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ͻ Largely positive budget, especially in terms of Gross Domestic Product (GDP)growth, roadmap for
fiscal consolidation, direct tax measures and lower
ͻ Focus on infrastructure, rural economy, agriculture and export relief.

ECONOMY AND FISCAL HEALTH

As expected, economic statements on GDP growth, deficits and tax measures were encouraging and
reflected India͛s continuing economic recovery. The government estimated GDP growth for year 10 at
7.2% and indicated that it aimed to strengthen this growth to 9-10% in the medium term. In financial
year 10, gross domestic savings and the rate of gross capital formation decreased, while per capita
income rose by 5.3%.

The government͛s roadmap for fiscal consolidation, its direct tax measures and lower than-expected
borrowings were also seen as positive. The fiscal deficit in FinanciaL YEAR 10, inclusive of oil and
fertiliser subsidies, was estimated to be 6.9% of GDP. The government indicated its target fiscal deficit
for FY(financial year) ͚11 to be 5.5% of GDP and said that it aims to reduce the deficit to 4.1% by FY13.

TAXATION
The budget made no change to corporate tax rates. While it raised the ͚Minimum Alternate Tax͛ (MAT)
from 15% to 18% of book profits, it reduced the surcharge from 10% to 7.5%. Personal income tax
brackets were revamped, but the services tax was retained at 10%.

The budget͛s increase in tax exemptions will boost disposable income, and in our opinion, the setting up
of commissions to study financial sector reform and effective tax administration are steps in the right
direction.The budget indicated that the Goods & Services Tax (GST) and the Direct Tax Code(DTC) were
to be implemented by April 2011. The timeline to introduce the DTC seems to have been firmed up, but
the introduction of the GST continues to be plagued by alack of consensus between the central and
state governments. The various studies commissioned by the Thirteenth Finance Commission suggested
that the GST could boost India͛s GDP by approximately 0.9% to 1.7%.



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The budget continued its emphasis on infrastructure, the rural economy, agriculture and relief for
exporters. As seen in recent years, an increased focus on agriculture and the rural sector could help a
wider section of India͛s population benefit from economic growth. The strength in the rural economy
bolstered India͛s economy through the slowdown caused by the global financial crisis.
The government also continued to focus on various social sector and infrastructure development
programmes, which we believe can help the benefits of economic growth to percolate to all segments of
the society. This, in turn, could help bridge the socioeconomic divide and boost economic activity across
the country. We believe that the implementation of social policies and various infrastructure projects
will remain central to the country͛s economic progress.

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aY Gross Domestic Product (GDP) estimated to have grown at 8.6 per cent in 2010-11 in
real terms. Economy has shown remarkable resilience
aY Indian economy expected to grow at 9 per cent with an outside band of +/- 0.25 per
cent in 2011-12
aY Exports have grown by 29.4 per cent, while imports have recorded a growth of 17.6 per
cent during April to January 2010-11 over the corresponding period last year



 

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aY Allocation of Rs 2,14,000 crore (US$ 46.5 billion) for infrastructure in 2011-12. This is an
increase of 23.3 per cent over 2010-11. This also amounts to 48.5 per cent of total plan
allocation
aY Government to come up with a comprehensive policy for further developing PPP
projects
aY IIFCL to achieve cumulative disbursement target of Rs 20,000 crore (US$ 4.3 billion) by
March 31, 2011 and Rs 25,000 crore (US$ 5.4 billion) by March 31, 2012
aY Under take out financing scheme, seven projects sanctioned with debt of Rs 1,500 crore
(US$ 325.6 million). Another Rs 5,000 crore (US$ 1.1 billion) will be sanctioned during
2011-12
aY To boost infrastructure development, tax free bonds of Rs 30,000 crore (US$ 6.5 billion)
proposed to be issued by Government undertakings during 2011-12.

 

aY Rs. 300 crore (US$ 65.1 million) expenditure to promote 60,000 pulses villages in rain
fed areas for increasing crop productivity and strengthening market linkages
aY Proposal to spend Rs. 300 crore (US$ 65.1 million) to promote oil palm plantation in
60,000 hectares and Rs. 300 crore (US$ 65.1 million) for the initiative on vegetable
cluster
aY Rs 400 crore (US$ 86.8 million) is proposed to be spent to improve rice based cropping
system in the Eastern.


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The scope of Health services is being expanded by including:

a) All services, including diagnostic services, provided, by a centrally air-

conditioned (wholly or partially) clinical establishment having more than 25 beds for in-
patient treatment during any part of the year;

b)Diagnostic services being provided by a clinical establishment with the aid of laboratory or o
ther medical equipment; and

c)Services provided by a doctor, not being an employee of a clinical establishment, from

the premises of such establishment..
In view of the comprehensive coverage of health services under (a), (b) and (c) above, the exi
sting health services where
paymentsare required to be made directly by the insurance company or business entities wou
ld no longer be operational.The above changes will come into effect from a date to be
notified, after the enactment of Finance Bill, 2011.

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* Standard rate of excise duty held at 10 percent; no change in CENVAT rates

* Personal income tax exemption limit raised to Rs 180,000 from Rs 160,000 for individual tax
payers
*For senior citizens, the qualifying age reduced to 60 years and exemption limit raised to Rs
2.50 lakh.
*Citizens over 80 years to have exemption limit of Rs 5 lakh.
* To reduce surcharge on domestic companies to 5 percent from 7.5 percent.
* A new revised income tax return form 'Sugam' to be introduced for small tax papers.
* To raise minimum alternate tax to 18.5 percent from 18 percent ( Read story )
* Direct tax proposals to cause 115 billion rupees in revenue loss
* Service tax rate kept at 10 percent
* Customs and excise proposals to result in net revenue gain of 73 billion rupees
* Iron ore export duty raised to 20 percent
*Nominal one per cent central excise duty on 130 items entering the tax net. Basic food and
fuel and precious stones, gold and silver jewellery will be exempted.
*Peak rate of customs duty maintained at 10 per cent in view of the global economic
situation.
*Basic customs duty on agricultural machinery reduced to 4.5 per cent from 5 per cent.
*Service tax widened to cover hotel accommodation above Rs 1,000 per day, A/C restaurants
serving liquor, some category of hospitals, diagnostic tests.
*Service tax on air travel increased by Rs 50 for domestic travel and Rs 250 for international
travel in economy class. On higher classes, it will be ten per cent flat.
* Electronic filing of TDS returns at source stabilised; simplified forms to be introduced for
small taxpayers.
* Works of art exempt from customs when imported for exhibition in state-run institutions;
this now extended to private institutions.


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aY Fiscal consolidation targets at Centre and States have shown positive effect on
macroeconomic management of the economy.
aY Amendment to Centre͛s FRBM Act, 2003 laying down the fiscal road map for the next
five years to be introduced in the course of the year.
aY Proposal to introduce the Public Debt Management Agency of India Bill in the next
financial year.
aY Direct Taxes Code (DTC) to be finalized for enactment during 2011-12. DTC proposed to
be effective from April 1, 2012.
aY Areas of divergence with States on proposed Goods and Services Tax (GST) have been
narrowed. As a step towards roll out of GST, Constitution Amendment Bill proposed to
be introduced in this session of Parliament.
aY Significant progress in establishing GST Network (GSTN), which will serve as IT
infrastructure for introduction of GST