Budget Analysis 2009 - 2010

INCOME TAX Individual Positive Standard Deduction Existing Proposed Individual Up to Rs.1,50,000 Up to Rs.1,60,000 Individual (Woman) Up to Rs.1,80,000 Up to Rs.1,90,000 Senior Citizens Up to Rs.2,25,000 Up to Rs.2,40,000 To remove Surcharge of 10% on Personal Income Tax. Section 80DD of IT to be hiked to Rs.1 lakh. New Pension System Trust not to attract Income Tax, STT & DDT. Corporate Neutral No change in Corporate Tax TAX - OTHERS Positive CTT to be abolished FBT withdrawn CENVAT reduced GST to be introduced from April 1, 2010 MAT Negative MAT rate to be increased to 15% v/s 10% of book profit. Carry forward tax credit on MAT to 10 years v/s 7 years. AGRICULTURE Positive Target for agriculture credit flow set at Rs.3,25,000 crore for the year 2009-10 v/s Rs.2,87,000 crore in 2008-09. Interest subvention scheme for short term crop loans up to Rs.3 lakh per farmer at the interest rate of 7% per annum to be continued. Additional subvention of 1% to be paid from this year, as incentive to those farmers who repay short term crop loans on schedule. Time given to the farmers having more than two hectares of land to pay 75% of their over-dues under Debt Waiver and Debt Relief Scheme extended from June 30, 2009 to December 31, 2009. Allocation under Accelerated Irrigation Benefit Programme (AIBP) increased by 75% over budget estimate (B.E.) of 2008-09. Allocation under Rashtriya Krishi Vikas Yojana (RKVY) stepped up by 30% in B.E. 2009-10 over B.E. 2008-09. Subsidy regime for fertilizers to change to nutrient- based rather than price-based. Direct transfer of subsidy to farmers being worked out. EDUCATION Positive The overall Plan budget for higher education is to be increased by Rs.2,000 crore over interim B.E. 2009-10. Full interest subsidy for students taking courses in approved institutions. Provision for the scheme ‘Mission in Education through ICT’ substantially increased to Rs.900 crore and the provision for setting up and up-gradation of Polytechnics under the Skill Development Mission enhanced to Rs.495 crore. Rs.827 crore allocated for opening one Central University in each uncovered State. Rs.2,113 crore allocated for IITs and NITs which includes a provision of Rs.450 crore for new IITs and NITs. Rs.50 crore allocated for Punjab University, Chandigarh. Plan allocation for Chandigarh to be suitably enhanced during the year to provide better infrastructure to the people of Chandigarh. INDUSTRIES Automobile and Ancillaries Positive Specific component of excise duty applicable to large cars/utility vehicles of engine capacity 2,000 cc and above to be reduced from Rs.20,000 per vehicle to Rs.15,000 per vehicle. Excise duty on petrol driven trucks/lorries to be reduced from 20% to 8%. Excise duty on chassis of such trucks/lorries to be reduced from ‘20% + Rs.10000’ to ‘8% + Rs.10000’. Banking & Financial Companies Negative Scheduled commercial banks allowed to set up off-site ATMs without prior approval subject to reporting. A sub-committee of State Level Bankers Committee (SLBC) to identify and formulate an action plan for providing banking facilities in under-banked/unbanked areas in the next three years. Rs.100 crore set aside as one-time grant in-aid to ensure provision of at least one centre/Point of Sales (POS) for banking services in each of the unbanked blocks. Exemption from service tax (leviable under Banking and other financial services or under Foreign exchange broking service) being provided to inter-bank purchase and sale of foreign currency between scheduled banks. Loans at a subsidized interest rate of 6% for farmers who pay their dues in time, which is 1% less than what others would get. Time given to the farmers having more than two hectares of land to pay 75% of their over-dues under Debt Waiver and Debt Relief Scheme extended from June 30, 2009 to December 31, 2009. Full interest subsidy for students taking courses in approved institutions. No change in FDI limit in insurance Consumer Durable Positive List of specified raw materials/inputs imported by manufacturer-exporters of sports goods which are exempt from customs duty, subject to specified conditions, to be expanded by including five additional items. Fertilizer Positive Direct transfer of subsidy to farmers being worked out that will unshackle fertilizer companies. Subsidy regime for fertilizers to change to nutrient- based rather than price-based. Excise duty on naphtha to be reduced to 14%. FMCG Negative Investment-linked tax benefits for gas pipelines, cold chains Concessional customs duty of 5% on specified machinery for tea, plantations to be reintroduced for one year, up-to 06.07.2010. Gems & Jewellery Neutral Excise duty on branded articles of jewellery to be reduced from 2% to Nil. Tax holiday for exporters extended until 2011. Custom duty on Gold & Silver increased. Healthcare Positive Allocation under National Rural Health Mission (NRHM) increased by Rs.2,057 crore over Interim B.E. 2009-10 of Rs.12,070 crore. All BPL families to be covered under Rashtriya Swasthya Bima Yojana (RSBY). Allocation under RSBY increased by 40% over previous allocation to Rs.350 crore in B.E. 2009-10. Customs duty on 10 specified life saving drugs/vaccine and their bulk drugs to be reduced from 10% to 5% with Nil CVD (by way of excise duty exemption). Customs duty on specified heart devices, namely artificial heart and PDA/ASD occlusion device, to be reduced from 7.5% to 5% with Nil CVD (by way of excise duty exemption). Adjustment assistance scheme to provide enhanced Export Credit and Guarantee Corporation (ECGC) cover at 95% to badly hit sectors extended upto March 2010. Interest subvention of 2% on pre-shipment credit for seven employment oriented export sectors extended beyond the current deadline of September 30, 2009 to March 31, 2010. Tax holiday for exporters extended until 2011. Infrastructure & Engineering Positive 1 lakh dwelling units for paramilitary forces personnel to be constructed IIFCL (India Infrastructure Finance Company Ltd.) to evolve a Takeout Financing Scheme in consultation with banks to facilitate incremental lending to infrastructure sector. IIFCL to refinance 60% of commercial bank loans for PPP projects in critical sectors over the next 15 to 18 months. IIFCL and Banks are now in a position to support projects involving total investment of Rs.1,00,000 crore. Allocation to National Highways Authority of India (NHAI) for the National Highway Development Programme (NHDP) increased by 23% over B.E. 2008-09. Allocation for Railways increased from Rs.10,800 crore in Interim B.E. 2009-10 to Rs.15,800 crore in B.E. 2009-10. Allocation for Bharat Nirman increased by 45% in 2009-10 over B.E. 2008-09. Allocations under Pradhan Mantri Gram Sadak Yojana (PMGSY) increased by 59% over B.E. 2008-09 to Rs.12,000 crore in B.E. 2009-10. Under Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), allocation increased by 27% to Rs.7,000 crore. Allocation under Indira Awaas Yojana (IAY) increased by 63% to Rs.8,800 crore in B.E. 2009-10. Allocation of Rs.2,000 crore made for Rural Housing Fund (RHF) in National Housing Bank (NHB) to boost the resource base of NHB for refinance operations in rural housing sector. Full exemption from excise duty to be provided on goods of Chapter 68 of Central Excise Tariff manufactured at the site of construction for use in construction work at such site. IT/ITES Positive Custom Duty on LCD panels cut from 10% to 5% Tax holiday for exporters extended until 2011. Sunset clause for Software Technology Parks of India extended by 1 year FBT abolished Media & Entertainment Negative Customs duty of 5% to be imposed on Set Top Box for television broadcasting. Customs duty on LCD Panels for manufacture of LCD televisions to be reduced from 10% to 5%. Oil & Gas Positive Investment-linked tax benefits for gas pipelines, cold chains SEC 80IB benefit extended to natural gas. Blueprint to be developed for long distance gas pipelines leading to a National Gas Grid to facilitate transportation of gas across the length and breadth of the country. Outlay for Assam Gas Cracker Project stepped up suitably in B.E. 2009-10. Government to set up an expert group to advice on a viable and sustainable system of pricing petroleum products. Duty paid High Speed Diesel blended with up-to 20% bio-diesel to be fully exempted from excise duties. Power Positive Cuts customs duty on wind power equipment by 2.5%. Allocation under Accelerated Power Development and Reform Programme (APDRP) increased by 160% to Rs.2,080 crore in B.E. 2009-10 over B.E. 2008-09. Customs duty on permanent magnets for PM synchronous generator above 500 KW used in wind operated electricity generators to be reduced from 7.5% to 5%. Excise duty on naphtha to be reduced to 14%. PSU Neutral While retaining at least 51% Government equity in Public Sector Undertakings, people’s participation in disinvestment programmes to be encouraged. Public Sector Enterprises such as banks and insurance companies to remain in public sector and will be given full support including capital infusion to grow and remain competitive. Real Estate Negative Interest subsidy for homes for loans up-to Rs 1 lakh Telecommunication Neutral Full exemption from 4% special CVD on parts for manufacture of mobile phones and accessories to be reintroduced for one year. Textile Positive Tax holiday for exporters extended until 2011. Adjustment assistance scheme to provide enhanced Export Credit and Guarantee Corporation (ECGC) cover at 95% to badly hit sectors extended up-to March 2010. Interest subvention of 2% on pre-shipment credit for seven employment oriented export sectors extended beyond the current deadline of September 30, 2009 to March 31, 2010. Customs duty on cotton waste to be reduced from 15% to 10%. Customs duty on wool waste to be reduced from 15% to 10%. Excise duty on manmade fibre and yarn to be increased from 4% to 8%. The scheme of optional excise duty of 4% for pure cotton to be restored. Excise duty for man-made and natural fibres other than pure cotton, beyond the fibre and yarn stage, to be increased from 4% to 8% under the existing optional scheme. MARKET REACTION Indices Open At 1:00 PM Change (%) Nifty 4,429.60 4,245.25 (4.16) Sensex 14,962.12 14,324.55 (4.26) BSE Midcap Index 5,211.32 5,057.77 (2.95) BSE Small Cap Index 5,857.54 5,710.23 (2.51) BSE Bank Ex Index 8,540.83 7,972.96 (6.65) BSE Power Index 2,953.98 2,815.74 (4.68) BSE PSU Index 8,288.56 7,903.25 (4.65) BSE Reality Index 3,460.62 3,300.78 (4.62) BSE Metal Index 11,243.54 10,762.61 (4.28) BSE Capital Goods Sector Index 13,142.48 12,585.89 (4.24) BSE Oil & Gas Index 9,664.71 9,308.71 (3.68) BSE Auto Index 4,627.36 4,479.99 (3.18) BSE TECk Index 2,656.95 2,578.42 (2.96) BSE IT Sector Index 3,346.92 3,266.68 (2.40) BSE Health Care Sector Index 3,641.36 3,589.95 (1.41) BSE FMCG Sector Index 2,296.37 2,303.94 0.33 BSE Consumer Durables Sector index 2,992.63 3,016.41 0.79

Markets reacted negatively , plunged more than 4% at around 1 PM (IST)

Domestic markets were trading under huge selling pressure (at around 1 PM) as investors were disappointed after Union Budget 2009-2010 did not contain any major reforms such as a roadmap to increase FDI in infrastructure & insurance, decontrol fuel prices and any clear roadmap on divestment. A surge in fiscal deficit target to 6.8% added to the market's woes. Sensex slipped below the 14,400 mark and Nifty fell below 4,250 mark. The significant selling pressure witnessed among Banking, Power, PSU, Realty and Metal stocks. The broader market indices were also under pressure as both BSE Midcap and BSE Smallcap indices traded with a loss of more than 2% each. However, markets opened higher today ahead of the Union Budget. Sensex crossed the 15,000 mark and Nifty jumped above 4,450 mark in the early trade. All the sectoral indices were trading in green. With the budget focusing on the common man rather than the economy as a whole, Sensex touched lowest level of 14,147.80 and Nifty fall to as low as 4, 195.40 level (at around 1 PM). Shares of companies that run insurance business fell after the Union Budget 2009-2010 did not include any measures to hike foreign direct investment limit in the insurance sector. Reliance Capital ,ICICI Bank, HDFC, Bajaj Finserv, SBI, Aditya Birla Nuvo and Max India fell by between 3-7%. PSU stocks fell as government bypassed announcement of divestment in public sector companies. Central bank of India, Hindustan Copper, MTNL, State Trading Corporation, Bharat Heavy Electricals, Power Finance Corporation fell by between 2-5%. Some of the Positives from the budget are: GST will be implemented from April 1, 2010 FBT abolished CTT removed While, disappointments are: Divestment in Insurance and Banks Fuel policy FDI in Infrastructure