CONTENTS

1. SECURITIES TRANSACTION TAX 2. OTCEI 3. GST 4. DTC 5. FISCAL POLICY 6. DEFLATION 7. FOREX MARKET

9. RAILWAY BUDGET 10. NATIONAL & INTERNATIONAL ISSUES 11. STATE BUDGET HIGHLIGHTS 12. ECONOMIC SURVEY 2010-11 13. AND ITS IMPORTANCE

 SECURITIES TRANSACTION TAX Previously, there was a different way of computing tax on profit incurred on account of sale of shares, debentures, bonds, mutual funds units and other securities. The honorable Finance Minister, Mr. P Chidambaram (in the Finance (No. 2) Bill presented by him in the Union Budget 2004-05 brought significant amendments in the policy for taxation on financial securities with effect from the assessment year 2005-06. Securities Transaction Tax is a neat and efficient way of computing tax on profit incurred from the sale of securities Securities Transaction Tax is applicable at different rates on the value of the taxable securities transaction. Taxable securities

transaction, payable by both the buyer and the seller, refers to any transaction of securities entered into, in a recognized Stock Exchange in India
Definition of Securities As per section 2(h) of the Securities Contracts (Regulation) Act, 1956 (SCRA), Securities includes: Shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate; Derivative instruments, Units or any other instrument issued by any collective investment scheme to the investors in such schemes; Security receipt as defined in section 2(zg) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; Government securities, such other instruments as declared by the Central Government; and Rights or interest in securities.

Exemption from Capital Gains Short-term Capital Gains It is taxable at the rate of 10% before levy of 10% surcharge for individuals and HUF (having total taxable income of more than Rs. 8,50,000) and at the rate of 2.50% for others, plus a 2% education cess for all other taxpayers Long-term Capital Gains Long-Term Capital gains on all of the above mentioned securities is exempt from income tax under Section 10 (38) of the Income Tax Act, 1961

Note: Securities (not meeting the above mentioned stipulations) sold before/after the specified date would be taxable before the levy of surcharge and education cess. Definition of 'Over-The-Counter Exchange of India OTCEI' An electronic stock exchange based in India that is comprised of small- and medium-sized firms looking to gain access to the capital markets. The first electronic OTC stock exchange in India was established in 1990 to provide investors and companies with an additional way to trade and issue securities. This was the first exchange in India to introduce market makers, which are firms that hold shares in companies and facilitate the trading of securities by buying and selling from other participants.

 Features of OTCEI:1. Introduced Screen Based trading for the first time in Indian Stock market 2. Trading takes place through a network of computers of over the counter (OTC) dealers located at several places, linked to central OTC computers. 3. All the activities of OTC trading process were fully computerized. OTCEI Brokers There are three types of intermediaries in this exchange called Members, Dealers & Sponsors. The above three contribute to the activities of the exchange through trading and enabling listing of companies on the Exchange. Members and Dealers can carry out activities like trading, underwriting, market making and participation in bought out deals. Dealers can never sponsor an issue for listing. Sponsors can perform the function of sponsorship of issues, but they are not permitted to take part in secondary market activities. OTCEIs Fact It is the first screen based nationwide stock exchange in India. It is the first exchange to introduce Market Making in India. It is the first exchange to introduce Sponsorship of companies in India. It is the only exchange which allows the listing of companies with a paid-up capital below Rs. 3 crore. It is the only exchange which allows the companies with less than 3 year track record to tap capital market.

 It has introduced Weekly Settlement Cycle. It allows the Demat trading through NSDL. OTCEIs Trading in Unlisted Securities According to the Dave Committee report in 1996, it was suggested to allow trading the equity shares of unlisted companies. The exchange has also designed trading rules and market guidelines in this context and it has also been submitted to SEBI for approval.

OTCEI Grievance Cells OTC Exchange of India became the first Exchange in the country to open the Investor Grievance Cells (IGCs) at the four Metros. The cell was opened in 1993 and it handles complaints/queries from the investors against the brokers and/or OTCEI listed companies. Benefits: 1) The OTCEI has set up a national, automated screen based and ringless stock market to help companies raise finance from the capital market in a cost effective manner and provides a convenient and effective avenue of capital market investment for investors at large. 2) While the other recognised stock exchanges require that in order to have its securities listed the company should have an issued capital of not less than Rs. 3 crore but the minimum issued equity share capital of a company for eligibility for listing on the OTCEI is Rs 30 lakhs. 3) Listing on OTCEI is advantageous to companies because of the high liquidity of these securities, which is a result of compulsory market making, improved access and speed of transactions

resulting from the extensive network of electronically interlinked counters. 4) Companies can obtain a fair price of their securities by negotiating the same with the sponsors (who are members of the OTCEI) and save unnecessary issue expenses who will in turn offload the securities to the public. This mechanism is now popularly known as a BOUGHT OUT DEAL. 5) All deals will be entered into through remote terminals which will be connected to the mainframe computer of the OTCEI. Hence transactions to be completed quickly and investors can settle the deals across the counter within a few days. GOODS AND SERVICE TAX The introduction of the State GST will comprehensively include all State level Indirect Taxes and integrate taxes on Goods and Services for set-off relief, eliminating the burden of all cascading effects including that of existing State VAT on CENVAT & Service Tax. Advantages of Implication of GST in India It will evade the cascading effect in Indirect tax regime. In GST system, both Central and state taxes will be collected at the point of sale. Both components (the Central and state GST) will be charged on the manufacturing cost. It will result in a simple, transparent and easy tax structure; merging all levies on goods and services into one GST. It will result in a good administration of tax structure. It will increase tax collections due to wide coverage of goods and services. It will result in cost competitiveness of goods and services in Global market.

 It will reduce transaction costs for taxpayers through simplified tax compliance. GST System (a) Invoice System: In this system the GST (Input) can be claimed on the basis of acknowledgement of invoice, put aside the matter whether payment is cleared or not. The GST (Output) is accounted for when invoice is raised. Here the time of receipt of payment keeps no value. In our country prevailing system of sales tax on goods is an invoice system of VAT and it bears no value for taxpayer if he follows the cash basis of accounting or mercantile basis of accounting. This system has both the advantages & disadvantages. The benefit can be derived from this system is that the input credit is claimed without clearing payment. The disadvantage of the invoice system is that the payment for GST has to be made without receiving the payment. (b) Payment System: In this system the GST (Input) can be claimed at the time of making the payment for purchases and the GST (Output) is accounted for when the payment is cleared. In payment system, it has no value whether the assessee is preserving the accounts on cash basis or not. This system has both the advantages & disadvantages. The advantage is that no sooner the payment for the goods and/or services is received the Tax (output) should not be deposited. The disadvantage is that the GST (input) cannot be acclaimed without releasing the payment. The Taxes on services in

India are based on this payment system.

(c) Hybrid System: In this system GST (Input) can be claimed at the time of receiving invoice and GST (Output) is accountable on the ground of payment, if allowed by the law. In some countries the dealers have to put their option for this system or for a reversal of this system before adopting the same.

How GST Will Work The idea of Goods and Services Tax (GST) also known as Value Added Tax (VAT) is a tax on each financial contribute in the distribution chain. The taxable event is supply of goods and supply of services. Any transmit of right to utilize goods will comprise supply of goods, and, any supply not engaging goods will treat as supply of service. On the other hand, the tax is exercised on the value-added component of the supply. This is accomplished by working tax on the full fundamental value of the goods or service and giving set off/credit of tax undergo at previous stage, identified as input stage, to keep away from cascading effect. Thus, the entire supply chain up to final consumer gets taxed with in-built mechanism of input stage credit. In this system, the final consumer ends up bearing the full burden of tax without any set off benefit. The new Direct taxes code has been published by Finance ministry, which would replace current Income Tax structure from 2011-12. This draft is put for public opinion and will be presented to parliament by winter session. If passed, this will be applicable from Financial Year 2011-12. (Starting from 1st Day of April 2011). But transitional changes will be expected from 2010-11. This means the coming budget will bring in more measures to streamline the transition procedure. In General: Earlier Income Tax Act and Wealth tax Act are abolished and single code of Tax, DTC in place. Concept of Assessment year and previous year is abolished. Only the Financial Year terminology exists.

 Only status of Non Resident and Resident of India exits. The other status of resident but not ordinarily resident goes away. Earlier the terminology of assessee was meant for the person who is paying tax and/or, who is liable for proceeding under the Act. Now it has been added with 2 more definitions namely a person, whom the amount is refundable, and/or, who voluntarily files tax return irrespective of tax liability. No changes in the system of Advance Tax, Self Assessment Tax and also TDS. Government assessee is covered in Direct Tax Code. Even though they are not liable for Income Tax / Wealth Tax, Government Assessee are required to comply with provision of TDS and TCS. (Current act was not covered with Government Assessee) It removes categories of exempted income. Equity mutual fund, ELSS, term deposit, NSC, ULIPs, long term infra bonds, house loan, principal repayment, stamp duty & registration fees on purchase of house property will lose tax benefits. Only half of short-term capital gains are taxable Surcharge and education cess are abolished Income arising from HP deductions for rent and maintenance would be reduced from 30% to 20% of gross rent. Tax exemption on edu loan to be continued Tax on dividends will attract 5% tax Taxation of capital gains from property sale within 1 yr. is added to taxable salary HIGHLIGHTS OF DTC: 1. Tax exemption for Sr. citizen and individual remain in 30% itself without surcharge and cess 2. Invst. for approved funds & ins scheme raised @ 1.5 lakhs against 1.2 lakhs

3. Fringe Benefit tax will be charged to employee not to employer Meaning of Fiscal Policy The fiscal policy is concerned with the raising of government revenue and incurring of government expenditure. To generate revenue and to incur expenditure, the government frames a policy called budgetary policy or fiscal policy. So, the fiscal policy is concerned with government expenditure and government revenue. Fiscal policy has to decide on the size and pattern of flow of expenditure from the government to the economy and from the economy back to the government. So, in broader term fiscal policy refers to "That segment of national economic policy which is primarily

concerned with the receipts and expenditure of central government."

In other words, fiscal policy refers to the policy of the government with regard to taxation, public expenditure and public borrowings. Main Objectives of Fiscal Policy in India 1. Development by effective Mobilisation of Resources The principal objective of fiscal policy is to ensure rapid economic growth and development. This objective of economic growth and development can be achieved by Mobilisation of Financial Resources. The financial resources can be mobilized by:Taxation: Through effective fiscal policies, the government aims to mobilise resources by way of direct taxes as well as indirect taxes because most important source of resource mobilisation in India is taxation.

Public Savings: The resources can be mobilized through public savings by reducing government expenditure and increasing surpluses

of public sector enterprises.

Private Savings: Through effective fiscal measures such as tax benefits, the government can raise resources from private sector and households. Resources can be mobilized through government

borrowings by ways of treasury bills, issue of government bonds, etc., loans from domestic and foreign parties and by deficit financing.
2. Efficient allocation of Financial Resources The central and state governments have tried to make efficient allocation of financial resources. These resources are allocated for Development Activities which includes expenditure on railways, infrastructure, etc. While Non-development Activities includes expenditure on defence, interest payments, subsidies, etc. 3. Reduction in inequalities of Income and Wealth Fiscal policy aims at achieving equity or social justice by reducing income inequalities among different sections of the society. The direct taxes such as income tax are charged more on the rich people as compared to lower income groups. Indirect taxes are also more in the case of semi-luxury and luxury items, which are mostly consumed by the upper middle class and the upper class. The government invests a significant proportion of its tax revenue in the implementation of Poverty Alleviation Programmes to improve the conditions of poor people in society. 4. Price Stability and Control of Inflation One of the main objectives of fiscal policy is to control inflation and stabilize price. Therefore, the government always aims to control the

inflation by reducing fiscal deficits, introducing tax savings schemes, Productive use of financial resources, etc.

5. Employment Generation The government is making every possible effort to increase employment in the country through effective fiscal measure. Investment in infrastructure has resulted in direct and indirect employment. Lower taxes and duties on small-scale industrial (SSI) units encourage more investment and consequently generate more employment. Various rural employment programmes have been undertaken by the Government of India to solve problems in rural areas. Similarly, self employment scheme is taken to provide employment to technically qualified persons in the urban areas. 6. Balanced Regional Development Another main objective of the fiscal policy is to bring about a balanced regional development. There are various incentives from the government for setting up projects in backward areas such as Cash subsidy, Concession in taxes and duties in the form of tax holidays, Finance at concessional interest rates, etc. 7. Reducing the Deficit in the Balance of Payment Fiscal policy attempts to encourage more exports by way of fiscal measures like Exemption of income tax on export earnings, Exemption

of central excise duties and customs, Exemption of sales tax and octroi, etc. The foreign exchange is also conserved by providing fiscal benefits
to import substitute industries, imposing customs duties on imports, etc. The foreign exchange earned by way of exports and saved by way of import substitutes helps to solve balance of payments problem. In this

way adverse balance of payment can be corrected either by imposing duties on imports or by giving subsidies to export. 8. Capital Formation The objective of fiscal policy in India is also to increase the rate of capital formation so as to accelerate the rate of economic growth. An underdeveloped country is trapped in vicious (danger) circle of poverty mainly on account of capital deficiency. In order to increase the rate of capital formation, the fiscal policy must be efficiently designed to encourage savings and discourage and reduce spending. 9. Increasing National Income The fiscal policy aims to increase the national income of a country. This is because fiscal policy facilitates the capital formation. This results in economic growth, which in turn increases the GDP, per capita income and national income of the country. 10. Development of Infrastructure Government has placed emphasis on the infrastructure development for the purpose of achieving economic growth. The fiscal policy measure such as taxation generates revenue to the government. A part of the government's revenue is invested in the infrastructure development. Due to this, all sectors of the economy get a boost. What is deflation? Deflation is defined as a period when the general price level falls. But deflation can also be caused by an increase in a nations productive potential which leads to an excess of aggregate supply over demand

Causes of deflation 1. 2. 3. 4. Shift in demand and supply curve of goods and services Reduction in money supply Rise in productivity and reduction of transport cost Risk factor

Possible Economic Costs of Deflation 1. Holding back on spending: Consumers may opt to postpone consumption if they expect prices to fall further in the future 2. Debts increase: The real value of household, corporate and government debt rises when the price level is falling another factor that might cause people to cut back on their spending 3. The real cost of borrowing increases: Real interest rates will rise if nominal rates of interest do not fall in line with prices another factor driving spending lower 4. Lower profit margins: Company profit margins come under pressure unless costs fall further than final prices to consumers this can lead to higher unemployment as firms seek to reduce their costs. Weaker profit margins can also have a negative effect on stock markets because of a fall in expected profits and dividends to shareholders 5. Confidence and saving: Falling asset prices such as price deflation in the housing market hit personal sector financial wealth and confidence leading to further declines in AD and a rise in precautionary savings (the average and marginal propensity to save will tend to rise) Foreign exchange market It is a medium through which individuals, business, governments and banks buy and sell foreign currencies. It is not a single physical place, but a worldwide market which operates round the clock.

 It is the largest and the most liquid market in the world & a mechanism where various national currencies are purchased and sold like any other commodity. ~ The foreign exchange rate is determined by the demand for and supply of foreign exchange. ~ A foreign exchange market can be free or restricted. In India,

restrictions are made on foreign exchange convertibility whereby full convertibility is allowed only on current account and not on capital account.

*TYPE OF FOREIGN EXCHANGE MARKET: ~ The foreign exchange market is broadly divided into two categories: ^ Retail Market ^ Wholesale market. RETAIL MARKET: ~ The retail foreign exchange market is a secondary price marker wherein travelers, tourists and people who are in need of foreign currency carry out small permitted transactions. WHOLESALE MARKET: ~ The wholesale foreign exchange market is also called the interbank market wherein large transactions of foreign exchange are carried out. The dealers in this market are highly professional and are the primary price makers.

*PARTICIPANTS:

i) RETAIL CLIENTS: Retail clients are the ones who deal through commercial banks and authorised dealers. These include individuals, international investors, multi-national corporations and others who need foreign exchange. ii) COMMERCIAL BANKS: Commercial banks deal through other commercial banks and also through foreign exchange brokers. They buy and sell foreign exchange for their retail clients and also carry out their own foreign exchange transactions. iii) FOREIGN EXCHANGE BROKERS: Each foreign exchange market centre has some authorised brokers who act as intermediaries between buyers and sellers mainly banks. Commercial banks prefer foreign exchange brokers as banks obtain the most favourable quotations from them. iv) CENTRAL BANKS: The above groups generate demand and supply forces and help to determine the foreign exchange rate. The brokers are the middlemen between the price makers and possess more information and better knowledge of the market. The large commercial banks and foreign exchange brokers who participate in foreign exchange market are linked together by telephone, telex and satellite communications network called Society for Worldwide International Financial Telecommunications (SWIFT) and thus makes the foreign exchange market efficient and conventional. *INDIAN FOREIGN EXCHANGE MARKET: Indian foreign exchange market is made up of three tiers: ^ 1st level Deals between RBI and authorised dealers (mainly commercial banks) ^ 2nd level Deals among authorised dealers. ^ 3rd level Deals between authorised dealers and their corporate customers.

*FUNCTIONS: 1) TRANSFER OF PURCHASING POWER: Import & export of goods and services Payment and receipt of Dividend, interest and profit from and to foreign firms. Unilateral payments & receipts. Capital outflow in the form of investments abroad, short / long term lending, etc. & Capital inflow in the form of foreign investments in India, NRI deposits, borrowings, etc. 2) PROVISION OF CREDIT INSTUMENTS AND CREDIT: ~ The foreign exchange market facilitates provision of credit for foreign trade through credit instruments like telegraphic transfer, letters of credit, bill of exchange, drafts, etc. Moreover, instruments with time period (ex. Bill of foreign exchange of 90 days or more) can be discounted with commercial banks or authorised agents before due date. 3) COVERGE OF RISK: ~Exports and imports may cover the risk due to future change in exchange rate through forward exchange market whereby currencies are exchanged (at a fixed rate) at some specified date. ~ In foreign exchange market, two types of exchange rate operations take place, spot exchange rate and forward exchange rate. *SPOT EXCHANGE RATE: Spot exchange rate is the current exchange rate. It is determined by market forces (demand for and supply of foreign exchange)

~ At the spot rate, immediate delivery of foreign exchange has to be made. However, in practice, there is a two day time lag between the transaction and actual delivery for paper work, verification and clearing of payments. The primary price makers in the foreign exchange market continuously bid or ask the currencies, hence the exchange rate also changes continuously in a free market. ~ Since the primary dealers quote two-way prices and are ready to deal on either side (i.e. to buy and sell) the rate is quoted in the following manner: *Spot Date: Spot date refers to the delivery date of the currency. It is the settlement date when actual exchange of currencies takes place. The delivery of currency of the spot transaction takes place on the second working day after the date of settlement. *Spot Transaction: The spot dealings between an individual like a tourist and banks are settled on the spot by exchanging the currencies immediately. *FORWARD EXCHANGE RATE: ~ In the foreign exchange forwards market, the purchase/ sale of foreign exchange is done currently for delivery and payment at a fixed date in future at a specified exchange rate. This is known as the foreign exchange rate. ~ These contracts usually have maturities of 30, 60 or 90 days. Some transactions also have maturities of 180 0r 360days. ~ Forward exchange rate may either be at a premium or discount in relation to the spot exchange rate. FACTORS INFLUENCING FORWARD EXCHANGE RATE: Balance of payments position Inflation rate. Interest rate. Degree of speculation in foreign exchange market.

 Economic situation in the country. Political situation in the country. Government policies, etc. *HEDGING: ~ Hedging covers the risk arising out of changes in the exchange rate. It is especially essential for firms having large amounts receivables or commitments to pay in foreign currencies. The strategy of hedging involves increasing the currency that is likely to appreciate and decreasing the currency that is likely to depreciate. *SPECULATION: ~ Speculation involves purchase and sale of foreign exchange in the forward market with the intention of making profit by taking advantage of changes in foreign exchange rates. They speculate on the basis of their own calculation of the difference between the forward rate and spot rate that may prevail at a future date. Speculators try to minimise their loss by entering in spot and forward agreements simultaneously. Speculation may have stabilising or destabilising effect. ~ Stabilising speculation refers to purchase of foreign currency when the domestic price of a foreign currency falls with the expectation of its increase in the future. ~ Destabilising speculation refers to sale of foreign currency when the exchange rate falls with the expectation that it would fall further. *ARBITRAGE: Arbitrage refers to purchase of an asset in a low price market and its sale in a higher price market. This process leads to equalisation of price of an asset in all the segments of the market.

~ Arbitrageurs take advantage of the different exchange rates prevailing in various foreign exchange markets due to different interest rates. ~ They purchase foreign currency from the foreign exchange market with lower exchange rate and sell the same in market with a higher exchange rate. ~ Arbitrage is also possible within the country where two banks offer two different bids and asking rate. ~ When arbitrage involves only two currencies or two countries, it is called two-point arbitrage. It increases the supply of dearer currency.

1) To encourage value addition in our manufactured exports and towards this end, have stipulated a minimum 15%. 2) 100% export oriented units for one additional year till 31st March 2011. 3) The Government seeks to promote Brand India through six or more Made in India shows to be organized across the world every year. 4) Foreign Trade Policy is to help exporters for technological up gradation export sector infrastructure, Towns of Export Excellence and units located therein would be granted additional focused support and incentives. 5) To encourage production and export of green products through measures such as phased manufacturing programme for green vehicles, zero duty EPCG scheme and incentives for exports. 6) Incentive available under Focus Market Scheme (FMS) has been raised from 2.5% to 3%. 7) Incentive available under Focus Product Scheme (FPS) has been raised from 1.25% to 2%.

8) 26 new markets have been added under Focus Market Scheme. 9) Income Tax exemption to 100% EOUs and to STP units. 10) In Tea Sector Minimum value addition under advance authorisation scheme for export of tea has been reduced from the existing 100% to 50%. 11) Time limit of 60 days for re-import of exported gems and jewellery items, for participation in exhibitions has been extended to 90 days in case of USA. 12)Gem & Jewellery units in SEZ and EOUs can receive precious metal i.e. Gold/silver/platinum prior to exports or post exports equivalent to value of jewellery exported. This means that they can bring export proceeds in kind against the present provision of bringing in cash only. 13)Reduce transaction costs, dispatch of imported goods directly from the Port to the site has been allowed under Advance Authorisation scheme for deemed supplies. EXIM POLICY HIGHLIGHTS Service Exports Duty free import facility for service sector having minimum foreign exchange earnings of Rs.10 lakhs. Agro Exports a. Corporate sector with proven credential will be encouraged to sponsor Agri Export Zone for boosting agro exports. The corporates to provide services such as provision of pre/post harvest treatment and operations, plant protection, processing, packaging, storage and related R&D. b. DEPB rate for selected agro products to factor in the cost of preproduction inputs such as fertiliser, pesticides and seeds.

Hardware/Software a. To promote growth of exports in embedded software, hardware shall be admissible for duty free import for testing and development purposes. Hardware upto a value of US$ 10,000 shall be allowed to be disposed off subject to STPI certification. b. 100% depreciation to be available over a period of 3 years to computer and computer peripherals for units in EOU/EHTP/STP/SEZ. Gem & Jewellery Sector a. Diamond & Jewellery Dollar Account for exporters dealing in purchase/sale of diamonds and diamond studded jewellery. Export Clusters a. Upgradation of infrastructure in existing clusters/industrial locations under the Department of Industrial Policy & Promotion (DIPP) scheme to increase overall competitiveness of the export clusters. Rehabilitation of Sick Units

For revival of sick units, extension of export obligation period to be allowed to such units based on BIFR rehabilitation schemes. This facility shall also be available to units outside the purview of BIFR but operating under the State rehabilitation programme. Removal of Quantitative Restrictions a. Import of 69 items covering animal products, vegetables and spices, antibiotics and films removed from restricted list. b. Export of 5 items namely paddy except basmati, cotton linters, rare earth, silk cocoons, family planning devices except condoms removed from restricted list.

Special Economic Zones Scheme EOU Scheme a. Agriculture/Horticulture processing EOUs will now be allowed to provide inputs and equipments to contract farmers in DTA to promote production of goods as per the requirement of importing countries. This is expected to integrate the production and processing and help in promoting agro exports. b. Foreign bound passengers will now be allowed to take goods from EOUs to promote trade, tourism and exports. EPCG scheme a. The scheme shall now allow import of capital goods for preproduction and post-production facilities also. b. To facilitate upgradation of existing plant and machinery, import of spares shall also be allowed under the scheme. c. Capital goods upto 10 years old shall also be allowed under the scheme. d. To facilitate diversification into the software sector, existing manufacturer exporters will be allowed to fulfill export obligation arising out of import of capital goods under the scheme for setting up of software units through export of manufactured goods of the same company. DFRC Scheme (Duty Free Replenishment Certificate) Reduction of Transaction Cost a. High priority being accorded to the EDI implementation programme covering all major community partners in order to minimise transaction cost, time and discretion. We are now gearing ourselves to provide on line approvals to exporters where exports have been affected from 23 EDI ports.

Railway Budget 2012-13 Highlights Fare Hike: Passenger fare will be hiked for every rail class after 9 Years as below:

Mail Passenger fare hiked by 2 p/km. Express Train fare hiked by 3 p/km. Sleeper Class fare hiked by 5 p/km AC 3-tier fare hiked by 10 p/km AC 2-tier fare hiked by 15 p/km AC-1 fare hiked by 30 p/km Minimum fare and platform ticket to cost Rs 5 instead of Rs 3 now.

New Train Services in Rail Budget 2012

75 New express trains will be introduced this year including 21 new passenger services, 9 DEMU and 8 MEMU services. 75 new local trains for Mumbai, 44 new local trains for Kolkata and 18 new local trains for Chennai are introduced. 39 trains will be extended and frequency of 23 trains will be increased. Project to connect Nepal via rail route will be taken up in Railway Budget 2012-13. Wagon factory to be setup at Sitapali in Ganjham district of Odhisa. Rail Coach Factory to be set up at Palakkad with the support of Kerala Government. The entire meter gauge, narrow gauge sections to be made broad gauge by the end of 12th Plan. 6,500 km of railway track to be electrified in next 5 years. For the year 2012-13 Rs 60,100 crore railway budget is proposed.

Common Man Facilities in New Rail Budget 2012-13

SMS on passenger mobile phone to be accepted as proof of valid reservation. Meals during travel can now be booked through mobile SMS. 2500 coaches will be equipped with green toilets under Pilot Project 321 escalators will be installed at important railway stations of the country. 50% discount in AC and AC-chair car will be given to the patient of anemia and sickle-cell disease. Every Garib Ratha train will now be equipped with a separate coach for physically challenged people.

Employment and Awards in Railway Budget 2012-13

Railway will hire over 1 lakh employees in 2012-13. New hires can now fill up all vacancies in SC/ST and physically challenged categories. Every year Rail Khel Ratna Award will be given to 10 sportspersons. Railway workers will now get the bonus of 78 days.

Rail Budget Highlights Below are the few rail budget highlights of Railway Budget 2012:

The Rail Budget 2012-13 could lay an action plan for resource generation and increase thrust on PPP projects for capacity augmentation. A legislation to make the Railway Protection Force (RPF) responsible for all railway related law and order issues, apart from passenger safety, will likely be tabled in March 2012 when the Budget will be discussed in Parliament. Gujarat MPs are demanding bullet train between Ahmedabad and Mumbai. They are requesting Mr. Trivedi to announce the bullet train project as a special project in the upcoming Railway Budget 2012-13.

Current National and International issues 1. National Counter Terrorism Centre (NCTC) The one-day meeting between Prime Minister Manmohan Singh, Home Minister P Chidambaram and the Chief Ministers, representing virtually all the major political parties, was held in New Delhi on May 5. The meeting that was organized on the setting up of the National Counter Terrorism Centre (NCTC) remained inconclusive after steadfast opposition from chief ministers, including those from the Congress, United Progressive Alliance (UPA) allies, the Bharatiya Janata Party (BJP) and those of regional parties. Emerging Key Sticking Issues Two key sticking issues emerged after the meeting. 1. The anti-terror body should not be under the control of IB. 2. The counter-terror body - in whatever shape it is formed - should not carry out independent operations in states. The NCTC, an anti-terror body proposed by the Union Ministry of Home Affairs on February 3, is not acceptable to chief ministers in its present form. The states which did not agree on the NCTC in its present form include a couple of Congress-ruled states, all BJP-ruled states and the states

ruled by regional parties like the Akali Dal in Punjab, the National Conference (Jammu and Kashmir), the Trinamool Congress (West Bengal), the Biju Janata Dal (Odisha) and the AIADMK (Tamil Nadu). Many chief ministers questioned the logic of putting the NCTC under the IB. Possible Options One of the possible options is splitting the work of the NCTC-type body. A counter- terror body with central command could have access to IB databases on suspects, informers, friends of suspects and financiers for analysis. Operations could be handed over to the National Investigative Agency (NIA) formed after the November 2008 Mumbai attacks. Since the NIA was formed under an act of Parliament, Chief Ministers would have no objections to it.

2. BRICS SUMMIT The BRICS (Brazil, Russia, India, China and South Africa) is a grouping of the worlds emerging economies, representing five continents. The BRICS countries together account for 40 % of global GDP ($18.49 trillion). Intra-BRICS trade is worth $212 billion, and is growing at 28 % a year. It has set itself a trade target of $500 billion by 2015. However, the aim of the BRICS is to enhance cooperation among member countries and working together at the international forums. Clearly, it is an opportunity for India to improve and strengthen its relations with China and strive to get their disputes resolved.

Delhi Declaration At the end of the summit, BRICS leaders issued a Delhi Declaration. The Declaration hinted at backing an alternative candidate for the World Bank president's post which has always been appropriated by an American and exhorted the Bank and the International Monetary Fund (IMF) to quickly realign their priorities and approach to the needs of the developing world. The leaders also weighed the consequences of setting up a BRICS Bank and opted for a more contemplative approach by asking their Finance Ministers to examine its feasibility and report back at the next summit in Russia. They agreed that the bank should in no way emerge as a competitor to the World Bank and the IMF but provide funds for projects that do not find favor with these institutions. Indias Major Points Addressing the summit, Prime Minister Manmohan Singh also said that the grouping has agreed to examine in "greater detail" a proposal to set up a South-South Development bank, funded and managed by BRICS and other developing countries. He also said in their restricted session, the grouping also discussed the ongoing turmoil in West Asia and agreed to work together for a peaceful resolution of the crisis. Touching upon the issue of terrorism, Singh said the countries should enhance cooperation against terrorism and other developing threats such as piracy, particularly emanating from Somalia. 3. S&P downgrades India Global rating agency Standard & Poor's (S&P) scaled down India's credit rating outlook from stable' (BBB+)

to negative' (BBB-) with a warning of a downgrade if there is no improvement in the fiscal situation and political climate. Giving reasons for downgrading India's sovereign rating outlook to the lowest investment grade and just one step away from junk bond status. The S&P also lowered the rating outlook of the country's 10 top banks which include the State Bank of India (SBI), ICICI Bank and HDFC Bank. Other banks which would also suffer collateral damage are Axis Bank, Bank of India, IDBI Bank, Indian Overseas Bank, Indian Bank, Syndicate Bank and Union Bank of India. 4. Next Global Economic crisis in 2014 According to Dr. Kaushik Basu, Chief Economic Advisor of India, 2014 is an important year because numerous European banks would have to begin to repay 1.3 trillion dollars worth of loans that they had received from the European Central Bank. This could precipitate a major global economic crisisa third round of crisis after 2008 and 2011. I also asserted that despite Indias current slowdown (growth in 2011-12 was 6.9%), we will see Indian growth picking up slowly initially. But soon after the possible European crisis of 2014, we could see India as the worlds fastest growing economy, faster than even China.

5. Food Inflation According to data released on 29 December 2011, food inflation fell to its lowest level in six years at 0.42 % for the week ended 17 December with a sharp decline in prices of essential items like onions and potatoes.

 The fall is likely to prompt the RBI to cut interest rates at its policy review in January 2012. Food inflation declined to below 1 %, the lowest since April 2006. Experts attributed the fall to a good kharif harvest as well as a high base. Food items have a 14 % share in the overall Wholesale Price Index (WPI) basket. Overall, vegetables became cheaper by 36.02 %. Inflation in the vegetable and wheat segments eased during the reporting week but prices of protein-rich items such as eggs, milk and pulses continued to remain high. Pulses grew costlier by 14.07 % during the week under review, while milk grew dearer by 11.30 % and eggs, meat and fish by 11.56 %. Inflation in the overall primary articles category stood at 2.70 % during the week ended December 17, as against 3.78 % in the previous week ended 10 December 2011. Inflation in the non-food segment, which includes fibres and oilseeds, was recorded at 0.28 % during the week under review, as against 1.37 % in the week ended 3 December. Fuel and power inflation stood at 14.37 % during the week ended 17 December as against 15.24 % in the previous week. The Reserve Bank of India (RBI) ordered banks to set aside more capital for their investments in financial entities such as insurance with an objective to strengthen the ring fence around banks. The banks are to set aside 25% more capital following the central bank raise of the risk weight for buying or holding of equity in financial entities. Banks investments in paid-up equity of financial entities, even if they are exempted from the capital market exposure norms, will thus be assigned a 125 percent risk weight. RBI deputy governor Subir Gokarn

AGRICULTURE: Indias food grain production to grow by 0.6% in 2012-13: A modest growth in output of rice and wheat along with a recovery in production of coarse grains and pulses will be responsible for the overall growth. Planting the seeds of prosperity : Educated farmers who understand agriculture markets are making the most of their know-how to offer greater bargaining power to smallholders Group farming in Maharashtra : The moves in Pune are part of larger efforts by the state government to shift focus to develop groups of farmers and channel funds to them Government frees up cotton exports: Fresh registration of cotton exports allowed with immediate effect; decision on exporting sugar likely on 3 May Solar power project in Maharashtra cleared, says official : The project, which is a part of a larger 150 MW solar power project at Dhule, is entirely financed by the Maharashtra government Worlds smallest living women, jyoti amge, 18 recorded in Guinness book of world record Legendry actor devanand passed away Japan tsunami in the month of april India won the world cup after 28 years on april 2011 Anna hazare protests for introducing jan lokpal bill that created a sensational news in India- April Osama bin laden assassinated in month of may Apple co founder Steve Jobs dies due to cancer on oct 5th Two economists Thomas Saragent & Christopher Sims awarded noble prize for economics on oct 10th

 Toppled Libyan strongman Muammar Qadhafi is killed by new regime forces on oct 20th Sabarimala piligrims of 106 were killed in stampede Karnataka State Budget- 2012-13 (March 21st) - HIGHLIGHTS
- Government high school children to get computers - Rs 50 crore for rejuvenation of lakes - Rs 200 crore for solid waste disposal unit in Bangalore - Rs 200 crore for road work in Bangalore Rs 426 crore for BBMP signal-free corridors - Rs 500 crore for metro rail - BBMP and BWSSB to get Rs 1,000 crore each Rs 5,500 crore for Bangalore infrastructure development - Bangalore in budget: 8 transport complexes to come up - Ready-made garments cheaper - Duty on diesel reduced - Tax on jewellery reduced - Rs 10,500 allotted for irrigation; Rs 2,921 for agriculture; Rs 301 crore to tackle drought; Rs 1,000 allotted crore to procure fertiliser=14722 - Agriculture, fishery, animal husbandry are priority areas - Farmers to get loans to minimal interest rates - 50% rebate on farm equipments - 20% drop in rainfall despite early monsoons - Cigarettes, tobacco, beer to cost more

- Budget allocation: Sericulture - Rs 293 crore; Rs 200 crore - Organic farming Women and child development - Rs 2,883 crore; housing - Rs 1,439 crore; - Education - Rs 15,071 crore Public works - Rs 5,110 crore; Water resources - Rs 8,101 crore; health and family - Rs 4,260 crore; Animal husbandry - Rs 1,206 crore; Home and transport - Rs 4,288 crore; Rural development and panchayats - Rs 6,896 crore

sericulture 1% rural devl. 14% home & trans 9% animal husbandry 2% health and family 9% water 16%

budget allocation

organic farming 0% women and child housing 6% 3%

education 30%

public works 10%

New Tax Slab for Budget 2012-13 (16 Mar 2012 012:35 PM) Now individual income tax exemption limit raised to Rs 2 lakhs. Income between 2 to 5 lakhs to be taxed 10% Income between 5 to 10 lakhs to be taxed 20% and income Above 10 lakhs to be taxed 30%. No change in tax structure for corporate No advanced tax requirement for senior citizens. ECONOMIC SURVEY 2010-2011

The Economic Survey to review the economic performance in the current financial year and forecast the economy prospects for the coming year. 1. 2. 3. 4. 5. Estimated economic growth at 8.75-9.25 % for fiscal year 2012. Gross fiscal deficit decreases to 4.8% of GDP. Inflation estimated to be higher by 1.5%. India on way to become fastest growing economy in the world. Calls for new 'Green Revolution' for agricultural sector with higher investment and introduction of latest technologies.

6. Government working on regulations to emphasize on capital market. 7. Increase influx of foreign capital by building close association with G-20 countries. 8. National Forest Land Bank to improvise the infrastructure projects. 9. Estimated agriculture sector growth at 5.4 % during this fiscal year. 10. Growth of Industrial output by 8.6% where, manufacturing sector registers 9.1%. 11. The export stats; 29.5% in 2010 April-December and Import; 19%. 12. Trade gap minimizes to $82.01 billion. 13. Rose both saving and investment rate to 33.7% & 36.5% of GDP. 14. Estimated food grains production at 232.10 million tonnes. 15. Forex reserves to reach $297.30 billion. 16. Importance given to telecommunication sector. 17. Policies supporting accounting, legal, tourism, education, financial and other services. 18. Taxation of goods and services to be revised. 19. Introduction of Financial Schemes to monitor unemployment. 20. Reformation necessary in the current education system by inviting more private participation.

Industries have an important role to play in the economic development of a country like India. 1. Industrialisation helps in raising the per capita income. 2. The development of many other sectors in the economy is affected by the development of industries. Agricultural development, transport and communication, banking and insurance etc. are affected by industrial development.

3. Industrialisation can create jobs for the surplus labour force in agriculture. 4. The prices of industrial goods fluctuate less as compared to the prices of agricultural goods in the international market. Therefore, export earnings from industrial goods are more stable than export earnings from agricultural goods. 5. Urbanisation after industrial development may be better planned than urbanisation before industrial development. The industrial policy refers to such formal declaration by the government through which general policies for industries adopted by the government are made public. Any industrial policy may have mainly two parts- first, the ideology of the government which determines the nature of industrialisation, and Second, the government rules and principles which provide a certain framework behind existing ideology. The importance of an industrial policy can be explained through the following points:
A.

Deployment of Natural Resources The industrial policy helps in full deployment of natural resources of the country. It helps in identifying, collecting and using natural resources properly. It facilitates increase in national income of the country. Modernisation The industrial policy encourages modernisation for increasing industrial output and productivity. It envisages the use of modern and latest technique of production in industrial sector. It facilitates maximum output at minimum cost of production. Balanced Regional Development The industrial policy helps in balanced regional development of the country. The industrial policy may contain provisions regarding providing facilities or

B.

C.

concessions for rapid development of industrially backward regions of the country.

D.

Coordination between Basic and Consumer Goods Industries The balanced development of basic and consumer goods industries is essential for economic growth of a country. The industrial policy encourages development of basic and key industries on the one hand, while attention is paid to the development of consumer goods industries also on the other. Coordination between small-scale and large-scale industries The industrial policy plays an important role in coordinated development of small-scale or cottage industries and large scale industries. These industries can be made mutually helpful to each other through the provisions of industrial policy. Cordial Industrial Relations A comprehensive industrial policy is needed to establish cordial relations between workers and management. Cordial industrial relations are essential for rapid and sustainable industrialisation. Proper Utilisaiton of Foreign Investment An appropriate industrial policy envisages attracting foreign capital and entrepreneurs. It helps rapid industrial development of the country. A well thought of industrial policy checks the demerits of foreign investment and assistance. Chairman of SBI Pratip Chaudhuri Chairman of SEBI UK Sinha

E.

F.

G.