I thought it'd be a great idea to discuss pre and post budget news here, I'd also welcome your views and predictions. Thanks..
:banana:

Edit:


Download Budget Speech (http://indiabudget.nic.in/ub2011-12/bs/bs.pdf)

Budget Highlights (http://indiabudget.nic.in/ub2011-12/bh/bh1.pdf)

Annual Finance Statement (http://indiabudget.nic.in/afs.asp)

Expenditure Budget (http://indiabudget.nic.in/ebmain.asp)

The Macro Economic Framework Statement (http://indiabudget.nic.in/ub2011-12/frbm/frbm1.pdf)

More at: http://indiabudget.nic.in/index.asp

Salient Points from 2011-12 budget



FY'11 FISCAL DEFICIT TARGET REVISED TO 5.1%

PLANNED EXPENDITURE UP 18.3% (YOY) AT Rs. 14.41 LAKH CR

NET TAX RECEIPTS FOR FY'12 SEEN AT Rs. 6.64 LAKH CR

GROSS TAX RECEIPTS FOR FY'12 SEEN AT Rs. 9.32 LAKH CR

NON TAX REVENUE FOR FY'12 SEEN AT Rs. 1.25 LAKH CR

TOTAL EXPENDITURE UP 13.4% AT Rs. 12.57 LAKH CR

ALLOCATED Rs. 69199 CR FOR DEFENCE CAPEX IN FY'12

Rs. 8000 CRORE FOR NORTHEAST INDIA

Rs. 8000 CRORE FOR DEVELOPMENT NEEDS OF JAMMU & KASHMIR

OLD AGE PENSION FOR PEOPLE OVER 80 YRS HIKED TO Rs. 500/MONTH

NATIONAL MISSION ON HYBRID VEHICLES TO BE STARTED

PROPOSE Rs. 5000 CR FOR TAKEOUT FINANCING SCHEME

PROPOSE A 5 FOLD STRATEGY TO DEAL WITH BLACK MONEY

TO EXTEND INFRA TAX BREAKS FOR THE FERTILISER SECTOR

CLOSE TO FINALISING NATIONAL FOOD SECURITY BILL

PLAN Rs. 1.6 LAKH CR SPENDING FOR SOCIAL SECTOR PROJECTS

TO BRING BROADBAND CONNECTIVITY TO ALL VILLAGES

ALLOCATION FOR BHARAT NIRMAN RAISED TO Rs. 58000 CR

NREGA WAGE RATE INDEXED TO CONSUMER PRICE INDEX

SCHEDULED TRIBES ALLOCATION RAISED TO Rs. 2.44 LAKH CR

ALLOCATION FOR EDUCATION RAISED TO Rs. 52057 CR

PLANNED ALLOCATION FOR HEALTHCARE UP 20% TO Rs. 27,600 CR

IIFCL'S FY'12 DISBURSEMENT TARGET AT Rs. 25,000 CR

SPEND ON INFRA SECTOR TO BE HIKED BY 23%

GOVT AGENCIES CAN RAISE Rs. 30,000 CR FROM TAX FREE BONDS

COLD STORAGE TO BE BOUGHT UNDER AMBIT OF INFRA SECTOR

FURTHER SUBVENTION OF 3% FOR REPAYING FARM LOANS ON TIME

INTEREST SUBVENTION FOR FARM LOANS AT 7% TO CONTINUE

FII LIMIT IN INFRA SECTOR CORP BONDS RAISED TO $25 BN

TO SIMPLIFY SERVICE TAX REFUND PROCESS

MFG SHARE IN GDP TO RISE TO 25% OVER NEXT 10 YEARS

TO SET UP 15 MORE MEGA FOOD PARKS

RBI TO BRING OUT GUIDELINES ON NEW BANKING LICENCES

Rs. 6000 CR TO ENABLE BANKS TO MAINTAIN 8% TIER 1 CAPITAL

TO MOVE INSURANCE, PENSION AND BANKING BILLS IN PARLIAMENT

TO INFUSE Rs. 500 CR IN REGIONAL RURAL BANKS

ROLLOUT OF DTC TO BE EFFECTIVE FROM APRIL 1, 2012

TO SET UP INDIA MICROFINANCE EQUITY FUND WITH Rs. 100 CR

PROPOSE TO GIVE Rs. 3000 CR TO NABARD

TO GIVE Rs. 5000 CR TO SIDBI TO REFINANCE SMALL FIRMS

LIBERALISE INTEREST SUBVENTION OF HOME LOAN UP TO Rs. 15 LAKH

TO ENHANCE FUNDS UNDER RURAL HOUSING FUND TO Rs. 30,000 CR

MORTGAGE RISK GUARANTEE FUND FOR HOME LOANS TO POOR

HAVE HIKED PRIORITY HOME LOAN LIMIT TO Rs. 25 LAKH

TO GIVE PSU BANKS Rs. 20157 CR TO RAISE TIER 1 CAPITAL

NEW COMPANIES BILL TO BE INTRODUCED IN THE CURRENT SESSION

MINORITIES' LOAN TARGET UP AT 15% OF PRIORITY LOANS

ALLOCATION FOR FARM DEVELOPMENT HIKED TO Rs. 7860 CR

DISCUSSIONS ON TO FURTHER LIBERALISE THE FDI POLICY

GOVT TO MAINTAIN MOMENTUM OF DIVESTMENT

GOVT TO MOVE TOWARD DIRECT SUBSIDY TO PEOPLE LIVING BPL

DIRECT CASH SUBSIDY ON KEROSENE, FERTILISERS FOR BPL

EXTENDING NBS TO COVER UREA UNDER CONSIDERATION

PREPARATION OF GST ROLLOUT IN FINAL STAGES

MUST REVISIT EXACT CLASSIFICATION OF EXPENDITURE

TO INTRODUCE GST BILL AMENDMENTS IN THIS SESSION

AIM FOR FISCAL DEFICIT OF 3% BY FY'14

GST AND DTC REFORMS TO MODERATE RATES AND SIMPLIFY NORMS

PROPOSE INTRODUCING PUBLIC DEBT MGMT OF INDIA BILL

EXPECT RBI MEASURES TO MODERATE INFLATION

EXPECT CURRENT ACCOUNT DEFICIT TO COME DOWN NEXT YEAR

EXPECT INFLATION TO COME DOWN NEXT YEAR

CURRENT ACCOUNT DEFICIT STILL A CONCERN

HUGE PRICE GAP IN WHOLESALE & RETAIL NOT ACCEPTABLE

PRICES OF KEY AGRI COMMODITIES HAVE DECLINED

ECONOMY RESILIENT TO EXTERNAL AND LOCAL SHOCKS

EXPECT AGRI SECTOR TO GROW AT 5.4% IN FY'11

GDP ESTIMATED TO GROW 8.6% IN FY'11 IN REAL TERMS

SIMPLIFYING TAXATION, TRADE AND TARIFFS PROCEDURES

MUST ADDRESS STRUCTURAL CONCERNS ON INFLATION MGMT

NEED TO FIGHT CORRUPTION ON ALL FRONTS

NEED TO BALANCE SUPPLY AND DEMAND COMPONENTS

NEED TO BALANCE SUPPLY AND DEMAND COMPONENTS

NEED TO TACKLE SUPPLY SIDE ISSUES IN AGRICULTURE

REVIVAL IN PRIVATE INVESTMENT SHOULD BE SUSTAINABLE

FOOD INFLATION REMAINS A CONCERN

GOVERNANCE PRACTICE REMAINS A PRIORITY

PRIORITIES REMAIN GROWTH, PUBLIC DELIVERY

FY'11 FISCAL CONSOLIDATION IMPRESSIVE

SERVICE GROWING IN DOUBLE DIGITS

INDUSTRY REGAINING ITS MOMENTUM

PRANAB MUKHERJEE PRESENTS THE UNION BUDGET 2011

GOVT SHOULD TAKE MEASURES TO PROMOTE FDI IN ALL SECTORS

SOME AMOUNT OF LIQUIDITY INFUSION IS POSSIBLE

REDUCING FISCAL, INFRA DEFICIT CRUCIAL

MEASURES TO CONTAIN INFLATION ARE VERY CRUCIAL

EXPECT MEASURES FOR FINANCIAL SAVINGS

EXPECT VOLATILITY ON FII FLOWS TO CONTINUE

COMMITTED TO PROVIDING CHEAPER COOKING FUEL

NEED TO PLUG PDS SLIPPAGES TO EXPAND COVERAGE

INITIALLY LICENCES SHOULD BE GIVEN TO NBFCS, MFIS

GIVE TWO KINDS OF BANK LICENCES

EXPECT VOLATLITY ON FII FLOWS TO CONTINUE

SLOWDOWN IN FDI PARTLY OFFSET BY FII FLOWS

BUREAUCRACY IMPEDING FDI FLOWS

STRONG GROWTH IN EXPORTS AT 29.5% FOR APRIL-DECEMBER

DEVELOPMENTS IN MID-EAST, EUROPE NEED TO BE WATCHED

URGENT NEED TO EXPAND STORAGE SPACE, FACILITIES

NEED TO REVIEW GRAIN RELEASE

FAVOURS SMART CARDS FOR KEROSENE, FERTILISER SUBSIDY

SMART CARD, COUPON TO HELP TARGET FOOD SUBSIDIES BETTER

BETTER SUBSIDY TARGETING FOR BETTER FISCAL MGMT

ANTI-INFLATIONARY STANCE WARRANTED

FOOD PRICES, DEMAND PRESSURE TO SHAPE INFLATION OUTLOOK

RISE IN PURCHASING POWER LEADING TO INFLATION UPTREND

SIGNS OF FOOD, FUEL PRICE INCREASES SPILLING OVER

SHARP RISE IN FOOD PRICES A CAUSE OF CONCERN

EXPENDITURE GROWS AT 11.2% FOR FIRST NINE MONTHS

REVENUE RECEIPTS GREW BY 50% FOR FIRST NINE MONTHS

NON TAX REVENUES GREW BY 136.4% FOR FIRST NINE MONTHS

GROSS TAX REVENUES GREW BY 26.8% FOR FIRST NINE MONTHS

NEED EXPENDITURE REFORMS TO REACH PROJECTED DEFICIT

PROSPECT OF REVENUE LED FISCAL CONSOLIDATION

FY'11 REV DEFICIT EXPECTED TO BE AT 3.5% OF GDP

FY'11 FISC DEFICIT EXPECTED TO BE AT 4.8% OF GDP

EFFICIENT TAXATION BY A NEW GST

IMPROVING NREGA BY FOCUSSING ON PERMANENT ASSET

SECOND GREEN REVOLUTION IN AGRI

NEED TO STREAMLINE LAND ACQUISITION, ENV CLEARANCES

PRIVATE SECTOR PARTICIPATION IN SOCIAL SECTORS

PLAN TO INCREASE DIESEL PRICES IN A STAGGERED MANNER

GOVT TO CAP AUTO FUEL PRICES IF CRUDE OIL SPURTS

CURRENT ACCOUNT GAP TO MODERATE ON HIGHER EXPORTS

FY'11 FISCAL GAP SEEN AT 4.8% ON HIGHER GDP BASE

INFLATION TO MODERATE ON FISCAL, MONETARY STEPS

INFLATION REMAINS A DARK CLOUD FOR THE ECONOMY

ECONOMY TO GROW BY 8.75% - 9.25% IN FY'12

GOVT TO CAP AUTO FUEL PRICES IF CRUDE OIL SPURTS

PLAN TO INCREASE DIESEL PRICES IN STAGGERED MANNER

COMMITTED TO COOKING FUEL AT AFFORDABLE PRICE

FAVOURS SMART CARDS ALSO FOR KEROSENE, FERTILISER SUBSIDY

NEED TO PLUG PDS SLIPPAGES TO EXPAND IMPROVE COVERAGE

SMART CARD, COUPONS TO HELP TARGET FOOD SUBSIDY BETTER

ECONOMY TO GROW AT 8.75%-9.25% FOR FY’12

FY’11 REVENUE GAP SEEN 3.8% OF GDP

PROSPECTS OF REVENUE-LED FISCAL CONSOLIDATION

BETTER SUBSIDY TARGETING IMPROVING FISCAL MANAGEMENT

BUREAUCRACY IMPEDING FDI INFLOWS

NEED PERSISTENT ANTI-INFLATION MONETARY STANCE

INFLATION SIGNIFICANTLY ABOVE COMFORT LEVEL

NEED TO BE VIGILANT AGAINST DEMAND SIDE PRESSURES

LIQUIDITY MGMT MAJOR CHALLENGE FOR RBI

DIRECT TAX CODE PROPOSED TO BE LAUNCHED APRIL 2012

FY’11 FISCAL GAP SEEN 4.8% ON HIGHER GDP BASE

source (http://www.ndtv.com/budget/highlights.php)



Budget 2011 could extend tax benefit on infrastructure bonds by a year

NEW DELHI: The Union budget for 2011-12 could extend the tax benefit on investments made in infrastructure bonds by a year while giving banks access to this special window in an effort to raise debt funds for building physical assets of the country. The last budget had allowed a deduction of an additional Rs 20,000 for investment in longterm infrastructure bonds, over and above the Rs 1 lakh limit prescribed for investments in tax saving schemes. Only dedicated infrastructure companies or lenders were allowed to raise funds through these tax savings bonds.

"Various options for infrastructure financing are being examined," said a government official, adding “extending this window is one of them” . The budget for 2009-10 had limited the tax benefit on infrastructure bonds for one year. This was because the government was hoping to roll out of the Direct Taxes Code from April this year. But now that the new code is unlikely to be implemented before April 2012, the government could extend the tax relief on these bonds.

“Keeping in view the infrastructure fund requirements of the country and also to make the to make the tax deduction more meaningful, the government should enhance the investment limit to . 50,000,” said Vikas Vasal, executive director, KPMG. Infrastructure Development Finance Company (IDFC), IFCI and L&T Infrastructure Finance have already raised about Rs 5000 crore so far in the fiscal through these bonds. IDFC has already raised over . 1,200 crore in two tranches of its infrastructure bond issue in the current financial year. The rate of interest offered on these bonds has been in the range of 8% simple interest per annum.

The tax-free infrastructure bonds have a minimum tenure of 10 years and a lock-in period of at least five years to ensure the much-needed long-term funds for the sector. Investors can exit from these bonds only after five years in the secondary market if the bonds are being traded or go in for a redemption if they have opted for bonds that allow this option . According to the planning commission, the sector would require $500 billion worth of funds in the 11Five Year Plan ending in March 2012 and $1 trillion in the 12Plan.

Equity funds are relatively easy to raise for long gestation infrastructure projects, but raising debt funds have been difficult in the absence of a vibrant debt market in India. Giving banks access to this window is another measure the government is thinking about. Bankers had sought this access in their pre-budget interaction with FMPranab Mukherjee. Banks have stepped up infrastructure lending, which has exposed them to asset-liability mismatch of providing long-term funds from deposits that usually mature in three to five year. There is a restriction on the amount lenders can raise through these bonds — a maximum of 25% of their incremental lending to infrastructure sector over the previous financial year.

Savings Calculation

The last Budget allowed tax saving of Rs 20,000 for investment in long-term infrastructure bonds

The Govt had limited the tax benefit on infrastructure bonds for one year as it expected to roll out new tax regime, DTC, from April this yr

Some experts seek enhanced investment limit of Rs 50,000

IDFC, IFCI AND L&T Infrastructure Finance have already raised about Rs 5000 crore so far in the fiscal through these bonds.

source (http://economictimes.indiatimes.com/news/economy/policy/budget-2011-could-extend-tax-benefit-on-infrastructure-bonds-by-a-year/articleshow/7499062.cms?curpg=2)

Budget 2011: Inflation, current account deficit main concerns; says DK Srivastava, Director, Madras School of Economics

Fiscal consolidation seems to be on target and we expect the revised estimates for 2010-11 to be marginally better than the budgeted 5.5% of GDP. This would happen for two reasons. First, the nominal GDP growth assumed for 2010-11 was 12.5%, but it may turn out to be higher than 16% given real growth of 8.6% and more than 7% inflation in the implicit price deflator . Second, the government borrowing benefited from an upsurge in non-tax revenues, aided by the 3G spectrum sales, as also from reasonably buoyant tax revenues.

By November 2010, the revenue receipts were 70% of full year target as compared to 50% in the corresponding period last year. By November 2010, the cumulative monthly central tax revenues showed a growth of about 26%, implying a buoyancy of about 1.6 assuming a 16% nominal growth rate. Fiscal deficit was less than 50% of the budgeted by November 2010. In comparison, it was more than 76% of the annual target in November last year. Given this performance for 2010-11 , we expect the government to persist with fiscal consolidation during 2011-12 , largely based on 8.5% plus growth and reasonable tax buoyancy.

With both the Direct Taxes Code and the Goods And Services Tax pushed to April 2012, no major structural impact on tax revenues is expected in 2011-12 . The budget 2011-12 faces major macro risks arising from two sources: food prices and current account deficit. High inflation, mainly due to high food and fuel prices, has been a source of persistent discomfort for policymakers this fiscal year in spite of a comfortable growth story. Both of these pressures are likely to continue in the coming year. There is disturbing news about crop risk in China and many countries trying to stock up grains.

International food prices have been firming up. The FAO food price index rose for the seventh consecutive month in January 2011, up 3.4% from December 2010. It has recorded the highest level since 1990. Sourcing grains from international markets will require paying high price as many countries have suffered from extreme weather both in terms of winter and floods. The crude oil prices internationally have also been hovering around $100 a barrel and are not likely to ease.

The expenditure side of the budget may therefore face significant pressures. First, because of the relatively higher inflation rates, the adjustment in DA for salaries and pensions are likely to be high. Second, higher outlays are expected for food subsidies, since the government may have to mount an aggressive procurement programme at high average costs. The proposed Food Security Act would also put pressure. This combined with high crude prices will push the current account deficit further up.

The government may have to cut some agricultural exports putting additional pressure on the current account deficit. I expect fiscal consolidation to be pursued but an uncomfortable year ahead of us because of continued supply-side pressure on inflation and a large current account deficit. The longer term challenge would be to uplift investment in agriculture as the food shortages appear to be chronic and affecting major suppliers across the world because of neglect of environment.

Distorted fertilizer subsidy regime has also done a long-term damage to the productivity of soil in many parts in India. Maintaining fiscal consolidation, resisting the pressure to increase revenue expenditures, using a large part of borrowing on investment in agriculture, and attempting support to infrastructure through private-public partnerships and a suitable special purpose vehicle appear to be workable and desirable options.

source (http://economictimes.indiatimes.com/news/economy/indicators/budget-2011-inflation-current-account-deficit-main-concerns-says-dk-srivastava-director-madras-school-of-economics/articleshow/7499043.cms?curpg=2)

Budget 2011: Subsidise tech R&D

One decade of the new millennium is over and companies, especially in consumer electronics , are wooing customers with new models. Mobile handset vendors are releasing, on an average , about 35 new models in the domestic market every month, indicating a drastic reduction in product lifetime. However, new technology is also at the risk of becoming obsolete very fast. What do rapid evolution of technology and the resultant obsolescence mean for the stakeholders?

Should a customer change her mobile, desktop or laptop every year? How do companies generate economic value out of obsolescence ? Should the government step up investment in public IT infrastructure? First, let us take the effect of technological obsolescence on companies. Technology obsolescence impacts the future economic value of a product or a component, which increases the risk involved in financing its development.

Companies may resort to different strategies to tackle the problem. These include differentiated pricing for an upgraded product, forward or backward integration to gain control of the market for the product, greater R&D intensity to introduce differentiated products or diversification to derisk. In telecom, the move away from proprietary to opensource software adoption, especially in mobile handsets — such as Android — reduces technology obsolescence cost, both for handset-makers and consumers.

Another trend is the emergence of managed services wherein mobile service providers such as Airtel have outsourced network deployment and management to network equipment makers such as Ericsson and Nokia-Siemens . Airtel transfers the obsolescence risk to the network equipment makers. BSNL has gone a step further, adopting a franchisee model in broadband wireless access. Here, the obsolescence risk is transferred to the franchisee. Also, in technology, obsolescence may not be related to the whole product, but might occur for components that make up the product.

Sometimes , obsolescence rate is faster than the component’s lifetime. Technology refresh is required either because the component ages or has reached end-of-life . It is also possible that the technology refresh makes the system much more efficient that the extra features make it worth the refresh , or the maintenance costs go down substantially justifying the refresh cycle. Besides industry, technology obsolescence also impacts the consumer. The customer upgrades the hardware or software to stay on top of the technology trend. Pricebased competition is likely to provide similar alternative products to the subscriber and enable her to reduce the technology obsolescence cost.

The success of featurerich mobiles from domestic handset companies such as Micromax, Lava and Karbonn as reasonable cost-effective alternatives to handsets from multinational companies illustrates this customer rationality. A customer can also trade her old incompatible version to reduce costs.

Technology refresh at low prices, or made available for free, encourages the consumer to stay with the same brand. For example, when Apple introduced the iPhone 4 with a more powerful operating system, it allowed owners of the previous model, iPhone 3GS, to download the new software . Thus, consumers of the older version were able to do a refresh and get access to the new experience without having to spend anything extra.

Adobe does not let us forget that its Flash needs refreshing . So, technology refresh promotes customer lock-ins to products and brands. Against this backdrop is our wishlist for Budget 2011. Domestic R&D will help tide over technological obsolescence since cost-effective indigenous technology, rather than imported one, is more suited to Indian consumer’s needs. The government should encourage R&D for fostering home-grown products and process innovation, using directly-targeted R&D subsidies than tax incentives for imported packaged software.

It is unfortunate that domestic companies spend a relatively smaller proportion of their revenues on R&D . Further, the mere existence of an R&D lab as a counterpart to a foreign R&D lab will not result in technology absorption. Indeed, such domestic R&D labs require producers to convert their ideas into usable innovations. Hence, there is a need for strong industry-lab partnerships. The government should foster better linkages of the industry with publicly-funded research laboratories and IITs as well as universities.

Given that there will be a huge offtake in consumer electronics, hardware and software in future, we should encourage home-grown R&D and innovation to tide over technology obsolescence. Domestic manufacture of hardware and associated software for our consumption — much like what China is attempting to do — will help us reduce the obsolescence risk.

source (http://economictimes.indiatimes.com/opinion/budget-2011-subsidise-tech-rd/articleshow/7506167.cms?curpg=2)

Budget 2011: Insurers seek separate tax exemption limit for life policies


NEW DELHI: The insurance industry wants the government to create a separate tax exemption limit of Rs 50,000 for life insurance premium in the forthcoming budget to encourage more individuals to buy such policies.

"It is suggested that a standalone additional exemption limit of Rs 50,000 (over and above the already existing limit of Rs 1,00,000) be specified for (life) insurance premiums alone under the Income Tax Act,"Canara HSBC OBC Life Insurance Chief Financial Officer Anuj Mathur said.

Currently investment in saving instruments, like risk cover, pension products, PF contributions, National Savings Certificates and others, are eligible for aggregate deduction of Rs 1 Lakh.

Besides, investments in infrastructure bonds up to Rs 20,000 also qualify for deduction.

"We recommend a separate limit for tax exemption for long-term saving instruments like life insurance or increasing the limits on life and health insurance premium could be looked at," Max New York Life Insurance MD & CEO Rajesh Sud said.

Industry experts said changing lifestyle made necessary an assurance for future income generation, thereby increasing the need for a life insurance policy.

Mathur said in order to ensure better insurance penetration, the life insurance companies should be allowed to come under the Exempt, Exempt, Exempt (EEE) bracket.

Under EEE, a policy holder gets tax exemption at various stages during the term of the policy.

Insurance sector needs capital on a periodic basis for expansion and experts hope that the budget session would also see passage of FDI bill in insurance sector to 49 per cent, from the current 26 per cent.

"There is a need for more proactive regulatory architecture for insurance. Foreign insurers could be allowed to set-up under a wholly owned subsidiary with 100 per cent FDI. The life insurance industry is very capital intensive and companies need huge capital to fund growth," KPMG Executive Director Naresh Makhijani said.

The life insurance companies currently pay tax of 12.5 per cent and the Direct Taxes Code, which would replace the archaic IT Act from April 1, 2012, does not specify any specific limit for the same. This would mean being taxed at 30 per cent.

"A significant portion of funds of life insurance companies are invested in infrastructure projects. ALso companies incur huge losses initially due to long gestation period. With higher tax rates, it will be unattractive proposal for new investors to invest in the sector," Max New York Life's Sud said.

source (http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/budget-2011-insurers-seek-separate-tax-exemption-limit-for-life-policies/articleshow/7508287.cms)

^^...first thanks for starting this thread.
the finance bill doesnt say anything about general taxes, plans about capping oil prices, etc etc!!

Expectations: Unicon Investment


India was among the few countries in the world to implement a broad-based counter-cyclic policy package to respond to the negative fallout of the global slowdown. These policy actions has helped Indian Economy to clock a growth of 8.6% in FY11 (advance estimates). While rising strongly in the world economic order, India faces the most critical challenge of crossing the 'double digit growth barrier'. Current macroeconomic challenges are manifold 1. Controlling inflation, including that for essential commodities, 2. Maintaining fiscal deficit amongst rising oil prices, 3. Absence of one-time revenues such as 3G, WiMax license fees, 4. Allocation & channelising investment in Infrastructure, 5. Domestic financial sector liquidity management with large government borrowing can potentially be a dampener for private investments, 6. Reducing current account deficit from current elevated levels, 7. Over and above, handling corruption issues. The upcoming elections in some of the major states may prompt the government to continue to take some populist measures.

Union Budget 2011-12 - Focus on Agriculture & Infrastructure sector

On backdrop of higher inflation (supply side constraints), lower industrial growth & infrastructure investments, Union Budget 2011-12 is likely to undertake measures to ease such constraints in the form of reforms in Agriculture & Infrastructure sector.

A) Agriculture sector
1. Larger Investments in Agriculture sector,
2. Improvement in the Agri logistics & cold storage chains,
3. Steps towards reduction in essential commodities hoarding,
4. Investment in R&D in agriculture.
5. Irrigation and water management
6. Related to agri inputs

B) The lower growth in the industrial production last year is also likely to be addressed; to sustain the growth momentum and expand manufacturing base of the economy over medium term, the government is likely to look at addressing the challenges of land acquisition, infrastructure bottlenecks and infrastructure financing, among others. Besides agriculture, & infrastructure sector, power, rural electrification, education, logistic and rural oriented sectors will be the main focus of the budget, as it would be the main participants in the acceleration of GDP growth of country. In addition, we are likely to see relaxation of FDI norms further in Retail, Insurance and FDI procedures.

C) Inclusive agenda: After years of substantial expansion in the social sector spending, the government is likely to go relatively slower on its inclusive growth agenda, given limited fiscal headroom. No major change in the prevailing tax regime is expected; due to fears of a slower GDP growth in 2011-12. Moreover, any major tinkering in the indirect tax rates is unlikely as the government is targeting rollout of the integrated goods and service tax (GST) in a year. Similarly, changes in direct tax regime may be limited to aligning it with the upcoming direct tax code (DTC).

One of the problems is funding revenue expenditure through capital receipts and, thus, bringing in greater inter-generational inequalities. In the process, we run the risk of prioritising the immediate problems at the cost of our longer-term policy objectives (reforms and infrastructure creation). Unfortunately, we are, once again, likely to get stuck in addressing only the near-term problems in the coming budget too!

Capital Goods & Infrastructure: Infrastructure spending is the backbone of any economy especially in a developing country like India. With end of XI five year plan and missing targets, focus would remain on infra sector. Currently, the sector faces issues like higher commodity prices, higher funding cost and over and above slow pace of award win. At operational level difficulties are faced in obtaining several clearances for land, environment etc causing further delay in project execution and cost over run.

Given the recent reshuffling in the cabinet, low pace of award win activities and dismal IIP data over last couple of months, the thrust would be to accelerate the infrastructure spending and promote private participation to achieve inclusive growth of the economy. Emphasis would be towards higher infrastructure spending both from public and private participants in order to achieve higher GDP growth rate of 8.5%+. We expect higher fund allocation to various infrastructure development schemes (like Bharat Nirman, JNNURM, APDRP, RGGVY etc.) & focus on higher social spending benefitting construction and water & rural infrastructure taking front seat while allocation. Formalization of Public Private Partnership for Infra projects is also likely.

Cement: Cement industry currently faces multiple challenges both internal and external. On one hand, demand is moderating especially in the North region and muted to negative growth in Southern region, industry is also facing higher input and fuel costs. The situation was also aggravated due to hike in diesel prices, making transport cost (freight) dearer. With low demand in over supply regime, industry is unable to pass on the higher costs to end user thereby keeping their margin under pressure or voluntarily opt to keep volume low. Given the backdrop of Government thrust to accelerate economic growth, industry expectations are high to reduce excise duty on cement which in our view is unlikely.

With country's GDP pegged to grow ~8%+ annually going forward, cement industry is likely to grow in double digit over long term and outlook for demand remains positive. With a view to have inclusive growth of all sectors, emphasis would be to create demand for real estate sector with focus on affordable housing, Govt. led higher infra spending in the form of higher fund allocation and incentive for public private partnership (PPP) to keep robust demand for cement. Sector specific, we do not expect material changes.

Metals / Mining: Metal prices have been in an uptrend on the back of rising input costs. Recent disruption in coking coal and iron ore supply due to floods in Australia have been responsible for the rising prices of steel. Spot prices of 63.5 Fe grade iron ore have risen sharply from ~USD 125 / MT in July 2010 to ~USD 196 / MT currently. China coking coal prices have increased from ~USD 265 / MT in July 2010 to ~USD 320 / MT currently. This steep rise in input costs have resulted in compression of margins for non integrated players such as JSW Steel and SAIL while it has helped the integrated players such as Tata Steel and Jindal Steel & Power and mining companies like NMDC and Sesa Goa to improve their profitability.

Going forward we expect steel prices to remain firm on account of strong demand lead by recovering global economies. However we believe iron ore prices would come under pressure going forward on account of high inventory levels. Iron ore inventory in China's ports has reached 82.8 MT, record high in three years. With the resumption of supplies from Australia, prices of coking coal would also normalize from their highs. We believe this scenario would be positive for steel companies.

Oil & Gas: The International Energy Agency (IEA) estimates global oil demand at 89.1 million barrels per day (mb/d) for CY11, an increase of 1.4mb/d over CY10. Asia and the Middle East would account for a major portion of the increase with an expected rise in demand by 1 mb/d. Per capita consumption of energy in India is still one of the lowest in the world (around 0.3 tonnes of oil equivalent compared to world average of l .8). The rise in oil demand can be attributed to a buoyant economic recovery globally. To cater to this demand, IEA estimates OPEC supply at 29.9 mb/d, non-OPEC supply at 53.4mb/d and OPEC NGLs to contribute 5.8 mb/d in 2011.

With demand expected to remain strong we expect crude prices to remain high going forward which is negative for the sector, especially the downstream players. Uncertainty regarding subsidy continues to bleed the oil marketing companies. The three OMCs will end the fiscal with around INR 800 bn of revenue losses on selling diesel, domestic LPG and kerosene below cost, compared to ~INR 440 bn last year. The focus on laying of natural gas and gas transmission pipelines continues with transmission and distribution companies like GSPL, IGL, GAIL and GGCL having performed very well over the last year. With issue of coal availability, ramp up of KG basin production and government's thrust on cleaner fuels, natural gas business is expected to grow very rapidly.

Power: Investments in power transmission & distribution (T&D) are currently lagging behind compared to investments in power generation and are expected to play catch up in the coming years. Given the heavy investment (INR 8370 bn for XIth Plan) requirement in this sector, we believe that the thrust on spending will be maintained. We expect the incentives to continue and in a best case scenario, there could be some more positive surprises as well. Incase of customs duty exemption, there would be reduction in the cost of power generation which will help our economy at large besides encouraging more industries to come forward to set up power plants. All initiatives from industries to set up Independent, Merchant and Captive Power Plants are expected to be encouraged by Government of India. Focus of the budget is expected to be on improving the T&D infrastructure in the country & promoting renewable energy.

Auto: The budget last year had partially rolled back the stimulus provided to the auto players by increasing the excise duty to 10%. We may see a complete withdrawal of the stimulus with excise duties on two wheelers and small cars back to 12%. The auto industry has begun showing signs of a slowdown, imminent on the back of a high base due to strong growth last year on account of pent up demand post the recession. Increasing input costs, rising vehicle & crude prices, general inflation and an upward spiral in interest rates have also resulted in moderating the auto demand. Most auto majors have expressed their concerns and we expect the industry to grow at 10-12% in CY11 compared to 31% in CY10.

Textiles: Indian Textile industry contributes 14% of the total industrial output and 15% of exports. The Industry ranked second in terms of employement generation employing more than 35 mn people. The industry is going through major technology upgradtion to increase the productivity during the last few year to counter global competiton. The Government expects the industry numbers to triple by the next decade to USD 220 bn from the current USD 70 bn considering the rising demand from the western countries. With the US economy showing good signs of recovery, textile demand would increase at a rapid pace going forward. The textile industry with help from TUFs scheme has already modernised with a lot of textile majors now having integrated business models right from raw materials to garments. To further support the growth story of the industry there are favourable expectation from the union budget.

Paper: The Indian paper industry is currently passing through a very difficult phase due to high input cost of raw materials. Since the industry is highly fragmented in nature, it has not been able to take advantages economies of scale as has been the case with its global counterparts. As a result, production in India is very low at 14% compared to 60% in developed countries with high cost of production. Paper industry in India depends on import of waste paper for manufacture of paper/paperboards, as there is a huge shortage of the raw material domestically. We think the government will provide relief to the paper industry by reducing the customs duty on waste paper and pulp which would be positive for the paper companies.

FMCG: FMCG companies witnessed growth in volumes across product categories. However, rise in raw material costs took a toll on the operating margins across companies, with margins contracting by ~ 200 bps to 500 bps. The increasing competition among players also resulted in greater Advertising & Promotion (A&P) expenses of majority FMCG companies barring a few. The companies in this space either, have already taken price hikes during the quarter or are planning to rise prices to protect margins from erosion.

The recent correction in FMCG stocks has made them attractive, given the fact that underlying consumption story remains intact. Rural sector accounts for about 33% of sector’s total revenue. The rural FMCG market is growing on the back of rising demand driven by rising income levels, changing lifestyles and favorable demographics. The pace of rural consumption is growing much faster than urban areas. The acquisitions by FMCG companies in other emerging as well as developed markets would also be earnings accretive in the long run. The sector is expected to be a market performer. Overall, we remain positive about the sectors prospects given the acceleration in rural spend and urbanization.

Pharmaceuticals: The domestic pharma industry continues to grow at 11-12%, dwarfing the global average of five-six percent. Similarly, improved traction in productivity trends has prevented margin pressures, notwithstanding the intensifying competitive landscape domestically. The government's Vision 2015 statement indicates an 18% plus CAGR for the pharma sector, translating to a doubling of revenues to USD40 bn over the next five years. Growth will be driven by all verticals: domestic formulations, generics exports, and outsourcing (CRAMS). The government has recently announced the setting up of a venture fund that will target the infusion of INR 20 bn into the sector.

Fertilizers: Urea has taken centre stage in fertiliser sector in Budget 2011-12. Urea represents almost 50% of all fertiliser products consumed in the country with an annual consumption of 27mn tonnes (mt), of a total fertiliser consumption of 55 mt. The Committee of Secretaries is currently working out a viable model to determine how the subsidy component would be fixed, as urea production is based on different forms of feedstock such as gas, naphtha, fuel oil and coal. The government was also working at raising the urea prices by 2-5% in 2011-2012. De-canalisation of urea imports would also take place once urea comes under the NBS regime. At present, only authorised agencies can import urea. The industry is also eyeing upgradation of investment policy for urea by the government. The fertilizer industry expects Rs 50,000 crore in cash for FY12 by way of subsidies. It also expects further cushioning for FY11 subsidy. The sector has also sought removal of import and export restrictions.

Banking, Financial Services & Insurance: Banking sector being a backbone of the economy has shown a strong growth in the FY11; especially the robust results in the last few quarters have bestowed strength in the banking sector. In the first half of the financial year 2011 the credit growth has been subdue but later it improved on back of strong demand for capex, infrastructure and agriculture. Due to inflationary pressures in the economy RBI has raised repo & reverse repo rate six times in last financial year. Despite this bank's have improved their performance on all fronts like NII, NIMs, CASA etc. Going ahead, banks are likely to focus more on CASA growth by expanding there branch network (rural and unbanked areas), improvement in NIMs & reduction in NPA's. We believe the sector will continue to remain under pressure in the near term until a sharp uptick in credit and deposits growth alongside pressure on yields easing off. We have seen interest rates on the deposits side, money markets, etc. inching up at a much faster pace on account of continued liquidity shortfall which would affect banks NIMs. Banks with higher CASA will be able to ride the wave better and protect NIMs. However, the inherent strengths of the Indian banking industry is likely to offset this impact.

Information Technology: While earnings of the companies have been positive so far, revenue growth is a concern for IT companies. Volume growth has been slower than expected. The managements of IT companies are confident that future outlook would be better with increasing IT budgets. Also discretionary spending is witnessing a revival. While the big-players are not facing problems currently, the small and mid-sized ones are struggling to grow post the recession, and so a slew of measures such as the STPI extension and tax clarifications would provide an improvement in their bottom-lines that would fuel future growth.

Telecom: Indian mobile market has undergone revolutionary change during the past few years to become one of the leading mobile markets on the global map. The number of mobile subscribers stands at 752.19 mn in December 2010. With this the sector has become hyper competitive market with ~12-13 players as compared to ~3-4 in most other developed markets. Thus is expected to witness consolidation in near term. Mobile number portability could affect the subscription figures of some companies but established player may not feel the pinch. Companies are expected to roll out 3G services (Rcom , Bharti and Tata have already started) but the traction generated by it is still to be seen. Moreover, recent regulator recommendation has stimulated some uncertainty in the sector, especially with regards to recent 2G pricing and license renewal fees. However, increasing rural penetration and data services offers immense potential going forward.

Media: The Indian Media & Entertainment industry (television, film, radio, print, music, the internet, animation, gaming and outdoor media) offers attractive growth potential as compared to both developed and other emerging markets. The entertainment sector is expected to grow at 10 .7% in 2009-13. Rapid urbanisation and an increase in disposable income have accelerated the addition of new viewers driving the viewership number. The Media and Entertainment sector is witnessing continues increase in media spends by various industries. A rapid adoption of satellite based television services via DTH and digital cable augurs well for the Television industry. Regional print is expected, to continue to show strength backed by increasing regional demand however, rising newsprint prices could play a spoiler going forward. Phase-III licenses are expected to give a boost to the radio industry.

Hotels: An improvement in the macro environment and the consequential improvement in foreign tourist arrivals and domestic corporate travel have aided a rebound in the hotel Industry. Occupancies have shown a remarkable improvement and this is likely to be followed by an improvement in average room rates (ARRs). The tourism industry is expected to grow at a CAGR of 7.6% for the next 10 years. With increase in disposable incomes and favorable demography domestic leisure travel is set to grow at a healthy pace. Growth in demand is seen across business as well as leisure destinations and we maintain our positive stance on the hotel industry, on the back of the improving dynamics despite huge inventory lined up and foreign players also queuing up to be a part of domestic hospitality growth saga. There might be some rate corrections across hotel categories owing to competition from leading international and domestic brands entering the market as well as the availability of quality options in the mid-market and budget category.

Shipping / Ports / Logistics: India suffers from an inefficient modal mix in its transport landscape, because its share of roads over more operationally as well as cost effective modes like rail or coastal shipping is large. The Indian transportation & logistics sector is increasingly attractive to foreign and domestic operators as well as strategic and financial investors. To build a strong platform for driving long-term economic growth, an increase in the government’s thrust on this sector is vital. The domestic shipping industry is burdened by severe competition on the one hand and taxes on the other vis-a-vis global players operating from tax neutral jurisdictions. The ports sector is anticipating rapid growth and considerable investor interest. This would entail major investment in initiatives to expand capacity of major ports and make improvements to their facilities. There is an urgent need for measures to facilitate growth in ground logistics (warehousing, rail freight and cold chain logistics) and we expect some solid reforms to be announced in the budget.

Retail: With the improving economic scenario, purchasing power of consumers is on the rise. However the recent inflation shock is denting this purchasing power. While retail companies have so far produced good results, the future outlook would be under pressure if inflation continues unchecked. While little can be done on the global commodity front, improved FDI in retail could help bring down prices of consumer goods, thus fueling growth.

In the short-term, given the inflationary scenario, we don't expect Retail to outperform, as people's daily necessities will take over a large part of their spending budget. However over the long term, since the economy is growing, we expect the Retail Sector to perform well.



Full PDF (http://www.moneycontrol.com/news_html_files/news_attachment/2011/PreBudget_Unicon_170211.pdf)
source (http://www.moneycontrol.com/news/brokerage-recos-others/union-budget-2011-12-expectations-unicon-investment_524200.html)

Corporate America sends budget wish list to Mukherjee


WASHINGTON: Corporate America wants Indian Finance Minister Pranab Mukherjee to give positive indications on raising the FDI cap in insurance sector and opening multi-brand retailing during presentation of budget.

In their wish list to Mukherjee, as he prepares to present his annual budget in less than 10 days, the US business houses have sought increasing FDI cap in insurance sector to 49 percent, besides reducing tariff in a whole range of items.

The American corporates also urged opening up of multi- brand retailing; liberalisation of FDI norms for food and agricultural products and streamlining the foreign investment process.

"We believe adoption of these proposed changes would be of tremendous benefit to the Indian economy by stimulating long term stable investment and significant job creation," said Ron Somers, president of US India Business Council, in a memorandum.

The council represents the top American companies, including PepsiCo, Boeing, General Electrics, and Lockheed Martin that does business with India.

Despite global economic recovery, many conditions persist that stand as challenges to India maintaining its rapid growth, Somers said.

He said USIBC is committed to supporting implementation of policies and regulations that further strengthen markets in India, while facilitating inclusive growth across all economic sectors and tackling challenges such as the price rise which threatens India's food security goals.

The memorandum send February 9, was twitted by USIBC on Friday with a link to its copy.

It notes that India remains an attractive destination for foreign investors particularly because it strives to create a predictable and transparent regulatory environment that encourages investment.

"Raising the Foreign Direct Investment (FDI) cap in insurance to 49 percent will be an important tool in the creation of a world-class infrastructure that will propel India to a higher level of economic growth," said the memorandum spread over 11 pages

source (http://economictimes.indiatimes.com/news/economy/finance/budget-2011-corporate-america-seeks-opening-of-multi-brand-retailing/articleshow/7527613.cms)

i see nobody is interested in the budget, reckon it's too much to digest...never mind here goes...

Car companies split over import duty

NEW DELHI: The proposed India-EU trade agreement has divided car makers with Pawan Goenka, the president of industry body Society of Indian Automobile Manufacturers (SIAM), opposing any move to cut duty on imported cars while several members, including foreign luxury car makers such as Audi, Mercedes and BMW, batting for lower tariffs.

SIAM has struck a protectionist note, opposing any move to remove car imports from the negative list, that will see a gradual lowering of duty from the current level of 60%, which finally bulges to around 110% after the addition of counter-vailing duty (CVD), VAT and other local levies.

The industry lobby has made a strong pitch to the commerce department against the lowering of duty (something sought by the EU), saying it could see a flight of manufacturing investments from India and will negatively affect the domestic players and hurt employment.

"We are not being protectionist. Every country should ensure that opening up of trade does not hurt its local industry," Goenka told TOI. Goenka said Indian companies did not have the scale to protect them from an onslaught of imported products if they came in cheaply.

But the split within SIAM comes out in the open when you speak to companies such as Audi, BMW and Mercedes. Even Japanese player Honda feels that the stiff import duty should be lowered, at least for green technology vehicles like hybrid cars.

"It is a misconception that the Indian industry will suffer if duty is lowered. While we support the argument that duty should remain high where competitive volume products are there, there is no argument to support talk of maintaining higher duty for the luxury-end," said Debashish Mitra , director, sales and marketing at Mercedes-Benz India.

"There are no competitive products from India in the luxury end, and thus nobody will be hit. In fact, lower duty will help companies like ours to bring in the latest technology products at cheaper prices, something that will spur their demand and push us to gradually manufacture them here," Mitra added.

Michael Perschke, MD of Audi India, also sought lower duty, especially for cars above 2000cc. "This way there is no fear of the domestic industry being cannibalised as about 80-90% of Indian car market is below 2000cc."

source (http://economictimes.indiatimes.com/news/news-by-industry/auto/automobiles/budget-2011-car-companies-split-over-import-duty/articleshow/7538802.cms)


Excise hike of 2% likely in FMCG, auto; says SMC Global Securities

NEW DELHI: The government is likely to increase excise duty by 2 per cent in sectors like FMCG and automobiles, as well as raise service tax, in the forthcoming Budget to reduce the fiscal deficit, a report said.

SMC Global Securities Ltd, in its forecast for the 2010-11 Budget, said that service tax is expected to be hiked to 12 per cent from the current level of 10 per cent.

In bad news for exporters, it said the Finance Minister is unlikely to extend the interest subsidy of 2 per cent, as the country's exports are likely to cross the $200 billion target for the current fiscal.

In the last Budget, the government had extended the concessional export finance regime till March 31.

"In order to contain fiscal deficit, Pranab Mukherjee will stress on revenue generation by expanding the excise tax base by another 2 per cent in sector such as automobile, cement, FMCG, power and telecom, besides increasing service tax," SMC Group Managing Director Subhash Aggarwal said.

India's fiscal deficit had ballooned to 6.8 per cent of the GDP in 2009-10 and is pegged quite high at 5.5 per cent for the current fiscal.

Aggarwal said the minister may widen the service tax basket and include education and healthcare in the Budget.

"... India is likely to resort to pre-crisis fiscal and monetary policies from April, 2011, onward, focusing on revenue mobilisation," it said.

The report also said the government may increase spending in agriculture, infrastructure and education.

In a bid to support agriculture growth, the finance minister could raise credit target for banks to Rs 450,000 crore. In the last Budget, the target was raised to Rs 37,500 crore.

The minister may allocate Rs 40,000 crore to the Mahatma Gandhi NREGA, it said.

Furthermore, the pre-Budget analysis said that Mukherjee is likely to cap the combined debt of the Centre and states close to 65 per cent of national GDP.

On disinvestment, the report states that the government is likely to fall short of capital proceeds from its disinvestment target of Rs 40,000 crore in current fiscal.

In 2011-12, it is expected that the government would be able to generate between Rs 35,000 to Rs 40,000 crore through divestment in companies like IOCL, BHEL and MMTC Ltd , it said.

The report says that deregulation in diesel will take place only after inflation cools off to level of 5 to 6 per cent, as a diesel price hike always has major ramifications on the economy.

source (http://economictimes.indiatimes.com/news/economy/finance/budget-2011-excise-hike-of-2-likely-in-fmcg-auto-says-smc-global-securities/articleshow/7538599.cms)

SMEs wants government to continue with stimulus package


NEW DELHI: Small and medium enterprises want the government to continue with the stimulus measures previously announced for the sector in the next fiscal as well so that growth of SMEs is not affected, as per a survey.

"Considering the current high rate of inflation and increase in input costs, almost 90 per cent of SMEs who participated in the survey urged the government to continue with the stimulus package for the next fiscal so that growth of the sector remains robust," tradeindia.com, a B2B portal, said in a statement.

The survey findings were based on the responses to an online questionnaire sent by Tradeindia to its 5 lakh users representing the SME sector across five 5 metros -- Delhi, Mumbai, Bangalore, Chennai and Kolkata -- and other 18 cities of the country.

SMEs also said the government should announce tax breaks for employment-intensive units rather than capital-intensive ones.

source (http://economictimes.indiatimes.com/news/smb/budget-2011-smes-wants-government-to-continue-with-stimulus-package/articleshow/7538563.cms)

^^ what do you think about stimulus package?

^^ what do you think about stimulus package?

It's not so stimulating.....I think they might need to boost the broadband connectivity across India as soon as possible, believe me bandwidth metering and speed limitation is killing some of the critical business plans and is hurting the corporate sector very badly, it's the same as power shortage issues which is killing all the potential fdi inflows.

Most corporate networks run VoIP, video conferencing, vpn and backup systems, poor connectivity is a limitation.

For home users, high-end media streaming services like netflix, hulu and amazon etc might want to invest here as there is a great demand for it. Still, thats not possible yet, in Bangalore I have a 16 mbps connection compared to 60 mbps in US :lol:, the Indian government must simply meet the growing demands.

^^ and what steps are they taking?

^^ and what steps are they taking?

This (http://www.livemint.com/2011/01/19173749/National-Broadband-Plan-bluepr.html)

hmm... and what about the excise cut/import duty in petrol because NYMEX crude is $94-93 today :ohno:

hmm... and what about the excise cut/import duty in petrol because NYMEX crude is $94-93 today :ohno:

Not a good idea, crude oil cuts always affects the on going inflation.

More here: http://www.investopedia.com/ask/answers/06/oilpricesinflation.asp

source: http://economictimes.indiatimes.com/pmeac-asks-government-to-withdraw-some-stimulus/articleshow/7540864.cms

Ahead of the general Budget , the Prime Minister's Economic Advisory Council today asked the government to withdraw some tax incentives provided to the industry to combat impact of the global financial meltdown .

"We have to get back to the fiscal consolidation ... this means withdrawal of some of the stimulus," PMEAC Chairman C Rangarajan said while releasing the 'Review of the Economy 2010-11' report here.

Pointing out that significant portion of fiscal adjustment will have to come from additional tax revenues, the Review called for "continued attempts to reform tax administration, review the double taxation avoidance agreements and other measures to prevent flight of incomes to tax havens."

Finance Minister Pranab Mukherjee had started the process of rolling back stimulus measures last year and it is expected that in the forthcoming budget too some of the tax incentives would be withdrawn.

Mukherjee is scheduled to unveil the Budget for 2011-12 in the Lok Sabha on February 28.

Pointing out that the withdrawal should be in stages, Rangarajan said, "I believe it is the time to move towards the process of fiscal consolidation. We clearly need to move in that direction."

Following the stimulus, which included tax incentives and raising public expenditure, the fiscal deficit shot up to 6.3 per cent in 2009-10.

In view of the economic growth picking up, Mukherjee in 2010-11 Budget had raised the excise duty by 2 per cent to 10 per cent and increased Minimum Alternate Tax (MAT) from 15 per cent to 18 per cent.

As the economic growth rate is expected to pick up to 8.6 per cent in the current fiscal from 8 per cent a year ago, there is likelihood of government raising duties to contain fiscal deficit.

The fiscal deficit in the current year, according to PMEAC projections, is likely to decline to 5.2 per cent of the GDP against 5.5 per cent estimated earlier.

As per the target set by the Finance Commission, government will be required to bring down fiscal deficit to 3 per cent of the GDP by 2014-15.

"With the current year's fiscal adjustment may not be a problem, the government faces formidable challenge of conforming to the Finance Commission's targets in the medium term", the Review added.

source: http://economictimes.indiatimes.com/articleshow/7522442.cms

IT industry is hiring almost 2.5 lakh engineers every year. That still constitutes a very low percentage of total number of engineers coming out of colleges in India said Vineet Nayar , Vice Chairman and CEO, HCL Technologies in an interview with ET Now.

If there was an unemployment rate of engineers coming out of India, you would be surprised, it is quite high. Therefore, the robustness of the IT industry is critical for creating employment he opined.

"The Indian IT industry is also hiring a lot of graduates, and therefore, contributed to employment of the graduates, which also was a challenge in our country. So, it is critical for the government to keep the employment meter going and, therefore, the health of the Indian IT industry" , he said.

Now, when you look at the health of the Indian IT industry, it is very important that you invest in infrastructure, education, water and security, and in absence of all of that in most part of the country, the Indian IT industry itself is spending on all these issues.

HCL's argument and request to the government is to look at the STPI norm, at least for one year till the new tax norms come into place and extend the STPI, so that the country’s competitiveness increases. When the new tax regulation comes in, there are incentive-based investments, and hopefully, with those investment-based incentives, we would be able to continue to be competitive in the industry.

That’s very important because it is linked to employment, it is linked to the success of small and medium enterprises, and it is linked to innovation which is being created in the IT industry.

The Indian IT industry has sought extension of tax benefits under STPI and simplification of the tax structure to encourage investments in the sector, among others as part of its budget wish-list.

The USD 76 billion software industry has requested the government to extend the Software Technology Parks of India (STPI) scheme till the Direct Tax Code (DTC), which is under consideration, is implemented.

"We have requested for the STPI scheme to be extended till the DTC comes in with the right incentives because we need one incentive or the other to encourage people to come in and invest, especially in small and medium companies," Nasscom President Som Mittal said.

STPI, which offers tax exemption to export oriented units on profits under Section 10A and Section 10B of the Income Tax Act, was extended by one year till March 2011 in the Budget last year.

"These things start impacting in the long run. When they said they won't extend STPI was at a time when DTC was supposed to come in 2011. For many larger companies, STPI benefits have got over and they have moved into SEZs. But not all companies can get into SEZs," Mittal said.

The government had introduced the SEZ policy, under which the first five years offer a 100 per cent tax exemption and 50 per cent for the subsequent five years.

If the scheme is not extended, tax rates for Indian IT companies could go up to 25-30 per cent from about 20 per cent currently.

Other demands include reduction of MAT (minimum alternate tax), introducing new incentive schemes based on employment and location, simplification of service tax refunds and clearer interpretation of tax laws.

Agrees AMD MD and Corporate VP (Sales and Marketing) Ravi Swaminathan. "Instead of tweaking one per cent here and there every year, the government needs to adopt a long-term view and adopt a zero-tax regime. This will bring in PC penetration and promote manufacturing." he said.

MAIT, a body representing hardware manufacturers said, the tax structure needs to focus on reducing the dependence on imports to feed domestic manufacturing.

"Less than 20 per cent components required for local equipment manufacturing are available from domestic sources. The tax regime needs to ensure that companies look at local equipment rather than importing them at cheaper rates from the neighbouring countries," Manufacturers' Association for Information Technology (MAIT) Executive Director Ashwini Aggarwal said.

Source: http://economictimes.indiatimes.com/articleshow/7445850.cms

Source: http://economictimes.indiatimes.com/tax-benefits-under-stpi-eou-unlikely-to-get-extension/articleshow/7545747.cms

Tax benefits under the Software Technology Parks of India (STPI) and export-oriented unit schemes are not likely to be extended beyond March this year, the Commerce Ministry indicated today.

"... there is a sunset clause, the Finance Minister announced in his last Budget that this would be the final year (of STPI and EOU scheme). However, we are using all our good offices to try and pursued the case on your (industry) behalf. Lets hope for the best," Minister of State for Commerce and Industry Minister Jyotiraditya Scindia said here.

The $76 billion software industry has requested the government to extend the Software Technology Parks of India (STPI) scheme till the Direct Tax Code (DTC), which is under consideration, is implemented.

Similarly, exporters are also demanding from the government to extend the export oriented unit (EOU) scheme.

Under STPI and EOU schemes, companies enjoy tax exemptions on profits under Section 10A and Section 10B of the Income Tax Act. These benefits, which were set to lapse in 2009, were extended by one year till March 2011 in the Budget last year.

Scindia was speaking at AIMA award function. Earlier in the day, speaking on the occasion, Commerce and Industry Minister Anand Sharma said that, "clean and green technology is the need of the hour and India is ready to play a defining role".

Sharma also said that the government is working to build India as a manufacturing capital of the world so that more and more jobs can be created to use the global opportunities.

Source: http://economictimes.indiatimes.com/budget-2011-govt-plans-booster-dose-for-electronics/articleshow/7546083.cms

The government is considering a new special incentive package for the electronics industry that it hopes will make India less dependent on imports of electronic components, systems and products.

Ajay Kumar, joint secretary in the information technology department, said on Monday that a committee under HCL Infosystems CEO Ajai Chowdhry had submitted recommendations. The new package is an attempt to improve on the incentive package the government introduced under its semiconductor policy of 2007, which is seen to have largely failed in its broader objectives. The 2007 package had offered 20-25% subsidies to large investments of Rs 1,000 crore to Rs 2,500 crore in semiconductor fab units and eco-system units.

But the only investments it attracted were from the solar photovoltaic segment. Some 11 such projects achieved financial closure in the three-year window that was provided under the scheme, and these are currently being appraised by the government for provision of the subsidy.

Kumar, who was speaking at the India Semiconductor Association (ISA)s Vision Summit, admitted that the response to the scheme was lukewarm. He said he could not disclose the recommendations of the Chowdhry committee, but said that the focus would no longer be on large projects, rather, it would be on all segments along the value chain of electronic systems. Chips, chip components, accessories, assembly, testing would all be sought to be stimulated. The idea is to provide financial incentives to all units in the value chain, he said.

The ISA and the electronics industry has long been pointing out that the gap between India's demand for electronic products and its domestic production could become dangerously wide in the years to come, given the sharp rise in demand that is expected. According to the government's own estimate, India's demand for electronic hardware that was $45 billion in 2009 would rise to $400 billion by 2020.

Source: http://economictimes.indiatimes.com/articleshow/7475086.cms

ECSEPC (Electronics and Computer Software Export Promotion Council) in its pre-budget recommendation to the finance minister has demanded zero customs duty for blade fuse body for manufacture of blade fuses.

Import Duties on Raw Materials are making manufacturing of Blade Fuse in India unfeasible. Currently India is 100% dependent on Imports for Blade Fuse Body and the country loses valuable foreign exchange as a result.

ECSEPC has thus is recommended that the present duty on import of blade fuses body may be reduced from 7.5% to nil.

Source: http://economictimes.indiatimes.com/articleshow/7467332.cms

ELCINA (Electronic Industries Association of India) has called for the implementation of GST wef April 2011; 12% GST (8% Excise + 4% VAT) on electronics value chain, specially components, parts and assemblies.

Apart from this it has also recommended the following key points:

10% Excise Duty be retained, considering the fragile global economic recovery. 4% SAD be abolished.

Streamlining excise procedures on import of inputs/raw materials for electronic components at 0% to equate with import of finished components without any procedural hassles.

4% Vat on all electronic components and assemblies.

In case of any delay in implementing GST, Zero CST on electronics value chain till such time as GST is implemented

Finished electronic equipment import be subject to atleast 10% Customs Duty to encourage local manufacturing

Mandate local content in key sectors such as telecom, rural IT infrastructure, e-governance projects (similar to 30% under DOFA in defence sector) and in special giveaway schemes such as the Tamil Nadu Government scheme of donating TVs.

Do not implement ITA -II and do not include electronic components and parts in any future FTA’s

Zero duty on all inputs for manufacture of electronic components and parts, including dual use inputs for all ITA-1 items and correct inverted duty on others

Promote Domestic Manufacturing & Value Addition

Policy for encouraging local manufacture of champion products such as CFLs, Solar Lighting, Mobile accessories (Chargers) etc. Simple products required in large quantity with high employment potential.

For Electronic Components and Parts have high value addition – Allow manufacturers to retain Excise Duty paid through PLA as interest free loan for 5 years and Income Tax benefit related to value addition.

Promote hardware manufacturing zones – clusters

Implement recommendations of Report by Task Force set up by DIT’s released in December 2009

source: http://economictimes.indiatimes.com/budget-2011-common-mans-expectations-from-the-fm/articleshow/7546436.cms

Here we take a look at the common man's expectations from the Budget 2011:

Further dilution of tax slabs

The revised tax slabs announced by the finance minister ('FM') for the financial year 2010-11 in the previous budget was a welcome relief. However, that benefit seems to have been lost to the inflation that we have seen. Therefore, the expectation to further liberalize the tax slabs is only fair. With the implementation of the Direct Tax Code in the pipeline, the FM may consider bringing tax slabs in line with the slabs proposed under DTC and raise the basic exemption limit to Rs 200,000. The exemption limit may be raised to Rs 250,000 for women and Rs 300,000 for senior citizens.

Exemption limit for various allowances

In 1997, the then finance minister, Mr P.Chidambram, had revised the exemption limits for various allowances like transport allowance (exemption allowed at Rs 800 per month), children education allowance (Rs 100 per month), and hostel expenditure allowance (Rs 300 per month). However, over the period 1997 to 2011, the economic conditions have undergone vast changes. This may be a right time for the government to consider revising these existing exemption limits to bring them in line with the market reality. The new limit of conveyance allowance should be Rs 4,000 per month. Children education may be Rs 500 per month and hostel Rs 2,000 in line with the current increase in educational costs.

Reimbursement of medical expenses

An exemption for reimbursement of medical expenses on the treatment of employee or his family members is available up to Rs 15,000 per annum. Over the last years, the expected cost of basic medical facilities has increased considerably. Keeping this in view, the government can consider revising the exemption limit from the existing Rs 15,000 to a more realistic level of Rs 50,000. This will also be in line with the limits prescribed in the Direct Taxes Code.

Raising the Rs 1 lakh deduction limit

As per Section 80C of the Income Tax Act, 1961, an individual can claim deduction for specified investments in mutual funds, provident fund, fixed deposits, etc and for specified expenses such as children's education. This provides a dual benefit - on one hand the individual becomes eligible to claim tax deduction on these investments, while on the other hand he enjoys steady returns from such investments. Thus, common man's expectation of an increase in the deduction limit from the current Rs 1,00,000 to Rs 2,00,000 will not be an overstatement. Also, a deduction up to Rs 20,000 under 80CCE for investment in infrastructure bonds is allowed which can be increased to Rs 30,000. Increasing this deduction limit will not only impact the common man with a lesser tax burden, but will also help the government to channelize funds into the Indian infrastructure sector.

Source: http://economictimes.indiatimes.com/articleshow/7532300.cms

Foreign investors are looking forward to more clarity in taxation laws in India, which is "a very attractive investment destination", according to tax experts at Deloitte.

"There is a good environment for investment in India. Foreign investors will like to see more clarity as well as certainty about the country's tax laws," Vijay Dhingra, Leader (India Desk) at Deloitte AP ICE, told PTI.

AP ICE is Asia Pacific International Core of Excellence, a group of tax experts from different countries.

India has embarked on plans to revamp the existing taxation system with the introduction of Direct Taxes Code (DTC) and Goods and Services Tax (GST).

DTC , which would replace the archaic Income Tax Act, would come into effect from April 1, 2012. Discussions are progressing with various states for the proposed GST that would come in place of state-level Value-Added Tax (VAT) and excise duty, among others.

Alan Tsoi, co-leader of Deloitte AP ICE and Asia Pacific M&A tax leader, said that foreign investors always look for stable, transparent and friendly investment environment, especially when it comes to tax system.

Dhingra and Tsoi, both of them based out of Hong Kong, noted that Indian tax regime is progressing in a positive direction and is "getting sophisticated".

India's exchange control regulations are also getting flexible, that makes it more easier for foreign investments to come into the country, Dhingra said.

Infrastructure, automotive, energy and telecom would be among the sectors that are likely to see more foreign investments in the near future, he noted.

Terming India as a "very attractive investment", Dhingra said that interest shown by foreign investors in the market is phenomenal.

On the investment climate between India and neighbouring China, Tsoi said it looks very healthy and flows are expected to increase in the near term.

In December, India saw foreign direct investment (FDI) worth about USD 2 billion. FDI stood at USD 25.88 billion in fiscal year 2009-10.

source: http://economictimes.indiatimes.com/articleshow/7533029.cms

The government should address macroeconomic issues like high fiscal deficit and rising inflation in the forthcoming Budget for sustainable growth of economy, a survey by industry body Assocham said.

The study also said that prices of raw material and energy are expected to go up further. Per unit cost of raw material have increased in the third quarter of the current fiscal by about 88 per cent, according to the survey of 423 business leaders.

The study said the growth story will lose its momentum "if existing macroeconomic concerns are not addressed and down-slide of corporate investments is not arrested".

India recorded 8.9 per cent growth in the first six months of the fiscal. For the full fiscal, the economy is expected to expand by 8.6 per cent.

Fiscal deficit had ballooned to 6.8 per cent of the GDP in 2009-10 and was pegged quite high at 5.5 per cent for the current fiscal.

On business confidence, primary and secondary sectors indicated relatively higher confidence, while services and infrastructure firms were less confident.

About 86 per cent of the respondents said "the operating conditions of businesses showed there was no let up from the inflationary measures". The analysis also said power and fuel bills are increasing.

source: http://economictimes.indiatimes.com/articleshow/7539353.cms

The government is considering a simple and streamlined set of norms for all kinds of overseas investments into capital markets, but wants such foreign investors to undergo a stricter scrutiny process.

The move could facilitate direct investments by both individual and institutional entities abroad into Indian equity and debt markets, as against the current practice of coming through FIIs, venture capital and private equity funds.

However, foreign investors would need to face stringent scrutiny before being allowed to invest in Indian capital markets as per the proposal, on which the Finance Ministry is seeking feedback from key financial sector regulators such as Sebi and RBI, sources said.

The proposals would have no bearing on the FDI (Foreign Direct Investment) norms and would only apply to the portfolio investments, or those coming into the capital markets.

While flow of foreign investments into Indian markets have been robust over past few years, a tedious and complex process has been often criticized for coming in way of the optimal level of overseas fund flow into the country.

The proposed measures, expected to be announced in the union budget later this month, would focus on simplify the process of foreign investment in capital markets and avoid uncertainty, delay or unequal treatment with regard to various investor classes, sources said.

At the same time, the proposals would put a strong emphasis on KYC (know your customer) norms for these investors to thwart any possibility of illicit wealth coming into the Indian markets, they added.

The measures are also being considered for allowing foreign entities, both individual and institutional, to invest in capital markets here without setting shops here.

Instead, they would be allowed to invest in India after registering with the Indian depository participants present in their respective counties.

The proposed measures are largely based on recommendations made by a high-powered working group last year on steps required for attracting foreign investments.

The panel, incidentally headed by U K Sinha who has now been given charge as Chairman of capital market regulator Sebi, had proposed that the foreign investors should not be categorised in different classes like FIIs, FVCIs or NRIs and a common set of regulations be formed for them.

Among others, the Sinha panel had suggested a single window for registration and clearance of portfolio investment regulations, without distinguishing between investor classes.

Corporate India can look forward to a clearer roadmap for shifting to International Financial Reporting Standards (IFRS) for accounting with the government expected to issue tax-related clarifications in the Budget.

The convergence of the Indian Account Standards, currently used by domestic companies, and IFRS is one of the major issues concerning India Inc as this would lead to a revaluation of their assets and liabilities and in several cases the new accounting norms will also result in change in income recognition norms.

One of the biggest changes will be the move towards fair value accounting which will require companies to move their assets and liabilities to market value, resulting in markup or mark-down in values. The change in value will not just result in a change in the balance sheet position but will also have an impact on the bottomlines of companies due to changes that will be required in the profit and loss accounts.

A higher profit due to the accounting change will result in higher tax liability for companies and the converse also holds true.

One option under consideration is to mandate that companies prepare two sets of accounts with the one based on IFRS to be used by shareholders and the other by regulators. For tax purposes, separate accounts based on historical standards could be mandated. Ministry of corporate affairs (MCA) has, however, approached the tax authorities to issue clarifications for a smoother roll-out of the new accounting norms.

Already, to make the new system more palatable, the government and regulators have opted for a four-stage implementation.

In the first stage, starting April, companies that are part of the nifty or the sensex, those with shares listed overseas or with a net worth of over Rs 1,000 crore are expected to move to IFRS. From April 2012, insurance companies would be added to the list.

From April 2013, companies with a net worth of over Rs 500 crore, banks and large non-banking finance companies are expected to adopt IFRS. In the fourth stage, starting April 2014, listed companies with a net worth of less than 500 crore, NBFCs with a net worth of over Rs 500 crore and urban cooperative banks with net worth of Rs 200-300 crore would be required to shift to IFRS.

The government has also said that unlisted companies with a net worth of under Rs 500 crore and urban cooperative banks with a net worth of uder Rs 200 crore won’t be required to adopt IFRS.

Source: http://economictimes.indiatimes.com/articleshow/7539319.cms

Source: http://economictimes.indiatimes.com/articleshow/7538599.cms

The government is likely to increase excise duty by 2 per cent in sectors like FMCG and automobiles, as well as raise service tax, in the forthcoming Budget to reduce the fiscal deficit, a report said.

SMC Global Securities Ltd, in its forecast for the 2010-11 Budget, said that service tax is expected to be hiked to 12 per cent from the current level of 10 per cent.

In bad news for exporters, it said the Finance Minister is unlikely to extend the interest subsidy of 2 per cent, as the country's exports are likely to cross the $200 billion target for the current fiscal.

In the last Budget, the government had extended the concessional export finance regime till March 31.

"In order to contain fiscal deficit, Pranab Mukherjee will stress on revenue generation by expanding the excise tax base by another 2 per cent in sector such as automobile, cement, FMCG, power and telecom, besides increasing service tax," SMC Group Managing Director Subhash Aggarwal said.

India's fiscal deficit had ballooned to 6.8 per cent of the GDP in 2009-10 and is pegged quite high at 5.5 per cent for the current fiscal.

Aggarwal said the minister may widen the service tax basket and include education and healthcare in the Budget.

"... India is likely to resort to pre-crisis fiscal and monetary policies from April, 2011, onward, focusing on revenue mobilisation," it said.

The report also said the government may increase spending in agriculture, infrastructure and education.

In a bid to support agriculture growth, the finance minister could raise credit target for banks to Rs 450,000 crore. In the last Budget, the target was raised to Rs 37,500 crore.

The minister may allocate Rs 40,000 crore to the Mahatma Gandhi NREGA, it said.

Furthermore, the pre-Budget analysis said that Mukherjee is likely to cap the combined debt of the Centre and states close to 65 per cent of national GDP.

On disinvestment, the report states that the government is likely to fall short of capital proceeds from its disinvestment target of Rs 40,000 crore in current fiscal.

In 2011-12, it is expected that the government would be able to generate between Rs 35,000 to Rs 40,000 crore through divestment in companies like IOCL, BHEL and MMTC Ltd , it said.

The report says that deregulation in diesel will take place only after inflation cools off to level of 5 to 6 per cent, as a diesel price hike always has major ramifications on the economy.

source: http://economictimes.indiatimes.com/articleshow/7520359.cms

Finance Minister will try to ease inflation-hit voters' pain with a budget heavy on spending for food, fuel and fertiliser subsidies, while selectively lifting taxes to meet fiscal targets.

Pranab Mukherjee, faces a tough time reining in inflation while keeping the economy on a high-growth path when he presents his annual budget for 2011/12 in parliament on Feb. 28.

Last year, government rolled back about $10 billion of a $40 billion stimulus package implemented during the 2008 global financial crisis.

This year, the government is unlikely to make tough belt-tightening decisions. It is on the back foot over corruption scandals and faces elections in four major states.

Stubbornly sticky inflation in Asia's third largest economy, driven by food and other commodity prices, combined with a high fiscal deficit has prompted repeated calls from the central bank for fiscal consolidation.

However, government tends to bank on higher revenues rather than spending cuts, a formula that worked in the current fiscal year thanks to a windfall from the sale of 3G mobile bandwidth.

Below are some questions and possible answers that the finance minister faces over the budget:

WILL INDIA FURTHER TRIM FISCAL STIMULUS?

Since Mukherjee wants to reduce the fiscal deficit to 4.8 percent of gross domestic product in 2011/12 and 4.1 percent in 2012/13, he is expected to continue a gradual rollback of the fiscal stimulus package unveiled during 2008 global crisis.

In last year's budget, he trimmed the package by raising factory gate duties on all major items to 10 percent from 8 percent and reimposing the taxes on crude oil, petrol and diesel that were withdrawn in 2008.

The government rolled out its stimulus package in three phases during 2008 and 2009 by cutting taxes and lifting spending on infrastructure to prop up demand.

Meanwhile, an effort to overhaul India's tax system has been deferred until next year, meaning Mukherjee may hold off on raising tax rates across the board and instead lift rates only for goods such as cars and commercial vehicles, while bringing more services into the tax net.

WILL INDIA FOLLOW THE FISCAL CONSOLIDATION PATH?

Partially. Mukherjee could rely on a surge in domestic demand and global recovery to drive tax receipts to meet fiscal targets.

The RBI, which has raised rates seven times since March to tackle high inflation, hopes the government moves towards fiscal consolidation in 2011/12.

The finance minister may also marginally lower government borrowings below this year's Rs 4.47 trillion ($98 billion) to show his commitment to fiscal consolidation, though he will not have the cushion of revenue from the 3G spectrum auction in the new year.

The government could raise up to Rs 40,000 crore from the sale of stakes in companies, partially offsetting a swelling food subsidy bill estimated at Rs 70,000 crore. A downturn in the stock market, however, has curbed investor appetite for new issues for the time being.

Consumers may have to shell out more on electronics , appliances and fast moving goods. Talks of a rollback of the stimulus and increase in excise duty are making consumer goods’ companies apprehensive. Already reeling under the surge in input costs over the year, companies will be forced to pass the excise duty burden, leading to higher retail prices for consumers. It looks almost certain that excise will be hiked in the auto sector, experts say.

Durable and electronic companies like Samsung and LG India say the move will hit growth of the industry, while FMCG firms, including beverage companies feel that the move will squeeze their profitability and impact margins.

“There is speculation that the duty benefit given earlier may be rolled back, which will lead to a 2% increase in the excise levy. We hope this does not happen. The move will be detrimental , and pull down growth ,” a top executive with a consumer durable company told TOI. Recently, speculation about the increase has been rife, with the PMEAC also making a strong case for the stimulus withdrawal in view of the robust growth in the economy.

The stimulus and tax cuts given to the industry in 2009 had provided a fillip to the sagging economy, with the consumer durable industry growing at strong double digit in 2010. Flat panel TVs grew 80%, while refrigerators, air-conditioners and washing machines showed a 12.5%, 44% and 10% growth respectively, during January-December 2010. The industry has been suffering due to hike in metal prices with the increase in copper at 45%, steel 16%, resins 18% and aluminium 23% over August last year.

“At a time when the industry is reeling under the impact of rising input costs, one is looking at support from the government by way of policies that will boost domestic manufacturing ,” R Zutshi, deputy MD, Samsung India .
Consumer goods, including durable firms, have implemented price hikes across the board over the last few months up to 10-15 %. Says LG India COO YV Verma: “Such a move will adversely impact the industry, already suffering with high costs” . The upped tags will be bad news for consumers, who are already burdened by a surge in food inflation even as their overall expenses have shot up.

“If the budget announces an increase in duties it will affect the end consumer who is already stretched as far his budgets go. There has to be some caution exercised by the government to curb further price hikes,” said KK Modi, chairman, Godfrey Phillips India . The group, which has interests in diverse businesses such as confectionery, cosmetics and tea along with its mainstay tobacco, “hopes that there no excise duty increases for tobacco .” Cigarette prices have gone up by about 25% in the last one year.

The $2-billion soft-drinks market, largely comprising the two cola majors—PepsiCo and Coca-Cola—is also expected to be hit with the rise in excise duty. At present, the levy at about 8%, if rolled back, along with other increases in manufacturing costs, will hurt their bottom lines. Also, FMCG companies which have facilities located outside of excise duty-free zones, will be impacted . Says Siddhartha Sanyal, chief India economist, Barclays Capital: “... A small hike in excise duties cannot be ruled out as the government is trying to boost revenue collection and the current excise rates are still below the prestimulus levels for a number of industries.”


Source: ET

source: ET

The government may raise the income tax exemption limit in the upcoming Budget to provide some relief to the taxpayer from inflation, Goldman Sachs said today.

"Income tax relief can be provided to lower income brackets to compensate for inflation. This could take the form of raising the tax exemption limit from the current Rs 1.6 lakh," it said in a report.

Presently, income up to Rs 1,60,000 is exempted from tax for individuals. For women and senior citizens, the limit is Rs 1,90,000 and Rs 2,40,000, respectively.

Inflation continues to be a concern for the common man as well as the government.

While the food inflation had touched 18.32 per cent in December, 2010, before being moderated to over 11 per cent this month, the overall inflation still stood above eight per cent as against the comfort level of 5-6 per cent.

Goldman also expects the fiscal deficit for the current fiscal to reduce to 4.9 per cent of the GDP against 5.5 per cent estimated in Budget 2010-11.

The reduction is largely due to the windfall on 3G telecom auctions and disinvestment proceeds.

"For 2011-12, even with revenue measures and slower growth in expenditures, we expect the central deficit to be slightly higher at 5 per cent of GDP, largely as the one-off revenues would be considerably reduced", it said.

The government mobilised over Rs 100,000 crore from the 3G and Broadband Wireless Access (BWA) auctions in the current fiscal.

Besides, the government raised over Rs 15,000 crore by listing Coal India on the bourses, apart from Rs 6,000 crore from Powergrid Corporation, MOIL , Engineers India , Shipping Corporation and Satluj Jal Vidyut Nigam Ltd, taking the disinvestment proceeds to over Rs 21,000 crore.

Source: ET

Fearing a slowdown in the industrial growth rate in the next six months, trade body FICCI urged Finance Minister Pranab Mukherjee not to raise excise duties or roll back stimulus for the sector in the forthcoming budget.

Stating the business confidence index had plummeted on concerns of rising raw material costs and food inflation spilling to other sectors of economy, FICCI said, "there should be no further roll back of stimulus measures. Excise rates in particular should not be raised."

The chamber also urged Mukherjee to provide tax relief to individuals who were facing the brunt of inflation and to move ahead with the implementation of the Goods and Services Tax (GST).

The Minister is slated to unveil the budget for 2011-12 in the Lok Sabha on February 28.

The overall business confidence index, according to the Federation of Indian Chambers of Commerce and Industry (FICCI), slipped to 63.8 in the current survey from 76.2 earlier.

FICCI's suggestion, however, is in variance with that of the Prime Minister's Economic Advisory Council (PMEAC) which had made a strong case for withdrawal of stimulus and raising of excise duty in view of the economic growth rate expected to revert to the pre-global crisis level of 9 per cent in 2011-12.

The PMEAC also said inflation could fall to 5 per cent by June end.

FICCI's business confidence survey, however, said the confidence level of corporate India has slipped ahead of the Budget 2011-12 on fears of increasing rising raw material and manpower prices and high food inflation impacting the manufacturing sector.

"The major problem area is input cost inflation which is hitting industry hard," the survey added.

About 90 per cent of the 296 firms participated in the survey said that rising raw materials prices were acting as a 'negative factor' and would impede their business performance.

Majority of the respondents said companies are increasingly facing demands for higher wages and salaries and this is complicating their cost structure further.

Over half of the respondents said "they would increase selling prices in the next six months" due to rising raw material prices.

The survey said while current demand situation appears satisfactory, the near term order book position is showing signs of some moderation.

"It seems that the successive hikes introduced by RBI in the key monetary variables (seven times since March 2010) have started impacting industry's performance," it added.

About 53 per cent of the firms have said that high lending rates by banks are having an impact on their operations.

cc: ET

The rollback of fiscal stimulus is one of the options the government is considering to control inflation . In response to a Parliament question, minister of state for finance Namo Narain Meena said that rolling back of fiscal stimulus and RBI's policy measures to curb excess liquidity would help the government pin down high inflation.

The Centre has also instructed state governments to take necessary action under the provision of the Essential Commodities Act and the Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act, to prevent hoarding and blackmarketing of essential commodities.

To enable the state governments to take such measures , the Centre had also empowered them “to impose stockholding limits by keeping in abeyance some provisions of the central order dated February 15, 2002 in respect of pulses, edible oils, edible oilseeds, rice, paddy and sugar for the period up to March 31, 2011,” Meena said. As a result of the crackdown on blackmarketers, at least 250 people had been detained in 2010 and 147 in 2009. The highest such cases were reported from Tamil Nadu (232) in the last two years followed by Gujarat.

good going, studdmanster

Budget 2011: Power companies want extension of tax sops


MUMBAI: Indian power sector expects the government to continue its thrust on infrastructure and pins its hopes on incentives for the renewable energy sector and extension of sunset clause under Income Tax Act in the federal budget for 2011-12 to be tabled in parliament on Feb 28.

Under section 80-I(A) of the Income Tax Act mega power generation projects, with over 1,000 megawatts (MW) in case of thermal and over 500 MW in hydro, are exempted from income tax for 10 years, if they are commissioned before March 2011.

The industry is, however, divided over the issue of levying customs duty on imported power equipment.

The present power infrastructure of the country is inadequate to meet demand in an economy that has been growing more than 8 percent over the past few years. The federal government has forecast a GDP growth of 8.6 percent for 2010-11.

The government's thrust, more off-budget than through budget, is to help the sector add generation capacities, discourage wastage, encourage generation of renewable energy, ensure supply of power equipment and facilitate rural electrification.

However, analysts are suspicious of the government's ability to implement this agenda as speedier as it intends to. The government had cut capacity addition target for 2007-12 (Eleventh Five Year Plan) several times in the past year.

"Overall, policy and regulatory framework for the sector has evolved over the last decade, now the industry expects more in terms of tax and other incentives," Charudatta Palekar, principal consultant, energy, utilities and mining, PricewaterhouseCoopers' said.

ISSUES FOR 2011-12

Indian power equipment manufacturers have been demanding imposition of customs duty to ensure a level-playing field vis-a-vis foreign manufacturers, while power project developers have been lobbying against it on fears the move will dry up supply of cheaper equipment in the market.

At present, there is no customs duty on equipment used for mega-power projects. The government is unlikely to change this given its plan to achieve capacity addition target faster, analysts said.

Another issue is the import duty on power equipment spare parts.

"A concessional rate of duty is applicable for import of power equipment, which is not being extended when I import spare parts," Issac George, Chief Financial Officer, GVK Power said, hilighting the concerns of power producers.

That the power sector has no service tax exemption is an anomaly as other infrastructure segments such as roads, airports, railways, transport terminals, bridges, tunnels and dams are enjoying this benefit, industry officials said.

In its pre-budget memorandum, the Indian Electrical & Electronics Manufacturers' Association (IEEMA) has sought to rectify this anomaly.

The power equipment makers' body has also sought duty-free import of specialised steel, referred to as CRGO electrical steel, until indigenous production commences.

CRGO steel, demand for which is estimated about 3.5 million tonnes per annum for the Twelfth Five Year Plan (2012-17), is a critical raw material for manufacturing transformers, IEEMA said.

The companies are completely dependent on imports for this now.

The 2010-11 budget had more than doubled fund allocation for the sectoral schemes and also extended, by one year, the sunset clause in the Income Tax Act.

source (http://economictimes.indiatimes.com/news/news-by-industry/energy/power/budget-2011-power-companies-want-extension-of-tax-sops/articleshow/7555551.cms)

Not a good idea, crude oil cuts always affects the on going inflation.

More here: http://www.investopedia.com/ask/answers/06/oilpricesinflation.asp

$98 now

:doh: how will it increase the inflation? IMO it will keep fuel inflation in control and also be a relief for OMC who are loosing Rs 5/ litre now on petrol :ohno:

$98 now

:doh: how will it increase the inflation? IMO it will keep fuel inflation in control and also be a relief for OMC who are loosing Rs 5/ litre now on petrol :ohno:

The demand for fuel increases when the prices are low eventually leading to high fuel prices due to short supply. I suggest you watch this (http://www.ndtv.com/video/player/ndtv-special-ndtv-24x7/computers-cellphones-to-cost-more/191704)

The demand for fuel increases when the prices are low eventually leading to high fuel prices due to short supply. I suggest you watch this (http://www.ndtv.com/video/player/ndtv-special-ndtv-24x7/computers-cellphones-to-cost-more/191704)

you still not understood!!! if they are loosing Rs 4/ litre and if the govt. slashes import duties then they will not raise the prices(in this way you will get no losses for OMC's and no increase in prices)

you still not understood!!! if they are loosing Rs 4/ litre and if the govt. slashes import duties then they will not raise the prices(in this way you will get no losses for OMC's and no increase in prices)

dude, it could go either way- those duties are not that large for them to gauge the prices, it much more politics. Anyhow, will it affect you personally? If you own a car and finding it difficult to pay for the fuel then something doesn't add up there because it's not true.

good going, studdmanster


Thankyou!!!...:colgate:

Source: ET

Indian information technology firms are looking for increased spending on education, e-governance and defence sectors, and an extension by at least one year of tax benefits under the Software Technology Parks of India (STPI) scheme, but many think it is unlikely.

STPI was a society set up by the Ministry of Information Technology in 1991 to boost software exports. Among other benefits, the STPI scheme provides a 10-year income tax exemption for units situated in software technology parks.

"I think extension of STPI is a bleak possibility in the current form," said Ganesh Murthy, chief financial officer at MphasiS .

In the 2009-10 budget, the government had extended tax benefits for units in STPI by a year to March 2011, in the backdrop of a financial crisis in the United States, which accounts for more than 50 percent of India's software exports.

The budget for 2010-11 went without any mention of extending the STPI scheme, disappointing IT companies.

"We believe, an extension will not come," Anand Rathi Securities analyst Naushil Shah said, adding most analysts have factored in higher tax rates for the next fiscal. "So, if STPI is not extended, it will be neutral for the sector and if it gets extended, it will be a positive surprise."

Small- and mid-cap IT firms are hoping for an extension of the STPI scheme, as many have still not migrated to special economic zones to continue enjoying some sort of tax benefits.

"We urge the government to extend the tax benefits under the STPI scheme for another year or two to empower growth of small and medium sized companies," Surjeet Singh, chief financial officer at Patni Computer Systems , said.

SEZs, often located in and around large cities, also pose capacity constraints, while high rentals pose a cost barrier for small companies. If the STPI scheme is not extended, the increase in tax rate further could crimp margins, which are already under pressure due to attrition, rupee's appreciation and lower pricing.

"Most of the companies are paying an effective tax rate of about 15 percent and straight away that will jump to 25 percent," Murthy said. "Obviously the margins will take a hit."

IT companies greeted last year's budget with a muted response as the government, while remaining silent on STPI, also raised the minimum alternate tax to 18 percent of book profits from 15 percent, impacting cash flows.

The industry is looking forward to the minimum alternate tax rate being rolled back to 15 percent, Patni's Surjeet Singh said. However, analyst Shah expects the government to maintain status quo.

The $60 billion IT services sector is also expecting the 2011-12 budget to bring increased funding to the e-governance, defence and education sectors, increasing opportunities in the domestic market for IT companies.

Increase in defence spending will benefit companies such as Rolta India and Infotech Enterprises , while a rise in the education outlay would give a boost to firms such as Aptech , NIIT Ltd and Everonn Education .

The industry is also expecting the budget to address the refund of service tax on inputs used for export of software and simplify the process.

cc: ET

BPO major WNS in its pre-budget recommendations has said that it would expect that the sunset clause of the STPI be merged with the DTC or GST implementation dates.

Here is what Keshav Murugesh, CEO, WNS has to say:

WNS employs a lot of people from the Tier II or Tier III cities, so we believe the future of this model will be to take work to the people as opposed to taking people to the work. If we see the cost of education and the cost of moving from one profession to a completely different profession like BPO, the cost involved in training and development is huge, which individual companies alone cannot manage. The government should intervene.

Personally I would like to see the government focus a lot on the fiscal programs helping us get into smaller cities and build new centers in these locations by providing infrastructure, tax exemptions and education facilities. Therefore, I feel the need for incentives in the IT & BPO sector is high and the government should support it.

We have noticed that a lot of states have taken interest in developing the Tier II & Tier III centers. The reason being that there is some great talent available there and people in these places are grateful for the opportunities and jobs creation is easy and not to forget there is a vote bank there. The budget should focus on incentives for investments in tier 2 and 3 locations on infrastructure, training and development, salaries as opposed to focusing only on profit based incentives.

Globally the outsourcing market indicates that IT has always exceeded than BPO in term of numbers on the contrary in India, this year it is BPO which has exceed in terms of numbers as oppose to IT, the reason being the increase in the spends globally including governments across the world are looking for new solutions from BPOs to reduce costs.

Also, with an all time high inflation, the consumption is not getting effected, hence, the ability to service that demand and generate revenue is also very high. In addition, as the government is helping the country to catch up with the world market, it is a complete paradigm shift and once this percolates to the Tier II and Tier III cities, it will actually make us the Incredible India.

cc: ET

Amid concerns over the widening trade deficit, Commerce Ministry on Wednesday favoured continuation of stimulus for exporters in the forthcoming Budget to help the country double exports to USD 450 billion in three years.

The suggestion formed part of a draft paper, unveiled by Commerce Minister Anand Sharma , for finalising a strategy to push India's global trade to USD 1 trillion by 2013-14. "One of the major reasons to take this initiative and put it (a strategy) in place on urgent basis is because of the widening balance of trade," he said.

The Ministry has invited comments on the paper from stakeholders by March 23, on the basis of which an export strategy will be finalised by the end of next month. Eventually, it will be added to the Foreign Trade Policy to be unveiled later this year.

While seeking greater budgetary support from the government, the paper favoured a stable policy environment and continuation of the existing incentive schemes. "A stable policy environment is essential for a vibrant foreign trade and accordingly it will be essential to continue with the existing incentive schemes such as duty drawbacks, tax benefits and interest subvention scheme", the paper said days before the Union Budget , to be presented on February 28.

The paper also calls for a technology upgradation fund, financial support to various sectors and special focus on new markets worldwide, besides clearing of infrastructure bottlenecks which may cost about Rs 31.15 lakh crore.
India's exports this fiscal are likely to increase to USD 225 billion, from USD 178.6 billion in 2009-10. The total trade this fiscal is expected to be around USD 550 billion.

The paper has warned that the trade gap, which stood at USD 89 billion during the first 10 months of 2010-11, is likely to increase to around USD 115 billion for the entire fiscal and may further escalate to USD 278 by 2013-14.

"With the initiative that we proposed in the strategic paper, we hope to close the (trade) gap and bring the gap to below 10 per cent or may be close to 9 per cent of the GDP which in the view of those who manage the economy is perhaps is achievable and also manageable," Sharma said.

Trade deficit, the difference between imports and exports, depletes foreign exchange reserves and puts pressure on balance of payments, worsening the current account deficit. "The projected balance of trade deficit (BOT) on merchandise account of 13 per cent (of GDP) is clearly cause of serious concern because it can lead to an unsustainable CAD," the paper said.

It further added, "even with the achievement of an export target of USD 450 billion, the BOT deficit is still likely to be over 9 per cent of GDP, around the same as at present, which may be regarded as just about manageable".

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India will miss the April 1, 2011, deadline to implement the goods and services tax (GST), with the BJP-ruled states playing spoilsport once again. However, an influential policy advisory body has lent some hope to speed up the reforms process to create a common market across the country. In its report released a week ahead of Budget 2011, the Prime Minister’s Economic Advisory Council (EAC) has asked the Centre to adopt GST within the existing parameters of the Constitution . This framework allows the Centre to tax goods up to the manufacturing stage and also tax services. All the Centre needs to do is prune exemptions, convert specific excise duties — in commodities such as cement — to ad-valorem rates and tax all services.

Companies and service providers with a turnover of up to Rs 50 lakh should be out of GST and those above the limit should pay a 10% tax. The EAC’s recommendations are not new. These were proposed by an expert panel chaired earlier by M Govinda Rao, a member of the EAC and director at National Institute for Public Finance and Policy. The reforms, though seen as a step forward, are incremental . Already, most goods and services attract 10% duty. Manufacturers and services providers are also given credit for the input taxes that they pay on goods and services. The threshold exemption though varies for goods and services. Even a uniform threshold exemption will be a nightmare to administer.

Fact is the transition to GST requires two crucial amendments to the Constitution. These include new powers for the Centre to tax goods up to the retail stage and for the states to tax services. So, even if the EAC’s recommendations are accepted, the Centre cannot tax goods up to the retail stage. Most states support these amendments as this will strengthen their autonomy and boost revenues. In a federal structure, the Centre must also ensure that it does not infringe on the taxation powers of states. They should have the flexibility to change GST rates, if they want to, although they should ideally not. The government has done well to address some concerns of the states. It has watered down an amendment on the GST Council, originally proposed to be chaired by the finance minister.

The GST Council, with a majority representation of states, will be a useful forum for the states and the Centre to work out fiscal sense. The Centre should, therefore, continue its dialogue with the BJP-ruled states to forge a consensus on implementing GST at least in 2012. So far, the Centre and the states have agreed to a dual GST, comprising of a central GST and a state GST. Decisions have to be taken on the rate structure and list of exemptions . But the first step is to make the relevant amendments to the Constitution. Budget 2011 will not have big-ticket announcements on GST or even a clear timetable for transition. However, preparatory work is a must. The IT system that can service GST should be up and running and the administration should be fully geared to handle the new tax system in 2012.

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With the proposal to introduce Direct Tax Code (DTC) from April 1, 2012 already in place, people seem to have accepted the fact that any change introduced in Budget 2011 would either be in accordance with the provisions of the DTC or may be a midway provision in order to facilitate a smooth transition to DTC. Somewhat like a test match which seems to be heading for a draw, hence the lesser excitement.

Some people, however, continue to hold the view that the last day of the test match may be exciting and that the unexpected may happen and the team of the aam aadmi may still win the match. These people continue to see Budget 2011 as a last opportunity available to make changes in the existing Act in order to settle past disputes and introduce some changes that ease the burden of tax on the middle/lower-income levels. Purely from a personal-tax perspective, some of the changes that are being expected are:

Given high inflation, which has been working like a doosra for the aam aadmi, revision in the tax exemption slab from current `160,000 to a higher amount is possible. However, given that DTC has proposed a limit of `200,000, the expectation is not too high. Also, abolishment of education cess of 3% would be a welcome move and would help in facing some more spin attack.

Increasing cost of medical care and the ever increasing list of ‘what is not covered’ under the medical insurance coverage is no less than the teesra delivery being faced by the aam aadmi. Budget 2011 might increase medical reimbursement exemption limit from current Rs 15,000. The limit provided by DTC of Rs 50,000 does provide some extra room to play and people are hopeful of some relief here.

On the other hand, Leave Travel Allowance (LTA) might undergo a change as no such exemption is available under DTC.

The current threshold of Rs 100,000 for specified payments and investments does not provide much relief to the tax payers or an impetus to compulsorily save for a rainy day. Given the hope provided by DTC to raise this amount to Rs 150,000, people are expecting some relief here.

The newly introduced deduction of additional Rs 20,000 for investment in long-term infrastructure bonds does not find its place under the DTC. People are hopeful that this will be continued and will be like the extra’s that were not counted in the DTC.

DTC has proposed some changes in the computation provisions for computing Income under House Property. The existing provision of standard deduction has been changed from current 30% on ‘annual value’ (calculated on rent as reduced by municipal taxes) to 20% of ‘gross rent’. This may increase the tax liability for individuals who have let out their house property. Though people are hopeful for some changes here, it would be not surprising, if some transitional provisions are built in this budget.

Given that the DTC has proposed major changes in the wealth tax regime, both on increasing the threshold limit and on the applicability of wealth tax on the category of assessee’s and different asset classes, the finance minister may use this opportunity to introduce some of these changes in this Budget.

Although it seems that the Budget provisions are likely to be in the direction of the DTC, the continuous spin attack being faced by the aam aadmi due to rising inflation and other external factors may keep the expectations alive and growing till the time the Budget is placed on the table.

(The author is Associate Director — Tax & Regulatory Services, Ernst & Young)

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Telecom lobbies COAI and AUSPI are pitching for rationalising multi-level taxes , charges and fees applicable to the telecom industry in the budget, demanding a unified system along with a single levy for revenue collection .

"The industry has repeatedly requested that multifarious taxes, charges and fees applicable to industry should be unified and a single levy on revenue should be collected.

"We propose to request Department of Telecommunications (DoT) to constitute a committee to study present structure of levies and make suitable recommendations to Government," AUSPI said in a pre-budget proposal for fiscal 2011-12.

The body is also requesting Finance Minister Pranab Mukhrjee, who will be tabling the budget on Feburary 28, to initiate the process of auctioning more spectrum for mobile services at the earliest.

The mechanism followed by the government to auction 3G spectrum recently has been successful and this should facilitate an early auction of additional spectrum.

In view of the above, the government should envisage auction of additional spectrum in the Financial Year 2011- 2012 and accordingly include the proceeds from auction of additional spectrum in the budgetary estimates, it said.

"We would therefore request the Government to initiate the process of auctioning more spectrum for mobile services at the earliest," GSM lobby group COAI said in a its pre-budget memorandum.

"We request that this upfront auction amount paid for acquiring 3G spectrum should be allowed as a capital asset for the purpose of tax depreciation and an amendment be introduced regarding the same," the telecom lobby said.

The Government had collected over Rs 67,719 crore for 3G spectrum aution.

COAI also wants service tax on broadband and pure internet services to be abolished besides doing away with service tax on renting of immovable property for use by telecom service providers.

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The indirect tax system in the country has seen far-reaching changes during the last decade. The key objective of these tax reforms has been to minimise the cascading effect on taxes . Tax exemptions have been the chosen method of providing tax incentives in the country and, over a period, these exemptions have grown disproportionately . In the last few years, efforts have been made to streamline and reduce the list of exemptions. Even then, today, more than 350 exemptions exist in central excise and more in Customs and service tax.

A major roadblock to minimising the cascading effect on taxes is the manner in which these tax exemptions are granted. The existing exemption schemes are based on the type of goods and services, industry sectors, value of clearances and are also available in the form of tax-free zones such as special economic zones, export-oriented units and designated specified areas, which have concessional or no excise duties. In most cases, the exemptions prescribe that the assessee is not required to pay tax on the procurement or supply of goods and services. The basic model of these exemptions is such that by exempting the final products without exempting the inputs and input services, they hamper the free flow of credits down the supply chain, which results in the cascading effect on taxes. For instance, at the central level, there are numerous exemptions that allow the manufacturer and the service provider not to pay tax on the final product or the output service.

The credit rules do not allow the manufacturer of the exempted goods and the provider of exempted services to take credit of the inputs and input services used. This result in inclusion of these taxes in the final price and the taxes are passed to the end-customer . This is clearly against the spirit of the goods and services tax (GST). The GST envisages a broader and uniform tax base across states and, hence, the present exemptions need to be rationalised . It is expected that the exemptions would be limited to the present list of exemptions available in value added tax (VAT), which does not exceed 100. As a step towards the GST, the government is reviewing the status of existing exemptions, so as to identify the ones that have achieved their purpose and the ones that are still essential.

Budget 2011 is seen as a starting point for the phasing out of certain exemptions. A number of items such as processed food, footwear, ice-cream and so on are being considered for removal of exemptions, as most of these goods are being taxed by states under the VAT regime. However, given the inflationary trend, it is unlikely that goods, which have an impact on the common man, would be touched. Many exemptions are still expected to find a place in the GST regime. The threshold-based exemption is one such exemption. In the present regime , the threshold limit prescribed under the excise law is Rs 1.5 crore, whereas in VAT law, it is Rs 10 lakh. Currently , the calibration of the threshold limit in the GST is a topic of debate .

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Standing Committee on Finance Chairman Yashwant Sinha today suggested raising the income tax exemption limit from Rs 1.6 lakh to Rs 2 lakh in the Budget apparently to provide relief to common man reeling under the impact of high inflation.

"...he (the Finance Minister) should introduce some of the provision which are part of the DTC, like raising exemption limit," Sinha told PTI in an interview.

When asked whether it should be raised to Rs 2 lakh, as proposed in the Direct Taxes Code (DTC) Bill, the Former Finance Minister remarked: "Whatever is in DTC."

Inflation continues to be a concern for the common man as well as the government.

While the food inflation had touched 18.32 per cent in December, 2010, before moderating to over 11 per cent this month, the overall inflation still stood above eight per cent as against the comfort level of 5-6 per cent.

Presently, income up to Rs 1.6 lakh per annum is exempt from tax for individuals. For women and senior citizens, the limit is 1.9 lakh and 2.4 lakh, respectively.

However, under the the DTC Bill, which was introduced in Parliament last year, the I-T exemption limit is proposed at 2 lakh.

Under the bill, the government seeks to widen tax slabs to levy 10 per cent rate on income between Rs 2 lakh and Rs 5 lakh, 20 per cent on Rs 5-10 lakh and 30 per cent above Rs 10 lakh.

The DTC, which would replace the Income Tax Act, is slated to come into effect from April next year.

"The DTC is with the committee but that should not prevent the FM from introducing in this Finance Bill some of the more acceptable non controversial provision of DTC," Sinha added.

He said the saving exemption limit, which is currently pegged at Rs 1 lakh, should also be raised.

"There is a case for going for a larger limit of exemption of savings, which is today limited to Rs 1 lakh," the Former Minister said.

Finance Minister Pranab Mukherjee is slated to present the Union Budget on February 28.

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Union Budget 2011 is just four days away. The finance minister is busy performing fiscal feats for an economy that is showing signs of recovering but has a current account deficit that has risen to 3.7% of GDP in the first half of 2010-11 . Budgeted combined fiscal deficit for the current year is on target, but only because of the three times higher money acquired from the spectrum auction, higher-than-targeted growth of the economy and the buoyant tax revenue . Given this, the most important challenge for the Budget is to have fiscal consolidation and to contain inflation with a 9% growth rate in GDP.

A persistent and alarmingly high rate of inflation during the year is a macroeconomic challenge for the Budget. The crude oil price in the international market is floating around $100 a barrel and is not likely to ease in near future. Food inflation has remained within double digits in the last year and has played a key role in pushing up the overall inflation rate. In December 2010, it stood at 15.5%. Sourcing grains from international market would require paying higher prices as many countries have suffered from abnormal weather conditions due to the extreme winter chill and unusual floods. Concerted efforts to increase tax-GDP ratio is the need of the hour. Two landmark reforms expected to be announced in the forthcoming Budget are the introduction of the Direct Taxes Code (DTC) and the goods and services tax (GST).

The Budget must make clear the ground rules for their implementation . However, the Bill for Constitutional amendments to pave the way for GST should be introduced only after the consensus has been reached between the Centre and the states. To make the direct tax system more progressive, the Budget could consider making wealth tax progressive. This would go a long way in reducing wealth inequalities. The Budget could also reintroduce inheritance tax, death duty, long-term capital gains tax and a tax on dividends . However, to spare the middle income group from the trauma of inflation , the tax exemption limit of income tax may be raised. The Budget may raise taxsavings ratio in the economy by allowing exempt-exempt-exempt (EEE) for savings in a progressive way.

This can be done by graduating the exemption from 100% to 75% and 50% for middle and higher income groups, respectively. This would give a fillip to the taxsavings ratio without a big impact on tax revenues. With regard to import duty on crude oil and other petroleum products, the Budget could reduce the tax rate to keep inflation under control . Such cuts will enable oil producers to absorb some of their higher costs and not pass these entirely to the consumer. Excise duty should be brought in consonance with the proposed rates of GST. Also, essential goods could be brought closer to the proposed 6% rate. Importantly, the Budget has to prune exemptions under the Cenvat. To ensure that the exemption limit for the Centre and the states is the same under GST, the current exemption limit of Cenvat has to be lowered.

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The government has unveiled a draft multi-pronged strategy to double the country's exports to $450 billion in three years, a move aimed at keeping the mounting current account deficit within manageable limits.

Policymakers are worried at the widening deficit in the current account, a measure of cross-border transactions in goods and services and transfers, which is likely to cross 3% of India's gross domestic product in 2010-11.

"The reason for taking this initiative is because of widening balance of trade. We hope to close that and bring the disbalance in trade to below 10% or 9% of GDP," commerce minister Anand Sharma said on Wednesday while releasing a draft paper on boosting exports.

The strategy paper talks about promoting high-value products, focusing on new markets, building brand image and incorporating new technologies to accelerate export growth. "A large widening of the trade deficit can potentially result in payments difficulties. And such a situation is simply unacceptable because it may jeopardise the entire growth process," the paper said.

To keep deficit manageable, it is imperative to attain the $450 billion export target in 2013-14 that would entail a 26% annual growth.

The paper has been posted on the commerce department website for comments. All views would be considered before the strategy is finalised by the end of next month, Sharma said. This strategy is expected to be incorporated in the commerce ministry's annual revision (in 2011-12) to the five-year foreign trade policy.

This year exports are expected to touch $225 billion, up from the targeted $200 billion. In the previous fiscal, exports had declined 3.6% to $178.6 billion as the global economic crisis shrunk demand in the Western markets.

But this current increase in exports will not suffice, the paper observes. Even at 22% export growth, the balance of trade (BOT) deficit could widen to 12-13% of GDP as imports, too, are rising.

It would result in a significant expansion of the current account deficit even if services exports and invisible earnings rise, increasing reliance on volatile foreign capital inflows.

"Maintaining the CAD at 3-3.5% of the GDP is still manageable, although a lower 2.5% is more desirable," commerce secretary Rahul Khullar said.

Export targets for 2013-2014
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http://img821.imageshack.us/img821/9140/photocmsk.jpg

.
INDIAN ECONOMIC SURVEY 2010 - 2011 (http://indiabudget.nic.in/survey.asp)

CHAPTER 1 : State of the Economy and Prospects (http://indiabudget.nic.in/es2010-11/echap-01.pdf)

Salient Points :

GDP – Current Market Price : INR 7877947 CRORES i.e. 78,779.47 BILLION

EXCHANGE RATE : US4 1 = INR 45.68

Thus GDP = US$ 1,724.59 BILLION

Population : 1.186 BILLION

Thus Per Capita GDP – Current Market Prices = US$ 1,454.

Per Capita Net National Income (Factor Cost)= US$ 1,193 ( INR 54,527)

Cheers :cheers:

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Reforms and convergence in schemes are the key takeaways for the social sector in the Economic Survey .

“More” reforms in the education system and health sector are needed to reap the benefits of the demographic dividend. It stresses on the need of “vision”, “long-term plan” and “bold decisions”.

There has been an increase in the expenditure on social services. It increased since 2005-06, from 5.49% of the GDP to 7.27% of GDP in 2009-10. However, the budget estimate for 2010-11 reveals a dip in the share to 6.63% of the GDP. This fits in with the Survey’s stress on the government’s challenge in mobilising funds, especially in the area of higher education. This is where, the Survey steps in to make a definite pitch for tailor-made public-private partnerships in the social sector — particularly higher education. However, this should not be at the expense of government’s regulatory oversight.

A larger outlay by the government, the emphasis put by the Survey must be accompanied by firm policy structures for effective implementation. To this end, the Survey has suggested the use of outcome budgets and Unique Identification ( UID )).

Even as the Survey recognises the role of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) in creating employment opportunities and putting additional money in the hands of the poor and disadvantaged, it has called for further improvements. The specific improvements include shifting the scheme towards permanent asset building and infrastructure development activities, reducing transaction costs, and extending the scheme to urban areas.

Two other interventions have been suggested for this employment guarantee scheme. First, its implementation shouldn’t result in shortage of labour during the agricultural season. Secondly, efforts should be made to ensure its convergence of various employment and poverty alleviations schemes to avoid duplication and leakage.

A discussion on human development indices necessitates a simultaneous one on the environment, especially as adaptation to climate change is becoming increasingly important. Adaptation effort inevitably is about assisting vulnerable population, and helping them build their lives to be able to deal with impacts of climate change on their livelihood pattern and habitat. Once again there is a close connection between the social sector, poverty alleviation and employment schemes. The Survey reiterates the need for proper balancing of the “climate” challenge and “growth” challenge. In doing so, it would appear to have not adhered to its own suggestion of “vision” and “bold decisions”. Instead, the Survey appears to come down on the side of “growth”.

“Careful planning and customised policies are needed to ensure that the green growth strategies do not result in slow growth strategy.” Clearly, the Survey is not looking beyond a conventional approach to growth. However, within this approach it accepts that environmental protection is important. The Survey has suggested the idea of forest banks, which would mean demarcating certain forest areas as inviolate. The focus of reform in education is clearly in the higher education sector; reform in primary education has been addressed in a measure the Right to Education.

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Consider this over a glass of milk: In another 10 years, your kids may think it quite normal to glug down imported milk.

The world’s biggest milk maker has not been able to keep pace with the demands at home and may soon turn a net importer — if it does not urgently focus policy and investment into the dairy sector. India’s milk requirement is expected to be 180 mt by 2021-22. We now produce only 112 mt. This means milk output must go up by 5.5% per annum over the next 12 years, compared with the current growth rate of 4%.

The more the economy grows, the more expensive and in short supply milk is likely to get. In urban areas, the demand for processed and packaged dairy produce will grow in consonance with a growing population with higher disposable income and higher health consciousness.

Already, the per capita availability of milk at 253 gms/day in 2009-10 was much lower than in developed countries, although it was well above the developing county average. “A large consumer like India entering the international market would have the potential to cause international prices to spurt,” the Survey cautions. It pitches for urgent and focused supply and investment response to the home milk market.

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In an interesting first, the Economic Survey 2010-11 measures the government’s ‘economic power’ or the ability of the government to project itself in the international sphere. The index is composed of four variables: government revenues, foreign currency reserves, export of goods and services and human capital and has been developed by the Finance Ministry for 112 countries over a 10 year span 2000-2009 .

It shows India in good light at number five in 2009 (up from number 10 in 2000), behind the US, China, Japan and Germany . The four variables capture the government’s ability to raise resources , its credit-worthiness and credibility in international financial markets, its influence on global economic activity and its representational strength or how much of the global economy, including its global manpower, it can claim to represent and includes a normative element .

The ranking corroborates what the Survey calls the changing dynamics of global economic power as reflected both in India’s membership of the G-20 and its increasing voice in the global arena. It shows the rapidly-growing clout of emerging markets.

Th US two of the three top-ranking countries of 2000, US and Japan , show a much slower rise in index values while the third, China , rose rapidly and after surpassing Japan in 2004 is now almost neck-to-neck with the US. The indices for China and India also show remarkable robustness , unlike the other top 10 countries of 2000, all of which had a lower index for 2009, mirroring the global slowdown.

The direct correlation between the growth in economic power between 2000 and 2009 and the change in GDP between the postcrisis period of 2009 and 2010 suggests a strong link between growth in economic power as measured by the index and the ability to recover from the crisis. The Survey, however, clarifies that this does not in itself establish a causal relationship. An important clarification as the previous paragraph talks of India ranking a lowly 134in the World Bank’s Doping Business in India Report!

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The pre-budget economic survey today said that over 52 per cent of the ongoing infrastructure projects are running behind schedule.

"As on October, 2010, out of the 559 projects, 14 are ahead of schedule, 117 are on schedule and 293 are delayed," the Survey said quoting Department of Programme Implementation (DPI) data.

DPI monitors the progress in central sector projects costing Rs 150 crore and above on a monthly basis.

In the road transport and highways sector, 51 projects have reported delay of up to 36 months, 20 power projects up to 18 months over the targetted schedule of completion. A total of 16 projects in oil sector have reported up to 16 months overrun, the Survey, tabled in the Parliament today, said.

Stating the level of investment and capacity addition achieved so far in the current Plan period is indicative of an "optimistic outlook" for the entire infra sector, the Survey, however, said "several non-financing" constraints needed to be urgently addressed to avoid time and cost overruns.

These include problems of tendering of unviable projects, bad quality of engineering and planning at the Detailed Project Report stage, lack of standardised and sub-optimal contracts, land acquisition delays, slow approval processes and weak performance of management in nodal agencies and PSUs among others.

"There is an urgent need to streamline land acquisition and environment clearance for infrastructure projects," it said, adding that capacity addition was lower than aimed in power, roads and railway lines.

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The Economic Survey released Friday called for careful planning and customised policies to ensure that green growth strategies do not result in slow growth rate.

The survey, tabled by Finance Minister Pranab Mukherkee in both houses of parliament, said: "The increasing importance of climate-related issues should not shake the foundations of our inclusive growth strategy."

Concerns have been raised by the industry in the past few months over the stringent implementation of green laws by the environment ministry.

In an effort to allay fears that environment was acting as a hindrance to growth, Environment Minister Jairam Ramesh in January announced setting up of a joint advisory council to look into industry's concerns regarding environment and forest clearances for projects.

The ministry has delayed environmental clearances to several infrastructure projects citing violation of green laws.

The prime pinister has formed a Group of Minister (GoM) to settle the ongoing tussle between environment ministry and coal ministry related to "go and no-go" area in coal belts of the country.

"I don't believe environment is becoming a constraint. We will try to find a way of addressing these concerns, fears and anxiety of people that environment will become a barrier to faster industrial growth," Jairam had said after meeting the industry representatives.

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The future of the information technology (IT) sector in India depends on the way it addresses challenges such as increasing competition and infrastructure constraints, according to the Economic Survey 2010-11.

Finance Minister Pranab Mukherjee presented the survey in parliament Friday.

"India continues to be the dominant player in the global outsourcing sector. However, its future will depend on how the challenges related to continued competitiveness are tackled," it said.

The annual report also suggested that the industry pay attention to competition in Business Process Outsourcing (BPO) from other countries and policies in some developed countries like Britain to employ locals.

According to Nasscom , the organisation that represents and sets the tone for public policy for the Indian software industry, the year 2010-11 will witness broad-based growth across mature and emerging verticals.

In 2009-10, while the overall Indian IT revenue grew to $63.7 billion, it is estimated to grow $76.1 billion in 2010-11, translating into a compound annual growth rate of 22.5 per cent from 2004-05 to 2010-11.

The industry grew by an estimated 19.5 per cent in 2010-11 compared to the moderate growth of 6.2 per cent in 2009-10.

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The Economic Survey has raised an alarm over the dismal performance of the farm sector saying the Indian agriculture has not seen any big technological breakthrough since the 1960s.

“The agriculture sector is at crossroads with rising demand for food items and relatively slower supply response in many commodities resulting in frequent spikes in food inflation," the Survey said.

The food safety net for each of India's billion-plus citizens requires enhanced agriculture production and productivity, it said.

“The need for a Second Green Revolution is being experienced more than ever before.” It said special attention is required to increase production of nutrition-rich crops like pulses, fruits and vegetables — which remained untouched in the first Green Revolution.

It suggested that Indian agriculture should diversify from just crop farming to livestock, fisheries, poultry and horticulture, besides focusing on raising farm productivity with adequate focus on rain-fed areas.

Raising concern over a marked drop in the yield and production of cereals, underpinned by abysmally low nutrient consumption per hectare, the Survey called for concerted and focused efforts to address the challenge of stagnating productivity levels.

“Increasing agriculture production and productivity is a necessary condition not only for ensuring national food security but also for sustaining the high levels of growth,” it said.

The Survey said the Indian agriculture requires massive doses of capital investments to keep pace with rising demand.

“Capital expenditure is up but investment is down and stagnating as a percentage of the GDP. The choice is clear: To invest more in agriculture with the right strategies, policies and interventions.”

Gross capital formation in agriculture has risen from 2.56% of GDP in 2004-05 to 2.97% of GDP in 2009-10.

The survey also argued that farmers must get remunerative prices for their produce. “Enhancing the returns farmers get on their production is essential for incentivising the farmers to produce more,” it said. However, it argued that high procurement prices run the risk of stoking inflation.

“The procurement operations linked with MSPs (minimum support prices) cause fiscal stress by way of increasing food subsidies. The issue of efficient food stocks management and offloading of stocks in time needs urgent attention.”

Pointing out that foodgrain diversion from ration shops was “too high”, the Survey said supply of rice and wheat will have to be doubled if the proposed National Food Security Act for the targeted group is to be implemented with the current delivery mechanism.

The Survey said targeted development of rain-fed area and effective marketing links could serve as a long-term remedy to check food price volatility. Investments in cold chains, packaging, handling and processing of processed foods should also be encouraged.

It warned that if subsidiary sectors, such as dairy, do not grow at 5.5% annually, India will soon become a net milk importer. The survey said the agriculture and allied sectors would register 5.4% growth this fiscal due to a good monsoon, compared with a mere 0.4% expansion last year.

But the sector needs to grow at 8.5% in 2011-12 to achieve the targeted 4% growth in every year of the 11th Five Year Plan.

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The government is increasingly expected to begin easing foreign investment in multi-brand retail as it battles high inflation, but opening is expected to be gradual and a change in policy is seen to be at least a few months away.

Monday's budget is expected to include a mention, at most, that opening the sector to more overseas investment is a possibility.

A Finance Ministry report on Friday said allowing more foreign investment in retail is worth considering, and would help farmers and consumers.

"I don't expect any announcement in the budget but definitely some announcement in the next three to six months, maybe earlier rather than later," said Thomas Varghese, chief executive of Aditya Birla Retail, part of the Aditya Birla Group, and chairman of the Confederation of Indian Industry's committee on retail.

India's $450 billion retail sector is among the fastest growing in the world, but it remains heavily regulated, with strict limits on foreign investment. Just 6 per cent of retail trade is organised.

The world's four largest retailers -- Wal-Mart Stores, Carrefour, Tesco and Metro AG -- are seeking to expand in India, where an economy growing at nearly 9 per cent is increasing the spending power of a rapidly burgeoning middle class.

They face opposition from "kirana" stores -- small mom-and-pop shops -- which account for the majority of India's retail market and are valuable vote banks for politicians.

Asia's third-largest economy does not allow any foreign ownership in multi-brand retail, and foreign ownership of single-brand retail is capped at 50 per cent. Overseas investment in multi-brand operations is confined to wholesale businesses.

The promise of opening multi-brand retail to foreign investors has seen many false dawns. While officials both on and off the record say a lot of progress has been made and are very upbeat about its prospects, they have never committed to a timeline given the political sensitivities of the move.

India's Trade and Industry Minister said last week that talks to open up the country's multi-brand retail sector to foreign investors were at an advanced stage.

"We do not want to second-guess the Indian Government's policy changes. However, it is encouraging to note the recent statement of the Minister of Commerce and Industry," a spokesperson for Bharti Wal-Mart said.

Wal-Mart, the world's biggest retailer, has partnered with Bharti Enterprises to operate wholesale outlets in the country. Germany's Metro also operates wholesale outlets in India.

Easing bottlenecks, inflation

Foreign participation would enable increased investment in logistics such as cold storage, and unclog supply bottlenecks, which contribute to double-digit food inflation.

Roughly 30 per cent of post-harvest produce goes to waste in a country where nearly half the people are malnourished.

"The industry wants foreign investment in multi-brand, as food retailing is the key thrust to easing inflation," Arnab Mitra, analyst at brokerage India Infoline said.

Indian food inflation is among the highest in Asia despite good harvests, and food prices have been in double digits for much of the last year, sparking protests and keeping pressure on a government already under fire over corruption scandals.

Finance Minister Pranab Mukherjee is expected to include measures to boost farm productivity in the budget on Monday.

"There are more and more government officials who are convinced that it is a means to tackling high, rising food prices as it removes supply chain inefficiencies," said Pinakiranjan Mishra, partner and national leader, consumer products and retail, at Ernst and Young.

Mishra believes a decision is still six months away.

Leftist parties and small traders oppose moves to open the sector, which they fear would drive small operators out of business, and imminent liberalisation is not assured.

cc: ET

It will be the 80th budget speech presentation in the history of independent India, when Finance Minister Pranab Mukherjee tomorrow reads out his taxation and other economic policies before Parliament.

Parliament has so far hosted 79 budget speeches, including interim and special situation budgetary proposals, ever since the country's first Union Budget presented by then Finance Minister R K Shanmukham Chetty on November 26, 1947.

For individual records, Mukherjee would present the budget for sixth time in history, thus becoming the Finance Minister to have made third highest number of budget speeches.

The maximum number of 10 budgets have been presented by Morarji Desai, while P Chidambaram, Yashwant Sinha, Y B Chavan and C D Deshmukh have presented seven budgets each.

Mukherjee would on Monday join the league of Prime Minister Manmohan Singh and the country's fourth Finance Minister T T Krishnamachari, who have presented six speeches each during their tenures in the Finance Ministry.

So far, Mukherjee have presented four annual budgets, including the one for the current fiscal 2010-11, and one interim budget for the fiscal 2009-10.

Among others, R Venkatraman and H M Patel have presented three budgets each, while Jaswant Singh, V P Singh, C Subramaniam, John Mathai and R K Shanmukham Chetty have two budgets each to their credits.

Besides, Jawahar Lal Nehru, Indira Gandhi, Rajiv Gandhi, Charan Singh, N D Tiwari, Madhu Dandwate, S B Chavan and Sachindra Chaurdhuri have presented one budget each.

The budget was presented by Nehru, Indira and Rajiv Gandhi in their capacity as Prime Minister and Minister of Finance.

Charan Singh (once) and Morarji Desai (on four occasions) presented budget as Deputy PM and Minister of Finance.

So far, a total of 12 interim budgets and four special-occasion budgetary proposals, also known as mini budgets, have been presented before Parliamant, while the remaining 64 have been normal annual budgets.

The first such mini-budget was presented by T T Krishnamachari on November 30,1956 in form of fresh taxation proposals through Finance Bills, demanded by the prevailing domestic and international economic situation.

The step was also required to tackle issues like rising inflation and dwindling forex reserves at that time.

The second mid-year budget taxation proposals were also presented by Krishnamachari in August 1965, while the third mini-budget was presented by Y B Chavan in December 1971 wherein he proposed additional measures for mobilisation of resources for defence requirements.

The last mini-budget proposals in the Parliament was also made by Chavan in July 1974, wherein he made fresh taxation proposals to tackle inflation-related issues after only five months of the regular annual budget.

cc: ET

Finance Minister Pranab Mukherjee is likely to give tax concessions to the salaried class and offer incentives to farmers in his Budget 2011-12 on Monday to give relief from high prices and keeping an eye on elections in five states.

It is widely expected that the Budget will raise the income tax exemption limit to Rs 1.80 lakh from the current Rs 1.60 lakh per annum.

The Finance Ministry is already committed to raising the exemption limit to Rs 2 lakh per annum in the Direct Taxes Code (DTC) which is to be implemented from April 2012.

Mukherjee may also consider raising the limit for investment in tax-free infrastructure bonds to give a boost to the fund-starved sector. Investments up to Rs 20,000 in infrastructure bonds enjoy tax exemption now.

Experts said with fiscal deficit projected to come down sharply to 4.8 per cent, the Finance Minister would have some leeway to provide these tax concessions.

The Economic Survey 2010-11 presented in Parliament projected fiscal deficit at 4.8 per cent, down from the budget estimate of 5.5 per cent for the current fiscal.

With five states -- Assam, Tamil Nadu, Puducherry, Kerala and West Bengal-- heading for polls, it is unlikely that Mukherjee would completely roll back the stimulus and come out with harsh measures to increase government revenues and bring down fiscal deficit, experts said.

Mukherjee's third consecutive budget is also expected to increase the credit flow to the farm sector.

On tax rationalisation, Mukherjee had said, "The sustained growth has been possible due to rationalisation of tax structure, improvement in tax administration and persistent efforts of the employees of Income Tax department."

Inflation has remained above the comfort level for most part of the current fiscal and will be another focus area for Mukherjee.

The overall inflation at 8.23 per cent is higher than the comfort level of the Reserve Bank at 5-6 per cent. Food inflation had also touched at a high of 18.23 per cent in December, but moderated to 11.49 per cent in mid-February.

Industry fears that Mukherjee may roll back some of the stimulus to fight inflation. Moreover, the Survey had also projected the economy is recovering fast and is expected to return to the pre-crisis growth rate of 9 per cent in 2011-12.

Stimulus package provided by the government at the time financial meltdown helped India grew by 6.8 per cent in 2008-09, and by 8 per cent in 2009-10. The economy grew by 8.9 per cent in the first half of 2010-11.

But the tax incentives and higher public expenditure also pushed up the fiscal deficit to 6.3 per cent in 2009-10. In the Budget 2010-11, Mukherjee had estimated fiscal deficit to be Rs 3,81,408 crore.

Even as there could be some decline in government revenue due to higher exemption limits, Mukherjee would pin hopes on increased economic activity with a high growth rate of 9 per cent to bring in money to Centre's kitty.

Live budget:

http://blogs.wsj.com/indiarealtime/2011/02/28/live-blog-finance-minister-pranab-mukherjees-budget-speech/

http://in.specials.yahoo.com/budget2011/commentary

http://budget.sify.com/

http://www.moneycontrol.com/budget2011/budget_flashes.html

So what are the good and bad news for common man in the budget?

cc: ET

Senior Citizen Age Limit reduced from 65 years to 60 years for Income Tax purposes
Naina Lal Kidwai: The green orientation of the budget is a welcome positive
Basic customs duty on agricultural machinery reduced to 4.5 per cent from 5 per cent
Uday Kotak: Direct investment in Indian Mutual Funds by any foreigner is a big move
Uday Kotak: MFs allowed to raise money from foreign investors is pathbreaking
Uday Kotak: Budget is positive for equity markets
Uday Kotak: Lower fiscal deficit target is commendable
No import duty on ship parts positive for SCI
Tax exemption limit for senior citizens raised to Rs 2.5 lakh from 2.4 lakh
Basic food and fuel and precious stones, gold and silver jewellery to be exempted from central excise duty
Nominal 1 per cent central excise duty on 130 items entering the tax net
LED to cost less
Swaminathan: Government has cut many import duties to check inflation
Swaminathan: No further rollback of 2008 stimulus
Direct cash subsidy for poor on fuel, fertilizers by March, 2012
Swaminathan: Category for ‘very senior citizen’ positive for rich
Steel prices to come down
ICICI Direct: Unchanged excise is positive for auto, OEMs
FY 11 revenue deficit at 2.1%, sentiment positive says Nirmal Jain
Tax exemption limit for individuals increased from Rs 1.6 lakh to Rs 1.8 lakh

cc: ET

Health Check-Ups in Private hospitals to become expensive
EXPENSIVE: International Air Travel
EXPENSIVE: Domestic Air Travel
Tax on life insurance service providers could be negative for insurance companies
Travel, Healthcare to become expensive due to increased service tax
Lack of FDI in retail was a disappointment
Nirmal Jain: New service tax to hurt companies in hospitality
Hike in export duty on Iron Ore is a negative, says Motilal Oswal
Air travel to cost more
Branded clothes may cost more
Rise in MAT to hurt RIL, GVK Power, telcos
FY 11 fiscal deficit above estimates, negative, says Motilal Oswal
Swaminathan: Divestment but no privatisation is timid
Swaminathan A Aiyer: Doubled anganwaadi wages with a check on absenteeism not good

So what are the good and bad news for common man in the budget?

POSITIVE:-

* A middle class man will be very excited as tax limit increased to Rs 1.8 lac

* 22lac anganwadi workers wages DOUBLES

* the farmers who had loans at 7% and if they sell their crops successfully will now get net interest rate to 3%(savings of 5%)

* autos excise duty remain same

* FDI IN MUTUAL FUNDS(very positive for stock markets)

* Fiscal Deficit projected at 4.6% of GDP

* Cut in Surcharge duty of corporates

* 24% increase in education spending

* 0 custom duties for parts of UMPP(ultra mega power projects)

* DTC from 2012

NEGATIVE:-

* No mention of FDI in retail.

* No mention of FDI in insurance

* Pay more for air travel.

* Rich will have to pay more for AC hospitals(Except govt. hospitals)

* Rich will have to pay more for booze or food in AC restaurant or bar.

* No date for rollout of GST.

:cheers:

I would love some experts here to discuss this budget!! I know SSCaddict is one! and Ichi too..

yup

Sagar bhai has listed them nicely.

Overall i am impressed with this budget. Well done Pranab.


the market approves.

RS.2,14,000 Crore Allocated for Infrastructure Sector
Rs.30,000 Crore Tax Free Bonds to be Issued
Iifcl to Achieve Disbursement Target of Rs. 25,000 Crore by 2012
Announcing the General Budget 2011-12 here today, Shri Pranab Mukherjee, Finance Minister, proposed an allocation of Rs.2,14,000 crore for infrastructure sector, which is 23.3% higher than current year. This amounts to 48.5% of the Gross Budgetary support to plan expenditure.

The Finance Minister, stated that in order to give a boost to infrastructure development in railways, ports, housing and highways development, it has been proposed to allow tax-free bonds of Rs.30,000 crore to be issued by various government undertakings in the year 2011-12. This includes Indian Railway Finance Corporation Rs.10,000 crore; National Highway Authority of India Rs.10,000 crore; HUDCO Rs.5000 crore and Ports Rs.5000 crore.

Shri Mukherjee informed that India Infrastructure Finance Company Limited (IIFCL) is expected to achieve a cumulative disbursement of Rs.25,000 crore by March 31, 2012. Under the “take out financing scheme”, seven projects have been sanctioned with a debt of Rs.1500 crore. Another Rs.5000 crore will be sanctioned during 2011-12, he informed.

http://pib.nic.in/newsite/erelease.aspx


Full text of budget speech on ibnlive (html) (http://ibnlive.in.com/news/full-text-pranab-mukherjees-budget-speech/144645-53.html)

IT exemption limit raised to 1.8 lakh and we save 2k rs :lol:

1.64 lakh crore to defense compared to 1.47 lakh crore last year..

Better than expected Budget, India Inc hails Pranab. Sensex up.

Good budget IMO.

yup

Sagar bhai has listed them nicely.

Overall i am impressed with this budget. Well done Pranab.


the market approves.

i am quite positive about the fiscal deficit target of 4.6% since i am hoping for 7% inflation for next fiscal so nominal GDP will grow again by 18-20%(this fiscal 22%) so you can get the fiscal deficit target... also you can get that because for the past 4 months trade deficit is also looking good...

some factors in the budget have been to protect local businesses a lot

like 20% tax on iron ore exports(note that our steel industry was hurting from cheap chinese steel imports)

similarly for mega power projects to protect domestic people

also ONE THAT EVERYONE IS MISSING is to give push to real estate sector there is some loan limit (i don' remember now) has been increased from Rs 20 lac to Rs 25 lac-3. To further stimulate growth in housing sector, I am liberalising the existing scheme of interest subvention of 1 per cent on housing loans by extending it to housing loan upto Rs 15 lakh where the cost of the house does not exceed Rs 25 lakh from the present limit of Rs 10 lakh and Rs 20 lakh respectively.
44. On account of increase in prices of residential properties in urban areas, I propose to enhance the existing housing loan limit from Rs 20 lakh to Rs 25 lakh for dwelling units under priority sector lending.(from budget speech)

and the basic law has been followed=taxing the rich people(air travel,hotels charging more than Rs 1000/day,branded clothes,AC hospitals etc.)

Broadening People’s Ownership of Public Sector Undertakings
The Union Finance Minister Shri Pranab Mukherjee reiterated that the Government is committed to retain at least 51 per cent ownership and management control of the Central Public Sector Undertakings (CPSUs). Rs. 40,000 crore will be raised through disinvestment in the next financial year as against Rs. 22,144 crores raised during this fiscal 2010-11. Maintaining the momentum on disinvestment, in the current fiscal year, six public issues of CPSUs have attracted around 50 lakh retail investors broad basing the ownership of CPSUs. A higher than anticipated realization non-tax revenues has led to rescheduling of some of disinvestment issues planned for the current year, he said.

privatization continues..

Ichi Bhai, Also tell us in which shares/MF to invest money after the Budget:-)

yup

Sagar bhai has listed them nicely.

Overall i am impressed with this budget. Well done Pranab.


the market approves.

1)There is reckless speculation in Stock/commodity markets. Govt should have considerd taxation for stability.

20 % Tax on Capital gains - investments held less than one year and intra day.
15 & for 1-3 years retention
10 % for more than 3 years...

And could have abolished trade tax .

2) Should have planned for 50 % cut on unwanted Ministries over a 5 year period like ,Broadcasting...

3) Large allocation for Family Planning with a target.

Policy should be to collect more from speculative income and spend more on skill development of people to earn more ( by making them more productive.

This is a status quo budget.

Ichi Bhai, Also tell us in which shares/MF to invest money after the Budget:-)

stay away from reality stocks for the next 3-4 months. Thats for sure regardless of budget.


Seems profit booking taking place on the market.

cc: ET

LED to cost less


Excellent,but anybody knows by how much percent?

:cheers: Hope most of the cities go for the LEDs for their street lighting purposes.I wish to see LEDs penetrating every house soon :banana:

Seems profit booking taking place on the market.

+1 i am thinking that how much money politicians would have made today?

pranab,chidambram,mmms,sonia all at least Rs 1000 cr :nuts:

and also since now exports from SEZ is 40% of total exports pranab being very clever will tax SEZ's now.. great!!!

But then, wont the SEZ investment slow down??? Is FDI allowed in SEZ?? I am just a layman, so forgive if its a silly question!

I've noticed hybrid cars are going to cost less, this will bring down the fuel consumption which is good news.

But then, wont the SEZ investment slow down??? Is FDI allowed in SEZ?? I am just a layman, so forgive if its a silly question!

no since they will be expempted from Income tax but they are now taxed under MAT... also i think yes there would be FDI in SEZ allowed(though i am not sure)

hmm pranab has levid a sort of luxury tax

Which is fine according to me!! Dont think the super-rich would really bother!

Whats the significance of allowing FDI in Mutual Funds?? I hear in channels that it is big step forward!!

Whats the significance of allowing FDI in Mutual Funds?? I hear in channels that it is big step forward!!

yup since many people assume safe to invest through Mutual Funds and for more info i think ichi will explain( i assume that black money of politicians will now enter to stock markets through mf's from swiss bank,mauritius etc.)

Which is fine according to me!! Dont think the super-rich would really bother!

hmm i dont think for eg only super rich stay in hotel rooms more than Rs1000
:lol:

nah its more of an upper middle class and above tax.

which is cool. I dont mind paying

yup since many people assume safe to invest through Mutual Funds and for more info i think ichi will explain( i assume that black money of politicians will now enter to stock markets through mf's from swiss bank,mauritius etc.)

+1

seems like they have given up fighting on bringing back black money

and are saying, you might as well invest that money in the markets via MF.


In marco economic terms. Say there is an old lady in say the USA. She wants to invest in India. So now she can directly invest in a mutual fund in India.

^+1 how come RS 50 SERVICE TAX makes air travel costlier :lol:

^+1 how come RS 50 SERVICE TAX makes air travel costlier :lol:

thats just indian media.

I mean dont think anybody will grumble.

but it will still be defined as being a luxury tax.

GOI should have done this a long time ago.

yup since many people assume safe to invest through Mutual Funds and for more info i think ichi will explain( i assume that black money of politicians will now enter to stock markets through mf's from swiss bank,mauritius etc.)

:lol:

I hope they don't allow someone like lehman bros to invest in the Indian market. This is mainly due to heavy international pressure because this is one area where India seems to be making considerable progress and heavy tv and newspaper promotion helps a lot but in United States there seems to be a gloom for these companies, you see them going down in real time so they are desperate for India to open up, I'm sure all those private meetings at g20 involved mutual funds :lol:

The increase in education spending and wages of anganwadi workers is heartening!

Weren't the black money entering our markets through FII's and Participatory notes or something before?? I just heard some analyst saying this in Tv and I have absolutely no clue what it means :nuts::nuts:

Weren't the black money entering our markets through FII's and Participatory notes or something before?? I just heard some analyst saying this in Tv and I have absolutely no clue what it means :nuts::nuts:

FII's are more murky

safer in mutual funds

FII's are more murky

safer in mutual funds

secondly

now even FII's can invest in mutual funds. :cheers:

so in some way or the other the money will find its way to the markets.


The only disappointment for me is that the retail sector is untouched. No real reform. the incentives are not enough.

I'm sure all those private meetings at g20 involved mutual funds :lol:

yeah!! surely they would have decided in G20 where to put trillion of $s of black money all over the world.. and guess what they found that indian stock markets is the safest place in the whole world :lol: and the safest route is MF's ;)

The only disappointment for me is that the retail sector is untouched. No real reform. the incentives are not enough.

if the scams were not there then this could have been taken up possibly today but now it could not be taken till 2014 because only 2 budgets are left for UPA govt. before they have elections in 2014.. so now no chance for it :ohno:

click here (http://www.moneycontrol.com/news/features/in-pics-whats-cheapercostlier_522439-0.html)-what is cheaper and costlier?

click here (http://www.moneycontrol.com/news/features/in-pics-whats-cheapercostlier_522439-0.html)-what is cheaper and costlier?

bascially most electronic/electrial appliances are cheaper.

^ yup except mobile phones everything is either same or cheaper

BTW you are exactly on the point TAX THE RICH and distribute to the poor :cheers:

POSITIVE:-

* A middle class man will be very excited as tax limit increased to Rs 1.8 lac



Thanks SSCaddict.. But I feel there is really nothing for the Urban Middle class to cheer... the entire budget looks like some number game just to confuse people... So even the opposition parties got confused and kept quite... looks like no one understood the head and tail of it.

Though there is focus on economic aspects and stabilize the economy. I don't see anything which has been focused at a common man..

The only thing is reduction is Electronic Goods prices, but are everyone going to buy it daily.. Doesn't impact anything.. since Mobile phone prices have already fallen and people are fine with it.

The Urban middle class is already bearing the pinch of price rise. Now they add Oil to fire... The reason is some of the things like Petrol prices can be increased anytime.. because in the budget they have hinted on reducing subsidies on petroleum products... in short after few months they are going to rise prices..

Inflation is high, there is no reference to tackle anything directly, the budget looks like a number game by economist.

Medical, Travel, Hotel prices are again going to go up. Plus service taxes implied on other sectors will indirectly increase prices.

Sad to see this budget.. It just looks some statistical work to me which may or may not happen..

For a common man.. there is nothing to rejoice .. but to wait till the next elections to change the government. :ohno:

Inflation is high, there is no reference to tackle anything directly, the budget looks like a number game by economist.


Didn't you listen to the budget? The inflation is driven by shortage of food supplies and the introduction of food security bill will ease that problem.

In India people have the habit of overstating simple changes from the media to the common man, legislations are overlooked, simple price rises are overstated- like the prise rise in airfare or the cad or the entertainment tax. People ought to look into it more deeply and study the pros and cons.

Inflation is high, there is no reference to tackle anything directly, the budget looks like a number game by economist.

Medical, Travel, Hotel prices are again going to go up. Plus service taxes implied on other sectors will indirectly increase prices.

Sad to see this budget.. It just looks some statistical work to me which may or may not happen..

For a common man.. there is nothing to rejoice .. but to wait till the next elections to change the government. :ohno:

:lol:

first of all give your definition of "common man"

and also nothing travel,medical,hotel prices will increase.. if a person who is paying Rs 1500 per day at a hotel room will not bother paying extra Rs 150..

also according to me only 2-3% of our population visits an private AC hospital with more than 25 beds.. and how many of the 2-3% of population is the "common man"?

as i said for a common man:-

1) He will save RS 2000 per month due to tax exemption.

2) The excise duty on the personal care products like diapers etc have been reduced from 10% to 1% which means drastic reduce in such products.

3) He will have to pay very less for laptops,LED,TV,AC and no increase in the excise duty for the auto sector(so no increase in prices of two wheelers for "common man").

4) For a common man who wants to buy a house worth Rs 25 lac he could take a loan of Rs 15 lac with interest rate of less than 1% than earlier.

5) A common man may benefit if he gets direct cash subsidy for LPG cyclinder rather than he buys from black market(so he save at least RS 400-500 per month)

6) A common man's petrol prices will not increase if crude touches $120+ because the govt. will cut the 5% custom duty on it as it did when crude topped $150 in 2008.

7) If the schemes that are proposed for agri sector like cold storage,food processing etc(that seriously will take some hard work by govt. to do though) then your food inflation can be controlled.

8) If a "common man" is going to build a house then this budget gives him decrease in steel prices(due to cut of excise duty on coking coal for steel companies),cement will come under another tax thus making it more cheaper.

9) If a common man wants to buy some jewellery then it will become cheaper now.

10) If a common man wants to invest in bond markets then he could do in tax free bonds upto Rs 20,000.

LAST but not the least IF GST is implemented then you will see drastic changes in food inflation :cheers:

and yes i forgot that no tax increases for alcohol and cigarettes which was expected though :lol:

Yaar somebody answer my question..!!!

Is there any increase in excise duties or any other charges on Cars/Automobiles???

Need an answer urgently....My car dealer is asking for more amount for my car which is due on 6th March..he says I need to pay extra if I take delivery after st march...

Somebody???

Yaar somebody answer my question..!!!

Is there any increase in excise duties or any other charges on Cars/Automobiles???

Need an answer urgently....My car dealer is asking for more amount for my car which is due on 6th March..he says I need to pay extra if I take delivery after st march...

Somebody???

WTF!!! no increase IR bhai!! sue him

:lol:

first of all give your definition of "common man"

and also nothing travel,medical,hotel prices will increase.. if a person who is paying Rs 1500 per day at a hotel room will not bother paying extra Rs 150..

also according to me only 2-3% of our population visits an private AC hospital with more than 25 beds.. and how many of the 2-3% of population is the "common man"?

as i said for a common man:-

1) He will save RS 2000 per month due to tax exemption.

2) The excise duty on the personal care products like diapers etc have been reduced from 10% to 1% which means drastic reduce in such products.

3) He will have to pay very less for laptops,LED,TV,AC and no increase in the excise duty for the auto sector(so no increase in prices of two wheelers or 4 wheelers for "common man").

4) For a common man who wants to buy a house worth Rs 25 lac he could take a loan of Rs 15 lac with interest rate of less than 1% than earlier.

5) A common man may benefit if he gets direct cash subsidy for LPG cyclinder rather than he buys from black market(so he save at least RS 400-500 per month)

6) A common man's petrol prices will not increase if crude touches $120+ because the govt. will cut the 5% custom duty on it as it did when crude topped $150 in 2008.

7) If the schemes that are proposed for agri sector like cold storage,food processing etc(that seriously will take some hard work by govt. to do though) then your food inflation can be controlled.

8) If a "common man" is going to build a house then this budget gives him decrease in steel prices(due to cut of excise duty on coking coal for steel companies),cement will come under another tax thus making it more cheaper.

9) If a common man wants to buy some jewellery then it will become cheaper now.

10) If a common man wants to invest in bond markets then he could do in tax free bonds upto Rs 20,000.

LAST but not the least IF GST is implemented then you will see drastic changes in food inflation :cheers:

here it is IR bhai

India Auto Makers Welcome Status Quo in Excise Tax

NEW DELHI -- Auto makers in India welcomed the government's move to abstain from increasing excise tax on vehicles by two percentage points in the federal budget and sharpen its focus on environmentally friendly hybrid and electric vehicles.

The news lifted the share prices of most auto makers as companies and investors were expecting an increase in the central excise tax on cars and two-wheeled vehicles to 12% from 10%. Also, an increased focus on the rural sector and spending on the infrastructure sector in the budget are expected to improve the long-term prospects for the automobile sector.

"Any increase in excise tax would have been inconsequential in comparison to the current interest rates and higher oil prices, but it is a welcome move," Venu Srinivasan, chairman and managing director of TVS Motor Co. Ltd., India's third-largest two-wheeler maker by sales, told Dow Jones Newswires.

Finance Minister Pranab Mukherjee, in his budget speech for the fiscal year starting April 1, also proposed starting a national mission for hybrid and electric vehicles.

He also proposed granting an exemption from the basic import tax and other charges on the import of parts for hybrid vehicles as "import dependence for their critical parts/sub-assemblies is still quite high."

He also proposed a concessional excise tax of 5% on hybrid vehicles to encourage local production of such vehicles. In addition, Mr. Mukherjee proposed halving the excise tax on kits used for conversion of fossil fuel vehicles into hybrid vehicles to 5%.

Such a move could benefit companies such as Mahindra & Mahindra Ltd., which already has a presence in the hybrid and electric vehicle sectors.

"Increased allocation to agriculture will lead to more spending [in rural areas] and will help all companies who have business in that area," said Uday Phadke, president in charge of finance, legal and financial services sector at Mahindra & Mahindra, India's biggest sports-utility vehicle and tractor maker by sales. "No change in excise duty is also a welcome move."

Shares of Mahindra rose as much 8% on the news. They traded 3.3% higher at 614 rupees on the Bombay Stock Exchange, compared with a 0.7% rise in the benchmark index.

TVS Motor traded 6.5% higher at 51 rupees, while Maruti Suzuki India Ltd., India's biggest car maker by sales, gained 3.3% to 614.80 rupees. Shares of Tata Motors Ltd., however, slid 2.4% to 1,080 rupees, while Hero Honda Motors Ltd. fell 2.4% to 1,465 rupees.

source (http://online.wsj.com/article/SB10001424052748704615504576171912700623784.html)

Yaar somebody answer my question..!!!

Is there any increase in excise duties or any other charges on Cars/Automobiles???

Need an answer urgently....My car dealer is asking for more amount for my car which is due on 6th March..he says I need to pay extra if I take delivery after st march...

Somebody???

No change, although hybrid and electric vehicles get 10% excise concession which is big.

edit: btw, which car?

del

No change, although hybrid and electric vehicles get 10% excise concession which is big.

edit: btw, which car?

Humn...Thanks SSCI and TT....

Its Volkswagen Vento

Humn...Thanks SSCI and TT....

Its Volkswagen Vento

great car dude, although Indian model doesn't come with gadgets...gps, parking assistance, lane departure warning, blind spot detection etc

what is your take "think" on the budget in terms of fiscal consolidation?

what is your take "think" on the budget in terms of fiscal consolidation?

We have paranoid policy makers, anyway it's not too bad as long as the GDP and infrastructure are the top priority. So, as long as there are enough inflows and productivity, fiscal consolidation won't hurt - it's not hurting now anyway, might ease long term bottlenecks I suppose. I think these guys are simply overwhelmed and couldn't manage with such a fast growth, you see that in China where they recently capped gdp at 7 for the next year.... that's why I think Indian government is down to the refining process of the existing procedures like the upcoming introduction of gst.

We have paranoid policy makers, anyway it's not too bad as long as the GDP and infrastructure are the top priority. So, as long as there are enough inflows and productivity, fiscal consolidation won't hurt - it's not hurting now anyway, might ease long term bottlenecks I suppose. I think these guys are simply overwhelmed and couldn't manage with such a fast growth, you see that in China where they recently capped gdp at 7 for the next year.... that's why I think Indian government is down to the refining process of the existing procedures like the upcoming introduction of gst.

but i think that china after several yrs of 10% growth now have capped its gdp growth and they will do it by disbursing less credit,limiting sales of autos etc..

which i think you can't do in a country like india even after 40yrs or 50yrs

but on other note there is no way RBI can bring inflation below 6.5-7% when growing 9-10%....do you think they can?

but i think that china after several yrs of 10% growth now have capped its gdp growth and they will do it by disbursing less credit,limiting sales of autos etc..

which i think you can't do in a country like india even after 40yrs or 50yrs

but on other note there is no way RBI can bring inflation below 6.5-7% when growing 9-10%....do you think they can?

Look, China is a bad example for economic power because there lies a very large issue of socio-economic discrepancy which has now reached it's peak. On the other hand India always looks at addressing these social issues alongside financial policies without hurting the growth rate, of-course this process will be slow and will remain slow. If India can reach 10% growth that would be truly best practices put-forth by the Indian government. What we must understand is that if a country is growing at greater than 5-6% every year there will naturally be inflation due to short supplies and excess demand, these issues can only be met if the growth reaches a balanced state otherwise every year the country grows along with the inflation. On the whole, inflation though cannot be lowered below 4-5% can be moderated by adequate infrastructure.

On the whole, inflation though cannot be lowered below 4-5% can be moderated by adequate infrastructure.

thanks for replying

do you think they can even bring it to 5% with 9% growth even building the infra within 10-20yrs?

thanks for replying

do you think they can even bring it to 5% with 9% growth even building the infra within 10-20yrs?

Yes, through disinvestment programs, reducing wasteful subsidies, infrastructure and privatization of loss making government agencies.

I'd like to tell you why infrastructure is badly needed- India once stopped 2 months worth of exports due to poor maintenance of ports :lol: resulting in imbalances in the fiscal year - this is not the fault of growth rate or bad policies, its poor infrastructure.

Yes, through disinvestment programs, reducing wasteful subsidies, infrastructure and privatization of loss making government agencies.

I'd like to tell you why infrastructure is badly needed- India once stopped 2 months worth of exports due to poor maintenance of ports :lol: resulting in imbalances in the fiscal year - this is not the fault of growth rate or bad policies, its poor infrastructure.

:nuts:

when?

hmm....

:nuts:

when?

hmm....

Back in 1999 or something, I was there to see how empty ports work :lol: (Chennai Port) - Imagine if port workers went on strike due to bad treatment or corrupt management officials, even this will result in imbalances in the trade receipts. What India is doing is nothing short of miracle though, no other country can manage 8% gdp with poor infra :lol:

:lol:

just hats off to indian middle class for so much of demand they are creating :cheers:

IR bhai

in the budget there is a special "IR/MOD from DELHI " tax of 10%

:lol:

just hats off to indian middle class for so much of demand they are creating :cheers:

Yep, but I still want infra.:tongue3:

we will have to create it because if it is not done our economy will soon crash due to hyperinflation

btw i think on the whole this budget is taxing the people more

indirect taxes are certainly adding up and will affect the middle class in the long term

^ just correct it for you

taxing the rich/upper middle class more :)

^ just correct it for you

taxing the rich/upper middle class more :)

even middle class my friend

dont look at it simply from the POV of salary earnt.

The capital gains are going to sting like a bitch in the long term in the face of fast rising assets

especially in real estate

cities like Mumbai Delhi Bangalore Chennai and Hyderabad every middle class person is gonna fill the hit years down the line

btw i think on the whole this budget is taxing the people more

indirect taxes are certainly adding up and will affect the middle class in the long term

But it's not significant now since they are going to introduce gst (in 3-4 months) to simplify taxation.

But it's not significant now since they are going to introduce gst (in 3-4 months) to simplify taxation.

they have simplicfed it no doubt.

but the previous system though too complicated (it needed to be reformed) gave you a lot of wriggle room.

for eg there were many provisions on tax exemption in many cases

they have simplicfed it no doubt.

but the previous system though too complicated (it needed to be reformed) gave you a lot of wriggle room.

for eg there were many provisions on tax exemption in many cases
yep...
What indian gst does is to reduce people from paying excess taxes, every state has it's own tax policies making people pay more than whats stated in the center. GST will sort of put all taxes (state and center) into a framework, this will lead to abolition of octroi, excess duties when you import something and reduces discrepancies when paying property tax which I'm sure is never accurate.

yep...
What indian gst does is to reduce people from paying excess taxes, every state has it's own tax policies making people pay more than whats stated in the center. GST will sort of put all taxes (state and center) into a framework, this will lead to abolition or octroi, excess duties when you import something and reduces discrepancies when paying property tax which I'm sure is never accurate.

that is true

anyways capital gains tax is one which worried me the most.

Especially residential long term

that is true

anyways capital gains tax is one which worried me the most.

Especially residential long term

That is something which needs weighty consideration. It would be better if they use the canadian model, you see all these cgts are made into capital trust funds so as to reduce burn on individuals, collectively taxed on the whole.

yes

that would have been nice

My property in mumbai has grown about 4 times original price in the last decade.

selling it is gonna be a big chunk capital gains.

yes

that would have been nice

My property in mumbai has grown about 4 times original price in the last decade.

selling it is gonna be a big chunk capital gains.

I think you better wait till the introduction of gst, I'm not sure how you will be taxed- not enough data :)

FM on gst (http://www.business-standard.com/india/news/gst-rollout-may-not-be-possibleapril-2012-finmin/127371/on). Who knows what else will be amended, better to wait.

IR bhai

in the budget there is a special "IR/MOD from DELHI " tax of 10%

Wow, I am famous....

A budget for a new India

MUKESH AMBANI
Posted: Tuesday, Mar 01, 2011 at 2330 hrs IST

Managing the economy of a continent-sized and complex country like India is by no means a simple task. And the two qualities that the task demands—experience and wisdom—are by no means widely available. Pranab Mukherjee possesses both these qualities in abundant measure. This became once again evident when he presented the Union Budget for 2011-12 on Monday. The finance minister has presented a remarkable Budget by continuing to set sights on the long term, committing to inclusive socio-economic development and having confidence in the potential of the Indian economy.

The Budget has many commendable features, and I shall mention five here. First of all, it seeks to consolidate the gains made by the Indian economy after successfully weathering the storm of the global financial crisis. The GDP in 2010-11 grew by almost 8.6%. It is especially heartening to note that agriculture has registered a rebound, which is crucial for making India’s growth story robust.

Secondly, the Budget has laid the basis for strong and broad-based growth in the medium and long term. The decision to increase allocation for infrastructure by almost 24% is certainly bold and farsighted. Alongside, it has recognised the need to expand the scope of private sector participation in infrastructure development. Equally farsighted is the announcement to introduce a National Manufacturing Policy, with an ambitious goal to raise the share of manufacturing in GDP from the current 16% to 25% over a ten-year period. If India can pull this off, we are going to see steady generation of a huge number of multi-skilled employment opportunities, which our youthful population desperately needs.

Thirdly, I am happy to see further encouragement being given to the rural sector. The target for agriculture credit for the coming year has been raised by a massive R 1,00,000 crore. The effective rate for crop loans has come down to as low as 4%. The emphasis on broadband connectivity to all the Panchayats in India has transformational significance.

The Budget has sought to address a critical gap in rural infrastructure —namely, the shortage of post-harvest storage capacity. The fact that nearly 40% of our fruit and vegetable production goes waste is simply intolerable. The goal of food security for a billion-plus population demands a multi-pronged strategy. The Budget has presented several praiseworthy initiatives in this regard, the most important of which is the announcement that the National Food Security Bill will be introduced in Parliament this year. In this context, the decision about direct transfer of cash subsidy on kerosene and fertiliser to BPL families is bound to yield far-reaching benefits.

Fourthly, the Budget has further expanded the attention being paid to education and health. As someone who strongly believes in the goal of “education for all”, I wholeheartedly welcome the allocation for education being hiked by 24%. Most of this increased allocation goes to the primary and secondary school segment, where it is most needed.

According to me, the most important social welfare initiative in the Budget is the announcement that the salaries of 22 lakh Anganwadi sevikas and helpers, who are the backbone of the Integrated Child Development Services (ICDS) scheme, will be doubled. ICDS is the world’s largest mother-and-child welfare programme. We need more such social sector initiatives. The more we invest in the education and health needs of our children and youth, the richer will be the rewards that the nation will reap in the years to come.

The fifth positive feature of the Budget is that, at long last, India seems to be moving closer to implementing two big tax reforms—the Direct Taxes Code (DTC) and Goods and Services Tax (GST). DTC is now well on its way to becoming effective from April next year. The finance minister has announced that a Constitutional Amendment would be introduced in this session of Parliament for the roll-out of GST.

We should see the Budget in the larger context of the tremendous strides that the Indian economy has been making in recent years. Thanks to India’s vibrant economy, the Budget has been able to provide unprecedented resources to various development activities. On the other hand, the bold and farsighted initiatives in the Budget accelerate and broadbase the growth momentum in the economy. Thus, there is a jugalbandi between the two. We should thank the finance minister for conducting this jugalbandi well.

The author is chairman & managing director, Reliance Industries...

Source (http://www.financialexpress.com/news/a-budget-for-a-new-india/756019/5)

.

INDIAN ECONOMIC SURVEY 2010-2011 (http://indiabudget.nic.in/survey.asp)

CHAPTER 10 : SERVICE SECTOR (http://indiabudget.nic.in/es2010-11/echap-10.pdf)

PAGE 252 : Table 10.11: IT-ITeS Revenue and Exports

Estimated Exports for 2010 – 2011 : US$ 58.9 BILLION

Cheers:cheers:

.
INDIAN ECONOMIC SURVEY 2010 - 2011 (http://indiabudget.nic.in/survey.asp)

CHAPTER 1 : State of the Economy and Prospects (http://indiabudget.nic.in/es2010-11/echap-01.pdf)

Salient Points :

GDP – Current Market Price : INR 7877947 CRORES i.e. 78,779.47 BILLION

EXCHANGE RATE : US4 1 = INR 45.68

Thus GDP = US$ 1,724.59 BILLION

Population : 1.186 BILLION

Thus Per Capita GDP – Current Market Prices = US$ 1,454.

Per Capita Net National Income (Factor Cost)= US$ 1,193 ( INR 54,527)

Cheers :cheers:

:cheers:


3 years to overtake UK and France.


probably 10-12 years Japan

UK is still growing at sometimes -ve and sometimes .3-.5% which i think india can overtake within 2 yrs if they grow 9.5-10% in FY12 :cheers:

btw sagar bhai

any idea what the capital gains on property are?

yes

that would have been nice

My property in mumbai has grown about 4 times original price in the last decade.

selling it is gonna be a big chunk capital gains.

reinvest most of your profit

btw sagar bhai

any idea what the capital gains on property are?

20%

but then you have indexing and other variables. it would vary from property to property

^from what yr to what yr? i mean time duration?

here's a good guide. of course you would need the latest CII figures for calculating indexing

http://www.rediff.com/getahead/2005/jun/23cap.htm

here's a good guide. of course you would need the latest CII figures for calculating indexing

http://www.rediff.com/getahead/2005/jun/23cap.htm

very helpful thanks BB :cheers:

http://img856.imageshack.us/img856/465/01032011004001005.jpg

http://img535.imageshack.us/img535/9400/01032011004001007.jpg

http://img340.imageshack.us/img340/1715/01032011004001006.jpg

cheers BB and SSC

hmm its a dilemma to be honest

we bought our apartment in 1996 for half white and half black ( as that was the only option in the market back then)

so our indexation and capital gains will be on the half white amount.


Its better to reinvest and pay the staggered 10% stamp duty of maharashtra

The Life Insurance marketplace in India is an immature advertises so as to be only tapped by the state owned LIC till the entry of private insurers. The infiltration of life insurance goods was 19 percent of the total 400 million of the insurable inhabitants. The state owned LIC sell assurance as a tax implement, not at the same time as a product giving protection.

Thanks for share this financial bill with us ..

Thanks for share this financial bill with us ..

You're welcome, keep an eye on for this years bill.

Union Budget 2012: Highlights

New Delhi: Budget 2012, presented by Finance Minister Pranab Mukherjee, identifies five objectives relating to growth recovery, private investment, supply bottlenecks, malnutrition and governance matters.

Following are the highlights of Budget 2012:

-GDP growth to be 7.6 per cent (+ 0.25 percent) during 2012-13

· Amendment to the FRBM Act proposed as part of Finance Bill. New concepts of "Effective Revenue Deficit" and "Medium Term Expenditure Framework" introduced

· Central subsidies to be kept under 2 per cent of GDP; to be further brought down to 1.75 per cent of GDP over the next 3 years.

· Proposed: Mobile based fertilizer management system; LPG transparency portal; scaling up and rolling out of Aadhar enabled payment for government schemes in at least 50 districts.

· Rs. 30,000 crore to be raised through disinvestment

· Efforts to reach broadbased consensus on FDI in multi-brand retail

· Rajiv Gandhi Equity Saving Scheme: to allow income tax deduction to retail investors on investing in equities

· Rs. 15,888 crore to be provided for capitalization of public sector banks and financial institutions

· A central "Know Your Customer" depository to be developed

· Swabhimaan: remaining habitations to be covered; to be extended to more habitations; ultra small branches to be set up in Swabhimaan habitations

· Investment in 12th Plan in infrastructure to go uptoRs. 50,00,000 crore; half of this is expected from private sector

· Tax Free Bonds of Rs. 60,000 crore to be allowed for financial infrastructure projects

· Allocation of Road Transport and Highways Ministry enhanced by 14 per cent to Rs. 25,360 crore

· Financial package of Rs. 3,884 crore for waiver of loans to handloom weavers and their cooperative societies; mega handloom clusters in Andhra, Jharkhand; weaver service centres in Mizoram, Nagaland and Jharkhand ; powerloom mega cluster in Maharashtra; Rs. 500 crore pilot schemes for geo-textiles in North-Eastern region

· Rs. 5,000 crore India Opportunities Venture Fund to help small enterprises

· Allocation to agriculture enhanced; RKVY gets Rs. 9,217 crore; BGREI gets Rs. 1,000 crore; Rs.2242 crore project to improve dairy productivity; Rs. 500 crore for coastal aquaculture

· Various other agricultural activities merged into 5 missions

· 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

· Rs. 200 crore for awards to incentivise agricultural research

· Provisions under rural housing fund increased to Rs. 4,000 crore from Rs. 3,000 crore

· Interest subvention of 1 percent on housing loans uptoRs. 15 lakh extended for one more year

· AIBP allocation raised by 13 per cent to Rs. 14,242 crore

· National Mission on Food Processing to be started in cooperation with State Governments

· Scheduled Caste Sub Plan allocation increases by 18 per cent to Rs. 37,113 crore; Tribal Sub Plan by 17.6 per cent to Rs. 21,710 crore

· Multi-sectoralprogramme to address maternal and child malnutrition in 200 high burden districts

· 58 per cent rise in allocation to ICDS, at Rs. 15,850 crore

· Rural drinking water and sanitation gets 27 per cent rise in allocation to Rs. 14,000 crore; PMGSY gets 20 per cent rise to Rs. 24,000 crore

· Projects covering length of 8800 km to be awarded under NHDP against 7,300 km during 2011-12

· RTE-SSA gets Rs. 25,555 crore allocation, showing an increase of 21 per cent; 6000 schools to be set up at block level as model schools in the 12th Plan; Credit Guarantee Fund to be set up for better flow of credit to students

· National Urban Health Mission is being launched

· 34 per cent increase in allocation to National Rural Livelihood Mission, to Rs. 3915 crore

· Rs. 1000 crore allocated for National Skill Development Fund

· Bharat Livelihood Foundation to be established to support livelihood interventions particularly in tribal areas

· Widow pension and disability pension raised from Rs. 200 to Rs. 300 per month

· Grant on death of primary breadwinner of a BPL family in the age group 18-64 years doubled to Rs. 20,000

· Defence services get Rs. 193407 crore; any further requirement to be met

· 4000 residential quarters to be constructed for Central Armed Police Forces

· UID-Aadhar to get adequate funds for enrolment of 40 crore persons, in addition to the 20 crore persons already enrolled

· White Paper on Black Money to be laid in the current session of Parliament

· Tax proposals mark progress in the direction of movement towards DTC and GST

· Income tax exemption limit raised from Rs.1,80,000 to Rs.2,00,000; upper limit of 20 per cent tax slab raised from Rs.8 lakh to Rs.10 lakh

· Interest from savings bank accounts deductible upto Rs.10,000; deduction of upto Rs.5,000 for preventive health check-up

· Senior citizens without business income exempt from advance tax

· Investment linked deduction of capital expenditure enhanced for certain businesses; new sectors eligible for investment linked deduction

· Turnover limit for compulsory tax audit for SMEs raised from Rs.60 lakh to Rs.1 crore

· STT on cash delivery reduced by 25 per cent to 0.1%

· General Anti Avoidance Rule being introduced to counter aggressive tax avoidance

· A number of measures proposed to deter generation and use of unaccounted money

· All services to attract service tax except those in the negative list

· Central Excise and Service Tax being harmonized

· Standard rate of excise duty raised from 10 per cent to 12 per cent; service tax rates raised from 10 per cent to 12 per cent; no change in peak customs duty of 10 per cent on non-agricultural goods

· Relief in indirect taxes to sectors under stress; agriculture, infrastructure, mining, railways, roads, civil aviation, manufacturing, health and nutrition, and environment get duty relief

· Certain cigarettes and bidis attract higher excise duty; large cars attract higher customs duty

· Excise imposed on unbranded jewellery also; measures to minimize impact on small artisans and goldsmiths; branded silver jewellery exempted from excise duty
· Net gain of Rs.41,440 crore due to taxation proposals

· 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

· Fiscal deficit targeted at 5.1 per cent of GDP, as against 5.9 per cent in revised estimates for 2011-12

· Central Government debt at 45.5 per cent of GDP as compared to Thirteenth Finance Commission target of 50.5 per cent

· Medium-term Expenditure Framework Statement to be introduced; will set forth 3-year rolling target for expenditure indicators

SOURCE (http://ibnlive.in.com/news/union-budget-2012-highlights/239803-7-172.html)


I've decided to start this thread in the hope that all budget related posts come right here. Here's my wishlist for this budget :lol:

-Direct Taxes Code.
-Speedy Implementation of GST.
-Measures to avoid inflationary pressures- although this is a bigger topic, it's mainly to do with the poor manual supply chain.
-Allow private players to import oil.
-Ban union representation.
-More Technology and Research Grants.
-Small Business Grants.
-Dis-invest Air India, better to auction it.
-Legal Aid for bpl.
-Grants Stem Cell research.
-Grants for Mandatory Vaccine and Medical checkups for schools.
-Update Labor policies.
-RBI Interest rates - although this one cannot be implemented.
-Grants for Textile, Pharma, Fertilizer and Coal.
-Clean Energy subsidy for metros.

-------

Focus on fiscal consolidation (http://ibnlive.in.com/news/budget-2012-focus-on-fiscal-consolidation/232372-7-172.html)

Automobile industry debates diesel tax (http://economictimes.indiatimes.com/news/news-by-industry/auto/automobiles/budget-2012-automobile-industry-debates-diesel-tax/articleshow/11975097.cms)

Exclude state levy of VAT on software transaction, says FICCI (http://articles.economictimes.indiatimes.com/2012-02-18/news/31074917_1_service-tax-tax-payers-executive-directors)

Wealth tax on deposits in foreign banks likely (http://www.livemint.com/2012/02/21194247/Wealth-tax-on-deposits-in-fore.html)

Govt may peg plan allocation at Rs 5.2 lakh crore (http://timesofindia.indiatimes.com/pre--budget/Budget-2012-Govt-may-peg-plan-allocation-at-Rs-52-lakh-crore/articleshow/11999081.cms)

What to expect from the Finance Minister (http://www.firstpost.com/budget/budget-2012-what-to-expect-from-the-finance-minister-222566.html)
--------(more to come)

Post your thoughts, wishlists and updates.

Pretty much most of the things I had in mind.

-- Direct Taxes Code
-- Reduce subsidies on kerosene
-- Tax deductibles for setting up regional and national cold storage facilities
-- Special Purpose Vehicles for large Green Energy projects - Solar and Wind Power

Use disinvestment to cut fiscal deficit, says Arun Nanda, Chairman, Mahindra Lifespaces (http://economictimes.indiatimes.com/news/economy/policy/budget-2012-use-disinvestment-to-cut-fiscal-deficit-says-arun-nanda-chairman-mahindra-lifespaces/articleshow/12033143.cms)

^^ ah...just like I said. It's comforting to know there are some sensible people out there.

No room for new expenditure commitments, expect no ambitious schemes (http://articles.economictimes.indiatimes.com/2012-02-23/news/31091014_1_congress-leader-finance-minister-food-security)

Budget 2012-13: Air India may get Rs 10,000 crore package (http://indiatoday.intoday.in/story/budget-2012-air-india-may-get-rs-10000-crore-package/1/175453.html)

No need to blame kingfisher when we have Air India gulping down our hard earned money and running retro style schemes as their business model.

10,000 crores from a population in which less than 1% see the insides of an airplane. our government is surely for its people and knows its priorities well !!!

^^ yea thats exactly what I felt- Why is the Indian Taxpayer bailing out this overgrown monolith everytime!! If KF fails - Air India should either go bankrupt - and not hang onto a lifeline just to face the same situation again. their entire policy right from merging IA-AI was a doomsday march from the onset!!!

Union Budget 2012: Populism may trump reforms in India

The Congress party's drubbing in Assembly elections proved beyond doubt that its populist politics failed to resonate with voters, and yet investors and consumers alike are bracing for more of the same from the besieged ruling party.
Hemmed in by maverick allies and the fallout from a slew of corruption scandals, the Congress party-led central government has failed to carry out any meaningful structural reforms since it was re-elected in 2009.
Investors had hoped a strong performance in the elections would ease political constraints on Prime Minister Manmohan Singh, giving him room to revisit politically contentious reforms.
"As things stand now, they won't be able to bring any reforms. Their own allies will oppose everything," said D. H. Pai Panandiker, who heads Mumbai-based think-tank RPG Foundation.
Some reforms, such as to land acquisition and foreign investment rules, and the sensitive issue of subsidies on fuel, are crucial to lifting investment and spending in an economy headed for its slowest growth in three years.
Tuesday's poll results, showing Congress fared badly in four of five states, altered the odds of any such push for reforms in the budget.
Rather than becoming the catalyst for a renewed reform push, the state elections would provoke more populism, was the consensus view of analysts.
That is likely to mean more spending on social programmes, such as a pledge to provide universal food security that could bleed public finances but help Congress' general re-election bid in 2014. The Budget for the fiscal year that begins April 1 will be unveiled on March 16.
SLOWING GROWTH, POLITICAL LOGJAM
India's economic growth is forecast to dip below 7% this fiscal year, the lowest since the 2008 financial crisis, as a political logjam and the RBI's aggressive policies to contain inflation hit capital investment.
After the Assembly elections, Singh's government was widely expected to implement a decision to open India's USD 450 billion supermarket sector to foreign firms such as Wal-Mart Stores Inc . It had been forced to backtrack on that policy late last year in the face of a strong political backlash.
New Delhi is also considering raising domestic fuel prices in order to ease its subsidy burden, a politically unpopular move for which it may not have the stomach.
"People are worried now that the government will make a compromise in the budget," said Taina Erajuuri, a Helsinki-based portfolio manager at FIM India. "The worry is that the government will increase the social expenditure at the cost of reforms. Foreigners do not want to see that."
The BSE Sensex fell more than 1% on Tuesday to its lowest close in more than five weeks, and a further half percent on Wednesday, although the declines were broadly in line with other Asian markets and BSE Sensex remains up more than 10% for the year-to-date. The rupee posted its biggest single session fall in six weeks on Tuesday.
Federal bonds failed to rally despite the Reserve Bank of India's plan to buy a higher-than-average amount of debt this week as a negative outcome for the Congress party doused hopes of a credible fiscal consolidation roadmap.
RESISTANCE TO REFORMS
It's one thing for the ruling United Progressive Alliance (UPA), which is led by the Congress, to admit its policies centred around handouts and higher rural wages have failed. It's quite another to try and push for higher taxes and transparency in the face of an energised opposition and squabbling coalition.
Still, several analysts reckoned the Congress leadership will see the writing on the wall, leaving it little choice.
"It's time for Congress to perform or perish," said Arun Kejriwal, strategist at Mumbai-based advisory firm KRIS, arguing for the government to put in place policies that may encourage business and create more jobs for voters.
"If this Budget doesn't give any direction to the economy, Congress is likely to find itself in a mess in 2014, because next year's Budget would be too late to do anything substantial for the economy," he said.
The easy option would be for the finance minister to sneak in reforms that don't need parliamentary approval, such as raising fuel prices or permitting more foreign holding of Indian bonds.
"This setback might be the final push to convince the UPA to bring in critical supply-side reforms to improve economic prospects," analysts at Standard Chartered Bank said in a note.
Before the global financial crisis of 2008, India's growth capacity was estimated at around 8.5%. But a lack of economic reforms since then has shaved that growth potential to a 7-7.5% annual pace.
Having failed to cut its subsidy bill, New Delhi is widely expected to miss by a long chalk its deficit target of 4.6% of GDP for the fiscal year that ends in March.
With global crude prices touching a new high on mounting geopolitical tensions, subsidy payout for the next year is only expected to rise unless pump prices are raised.
But for a party that has tasted electoral success on the back of welfare schemes for the poor and subsistence farmers, pleasing investors may not be easy as its seeks re-election in 2014.
"There is a risk that the government might opt for a more populist budget and rethink any possible decisions to trim subsidies -- which might hurt their support base at the grassroot level," said Radhika Rao, economist, at Forecast PTE in Singapore.
"The coalition administration will be hard at work in the run-up to the parliamentary elections in next two years, with odds skewed for another overshoot in 2012/13 fiscal deficit, at least over 5.0% of GDP."

http://www.moneycontrol.com/news/economy/union-budget-2012-populism-may-trump-reformsindia_677595.html

Balance between fiscal consolidation and growth needed

As the ‘A-Team’ at the finance ministry sits down to finalise the budget, the market is abuzz with optimism. Markets have moved up almost 20% over the last two months. All eyes are now on the FM’s announcements on March 16th. Presently a large part of the uptick in the stock markets is because of global liquidity, infused especially by the European Central Bank’s Long Term Re-Financing Operations (LTRO).

Last year the Indian economy was whiplashed by four forces— sticky inflation forcing the RBI to raise the interest rates aggressively, lingering policy paralysis as the government battled multiple political issues, large fiscal slippages leading to crowding out of private sector and of course uncertain global macroeconomic backdrop, particularly the European debt crisis.

But since December we have seen some improvement on several of these factors. Inflation is showing signs of coming under control, recently reaching the sub 7% levels. If this trend continues, RBI will most likely cut interest rates in the next policy announcement.

There also seems to be some action on the policy front like FDI in retail, Coal India FSA commitment, New telecom policy, Highway development etc. If Congress does well in the UP elections, the market is likely to interpret that as a positive signal, since this would make it stronger within the UPA coalition. In such a scenario the market expects the FM to take some important steps in the budget.

Given the fine balance the FM has to tread between managing fiscal deficit and growth, one of the options is to increase its revenues by increasing indirect taxes. The likely possibilities in this regard are: Increase in general excise duty to 12% and some specific sector such as diesel engine car and cigarettes can attract more duty, Bringing more services under the service tax net and marginal increase in corporate tax rate.

To jump start the economy and specifically investments, the market expects sops for the infra sector. To mention a few, Imposition of import duty on power equipment’s, Removal of cascading effect of Dividend Distribution Tax, extension of Section 80IA benefits beyond March 2012, increase in ceiling limit for claiming a home loan from Rs 1,50,000 to Rs 2,50,000 per year etc.

Markets would be keenly looking for fiscal deficit & subsidy figures and borrowing and divestment program. Market will be looking for a very fine balance between fiscal consolidation and growth orientation. We will have to wait and watch to see the action on the d day.

Given the turmoil that economy has faced last year, the market is looking keenly for some positive signals from the Finance Minister.


source (http://www.business-standard.com/india/news/budget-2012-balance-between-fiscal-consolidationgrowth-needed/160227/on)

so whatz going on?good or bad budget

DOWNLOAD THE BUDGET SPEECH (http://s3-ap-southeast-1.amazonaws.com/sng.docs.drop.ndtvprofit/201203161336562693151-BUDGET%20SPEECH.pdf)

so so budget

I think more than the actual budget market is reacting to political moves.


but i am happy the populism has not been as big as I expected. Its responsible one

http://i4.dainikbhaskar.com/web2images/www.bhaskar.com/2012/03/16/images/manju_330_02111112121_f_25011111_f.jpg

http://profit.ndtv.com/News/Article/budget-vodafone-verdict-prompts-changes-to-tax-laws-299836

I am impressed with the move that India planning to claw back the tax avoidance from corporate..! While you are squeezing every penny from normal middle class people in form of taxes and then why not from super rich companies...

Recently the same retrospective law has been passed here in UK to get back 500m from Barclays....

Read the key features (http://indiabudget.nic.in/ub2012-13/bh/bh1.pdf) of the budget.

i think it is a good budget,

* Increase of duties on gold, will reduce gold consumption thus reducing CAD.

* Increase in duties for Cigarette and tobacco is a big positive.

* Decrease in duties for coal & LNG is a big positive.

* Financing for power projects has ben made easier.

* Aviation companies can raise $1 billion in ECB's which will reduce the interest cost for airlines.

* Restricting subsidy to 2% of GDP(if done) is a great move.

* Also reducing STT is on expected lines, may boost equity volumes.

* Increase in excise duty should have been to 14% rather than to 12%, that would have increased the tax revenues substantially.

* I have a feeling that GST will be by the time we get elections in 2014.

I think considering the political circumstances budget is a big booster for govt. revenues though it may reduce consumer demand and increase inflation.

Some of the disappointments were:-

1) No increase in import duty for the imported power equipments.

2) No negative list for services.

3) no clear road map for FDI in aviation & FDI in retail.

4) Extending disinvestment proceeds for social scheme is not a good idea IMO.

5) fiscal deficit at 5.1% is too much.

6) Govt. borrowing will keep pressure on RBI to keep rates high and this is a big negative for the stock markets and infra sector.

In the last 2 days, i have lost 30% of the money earned in last 2 months, all because of the mamata drama, budget as such is not a disaster.

which is why i said so so

no big ticket reforms


and i dont blame the congress for that. Their allies to blame.


5.5/10


this budget would be fine if the world economy was not in the state it is today. Its average considering the threats India is facing.

Some of the disappointments were:-



2) No negative list for services.



I remember hearing him talk abt Negative list for services except for 17 services.

Edit: BUDGET FY13: Govt proposes negative list-based service tax regime in FY13 (http://banking.contify.com/story/budget-fy13-govt-proposes-negative-list-based-service-tax-regime-in-fy13-no-timeframe-on-gst-1148678)

Disappointing budget, as expected. Just tinkering on the margins and no big ticket reforms. It's laughable to see finance ministers every year micromanaging tax rates on hundreds of items - most of the budget is spent on just that. What a waste!

I had low expectations from this govt, and they met those low expectations. Of course they'd blame the allies for lack of any reforms. It would be naive to believe that in my opinion.

This was the only opportunity for this govt to do something before the next elections, and they squandered it. It will only get tougher from this point. Next budget, being the last one by this govt, is guaranteed to be hugely populist.

Unfortunately, this means no hope for any major improvement in GDP growth over the next 2 years. :(

3) no clear road map for FDI in aviation & FDI in retail.

4) Extending disinvestment proceeds for social scheme is not a good idea IMO.



Could you explain 4 & 5 please. FDI in aviation requires legislation.

http://www.thehindu.com/multimedia/archive/00953/TH17_budgetgraphic__953997a.gif

SRC : http://www.thehindu.com/news/article3001916.ece?viewImage=2

Could you explain 4 & 5 please. FDI in aviation requires legislation.

he said that they were discussing FDI in aviation, i mean budget can be a platform to announce legislative decision.

http://profit.ndtv.com/News/Article/budget-vodafone-verdict-prompts-changes-to-tax-laws-299836

I am impressed with the move that India planning to claw back the tax avoidance from corporate..! While you are squeezing every penny from normal middle class people in form of taxes and then why not from super rich companies...

Recently the same retrospective law has been passed here in UK to get back 500m from Barclays....

Are you kidding me? This is probably the most retrograde aspect of this budget. Retrospective laws are banned in many common law countries, and for good reason. In the US, it is considered so unfair, that the Constitution expressly forbids it!

Imagine, you can live your life (as an individual or corporation) playing by the rules and the govt can come in, change the laws/rules retrospectively and punish you for breaking the law. I can't imagine anything more unjust! How would you feel if govt retrospectively raised your tax rate, or disallowed some legal deductions you took, and demanded massive extra taxes for past years?

Of course, the Indian govt doesn't give a shit about justice and fairness. The Vodafone tax demand, that this retrospective law is supposed to allow, was ridiculous on so many fronts, that it would be unimaginable in most countries. Anyway don't mean to digress to much, so won't go into the details.

This retrospective law would be make foreign investors/companies think twice before investing in India. One reason some preferred India to China was that at least India had a decent justice system that, even though slow, worked somewhat (at least much better than the executive and legislative branches of the govt!). The Vodafone case reaffirmed that belief. But the Indian govt is taking away that sliver of advantage as well by this rule change.

I'm not too surprised though. This Congress govt would stoop to any level to get its way. Throughout its history since independence, Congress has embodied the philosophy of "mai baap sarkaar", where the govt is super powerful and its citizens (specially poor) are kept completely dependent on its doles/handouts. If that is its mindset towards its own citizens, no wonder it treats foreigners the same way.

http://www.thehindu.com/multimedia/dynamic/00953/rupee_953554e.jpg

SRC : http://www.thehindu.com/business/markets/article3002555.ece

http://www.thehindubusinessline.com/multimedia/dynamic/00953/BL16_BUDGETTRIVIA_e_953455g.jpg

SRC : http://www.thehindubusinessline.com/industry-and-economy/economy/article3002285.ece

it was the 5th crap budget in a row.....
jesus.
sell the loss making PSU's, inc railways.
slash import duty.
Give tax sops for FDI.
DOH , allow FDI
Fast track rural EEZ with 110% compensation for dislodged land owners.
Just get on with it for fucks sake.
its a bloody no brainer.
reform the courts.
introduce ID card.
expand the tax base.
sack some babus

^^ aaaaahh whats that?:eek:... don't ruin my topic.