India Budget 2011

India Budget 2011

India Budget 2011

India Budget 2011

Information in the publication provides a general outline of the Annual Union Budget presented on 28 February 2011. It should not be construed to be advice in any manner and Great Lakes accepts no responsibility for loss arising from any action taken or not taken by anyone based on this document.

India Budget 2011

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India Budget 2011

Contents
Introduction ............................................................................................................................................ 6 Indian Economy....................................................................................................................................... 7 Sectoral review ..................................................................................................................................... 10 Government Balance Sheet .................................................................................................................. 17 Budget Proposals .................................................................................................................................. 19 Direct tax ........................................................................................................................................... 19 Indirect tax ........................................................................................................................................ 24 Other regulatory changes ..................................................................................................................... 28 Estimated Outlay................................................................................................................................... 29 Quote Unquote .................................................................................................................................. 34

India Budget 2011

Introduction
The Union Budget for 2011-12 was presented by the Finance Minister in Parliament today. With key regulatory changes expected in fiscal year 2012-13, viz. the Direct Tax Code (DTC) and Goods and Services Act (GST); the industry did not have high expectations from this years budget. Indian Economy has been in good shape; however, inflation which acts as a GDP deflator has been a cause of concern. The Government has been able meet its fiscal deficit targets, which is a positive. However, this fete is mellowed down if we consider the fact that a Government which has access to funds at effectively negative interest rates, thanks to high rate of inflation, has still not been able to meet Fiscal Responsibility and Budgetary Management Act (FRBM). The Eleventh Five Year Plan has put infrastructure as a major thrust area to enable sustained economic development. There were expectations that this sector would get the fiscal incentive required to meet relatively large funding requirements. In line with these expectations, the budget proposed to issue `30,000 Crore tax free bonds along with other incentives like low withholding tax on approved infrastructure funds and increase in Foreign Institutional Investment (FII) limits in corporate bonds issued in infrastructure sector. This year also marked the expiration of tax-holiday schemes in the IT/ITES, Power and Mineral Oil sectors. In line with the governments policy to promote power generation, the budget extended the sun-set clause for power sector; however, tax holidays for Software Technology Parks and undertakings engaged in commercial production of mineral oil were allowed to expire. There was speculation that this years budget would streamline tax policy with the proposed DTC and GST. Those expectations have been partly met with the Finance Minister keeping peak indirect tax rates at their present levels. However, the industry is disappointed to see surcharge on domestic and foreign Companies reduced and not eliminated. In conclusion, this budget can be termed as a good transition from old to new fiscal regulations. There is optimism with respect to new laws and better tax administration which is rational and based on legal and factual merit. It is interesting to note that almost 50 per cent of the revenue collections by the Government are sent back as refunds during appeals before higher courts. Going forward, we can expect the Government to focus on long-term capital investment in farm sector by way of irrigation to encourage high farm productivity and ensure moderate inflation. It is also important to make sure that quality long-term foreign investment makes its way into India. We can do well by investing in human capital by way of education and reap benefits of the demographic purple patch we are in.

Great Lakes Institute of Management

India Budget 2011

Indian Economy
The Economic Survey 2010-11 estimates the Gross Domestic Product (GDP) for the current year to be at 8.6 per cent compared to 7.2 per cent in 2009-10. With fears of a double-dip recession behind us, the Emerging Economies have recaptured the imagination of global investors. Indian economy has sustained growth despite partial revocation of stimulus package in the last budget. However, with events unfolding in the Middle-East as you read, Indian industry would do well if the stimulus is carried forward for the next financial year. One major hurdle that the Economy has faced is with respect to inflation which is estimated at 9.4 per cent for the current financial year. Other than inflation, the economy has shown signs of short term slow-down in November 2010 Index of Industrial Production (IIP) figures. The bright side is that gross fiscal deficit of the Central Government for the current year has been reduced considerably and stands at 5.1 per cent of GDP for 2010 and has been pegged at 4.6 per cent in the coming fiscal year. This can be attributed to the higher than anticipated non-tax revenues from 3G spectrum auctions. Agriculture: In 2010-11, the sector is estimated to have grown at 5.4 per cent, which is higher than the negative 0.2 per cent growth witnessed in the last fiscal year. Agriculture has been an erratic performer predominantly because of its heavy reliance on the monsoons. With a high base going forward in the next year, we can expect growth in this sector to be low and will have to be compensated by high growth in services or industry to meet overall growth targets. Industry: Riding the fiscal stimulus provided by the Central Government, Industry has performed well for the second consecutive year. It has grown at the rate of 8.1 per cent in 2010-11 on the back of a strong 8.2 per cent growth last year. Services: The darling of Indian economy has not disappointed. With a robust 9.6 per cent growth on the back of a solid 8.3 per cent increase the sector witnessed last year, services sector has led the India growth story to all parts of the globe. Sectoral Growth rates (in per cent)
0.15 0.1 0.05 0 -0.05 -0.1 Agriculture Industry Services

India Budget 2011

Then & Now Since liberalization, the share of Agriculture has been declining on account of high growth witnessed in Industry and Services sector. However, interestingly, most of the growth is driven by services sector by private players, with Governments share remaining almost constant. Sectoral contributions

1991-92
14% 33% 12%

18% 23%

Agricluture, forestry and fishing, mining and quarring Manufacturing, construction, electricity, gas and water supply Trade, hotels, transporation and communication Financing, insurance, real estate and business services Public administration and defence and other services

2009-10
14% 17% 17% 26% 26%

Agricluture, forestry and fishing, mining and quarring Manufacturing, construction, electricity, gas and water supply Trade, hotels, transporation and communication Financing, insurance, real estate and business services Public administration and defence and other services

Growth vs. Inflation India has sustained a high growth rate since liberalization of the economy after the dream budget of 1997 which rationalized taxes and was followed up by the FEMA in 1999. However, it is now time to introspect and find out the cost attached to such high growth. Sustained inflation has meant that we have zero to negative real interest rates in our country funding the high growth we see. In fact, over the past 5 years, there have been two occasions where real GDP growth has been outpaced by the rate of inflation. With both demand and supply side pressures acting up, especially after unrest in the Middle East, it would be hard for the Government to keep long term inflation in check without ensuring food security either through imports or increasing farm productivity.

India Budget 2011

GDP and WPI based inflation (in per cent)

12 10 8 6 4 2 0

GDP Growth rate Inflation rate

The Bill proposes to increase the Budget Estimate of total expenditure by 13 per cent over last years estimates. With revenue neutral tax estimates, the bill estimates a net loss of `200 Crore from Direct and Indirect taxes, the Finance Minister seems to be funding this increased expenditure by: High growth estimation: The speech mentions an estimate of 9 per cent growth in GDP for fiscal year 2011-12. Reduction in subsidies: As promised in previous years budget, the Bill proposes fiscal prudence by stating that all subsidy related liabilities will be brought into fiscal accounting. Disinvestment targets: The bill sets a target of ` 40,000 Crore from disinvestment of public sector enterprises. However, the Finance Minister mentioned that Government holding in such enterprises shall not be allowed to fall below 51 per cent. Denominator Effect: Also called the base or nominal GDP effect; it works on a simple fact that tax receipts are computed on nominal GDP rather than Real GDP which bloats the receipts thanks to high inflation.

Even after accounting for the above revenue targets, the Bill estimates a Fiscal Deficit of 4.6 per cent for fiscal year 2011-12. However, the deficit figures are in double digits if we were to consider the impact of state deficits. Central Government Deficits

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Sectoral review
Energy, Infrastructure and Communications One of the major requirements for sustainable and inclusive economic growth is an extensive and efficient infrastructure network. It is critical for the effective functioning of the economy and industry. The key to global competitiveness of the Indian economy lies in building a high class infrastructure. To accelerate the pace of infrastructure development and reduce the infrastructure deficit, the Government has initiated a host of projects and schemes to upgrade physical infrastructure in all crucial sectors. Despite several challenges, the positive results of the Governments initiatives are showing in some sectors. However, required capacity addition in a time-bound manner needs focused attention in other sectors. Power Electricity generation by power utilities during 2010-11 has been predicted to increase significantly. During the period April-November 2010, power generation from nuclear sources have increased by a third since same period in 2009.This is indicative of a very clear reduction in dependence on the conventional sources such has thermal which has shown a modest growth figure of 8 per cent this year over the last. Nonetheless, of the additional capacity proposed in the eleventh plan, only 5.4 per cent promises to be contributed by the nuclear plants. The overall Plant Load Factor (PLF), a measure of efficiency, of thermal power stations during AprilDecember 2010, though less than that achieved during April-December 2009, exceeded the target of 71.35 per cent for the first three quarters of the current financial year. Oil and Gas Efficient and reliable energy supplies are a precondition for accelerated growth of the Indian economy. While the energy needs of the country, especially oil and gas, are going to increase at a rapid rate in the coming decades, the indigenous energy resources are limited. Oil and gas constitute around 45 per cent of total energy consumption. At the same time, the dependence on imports of petroleum and petroleum products continues to be around 80 per cent of total oil consumption in the country. In view of unfavourable demand-supply balance of hydrocarbons in India, acquiring equity oil and gas assets overseas is one of the important components of enhancing energy security. The Government is encouraging national oil Companies to aggressively pursue equity oil and gas opportunities overseas. The total investment by oil PSUs (OVL,OIL, GAIL, IOCL, BPCL, and HPCL) overseas is more than US$ 13 billion (`59,000 Crore). Railways and Roads The railways traverse the length and breadth of the country and carry over 20 million passengers and 2 million tons of freight daily. Freight loading has not increased significantly; this is largely due to the negative growth found in Iron Ore further caused due to Government restrictions in Orissa and Karnataka. During the Eleventh Five Year Plan period, electrification of 4,500 RKM was planned with an outlay of `3,000 Crore. This will require an excess of `1500 Crore.

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About 25 per cent of the total length of National Highways (NHs) is single lane / intermediate lane, about 52 per cent is two lane standard, and the balance 23 per cent is four lane standard or more. In 2010-11, the achievement under various phases of the NHDP up to November 2010 has been about 1,007 km and projects have been awarded for a total length of about 3,780 km. The status of the project of 170 km length was awarded and bids for five more projects are under various stages of process. Civil Aviation The Civil Aviation Sector witnessed a strong recovery during 2010 from the adverse impact of the recent global financial crisis. The scheduled domestic passenger traffic clocked a growth rate of 19 per cent during January-December 2010 as compared to the corresponding period in 2009. Domestic cargo transported by air increased from 3.4 million tonnes in 2009 to 4.7 million tonnes in 2010 registering a growth rate of 30 per cent. At present 12 scheduled airlines are operational (10 passenger and 2 cargo). The total number of aircraft in their fleet has risen by one to 419 at the end of December 2010. The non-scheduled operators as on December 2010 have 360 air-craft in their fleet. Telecommunication The opening of the sector has not only led to rapid growth but also helped a great deal towards maximization of consumer benefits as tariff have been falling across the board. From only 76.54 million telephone subscribers in 2004, the number increased to 764.77 million at the end of November 2010. Wireless telephone connections have contributed to this growth as their number rose from 35.62 million in March 2004 to 729.58 million at the end of November 2010. The wire-line has shown a decline from 40.92 million in 2004 to 35.19 million in November 2010. Clearly, the wireline has come of age. Urban Infrastructure The JNNURM was launched in 2005-06 to encourage cities to initiate steps to bring about improvement in existing civic service levels in a sustainable manner in Mission mode over a seven year Mission period. The components under the Sub-Mission Urban Infrastructure and Governance (UIG) include urban renewal, water supply (including desalination plants), sanitation and sewerage, solid waste management, urban transport, development of heritage areas, and preservation of water bodies. The allocation for the JNNURM (UIG) was increased from ` 25,500 Crore to ` 31,500 Crore in February 2009. On 3 December 2010, the Mission has completed five years. Human Resource Development The ultimate objective of development planning is human development or increased social welfare and well-being of the people. Increased social welfare of the people requires a more equitable distribution of development benefits along with better living environment. Development process therefore needs to continuously strive for broad-based improvement in the standard of living and quality of life of the people through an inclusive development strategy that focuses on both income and non-income dimensions. The challenge is to formulate inclusive plans to bridge regional, social and economic disparities. The Eleventh Five Year Plan sought to address this challenge by providing a

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comprehensive strategy for inclusive development, building on the growing strength of the economy. Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) This flagship programme of the Government of India touches the lives of the rural poor and promotes inclusive growth. The MGNREGS aims at enhancing livelihood security of households in rural areas of the country by providing at least one hundred days of guaranteed wage employment in a financial year to every household whose adult members volunteer to do unskilled manual work. It also mandates 33 per cent participation for women. The primary objective of the Scheme is to augment wage employment. This is to be done while also focussing on strengthening natural resource management through works that address causes of chronic poverty like drought, deforestation, and soil erosion and thus encourage sustainable development. The MGNREG Act was notified in 200 districts in the first phase with effect from 2 February 2006 and then extended to an additional 130 districts in the financial year 2007-08. The Act has been notified throughout the country with effect from 1 April 2008. During 2009-10, `5.26 Crore households were provided employment under this scheme as against more than `4.51crore during 2008-09. During 2010-11, the budget estimate for the MGNREGS is ` 40,100 Crore out of which ` 29,822.59 Crore have been released to the States/ UTs till 10 February 2010. Rural Infrastructure and Development The Government of India has accorded highest priority to building rural infrastructure with the objective of facilitating a higher degree of rural urban integration and for achieving an even pattern of growth for the poor and disadvantaged sections of society. Some of the initiatives taken by the Government to facilitate building of rural infrastructure and development include the PMGSY, Bharat Nirman, Total Sanitation Campaign, and NRHM. Bharat Nirman This programme, launched in 2005-06 for building infrastructure and basic amenities in rural areas, has six components, namely rural housing, irrigation potential, drinking water, rural roads, electrification, and rural telephony. It is an important initiative for reducing the gap between rural and urban areas and improving the quality of life of people in rural areas. National Programme of Midday Meals in schools Under the National Programme of Midday Meals in schools, cooked mid-day meal is provided to all the children attending Classes I-VIII in Government, local body, Government aided and National Child Labour Project schools. EGCs/alternate and innovative education centres including madarsas/maqtabs supported under the SSA across the country are also covered under this programme. At present the cooked midday meal provides an energy content of 450 calories and protein content of 12 grams at primary stage and an energy content of 700 calories and protein content of 20 grams at upper primary stage. Adequate quantity of micro-nutrients like iron, folic acid and vitamin A are also recommended for convergence with the NRHM. During 2009- 10, the budget allocation under this program was ` 7359.15 Crore against which the total expenditure incurred was ` 6937.79 Crore. A total number of `11.04 Crore children (`7.85 Crore in primary and `3.19 Crore in upper primary stages) have been benefitted under the programme during 2009-10. India Budget 2011 12

The Sarva Shiksha Abhiyan SSA The programme is being implemented in partnership with the States to address the needs of children in the age group of 6-14. The goals of the SSA inter alia include enrolment of all children in school, education guarantee centres (EGCs), alternate schools, 'back-to-school' camp, retention of all children till the upper primary stage by 2010, bridging of gender and social category gaps in enrolment with retention and learning, and ensuring that there is significant enhancement in the learning achievement levels of children at the primary and upper primary stages. The achievements under the SSA till September 2010 include opening of 309,727 new schools, construction of 254,935 school buildings, construction of 1,166,868 additional classrooms, 190,961 drinking water facilities, construction of 347,857 toilets, supply of free textbooks to 8.70 Crore children, and appointment of 11.13 Lakh teachers. Moreover, around 14.02 Lakh teachers have received in-service training under this programme. There has been significant reduction in the number of out-of- school children on account of SSA interventions. An independent study states that the number of out-of-school children has come down from 134.6 Lakh in 2005 to 81.5 Lakh in 2009. Higher and Technical Education Higher Education is of vital importance for the country, as it is a powerful tool to build a knowledgebased twenty-first century society. Improvement of access along with equity and excellence, adoption of State-specific strategies, enhancement of the relevance of higher education through curriculum reforms, vocationalization, networking and IT, and distance education are some of the main policy initiatives in the higher education sector. The other important policy initiatives in higher education are programmes for general development of universities and colleges; special grants for the construction of hostels for women; scholarships to students; scheme to provide interest subsidy on educational loans for professional courses to ensure that nobody is denied professional education because he or she is poor; and making interventions to attract and retain teaching talent in higher and technical education. Emphasis has been laid on expansion with equity, use of information and communication technology (ICT), and promotion of quality education. Welfare and Development of SCs, STs,OBCs, and other weaker sections As part of the strategy to achieve inclusive development, the Government is committed towards the economic and social empowerment and educational upliftment of socially disadvantaged groups and marginalized sections of society. Accordingly, a number of schemes and programmes are implemented by the Central Government through State Governments, UT Administrations, and NGOs. The Public Private Partnership (PPP) approach is also being explored for effective delivery of services with more accountability and transparency. Service Sector India stands out for the size and dynamism of its services sector. The contribution of the services sector to the Indian economy has been manifold: a 55.2 per cent share in GDP, growing by 10 per cent annually, contributing to about a quarter of total employment, accounting for a high share in foreign direct investment (FDI) inflows and over one-third of total exports, and recording very fast (27.4 per cent) export growth through the first half of 2010-11.

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Although the primary sector (agriculture mainly) is the dominant employer followed by the services sector, the share of services has been increasing over the years while that of primary sector has been decreasing. Between1993-94 to 2004-05, there was a sharp fall in the share of the primary sector in employment. The consequent rise in share of employment of the other two sectors was almost equally divided between the secondary and tertiary sectors. In 2007-08 compared to 200405, though the trend was similar, the fall in employment in primary sector was less (at -1.1 per cent) with a small commensurate rise in employment in the other two sectors, which was again almost equally divided between the other two sectors. Some services have been particularly important for this improving performance in India. Software is one sector in which India has achieved a remarkable global brand identity. Tourism- and travelrelated services and transport services are also major items in Indias services. Besides these, the potential and growing services include many professional services, infrastructure-related services, and financial services. Trade Trade is an important segment in Indias GDP. The GDP from trade (inclusive of wholesale and retail in the organized and unorganized sectors) at constant prices increased from ` 4,33,967 Crore in 2004-05 to ` 6,71,396 Crore in 2009-10, at a CAGR of 9.1 per cent. The share of trade in the GDP, however, remained fairly stable at around 15 per cent in the last four years. The last decade has witnessed acceleration in the growth rate of real GDP. It has been in the range of 8-9 per cent during the last five years. This fast growth means rising disposable income of the population, in particular that of the middle class. With the growth in consuming population, the retail business also got a boost. There are no official estimates of the size of retail trade in the country, though such estimates have been made by some institutions. Quoting a NSSO Survey, the International Council for Research on International Economic Relations (ICRIER) study of 2008 places employment in the retail trade at 35.06 million, which constitutes 7.3 per cent of the workforce in the country. On the basis of employment intensity in retail trading, the contribution of the retail sector in the GDP is estimated in the range of 10 to12 per cent. A large number of small and decentralized traders dominate the Indian retail scene. One estimate puts their number at 1.3 Crore. The organized corporate sector has started showing interest in the retail business. With fast growth in the GDP and rising disposable income of the consuming classes, the modern format of retailing (i.e. organized retailing) is attracting domestic and foreign investment. Tourism, including Hotels and Restaurants Tourism is one of the major engines of economic growth in most parts of the world including India. Since tourism does not fall under a single heading in the National Accounts Statistics, its contribution has to be estimated. In 2007-08, the contribution of tourism to the countrys GDP, and to total jobs (direct and indirect) in the country was estimated at 5.92 per cent, and 9.24 per cent, respectively. In absolute numbers, the total number of tourism jobs in the country increased from 38.6 million in 2002-03 to 49.8 million in 2007-08. According to the UN World Tourism Organization, tourism provides 6 per cent to 7 per cent of the worlds total jobs directly and millions more indirectly through the multiplier effect in this sector. Tourism also plays an important role in the countrys

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foreign exchange earnings, as its share in Indias export of services accounted for 13 per cent of the total export of services in 2009-10. Shipping Shipping plays an important role in the economic development of the country, especially in Indias international trade. The Indian shipping industry also plays an important role in the energy security of the country, as energy resources, such as coal, crude oil, and natural gas are mainly transported by ship. Further, during crisis situations, Indian shipping contributes to the uninterrupted supply of essentials, and can serve as second line of defence. Approximately, 95 per cent of the countrys trade by volume, and 68 per cent in terms of value, is being transported by sea. Though India has one of the largest merchant shipping fleets among the developing countries, it was ranked eighteenth in the world in terms of Dead Weight Tonnage (DWT) as on 01 January 2010. Leaving the flags of convenience countries, Indias share is low at 1.17 per cent, while Chinas is around three times higher than Indias. Indian shipping tonnage (capacity) was practically stagnant at around 7 million Gross Tonnage (GT) till the beginning of 2004-05. However, the tonnage tax regime introduced by the Government of India in that year boosted the growth of the Indian fleet as well as its tonnage. The Indian fleet presently stands at 10.16 million GT and 1040 ships (as on 1 January 2011), with the Shipping Corporation of India, a public-sector undertaking, having a major share of 35.3 per cent in Indias shipping tonnage. Of this 9.1 million GT with 340 ships caters to Indias overseas trade and the rest to coastal trade. The gross foreign exchange earnings/ savings of Indian ships during 2007-08 were at a record level of ` 14,589 Crore. Net foreign exchange earnings/ savings of Indian shipping companies, after accounting for financial costs at ` 8,952 Crore were around 61 per cent of gross earnings/ savings. Storage Services The warehousing services sector plays an important role in the economy of the country. Warehousing services are an important cog both in inbound logistics, as raw materials, parts, and stores have to be stocked, inventory control maintained, and materials which do not meet specifications returned to suppliers, as well as outbound logistics as the goods produced have to be stored in different geographical locations before shipping/ dispatch as per demand/ order inflows. In India, the most important component of warehousing is agricultural storage for agri-produce, food grains, fertilizers, manure, etc. Other components include industrial warehousing for industrial goods, import cargo, and excisable cargo; Inland Container Depots (ICDs)/ Container Freight Stations (CFSs) for facilitating import/export trade; and special warehouses for cold and temperature controlled storage. The warehousing sector also provides ancillary services like handling, transportation, pest control, farmer extension schemes, dedicated warehousing at doorsteps, consultancy, and project execution. Real Estate Services The real estate sector includes development of commercial and residential real estates, with participation and involvement of both Government agencies and private developers. The GDP from the real estate sector (including ownership of dwellings) along with business services witnessed a growth of 7.5 per cent (at constant prices) in the year 2009-10. In terms of share, it accounted for India Budget 2011 15

9.3 per cent of the GDP in the year 2009-10. Fiscal incentives for the housing sector provided in successive budgets together with liberal investment and credit policies and reforms brought the housing and real estate sector to the centre stage of the Indian economy. The policy measures include permission for FDI in townships, housing, built-up infrastructure, and construction development projects, including SEZs, under the automatic route, which has attracted foreign investors into this sector. However, FDI is not allowed in real estate business. The National Housing Bank (NHB) established with the objective of promoting housing finance institutions both at local and regional levels has conceptualized the reverse mortgage loan product exclusively for covering house owning senior citizens. It has introduced the Residential Real Estate Price Index (RESIDEX), which is an initiative towards providing the housing finance sector with an index which reflects the trends in the prices of residential properties across the country. IT and ITeS India has gained a brand identity as a knowledge economy due to its IT and ITeS sector. The IT-ITeS industry has four major components: IT services, Business Process Outsourcing (BPO), engineering services and R&D, and software products. The growth in the services sector in India has been led by the IT-ITeS sector which has become a growth engine for the economy, contributing substantially to increases in the GDP, employment, and exports. This sector has improved its contribution to Indias GDP from 4.1 per cent in 2004-05 to 6.1 per cent in 2009-10 and an estimated 6.4 per cent in 201011. The industry has also helped expand tertiary education significantly. The top seven States that account for about 90 per cent of this sectors exports have started six to seven times more colleges than other States. Research and Development As per the Department of Science and Technology estimates, the national investment on R&D activities was ` 37,777.9 Crore in 2007-08. Though India, with a R&D share of 0.8 per cent in the GDP in 2007-08, is ahead of other developing countries like Mexico, Malaysia, and Chile, it lags behind countries like South Korea (3.5 per cent), Russia (1.1 per cent ), China (1.5 per cent), and Brazil (1per cent)

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Government Balance Sheet

Receipts Expenditure

Tax Revenue(net to centre) Non Tax Revenue Recoveries of Loans Other Receipts Borrowings and other Liabilities

On Revenue account(Planned) On Capital account(Planned) On Revenue account(Non-Planned) On Capital account(Non-Planned) 7%

33%

29%

53% 58% 3% 1% 10% 6%

Receipts Revenue Receipts Tax Revenue(net to centre) Non Tax Revenue Capital Receipts Recoveries of Loans Other Receipts Borrowings and other Liabilities

(in ` Crore) 789892 664457 125435

Expenditure Plan Expenditure On Revenue account(Planned) On Capital account(Planned)

(in ` Crore) 441547 363604 77943 816182 733558 82624

467837 Non- Plan Expenditure 15020 On Revenue account(Non-Planned) 40000 On Capital account(Non-Planned) 412817 Capital account Expenditure Revenue account Expenditure 1257729 Total Expenditure 307270 412817

Total Receipts Revenue Deficit Fiscal Deficit

160567 1097162 1257729

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Detailed break-up
Plan assistance to state and UT Non Debt capital receipts service taxes and other taxes customs Income Tax Union Excise duties Non Tax revenues Corporation Taxes 11% 39% 17% 19% 18% 1% 27% 3% 34% 17% 7% 1% 6% Non- plan assistance to state and UT Subsidies Defence Other non plan architecture State's share of taxes and duties Interest payment

Key observations Interest payments: Not a significant change in interest payments which shows that a large portion of budget deficit owing to high accrued interest is still to be taken into account. India is a country with one of the largest budget deficits in the world with 10 per cent of budget deficit of total budget this year (centre plus state). Grants to states and UT: As Infrastructure condition has been a prime impediment in the growth of India, grants have been increased to make the states more self reliant. Police: Post 2008, attacks can observe that there has been a substantial increase in the expense for police force year after year. May be the time has come where government has realized the importance of internal defence as well. Loans and advances to state government: Have remained nearly constant. It is one of the strategies of the government to ensure that the states be funded in the name of Infrastructure and not in the form of mere loans to ensure proper accountability of funds.

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Budget Proposals
Direct tax
Income tax
Rates of tax
Personal tax rates Existing Income (INR) Upto ` 1,60,000 ` 1,60,000 to ` 5,00,000 ` 5,00,001 to ` 8,00,000 Above ` 8,00,000 Nil 10 per cent 20 per cent 30 per cent Proposed Tax rate (per cent) @ Nil 10 per cent 20 per cent 30 per cent

Tax rate (per cent)@

Income (INR) Upto ` 1,80,000

` 1,60,000 to ` 5,00,000 ` 5,00,001 to ` 8,00,000 Above ` 8,00,000

Age bracket to qualify as senior citizen reduced from 65 years to 60 years and new age bracket of individuals over 80 years introduced. While the structure of the slabs remains constant for all other categories, the minimum exemption limits for individuals of ages 60 and above and 80 and above are `2,50,000 and `5,00,000 respectively. Minimum exemption limit for women, however, has been left unchanged at `1,90,000. @ Education cess of 3per cent is leviable on the amount of income-tax, if any. Corporate tax rates Basic rates of corporate tax in the case of both domestic and foreign companies have had no change over the previous fiscal. Although, the existing surcharge of 7.5 per cent on domestic companies will be reduced to 5 per cent. Similarly, the surcharge on non- domestic companies has now been reduced from 2.5 per cent to 2 per cent. To off-set the consequent reduction in effective Minimum Alternate Tax (MAT) rate, MAT has been increased to 18.5 per cent from 18 per cent.

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Corporate tax rates inclusive of surcharge and education cess: Particulars Domestic Company Corporate tax Dividend Distribution Tax Foreign Company Corporate tax Rate (per cent) 32.445 16.2225 42.024

MAT is chargeable at 18.5 per cent (plus applicable surcharge and cess) which keeps its effective tax rate at 20 per cent, in line with the Direct Tax Code. Definition of Charity eased Charitable purpose under the Income tax Act, 1961 (the Act) has been defined to exclude any activity which results in a receipt of more than `10 Lacs. The limit has been increased to `25 Lacs. Infrastructure Debt Funds to be notified In order to augment long-term, low cost funds from abroad for the infrastructure sector, it is proposed to facilitate setting up of dedicated debt funds. These funds, once notified by the Central Government would be exempt from tax. Additionally, any interest received by non-residents from such debt funds would be taxable at the rate of 5 per cent. The entire tax shall be withheld at the time of making interest payments. Special Economic Zones (SEZ) developers and units under the MAT and Dividend Distribution Tax (DDT) Units and developers reporting accounting profits will have to shell out 18.5 per cent (plus applicable surcharge and cess) of their adjusted book-profits to comply with new provisions. However, the change is effective from 1 April 2011. Additionally, in the case of SEZ Developers under the Income-tax Act as well as the SEZ Act for dividends declared, distributed or paid on or after 15 June 2011. Research and Development gets a leg up Weighted deduction to the extent of 175 per cent is allowed for any sum paid to a National Laboratory or a university or an Indian Institute of Technology (IIT) or a specified person for the purpose of an approved scientific research programme. The deduction has been increased to 200 per cent of such payments. Investment linked deduction for specified business Keeping up to the spirit of the Direct Tax Code, 2010 (DTC), placed before the Parliament on 30 August 2010, the bill has increased the scope of deduction available in respect of any expenditure of capital nature (other than on land, goodwill and financial instrument) incurred wholly and

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exclusively, for the purposes of the "specified business", by including the following to the list of specified businesses: Developing and building a housing project under a scheme for affordable housing.
Production of fertiliser in India.

Provided they commence operations on or after 1 April 2011. The amendment will be applicable from 1 April 2012. New Pension Scheme (NPS) For the Employees Contributions made by the employee and the employer were included while computing the total deduction available under Section 80CCD cannot exceed `1 Lakh as per Section 80CCE. Section 80CCE has been amended to exclude contribution made by employer while computing the deduction limit of `1 Lakh. For the Employers Unlike Provident Fund, approved Superannuation Fund or an approved gratuity fund, contributions made by employers to the NPS are not allowed as deduction while computing business profits. The anomaly has been rectified and from 1 April 2012; i.e., such contributions shall be available for deduction to employers while calculating business profits. Long-term infrastructure bonds Deduction to the tune of `20,000 made available to investors over and above Chapter VIA limit of `1 Lakh for fiscal year 2010-11 has been extended to fiscal year 2011-12 as well. Sunset clause for power sector extended As per industry expectations, sunset clause for the power sector available, subject to certain conditions with respect to date of operations, under Section 80-IA of the Act which was to expire on 1 April 2011, has now been extended to 1 April 2012. Expiry of Sun-set clause for Mineral Oil Companies A 7 year profit linked deduction of 100 per cent in available to an undertaking engaged in commercial production of mineral oil subject to certain conditions. The sun-set clause was set to expire on 1 April 2011 has not been extended. In effect Contracts awarded under National Exploration Licensing Policy IX (NELP IX) shall not be eligible for deductions. Transfer Pricing Multinational Corporations engaging in International Transactions with Related Parties have to make sure that the price they charge is at Arms Length when compared to unrelated parties to avoid being classified as Associated Enterprises and attract Transfer Pricing adjustments. The Transfer Pricing Officer (TPO) allows a leeway of +/- 5 per cent while computing the transfer price while comparing the price of an unrelated party transition between entities involved in similar India Budget 2011 21

business activities (aka comparables). The bill seeks to remove the +/- 5 per cent spread, in effect giving ultimate authority to the TPO to determine the Arms Length Price. TPO has also been conferred with the power to conduct searches. Counter measures in case of transactions with notified jurisdictions In sync with the General Anti-Avoidance Regulations (GAAR) included in the DTC, the bill proposes to deem parties entering into a transaction with an entity in a non-cooperating tax jurisdiction. In such a case, the parties shall be deemed to be Associated Enterprises and the transaction be deemed to be an International transaction attracting transfer pricing regulations and documentations will have to be maintained for such entities. Further: No deduction in respect of any payment made to any financial institution shall be allowed. No deduction in respect of any other expenditure or allowance (including depreciation) arising from the transaction with a person located in a notified jurisdictional area shall be allowed If any sum is received from a person located in the notified jurisdictional area, then, the onus is on the entity to satisfactorily explain the source of such money Any payment made to a person located in the notified jurisdictional area shall be liable to deduction of tax at the higher of the rates specified in the relevant provision of the Act or rate or rates in force as per the Double Tax Avoidance Agreement (DTAA) or a rate of 30 per cent.

The amendment shall come into effect from 1 June 2011. Reduction in DDT on dividends received from foreign subsidiaries In order to encourage Indian Companies to bring monies back to India by way of dividends, the bill proposes to reduce the withholding DDT from marginal tax rate of 30 per cent to 15 per cent for a period of one year. The same was tried in United States of America (US) but was not that successful since interest rates in the US are abysmally low. Alternate Minimum Tax (AMT) for Limited Liability Partnerships (LLP) The LLP Act, 2008 introduced a new form of corporate structure where the ease and flexibility of a Partnership were combined with Limited Liability provision of a Company were combined. These have been brought under the AMT bracket. However, the method of computing adjusted bookprofits is different from that in case of MAT. Rationalisation of Tax on Income distributed to unit holders It is proposed to levy additional income-tax at a higher rate of 30 per cent on income distributed by debt funds to a person other than an individual. Reporting activities of Liaison Offices (LO) LOs are not allowed to undertake commercial activity in India and are established to perform basic market research by foreign entities testing waters in India for their products or services. They are established after obtained approval from the Reserve Bank of India and are not required to file an Income tax return. However, in recent past, there have been many Los involved in commercial India Budget 2011 22

activities. To check the trend, it is proposed that regular information from non-residents regarding the activities of their liaison offices in India.

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Indirect tax
Customs
The Basic custom duty rates of 2per cent, 2.5per cent and 3per cent will be unified to a median rate of 2.5per cent Agro/ Food Processing Basic Customs Duty Reduced from 5per cent to 2.5per cent Reduced from 7.5per cent to 2.5per cent Reduced from 7.5per cent to 5per cent Reduced from 30per cent to 10per cent Reduced from 100per cent to 30per cent Reduced from 30per cent to 10per cent Full exemption Special Additional Duty of Customs (SAD) Full Exemption Full Exemption CVD Full Exemption

Basic agricultural machinery Machinery required to produce the above mentioned Micro Irrigation equipment Raw Pistachios Sun dried dark seedless raisins Cranberry products De-Oiled rice bran oil cake

Automobiles Specific Parts of Hybrid Vehicles Battery, Chargers, Electric Motors and Controllers Import of spare battery packs Special Economic Zones Clearances from SEZ to DTA Plastic manufactured in SEZ units

Basic Customs Duty

Countervailing Duty (CVD)

Full Exemption Full Exemption SAD Full Exemption

Full Exemption Full Exemption VAT

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Textiles Raw Silk Cotton Waste

Basic Customs Duty Reduced from 30per cent to 5per cent Full exemption

Poly Tetra Madelyn Ether Glycol and Diphenylmethane 4, 4-diisocynate Acrylonitrile Sodium Polyacrylate Caprolactum Nylon chips, fiber & yarn Rayon grade wood pulp Capital Goods/Infrastructure Water reservoirs and pumping stations Tunnelling equipment form highway development projects Jewellery Machinery Cash Dispensers Mailroom equipment for newspaper establishments Specific High Voltage Equipment Bio-asphalt sealer, millings remover, asphalt remover Environmentally Friendly HEMS LED Solar Lamps

Reduced from 7.5per cent to 5per cent Reduced from 5per cent to 2.5per cent Reduced from 7.5per cent to 5per cent Reduced from 10per cent to 7.5per cent Reduced from 10per cent to 7.5per cent Reduced from 5per cent to 2.5per cent Basic Customs Duty Full exemption CVD SAD

Full exemption Reduced from 7.5per cent to 5per cent Full exemption 5per cent 5per cent Full exemption Basic Customs Duty Reduced from 10per cent to 5per cent

Full exemption

5per cent 5per cent

Full exemption Full exemption

CVD 5per cent

SAD Full exemption

Toughened glass and silver paste imported or produced for Solar cell manufacturing

Full exemption

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Health Sector Endovascular stents Specified raw material for the manufacture of syringes, needles, catheters, cannulae P&P medicines imported for retail sale Lactose for use in the manufacture of homoeopathic medicines

Basic Customs Duty Full exemption

CVD

SAD

5per cent

5per cent Full Exemption

Reduced from 25per cent to 10 per cent

Electronics Hardware Inkjet and laser-jet printers imported for manufacture of such printers Components required for the manufacture of PC connectivity cable and sub-parts of parts & components of battery charger, hands-free head phones and PC connectivity cable of mobile handsets including cellular phones. Components and accessories for manufacture of mobile handsets Parts for manufacture of DVD writers Aircrafts Aircrafts * Exemption from education, secondary and higher education cess Export Goods for manufacture of leather Fin fish feed Vannamei broodstock Bamboo used for manufacture of agarbattis Paper Waste Paper

Basic Customs Duty

CVD

SAD

5per cent

Full exemption Full exemption 5per cent Basic Customs Duty 2.5 per cent CVD Full exemption SAD Full exemption

Basic Customs Duty Full exemption Full exemption Full exemption Full exemption Basic Customers Duty Full exemption

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Metals Stainless steel scrap Ferro-nickel Statutory rate of export duty on iron ores Iron ore pellets Copper dross, copper residues, copper oxide mill scale, brass dross and zinc ash Vanadium pentoxide and vanadium sludge Gold and silver contained in the copper concentrate

Basic Customs Duty CVD Full exemption reduced from 5 per cent to 2.5 per cent Increased from 20 per cent to 30per cent Full exemption

SAD

Full exemption Reduced from 7.5per cent to 2.5per cent Full exemption

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Other regulatory changes

Indias exchange control system comes under the purview of the Reserve Bank of India (RBI) and is regulated through the FEMA. FEMA is a dynamic act, and its provisions are regularly updated vide notifications/ circulars issued by the RBI to keep up with the volatile foreign exchange markets. Indian Rupee is fully convertible for current account transactions, subject to a negative list of transactions that require prior approval. India is yet to achieve full capital account convertibility.

Proposed Changes To enhance the flow of funds to the infrastructure sector, the FII limit for investment in corporate bonds, with residual maturity of over five years issued by companies in infrastructure sector, is being raised by an additional limit of US Dollar 20 billion taking the limit to US Dollar 25 billion. This will raise the total limit available to the FIIs for investment in corporate bonds to US Dollar 40 billion. Since most of the infrastructure companies are organised in the form of SPVs, FIIs would also be permitted to invest in unlisted bonds with a minimum lock-in period of three years. However, the FIIs will be allowed to trade amongst themselves during the lock-in period.

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Estimated Outlay
Subsidies Nutrient Based Subsidy (NBS) has improved the availability of fertiliser; Government actively considering extension of the NBS regime to cover urea. Government to move towards direct transfer of cash subsidy to people living below poverty line in a phased manner for better delivery of kerosene, LPG and fertilisers. Task force set up to work out the modalities for the proposed system

Public Sector Bank Capitalisation ` 6,000 Crore to be provided during 2011-12 to enable public sector banks to maintain a minimum of Tier I CRAR of 8 per cent

Recapitalisation of Regional Rural Banks ` 500 Crore to be provided to enable Regional Rural Banks to maintain a CRAR of at least 9 per cent as on 31 March 2012.

Micro Finance Institutions India Microfinance Equity Fund of ` 100 Crore to be created with SIDBI. Government considering putting in place appropriate regulatory framework to protect the interest of small borrowers. Womens SHGs Development Fund to be created with a corpus of ` 500 Crore.

Rural Infrastructure Development Fund Corpus of RIDF XVII to be raised from ` 16,000 Crore to ` 18,000 Crore.

Micro Small and Medium Enterprises ` 5,000 Crore to be provided to SIDBI for refinancing incremental lending by banks to these enterprises. ` 3,000 Crore to be provided to NABARD to provide support to handloom weaver co-operative societies which have become financially unviable due to non-repayment of debt by handloom weavers facing economic stress. Public sector banks to achieve a target of 15 per cent as outstanding loans to minority communities under priority sector lending at the earliest.

Housing Sector Finance Existing scheme of interest subvention of 1 per cent on housing loan further liberalised. Existing housing loan limit enhanced to ` 25 Lakh for dwelling units under priority sector lending. Provision under Rural Housing Fund enhanced to ` 3,000 Crore. To enhance credit worthiness of economically weaker sections and LIG households, a Mortgage Risk Guarantee Fund to be created under Rajiv Awas Yojana. 29

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Central Electronic Registry to prevent frauds involving multiple lending on the same immovable property to become operational by 31 March 2011.

Agriculture Allocation under Rashtriya Krishi Vikas Yojana (RKVY) increased from ` 6,755 Crore to ` 7,860 Crore

Bringing Green Revolution to Eastern Region To improve rice based cropping system in this region, allocation of ` 400 Crore has been made.

Integrated Development of 60, 000 pulses villages in rain fed areas Allocation of ` 300 Crore to promote 60,000 pulses villages in rain fed areas.

Promotion of Oil Palm Allocation of ` 300 Crore to bring 60,000 hectares under oil palm plantations. Initiative to yield about 3 Lakh Metric tonnes of palm oil annually in five years.

Initiative on Vegetable Clusters Allocation of ` 300 Crore for implementation of vegetable initiative to provide quality vegetable at competitive prices.

Nutri-cereals Allocation of ` 300 Crore to promote higher production of Bajra, Jowar, Ragi and other millets, which are highly nutritious and have several medicinal properties.

National Mission for Protein Supplement Allocation of ` 300 Crore to promote animal based protein production through livestock development, dairy farming, piggery, goat rearing and fisheries.

Accelerated Fodder Development Programme Allocation of ` 300 Crore for Accelerated Fodder Development Programme to benefit farmers in 25,000 villages.

National Mission for Sustainable Agriculture Government to promote organic farming methods, combining modern technology with traditional farming practices.

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Agriculture Credit Credit flow for farmers rose from ` 3,75,000 Crore to ` 4,75,000 Crore in 2011-12. Interest subvention proposed to be enhanced from 2 per cent to 3 per cent for providing short-term crop loans to farmers who repay their crop loan on time. In view of enhanced target for flow of agriculture credit, capital base of NABARD to be strengthened by ` 3,000 Crore in phased manner. ` 10,000 Crore to be contributed to NABARDs Short-term Rural Credit fund for 2011-12.

Infrastructure and Industry Allocation of ` 2,14,000 Crore 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. Government to come up with a comprehensive policy for further developing PPP projects. IIFCL to achieve cumulative disbursement target of ` 20,000 Crore by March 31, 2011 and ` 25,000 Crore by 31 March 2012. Under take out financing scheme, seven projects sanctioned with debt of ` 1,500 Crore. Another ` 5,000 Crore will be sanctioned during 2011-12.To boost infrastructure development, tax free bonds of ` 30,000

Bharat Nirman Allocation for Bharat Nirman programme proposed to be increased by ` 10,000 Crore from the current year to ` 58,000 Crore in 2011-12. Plan to provide Rural Broadband Connectivity to all 2,50,000 Panchayats in the country in three years.

MGNREGA In pursuance of last years budget announcement to provide a real wage of ` 100 per day, the Government has decided to index the wage rates notified under the MGNREGA to the Consumer Price Index for Agricultural Labour. The enhanced wage rates have been notified by the Ministry of Rural Development on 14 January 2011. From 1st April, 2011, remuneration of Anganwadi workers increased from ` 1,500 per month to ` 3,000 per month and for Anganwadi helpers from ` 750 per month to ` 1,500 per month.

Scheduled Castes and Tribal Sub-plan Specific allocation earmarked towards Schedule Castes Sub-plan and Tribal Sub-plan in the Budget. Allocation for primitive Tribal groups increased from ` 185 Crore in 2010-11 to ` 244 Crore in 2011-12.

Education Allocation for education increased by 24 per cent over current year. `21,000 Crore allocated, which is 40 per cent higher than Budget for 2010-11. Pre-matric scholarship scheme to be introduced for needy SC/ST students studying in classes IX and X. 31

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Skill Development Additional ` 500 Crore proposed to be provided for National Skill Development Fund during the next year. An international award with prize money of ` 1 Crore being instituted for promoting values of universal brotherhood as part of National celebrations of 150th Birth Anniversary of Gurudev Rabindranath Tagore.

Health Plan allocations for health stepped-up by 20 per cent. Scope of Rashtriya Swasthya Bima Yojana to be expanded to widen the coverage.

Environment and Climate Change Forests ` 200 Crore proposed to be allocated for Green India Mission from National Clean Energy Fund.

Environmental Management ` 200 Crore proposed to be allocated for launching Environmental Remediation Programmes from National Clean Energy Fund.

Cleaning of Rivers and Lakes Special allocation of ` 200 Crore proposed to be provided for clean-up of some more important lakes and rivers other than Ganga.

Some Other Initiatives To boost development in North Eastern Region and Special Category States, allocation for Special Assistance doubled. ` 8,000 Crore provided in current year for development needs of Jammu and Kashmir. Allocation made in 2011-12 to meet the infrastructure needs for Ladakh (` 100 Crore) and Jammu region (` 150 Crore). Allocation under Backward Regions Grant Fund increased by over 35 per cent. Funds allocated under Integrated Action Plan (IAP) for addressing problems related to Left Wing extremism affected districts. 60 selected Tribal and backward districts provided with 100 per cent block grant of ` 25 Crore and ` 30 Crore per district during 2010-11 and 2011-12 respectively. A lump-sum ex-gratia compensation of ` 9 Lakh for 100 per cent disability to be granted for personnel of Defence and Para Military forces discharged from service on medical ground on account of disability attributable to government service. Provision of ` 1,64,415 Crore, including ` 69,199 Crore for capital expenditure to be made for Defence Services in 2011-12. To build judicial infrastructure, plan provision for Department of Justice increased by three fold to ` 1,000 Crore.

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Improving Governance UID Mission From 1 October 2011 10 Lakh Aadhaar numbers will be generated per day.

IT Initiatives Various IT initiatives taken for efficient tax administration. These include e-filing and epayment of taxes, adoption of Sevottam concept by CBEC and CBDT, web based facility for tax payers to track the resolution of refunds and credit for pre-paid taxes and augmentation of processing capacity. Under Mission mode projects, funds released to 31 projects received from States/ UTs for computerisation of Commercial taxes. This will allow States to align with roll out of GST. Bill to amend the Indian Stamp Act proposed to be introduced shortly. A new scheme with an outlay of ` 300 Crore to be launched to provide assistance to States to modernise their stamp and registration administration and roll out e-stamping in all the districts in the next three years A new simplified form Sugam to be introduced to reduce the compliance burden of small tax payers falling within presumptive taxation. Three more benches of Settlement Commission to be set up to fast track the disposal of cases. Steps initiated to reduce litigation and focus attention on high revenue cases

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Quote Unquote
Views of the Indian Prime Minister Manmohan Singh during an address to the Nation on Union budget 2011-2012.

The other important topic of discussion which has not been into light in previous budgets has been the issue of black money. Prime minister himself discussed his concerns over growing umbrella of black money and there have been serious implications owing to it. One of the other important parameter that was highlighted in the budget is the delivery services problem. Apart from infrastructural constraints, our system has been lacking for ages in a perfect delivery model. The quality factor is major concern with the growing quantity. The budgeting has been more focused on retaining the growth with decreasing the fiscal deficit issue and growing internal issues like poverty and corruption which is pulling the strings of a real growth of India as a nation. Owing to the same focus, the government borrowings from market is lower. The project borrowing was 4lakh thousand but the borrowing has been 3.4 lakh thousand, the condition which has brought the market in a bullish mode. PM also spoke on the concerns of corruption. India is facing a condition of chronic capitalism owing to high rate of corruption. This has been one of the major concerns communicated by PM but there are great ways ahead to curb communication at every end, removing the intermediatory costs. There are huge expectations from Nandan Nilekanis UID project for cash transfers. But for the same we need connectivity and technology adoption. Ruchir Sharma Managing Director Investment Management Morgan Stanley. The higher revenues and not the demand has been the cause of higher inflation. India is facing the budget deficit of 10% deficit of GDP and curbing this deficit shall be the major focus of India The sharp increase in inflation is also not due to the sudden increase demand but it is surge in global commodity prices - like oil food, global food prices. It can be very well observed that the highest in the past few months There has been an observation that despite of may or may not be some imports, there is a correlation between global food prices and Indian food prices . India as a growing economy and looking forward for a big leap in infrastructure has a terrible independence of India on oil prices. If we see that the market dump due to recent issues in Middle East and especially the oil champions, the situation doesnt really correlate. The oil prices were already $100 per barrel before Middle East issues.Presently the oil price per barrel is $110; the increase is not actually big to impact the market. India Budget 2011 34

Abundant liquidity has been a major cause of price rise and not the demand. The interest rates were low by banks after recession and thus there was a lot of money in the market. One of the immediate move the Indian economy and world economy has to is that the central banks around the world shall be forced to remove liquidity. Removing liquidity may lower oil prices, but would have global hit on economy growth and world growth. Thus living with aggravated oil prices is something we Indian are supposed to learn. An important observation has been that oil demand increase 3% and oil prices rose dramatically, though another important component that correlates directly to the economic growth e.g copper metal, the prices grew by 100% all because of not demand and liquidity. Commenting about the sudden spike in the Indian financial markets is that globalization has emerged as an important parameter for judging the performance of market, the correlation coefficient showing up close to 0.8.There has been a 10 % decrease in stock market because globalization decreased in recent times. So to learn about the possible patterns of financial markets, one need to watch stock markets of emerging economies and Indian stock markets are significantly correlated to emerging markets stock markets. Massive monitory stimulus (second one) from US has been a major cause to inflation. Vallabh Bhansali Chairman, Enam Securities Pvt. Ltd. There has not been much talk on the disinvestment this year as well when the expectations were different seeing the growing strand of India. The rule of disinvestment has been the same with 51% stake of government in public companies. The cement prices an important indicator of economy and growth as India is still the cadre of developing nations. So the cement prices reflect directly the economy pace. Commenting on the stimulus that was flown in market by Indian government, will the stimulus be rolled back to curb the excess liquidity in marketing resulting in Inflation? The answer lies in the results after the state budget which is round the corner.

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19, North Mada Steet, Srinagar Colony, Saidapet, Chennai - 600015

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