Budget Highlights: Indian Union Budget 2012-13, an opportunity missed

Budget Proposals

• Fiscal Deficit pegged at 5.1%
• Net market borrowings of Rs4.8lac crs
• Divestment target set at Rs300bn
• Raise agricultural credit target to Rs5,75,000crs
• Infusion of close to Rs160bn to capitalise nationalised banks
• 200bps increase in service tax and excise duty from 10% to 12%
• Issue of Tax Free Bonds of Rs600bn for financing infrastructure projects

Opportunity Missed

• Absence of roadmap on implementing DTC and GST
• Fuel Subsidy at Rs450bn seems to assume an impending oil price hike
• Lacks concrete measures to kickstart the investment cycle
• Diesel Decentralisation not taken up in the budget
• Minor Rejig of personal taxation slabs unlikely to put more money in the hands of the consumer
• Higher taxation likely to fuel inflation

Budget Provisions

20% reduction in STT on delivery transactions

New Equity Scheme which allows 50% deduction for retail investors earning less than Rs10lacs annually and investing Rs50,000 with a lock-in period of 3 years.

Two way fungibility of IDR permitted

Allowing QFI to access the Indian Corporate Bond Markets

Tax free bonds doubled to Rs600 bn

Allocation of Rs200 bn for rural infrastructure development fund

Allocation of Rs240bn for rural roads planned for FY 13

NHDP allocation increased by 14% to Rs254bn in FY13 and award of projects worth 8800km in FY13

ECB loan to part finance capex and withholding tax on ECB is reduced from 20% to 5%

Irrigation projects now qualify for viability funding

Extension of 80IA tax benefits

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