: 8.2 (3.9)

— Construction: 6.5 (5.9 )

— Trade, hotels, transport and communication: 8.3 (7.6)

— Financing, insurance, real estate business services: 9.9 (10.1)

— Community, social and personal services: 8.2 (13.9)