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CONTENTS

1. Budget At A Glance 2

2. A Macroeconomic Perspective 3 - 6

3. Sectoral Impact 7 - 57

4. Change In Central Plan Outlay 58 - 60

5. Receipts 61 - 62

6. Expenditure 63 - 65

7. Key Economic Indicators(Absolute Values) 66

8. Key Economic Indicators(Percentage Change Over Previous Year) 67

9. Glossary 68 - 71

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BUDGET AT A GLANCE

( ` bn) 2011-12 2012-13 Revised

EstimatesBudget

Estimates

1) Revenue Receipts 7,669.89 9,356.85

2) Tax Revenue (net to centre) 6,422.52 7,710.713) Non-Tax Revenue 1,247.37 1,646.14

4) Capital Receipts (5+6+7) $ 5,517.30 5,552.415) Recoveries of loans 142.58 116.506) Other receipts 154.93 300.007) Borrowings and other

liabilities *5,219.80 5,135.90

8) Total Receipts (1+4)$

13,187.20 14,909.25

9) Non-Plan Expenditure 8,921.16 9,699.0010) On Revenue Account

of which,8,157.40 8,655.96

11) Interest Payments 2,756.18 3,197.5912) On Capital Account 763.76 1,043.04

13) Plan Expenditure 4,266.04 5,210.2514) On Revenue Account 3,462.01 4,205.1315) On Capital Account 804.04 1,005.12

16) Total Expenditure (9+13) 13,187.20 14,909.2517) Revenue Expenditure

(10+14)11,619.40 12,861.09

18) Of Which, Grants for

creation of Capital Assets

1,375.05 1,646.72

19) Capital Expenditure(12+15)

1,567.80 2,048.16

20) Revenue De cit (17-1) 3,949.51 3,504.24% of GDP (4.4) (3.4)

21) Effective Revenue De cit(20-18)

2,574.46 1,857.52

% of GDP (2.9) (1.8)22) Fiscal De cit {16-(1+5+6)} 5,219.80 5,135.90

% of GDP (5.9) (5.1)23) Primary De cit (22-11) 2,463.62 1,938.31

% of GDP (2.8) (1.9)$ Excluding receipts under Market Stabilisation Scheme.* Includes draw-down of Cash Balance.

Note: 1) GDP for BE 2012-2013 has been projected at ` bn 101599 assuming

14% growth over the Advance Estimates of 2011-2012 ( ` bn 89122 crore)released by CSO.2) Individual items in this document may not sum up to the totals due torounding off.

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A MACROECONOMICPERSPECTIVE

The Union Budget for FY13 is presented ata time when the domestic economy is in themidst of a slowdown with the downturn in the

global economic environment further impedingthe growth momentum. Measures for boostingdemand, especially on the investment frontthrough progressive policy action and at thesame time laying a credible scal consolidationroad map were widely anticipated in this budget.

However, the announcements in the UnionBudget for FY13 could best be described asworkmanlike in nature. Acknowledging thatthe Government has limited scal space tomanoeuvre, the realistically high scal de cittarget of 5.1% could ensure that going ahead theeconomic agents would set their expectations ongrowth on the right path.

The Union Budget FY13, though lacks major big bang announcements, it has made an attemptto manage the Government nances in a much

prudent manner. Hike in the excise duties andservice tax was required to garner more revenue.The increase in the tax limits though marginal,would ensure some savings to the middle incomegroup which constitute the majority of the

population, thereby boosting demand. Further,

the intention to implement the Advance PricingAgreement which would signi cantly bring downtax litigation and provide tax certainty to foreigninvestors is a positive development.

On the expenditure front, Governments decision

to stay away from allocating a major proportionof funds towards the social sector or newannouncements is a welcome move as it would lead

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to divergence of funds towards other productiveareas. The Government has also emphasised theneed to accelerate infrastructure development.Allowing irrigation terminal markets, commoninfrastructure in agriculture markets, soil testinglaboratories and capital investment in fertiliser

sector, Oil and Gas/LNG storage facilitiesand oil and gas pipelines, xed network for telecommunication and telecommunicationtowers eligible for Viability Gap Funding (VGF)for support to Public Private Participation (PPP)

projects would enhance nancing. However, it

would be the effective realization of the schemewhich would boost infrastructure development asduring the previous budget announcements lack of implementation had created bottlenecks.

The focus of the Government on capital market

is a positive given it would accelerate capitalgeneration and funding requirement for the Indiancorporate thereby boosting investment. Besides,allowing External Commercial Borrowings(ECBs) to part nance Rupee debt of existing

power projects, for capital expenditure on the

maintenance and operations of toll systemsfor roads and highways and also for workingcapital requirements of the airline industry iscommendable as it would ensure securing of funds by these sectors which are facing nancingcrunch.

The biggest disappointment in the budget wasthat the Government did not lay down a strongreform agenda. While it was highly expected thatspeci c progressive policy action would be takenregarding subsidies, FDI, labour laws or landacquisitions, the budget failed to deliver on thatfront. Moreover, the Government also did notset out effective timelines for implementation

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of the much anticipated Direct Tax Code (DTC)& Goods & Services Tax (GST). Nonetheless,Government's efforts are expected to continueoutside the Budget which is required to boost thegrowth momentum.

Fiscal Arithmetic for FY13

The scal year FY13 is expected to witness aslow pace of recovery in growth, thus entailinglower revenue generation and exacting higher expenditure from the Government. For FY13,total expenditure is budgeted to increase by 13.1%to ` 14,909.25 bn as compared to the revisedestimates (RE) of ` 13,187.20 bn for FY12. Asin the last budget, the plan expenditure receiveda major boost with an allocation of ` 5,210.25 bn,

an increase of 22.1% over FY12 (RE).However,unlike the previous budget where the non-planexpenditure was budgeted to decline, this timearound it is budgeted to increase by 8.7% to ` 9,699 bn. The subsidy burden during FY13though budgeted to decrease by 12.2% during

FY13 from the revised estimates of FY12; it is budgeted to increase by over 32.0% over the budget estimate of FY12. The Government aimsto restrict the expenditure on Central subsidies tounder 2% of GDP in FY13 through better targetingand leakage proof delivery of the subsidies.

For FY13, the Gross Tax Receipts are estimatedto increase by 15.6% over FY12 (BE) and by19.5% over the FY12 (RE) given the moderationin the economic growth. On the direct tax front,corporate pro tability is expected to remain

subdued; revenue from corporate tax is budgetedto increase only by 13.9% (RE). In spite of broadening of the income tax slabs, the personal

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income tax collection is budgeted to increase by13.9% in FY13 over FY12 (RE). The 2% increasein excise duties from 8% to 10% is expected tolead to larger collection of indirect taxes; revenuefrom Union excise duty is budgeted to increase

by 29.0%. Further as a result of an increase in

service tax from 10% to 12%, services tax is budgeted to increase by 30.5% by FY13.

Unlike in the previous budget, Non-tax revenueis budgeted to record an increase of 32% duringFY13 as compared to RE of FY12. This would

be achieved primarily owing to signi cant 82.0%increase in other Non-tax revenue collections asexternal grants as well as interest receipts have

been budgeted to register a decline. During this budget, the Government plans to generate only ` 300.00 bn through disinvestments. During

the previous year against a target of `

400.00 bn, the Government had been able to raise onlyabout ` 140.00 bn from disinvestment. As aresult of expected lower revenue regeneration ascompared to higher expenditure the Governmenthas pegged the scal de cit target of 5.1% during

FY13 as compared to an estimated of 5.95%during FY12. Market borrowings are slated toincrease by around 9.8% to around ` 4,790.00 bnas compared to ` 4,364.14 bn in FY12 (RE).

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SECTORAL IMPACT

Sector RatingAgriculture Positive +Social Sector PositiveInfrastructure Positive

ServicesBanking, FinancialServices andInsurance(BFSI)

Positive +/Positive/Marginally Positive

Hospitality NeutralIT/ITeS Marginally PositiveMedia & Entertainment Marginally Positive

Real Estate & Construction PositiveRetail NeutralTelecom

Manufacturing NeutralAutomotive PositiveCapital Goods &

EngineeringMarginally Positive

Cement PositiveConsumer Goods NegativeGems & Jewellery Marginally PositiveLeather PositiveMetals & Mining PositiveMSMEs PositiveOil & Gas Marginally PositivePharma & Healthcare PositivePower PositiveTextiles Marginally Positive

Ratings: Positive + Predominantly positive proposals

Positive Positive impacting the sector

Marginally Positive

Positive proposals but not upto industryexpectations

Neutral Negative proposals offsetting positive

proposals Negative Negative proposal impacting the sector

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Agriculture Plan outlay for the Department of Agriculture

and Co-operation increased by 18%.

Outlay for the Rashtriya Krishi Vikas Yojana(RKVY) increased to ` 92.17 bn in FY13.

Target for agricultural credit raised by ` 1,000 bn to ` 5,750 bn in FY13.

Interest subvention scheme for providingshort term crop loans to farmers at 7%interest per annum to be continued in FY13.Additional subvention of 3% available for

prompt paying farmers.

Short term Regional Rural Bank (RRB) creditre nance fund being set up to enhance thecapacity of the RRBs to disburse short term

crop loans to small and marginal farmers.Kisan Credit Card (KCC) scheme to bemodi ed to make KCC a smart card whichcould be used at ATMs.

The scheme of capitalisation of weak RRBs

extended by another 2 years to enable all thestates to contribute their share.

A sum of ` 2 bn set aside for incentivisingresearch with rewards.

Investment-linked deduction of capital

expenditure incurred in cold chain facilityand warehouses for storage of food grains is proposed to be provided at the enhanced rateof 150% as against the current rate of 100%.

Warehouse for storage of sugar to beincluded for the purpose of investment-linked deduction.

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Allocation for Accelerated IrrigationBene t Programme (AIBP) inFY13 stepped up by 13% to` 142.42 bn.

Initiative of bringing Green Revolutionto Eastern India (BGREI) has resulted inincreased production and productivity of

paddy. Allocation for the scheme increasedto ` 10 bn in FY13 from ` 4 bn in FY12.

` 3 bn allocated to Vidarbha Intensi edIrrigation Development Programme under the RKVY.

` 5 bn provided to broaden scope of production of sh to coastal aquaculture.

A new centrally sponsored scheme titledNational Mission on Food Processing to

be started in FY13 in co-operation with stategovernments.

Basic customs duty on some water solublefertilisers and liquid fertilisers, other thanurea, reduced from 7.5% to 5% and from 5%

to 2.5% respectively. Weighted deduction of 150% on expenditure

incurred for agri-extension services.

Positive Plus

The Budget 2012-13 is positive for agricultureand rural development. Raising the target for agricultural credit is a welcome step as it has

played a critical role in supporting agriculture

production in India. Moreover, there were several gaps in the present institutional credit delivery system which the Budget has tried to address.

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One such measure being the setting up of a short-term RRB credit re nance fund which will facilitate provision of credit to small and marginal farmers. The extension of recapitalisation schemeof weak RRBs is also a positive development as

they extend credit mostly to small and marginal farmers, agricultural labourers and rural artisans operating in a few districts in a state.The tax proposals for cold chain facility are inline with the Governments policy shift towards

incentivising investments.

However, the present strategy of pumping credit into agriculture will not, by itself, translate intocommensurate increase in agricultural output. It needs to be accompanied by investments in other

support services. The Budget has remained silent regarding the reforms in the APMC Act, which iscritical for improving the quality and quantity of

farm yield and better remuneration.

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Social Sector

Human Resource Development andSocial Justice

Allocation of ` 158.50 bn for IntegratedChild Development Service (ICDS) scheme,representing an increase of 58% over BEFY12.

Allocation for Scheduled Castes Sub Plan at

` 371.13 bn, representing an increase of 18%over BE FY12.

Allocation for Tribal Sub Plan at ` 217.10 bn, representing an increase of 17.6%.

Allocation of ` 7.50 bn proposed for Rajiv

Gandhi Scheme for Empowerment of Adolescent Girls, SABLA.

A national information utility for computerisation of PDS is being created; to

become operational by December 2012.

Allocation under National Social AssistanceProgramme (NSAP) raised by 37% to ` 84.47

bn in FY13.

In the ongoing Indira Gandhi NationalWidow Pension Scheme and Indira

Gandhi National Disability PensionScheme for BPL bene ciaries, pensionamount to be raised from ` 200 to` 300 per month.

Lumpsum grant on the death of primary breadwinner of a BPL family, in the age group of 18-64 years, doubled to ` 20,000.

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To enhance access under Swavalambanscheme, LIC appointed as an aggregator andall public sector banks appointed as Points of Presence (PoP) and Aggregators.

Backward Regions Grant Fund schemeto continue in the Twelfth Plan withenhanced allocation of ` 120.40 bn in FY13,representing an increase of 22% over the BEFY12.

Education

For FY13, ` 255.55 bn provided for Rightto Education - Sarva Shiksha Abhiyan (RTE-SSA), representing an increase of 21.7%over FY12.

6,000 schools proposed to be set up at block level as model schools in the Twelfth Plan.

` 31.24 bn provided for Rashtriya Madhyamik Shiksha Abhiyan (RMSA), representing anincrease of 29% over BE FY12.

To ensure better ow of credit to students,a Credit Guarantee Fund proposed to be setup.

` 119.37 bn allocated for National Programmeof Mid Day Meals in schools.

Special grant provided to various universitiesand academic institutions.

Health & Sanitation

Existing vaccine units to be modernised andnew integrated vaccine unit to be set up inChennai.

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Scope of Accredited Social Health Activist ASHA is being enlarged. This will alsoenhance their remuneration.

Allocation for National Rural Health Mission(NRHM) proposed to be increased from` 181.15 bn in FY12 to ` 208.22 bn inFY13.

National Urban Health Mission is beinglaunched.

Pradhan Mantri Swasthya Suraksha Yojana being expanded to cover upgradation of 7more Government medical colleges.

Budgetary allocation for rural drinking water and sanitation increased from ` 110 bn to` 140 bn, representing an increase of over 27%.

Employment and Skill Development

Allocation of ` 39.15 bn made for NationalRural Livelihood Mission, representing an

increase of 34%. To ease access to bank credit, corpus for

Womens SHGs Development Fundenlarged.

Proposal to establish Bharat Livelihoods

Foundation of India through Aajeevikascheme.

Allocation for Prime Ministers EmploymentGeneration Programme increased by 23% to` 12.76 bn in FY13.

Projects approved by National SkillDevelopment Corporation expected to train

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62 mn persons at the end of 10 years. ` 10 bn allocated for National Skill

Development Fund in FY13.

To improve the ow of institutional creditfor skill development, a separate Credit

Guarantee Fund to be set up. Himayat scheme introduced in J&K to

provide skill training to 100,000 youth in thenext 5 years. The entire cost to be borne bythe Centre.

Weighted deduction at the rate of 150% provided on expenditure incurred on skilldevelopment in manufacturing.

Positive

The Budget has made signi cant effort to realisethe dream of inclusive development despite theconstraints being faced on the scal front. Thistime around, the Finance Minister has opted to

focus on existing schemes by way of increased

allocations. Additional budgetary resources, particularly towards RTE-SSA are likely toaddress the critical gaps in social infrastructureand could go a long way in meeting the needs of the rural poor. Besides, it is a welcome move that

school education has been exempted from servicetax. The weaker section has received a special attention in the Budget through proposals suchas higher allocation towards National Social

Assistance Programme and doubling of lumpsum grant. The Budget has rightly emphasised onactivities related to skill development, which

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are essential for improving the educational and economic conditions. The launch of credit

guarantee fund and exempting vocational training institutions from service tax will make

skills training affordable.

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InfrastructureInfrastructure Financing

Capital market reforms like Quali edForeign Investors (QFIs) allowed to accessthe Indian capital bond market, simplifyingIPO process, two way fungibility in IndianDepositary Receipts permitted with theobjective of encouraging greater foreign

participation in the Indian capital market.

Proposal to add sectors such as irrigation(including dams, channels and embankments),terminal markets, common infrastructure inagriculture markets, soil testing laboratoriesand capital investment in fertiliser sector aseligible sectors for Viability Gap Funding(VGF) under the Scheme for Support toPPP in infrastructure. Oil and gas/LNGstorage facilities and oil and gas pipelines,

xed network for telecommunication andtelecommunication towers will also be madeeligible sectors for VGF.

Approved guidelines for establishing jointventure companies by defence PSUs in PPPmode.

Permit to issue tax free bonds of ` 600 bn by various Government undertakings for

nancing infrastructure projects in 2012-13including ` 100 bn for National HighwayAuthority of India (NHAI), ` 100 bn for IndianRailway Finance Corporation (IRFC), ` 100

bn for India Infrastructure Finance CompanyLimited (IIFCL), ` 50 bn for HUDCO, ` 50

bn for National Housing Bank, ` 50 bn for

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SIDBI,`

50 bn for ports and`

100 bn for the power sector.

IIFCL has put in place a structure for creditenhancement and take-out nance for easingaccess of credit to infrastructure projects.

Creation of a consortium for direct lendingand grant of in-principle approval todevelopers before the submission of bids for PPP projects.

External Commercial Borrowings (ECB)allowed to part nance rupee debt of existing

power projects.

ECBs allowed for low-cost affordablehousing projects.

Credit Guarantee Trust Fund set up to ensure

better ow of institutional credit for housingloans.

ECBs permitted for working capitalrequirement of airline industry for a periodof one year, subject to a total ceiling of US$1 bn.

To provide low cost funds to stressedinfrastructure sectors such as power, airlines,roads and bridges, port and shipyards,affordable housing, fertiliser and dams, rateof withholding tax on interest payment on

ECBs reduced from 20% to 5% for 3 years. Rationalisation of Dividend Distribution Tax

to remove its cascading effect in a multi-tier corporate structure.

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Roads and Highways Target of covering a length of 8,800 kms

under National Highway DevelopmentProgramme (NHDP) during FY13.

Allocation of the Road Transport and

Highways Ministry enhanced by 14% to ` 253.6 bn.

ECB allowed for capital expenditure on themaintenance and operations of toll systemsfor roads and highways, if they are part of the

original project.

Rural Infrastructure

Budgetary allocation for rural drinking water and sanitation increased from ` 110 bn to` 140 bn, representing an increase of over 27%.

Allocation for Pradhan Mantri Gram Sadak Yojna (PMGSY) increased by 20% to` 240 bn to accelerate connectivity in the

states. Allocation under the Rural Infrastructure

Development Fund (RIDF) enhanced to` 200 bn ` 50 bn earmarked exclusively for creating warehousing facilities under the

RIDF.

Positive

Government strategy to increase investment ininfrastructure through a combination of publicinvestment and public private partnershipsindicates an increased thrust on the sector.

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Over 14% rise in budgetary allocation to the Ministry of Road Transport and Highway isexpected to encourage the transportation and logistics sector in India. Also, a 27% increasein budgetary allocation for rural drinking water

and sanitation and a 20% increase in PMGSY isexpected to improve overall rural infrastructureand connectivity in the states.

To boost infrastructure nancing, the Budget provides various nancing measures. Proposal to add certain sectors as eligible sectors for Viability Gap Funding is expected to provide

support to PPP in infrastructure. Additionally,allowing for tax free bonds to the tune of ` 600bn by various Government undertakings would

further support infrastructure nancing. Alsoreduction of withholding tax on interest paymentson ECBs is expected to provide low-cost funding to stressed infrastructure sectors.

Rationalisation of Dividend Distribution Taxto remove its cascading effect is expected tomake investment in infrastructure sector moreattractive.

Given the increased plan outlay for road transport and highway and for rural infrastructure,combined with increased thrust on plugging the gap in infrastructure nancing, the Budget is expected to be positive for the infrastructure

sector.

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Services

Banking, Financial Services andInsurance (BFSI)

Banking

Agricultural and Rural Finance

The target for credit ow to farmers has beenraised from ` 4,750 bn in FY12 to ` 5,750 bn

in FY13. The existing interest subvention scheme of

providing short term crop loans to farmers at7% interest has been extended to FY13. Anadditional subvention of 3% will be available

to prompt paying farmers. The Government has allocated ` 100 bn to

NABARD for re nancing of Regional RuralBanks (RRBs) to disburse short term croploans to the small and marginal farmers.

Kisan Credit Card (KCC) scheme will bemodi ed to make KCC a smart card whichcould be used at ATMs.

The Government has proposed to provideinterest subvention to Women Self HelpGroups (SHGs) to avail loans up to` 0.30 mn at 7% per annum. Women SHGsrepaying loans in time will get additional 3%subvention, reducing the effective rate to 4%for certain districts.

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Financial Inclusion In FY13, the Government has extended the

Swabhimaan campaign to habitations with population of more than 1,000 in north easternand hilly states and to other habitationswhich have crossed population of 2,000 as

per Census 2011.

Housing Credit

The existing scheme of interest subventionof 1% on housing loan up to ` 1.5 mn wherethe cost of the house does not exceed ` 2.5mn has been extended for FY13.

The provision under Rural Housing Fund has been enhanced from ` 30 bn to ` 40 bn.

Credit Guarantee Trust Fund set up to ensure better ow of institutional credit for housingloans.

The Government has permitted ECBs for low-cost affordable housing projects.

The limit of indirect nance under prioritysector has been enhanced from ` 0.5 mn to` 1 mn.

Capital Support and Funding

A sum of ` 158.80 bn capital has beenallocated to all Public Sector Banks (PSBs)and nancial institutions for FY13, keepingin view Basel III norms. This is in additionto the infusion of ` 120 bn in PSBs in FY12.The Government is evaluating a possibility of creating a nancial holding company to raise

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resources to meet the capital requirements of PSBs.

A central Know Your Customer (KYC)depository will be developed in FY13 toavoid multiplicity of registration and dataupkeep to bring banking payment structureat par with global standards.

Extension of the scheme of capitalisation of weak RRBs by another two years to enableall states to contribute their share.

To ease access to bank credit, corpus for Womens SHGs Development Fund enlargedto ` 3 bn.

To enhance availability of equity to theMSME sector, the Government has set up a` 50 bn India Opportunities Venture Fundwith SIDBI.

Enhanced allocation under the RuralInfrastructure Development Fund (RIDF)to ` 200 bn. An amount of ` 50 bn from theabove allocation is exclusively for creating

warehousing facilities under the RIDF. Tax free bonds of ` 600 bn to be allowed

for nancing infrastructure projects duringFY13. This includes ` 100 bn for NHAI,` 100 bn for IRFC, ` 100 bn for IIFCL, ` 50

bn for HUDCO,`

50 bn for National HousingBank and ` 50 bn for SIDBI, among others.

Others

A scheme for education loans is being

implemented by banks. To ensure better ow of credit to deserving students, a Credit

Guarantee Fund is being set up.

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For improvement of the ow of institutionalcredit for skill development, a separate CreditGuarantee Fund is being set up to bene tyouth in acquiring market oriented skills.

UID, Aadhar Adequate funds to be allocatedto complete enrolment of another 400 mn

persons.

Legislative Reforms

The Micro Finance Institutions (Developmentand Regulation) Bill, 2012; The NationalHousing Bank (Amendment) Bill, 2012; TheSmall Industries Development Bank of India(Amendment) Bill, 2012; National Bank for Agriculture and Rural Development(Amendment) Bill, 2012; Regional Rural

Banks (Amendment) Bill, 2012 to be proposedin the Budget session of the Parliament.

Of cial amendment to The Pension FundRegulatory and Development Authority Bill,2011, The Banking Laws (Amendment)Bill, 2011 and The Insurance Law(Amendment) Bill, 2008 to be moved in thissession.

Positive+

The Budget is expected to have a positive impact on the banking industry. A number of measureshave been announced towards enabling better

ow of credit to various sectors, including agriculture, housing, education and MSMEs

which is expected to encourage overall credit growth in FY13. The guidelines on priority sector

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lending are expected to be issued in FY13.

In addition, the Budget has emphasised on the nancial strengthening of PSBs, RRBs and other nancial institutions. The allocations madetowards capital infusion in PSBs and RRBs isexpected to bring more stability to the sector. TheGovernment aims to keep all the PSBs adequatelycapitalised so that the growth momentum of theeconomy is sustained. This will help maintaintheir minimum tier - I capital. In turn, lenders canexpand their asset base maintaining the growthmomentum. Banks would be able to manage their asset-liability better on the back of availabilityof long-term funds for infrastructure lending.

Further, credit schemes and interest subventionon loans to small farmers would enhance their ability to pay interest on time thereby helping

PSBs to contain their NPAs and helping recoveryefforts of banks.

Overall, the Budget is likely to have a positiveimpact on the banking industry by boosting credit

growth and supporting capital base of banks.

Capital Markets

Investment Environment

Rajiv Gandhi Equity Saving Scheme to allowfor income tax deduction of 50% to new retailinvestors, who invest up to ` 50,000 directly

in equities and whose annual income is below` 1 mn to be introduced. The scheme willhave a lock-in period of three years.

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Others Various steps have been taken for deepening

the reforms in the capital markets, includingsimplifying process of IPOs, allowing QFIsto access the Indian bond market, etc.

The Government has made it mandatory for companies to issue IPOs of ` 100 mn andabove in electronic form through nationwide

broker network of stock exchanges.

The Government provides opportunities

for wider shareholder participation throughelectronic voting facilities which would bemandatory initially for top listed companies.

Permit for two-way fungibility in IndianDepository Receipts (IDRs), subject to aceiling.

Removal of the cascading effect of DividendDistribution Tax (DDT) in a multi-tier corporate structure. Continuation to allowrepatriation of dividends from foreignsubsidiaries of Indian companies at a lower tax rate of 15% up to March 31, 2013.

Reduction in securities transaction tax by20% from 0.125% to 0.1% on cash deliverytransactions.

Positive

The measures undertaken by the Government to boost the equity market are positive. Theinitiatives are for ef cient market intermediation

between savers and investors. Reduction of STT will reduce transaction cost, revive intra-daytrading, promote retail participation. Reduction

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on taxation of foreign dividends would have a positive impact. Measures have been taken toboost greater foreign participation in the Indiancapital market and to encourage ow of savingsin nancial instruments.

Finance

Fiscal Consolidation

The Government is to introduce amendmentsto the FRBM Act as part of Finance Bill,2012. Concept of effective revenue de citand medium term expenditure frameworkare two important features of amendment toFRBM Act in the direction of expenditurereforms.

Taxation

Exemption limit for the general categoryof individual taxpayers increased from ` 180,000 to ` 200,000 giving tax relief of `

2,000. Upper limit of 20% tax slab proposedto be raised from ` 0.8 mn to ` 1 mn.

Proposal to allow individual tax payers adeduction of up to ` 10,000 for interest fromsavings bank accounts.

Senior citizens not having income from business proposed to be exempted from payment of advance tax.

Provision of low cost funds to stressedinfrastructure sectors, rate of withholding tax

on interest payment on ECBs proposed to bereduced from 20% to 5% for three years for certain sectors.

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Investment-linked deduction of capitalexpenditure for certain businesses proposedto be provided at the enhanced rate of 150%.

Proposal to extend the levy of AlternateMinimum Tax to all persons, other than companies, claiming pro t-linkeddeductions.

Service tax confronts challenges of its share being below its potential, complexity in taxlaw, and need to bring it closer to CentralExcise Law for eventual transition to GST.

Proposal to tax all services except those inthe negative list comprising of 17 heads.

Service tax law to be shorter by nearly 40%.

Revision Application Authority and

Settlement Commission being introduced inservice tax for dispute resolution.

Study team to examine the possibility of common tax code for central excise andservice tax.

New scheme announced for simpli cation of refunds.

Rules pertaining to point of taxation are being rationalised.

Insurance

Proposal to move Insurance Laws(Amendment) Bill and LIC Amendment Billin the current session.

Services provided by life insurancecompanies in the area of investment are also

proposed to be brought into the service tax

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net on the same lines as ULIPs. The Rashtriya Swasthya Bima Yojana

(RSBY) to be extended to cover unorganisedsector workers in hazardous mining andassociated industries like slate and slate

pencil, dolomite, mica and asbestos etc.

Black Money

Proposal to lay a white paper on black moneyin current session of Parliament.

Measures proposed to deter the generationand use of unaccounted money.

Others

Indian Stamp (Amendment) Bill, 2012; and

Public Debt Management Agency of IndiaBill, 2012 to be proposed in the Budgetsession of the Parliament.

On the death of the primary breadwinner of a below poverty line family, in the age group of

18 to 64 years, a lumpsum grant of `

10,000has been doubled to ` 20,000 with a matchingcontribution by the State Governments under the National Family Bene t scheme.

Restriction on Venture Capital Funds toinvest only in nine speci ed sectors proposedto be removed.

Marginally Positive

The Budget has few announcements having amarginally positive impact on the nance sector.

Individuals will bene t marginally from increased

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exemption limit. However, the rise in service taxwill result in high service charges.

Hospitality

Cascading of taxes has been signi cantlyreduced by permitting utilisation of inputtax credits in a number of services such ascatering, restaurants, hotel accommodation,

pandal and shamiana and transport sectors.

Neutral

An announcement was made permitting utilisationof input tax credits in various services such ascatering, restaurants, hotel accommodation,

pandal and shamiana and transport sectorsthereby reducing cascading of taxes. Thisannouncement is expected to marginally reducethe total cost of travel operators therebyimproving their pro t margin. The overall impact

of the Budget will be neutral.

IT & ITeS

Introduction of advance pricing agreement

(APA) in the Finance Bill of 2012. Central plan outlay by the Department of

Information Technology (DIT) increased by86.7% to ` 53.6 bn.

` 391.1 bn to be spent on modernisation of

signaling system of railways. A National Information Utility (NIU) for

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the computerisation of Public DistributionSystem (PDS) is being created. It is expectedto become operational by December 2012.

Marginally Positive

Provision regarding implementation of APAs tobe introduced in Finance Bill 2012 will help inaddressing concerns over the certainty of transfer

pricing arrangements. Proposal to improve service tax refunds process as well as enhance the scope for input credits for service tax will bene t the IT-ITeS sector since substantial amount of cash ow is tied up in refund claims. The central

plan outlay for DIT growing by 86.7%, allocationof funds for modernising signaling system of railways and creating a NIU for computerisationof PDS will have a positive impact on the IT

sector. The industry was expecting to see therevival of tax bene ts under the STPI scheme.

However, there was no mention in respect of extension of this clause. Thus, the overall Budget has a marginally positive impact on the sector.

Media & Entertainment

Entertainment and amusement services have been included in the negative list of servicetax.

The industry has been exempted from servicetax on copyrights relating to recording of

cinematographic lms.

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Marginally Positive

Exclusion of the entertainment and amusement services from service tax is expected to boost theindustry. Also, exemption of copyrights relating torecording of cinematographic lms from servicetax will impact the industry positively.

Overall, the announcements in the Budget areexpected to have a marginally positive impact onthe sector.

Real Estate and Construction

External Commercial Borrowings (ECBs)are allowed for low cost affordable housing

projects.

For affordable housing, the rate of withholdingtax on interest payments on ECBs is proposedto reduce from 20% to 5% for three years.

Set up Credit Guarantee Trust Fund to ensure

better ow of institutional credit for housingloans.

Enhance provisions under Rural HousingFund from ` 30 bn to ` 40 bn.

Extend the scheme of interest subvention of

1% on housing loan up to ` 1.5 mn where thecost of the house does not exceed ` 2.5 mnfor another year.

Enhance the limit of indirect nance under priority sector from ` 0.5 mn to ` 1 mn.

Investment-linked deduction of capitalexpenditure incurred in affordable housing

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business is proposed to be provided at theenhanced rate of 150%, as against the currentrate of 100%.

Construction services relating to residentialdwelling and low-cost mass housing up toan area of 60 sq. mtr. under the scheme of Affordable Housing in partnership are alsoincluded in the exemptions. For peoplealready owning an apartment, there is arise in exemption for the monthly charges

payable by a member to a housing society

from`

3,000 to`

5,000.

Positive

The Budgets focus on providing low-cost and affordable housing is laudable. The extensionof enhanced limit for interest subvention and increase in the priority sector lending limit areexpected to bene t buyers in tier-II, III citiesand towns. The accessibility of ECBs and

ease in withholding tax on interest paymentsmay encourage private developers to invest inaffordable housing projects. The incentives givento the construction sector are likely to have amultiplier effect on the economy via growth in

downstream sectors and increase in employment.Overall the Budget is positive for the sector.

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Telecom Fixed network for telecommunication and

telecom towers to be made eligible for Viability Gap Funding (VGF).

Service tax rate, excise duty hiked from 10%

to 12%. Exemption of customs duty on mobile phone

and memory cards.

Neutral

The investment scenario for infrastructuredevelopment has received a boost through itseligibility for viability gap funding scheme. Under this scheme, projects receive nancial support in the form of grants, one time or deferred,through public private partnerships with a viewto make them commercially viable. Customs dutyexemption on mobile and memory card is alsoexpected to have a positive impact on the mobile

handset industry. However, service tax and exciseduty hike are expected to offset the gains for thetelecom sector in this Budget.

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Manufacturing

Automotive

Increase in the excise duty on petrol-drivencars with length exceeding 4,000 mm andengine capacity under 1,200 cc from 22% to24%, and on petrol-driven vehicles havinglength exceeding 4,000 mm and enginecapacity exceeding 1,500 cc from 22% plus`

15,000 to 27% . Increase in the excise duty on diesel-driven

cars with length exceeding 4,000 mm andengine capacity under 1,500 cc from 22% to24%, and on diesel-driven vehicles havinglength exceeding 4,000 mm and enginecapacity exceeding 1,500 cc from 22% plus` 15,000 to 27%.

Increase in the excise duty on petrol/LPG/CNG-driven cars, with length not exceeding4,000 mm and engine capacity not exceeding

1,200 cc from 10% to 12% and on diesel-driven vehicles having length not exceeding4,000 mm and engine capacity not exceeding1,500 cc from 10% to 12%.

Reduction in the excise duty from 10% to 6%

on replacement batteries for supply to electricvehicle manufacturers who are registeredwith IREDA or any State Nodal Agencynoti ed for the purpose by the Ministryof New & Renewable Energy for Central

nance assistance till March 31, 2013.

Building of commercial vehicle bodies toattract an ad valorem duty of 3% as against the

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earlier speci c rate of `

10,000 on chassis. Reduction in the excise duty from 10% to

6% on speci ed parts of hybrid vehiclesincluding battery pack, battery charger, AC/DC motor, AC/DC motor controller, enginefor HV, transaxle for HV, power control unit,control ECU for HV, generator, brake systemfor recovering, energy monitor and electriccompressor.

Increase in the basic customs duty from 60%to 75% on completely built units of largecars/MUVs/SUVs with engine capacityexceeding 3,000 cc for petrol and 2,500cc for diesel, and whose value exceedsUS$ 40,000 per vehicle.

Lithium ion batteries imported for the

manufacture of battery packs for supply toelectric or hybrid vehicle manufacturers toenjoy full exemption from basic customsduty and special CVD with concessionalexcise duty/CVD of 6%.

Neutral

Vehicle manufacturers are likely to pass on theincreased excise duties to the consumers by way of vehicle price hikes. However, this is not expected

to have any signi cant impact on demand in themedium-to-long term. Reduction in the exciseduty on parts used in hybrid vehicles is aimed at making these vehicles more affordable.

Hike in the customs duty on large passenger vehicles would increase vehicle prices. However,

given the relatively lower price sensitivity of the

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customers in this segment, this is not expected to have any signi cant impact on demand. TheGovernments increased focus on infrastructuredevelopment would bene t manufacturers of commercial vehicles in the medium-to-long

term.

The Budget has proposed to allocate ` 10 bnto the National Skill Development Fund. Theincreased allocation is expected to address, to

some extent, the manpower challenges faced bythe automotive industry. Extension of weighted deduction of 200% for in-house R&D expenditureis expected to encourage the Original Equipment

Manufacturers (OEM) to increase focus on R&D initiatives. From a short-to-medium term perspective, the Budget announcements would have a neutral impact on the industry.

Capital and Engineering Goods

Full exemption from basic customs duty onequipment imported for road and highwayconstruction projects.

Import of equipment for expansion or settingup of fertiliser projects to be fully exempt

from basic customs duty of 5% for threeyears.

Basic customs duty to be reduced from 10% or 7.5% to 2.5% on machinery and instrumentsneeded for surveying and prospecting for

minerals. Basic customs duty to be reduced from

10% to 7.5% for equipment required for

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installation of train protection and warningsystem and upgradation of track structure for high speed trains.

Full exemption from import duty on certaincategories of speci ed equipment needed for road construction, tunnel boring machinesand parts of their assembly.

Tax concessions proposed for parts of aircraft and testing equipment for third partymaintenance, repair and overhaul of civilianaircraft.

Basic customs duty to be reduced from 7.5%to 2.5% on plant and machinery imported for setting up or substantial expansion of iron ore

pellet plants or iron ore bene ciation plants.

Full exemption from basic customs dutyto automatic silk reeling and processingmachinery as well as its parts.

Plant and equipment required for the initialsetting up of solar thermal projects are fullyexempted from special CVD.

Reduction in basic customs duty from 7.5%to 5% on speci ed coffee plantation and

processing machinery.

Reduction in basic customs duty from 7.5%to 2.5% on sugarcane planter, roof or tuber

crop harvesting machine and rotary tiller andweeder.

Concessional import duty available for installation of mechanised handling systemsand pallet racking systems in mandis or

warehouses for horticultural produce to beextended.

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Full exemption from import duty on tunnel boring machines and parts of their assembly.

Positive

Several positive measures focusing on theagricultural and related sectors were announced,including reduced customs duty on speci ed agricultural machinery and processing equipment.

Apart from this, equipment imported for road

construction and fertiliser projects also received a whole bunch of duty exemptions. However,increase in standard rate of excise duty from 10%to 12% has partially offset the signi cant positiveimpact of reduction or exemption in import and

customs duties to some extent on the capital and engineering goods sector.

The Union Budget FY13 also outlines theimportance of the infrastructure sector with

greater emphasis on capital investment required in construction of national highwaysand encouraging PPP projects. Demand for construction equipment is likely to be boosted owing to several positive proposals in theinfrastructure sector. Allocation of ` 795.79bn for capital expenditure made in the defence

services will also provide a boost to the capital and engineering goods industry in FY13.

Overall, the Budget is anticipated to have a

positive impact on the capital and engineering goods sector

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Cement Excise duty on the packaged cement

rationalised. It is proposed to prescribe auni ed rate of 12% plus ` 120 per metrictonne (PMT) for non-mini cement plants and6% plus ` 120 PMT for mini-cement plants.It is proposed to charge this duty on the retailsale price less abatement of 30%.

Full exemption from basic customs duty anda concessional countervailing duty of 1%on steam coal for a period of two years tillMarch 31, 2014.

Marginally Positive

Currently packaged cement, whether

manufactured by mini-cement plants or others,attracts differential excise duty depending on theretail sale price per bag. The move to prescribea uni ed rate is likely to have a positive impact on the industry. Also, removal of customs duty

is likely to have a positive impact on cement input prices since the cement industry is heavilydependent on imported coal.

Further, initiatives such as the investments in

infrastructure to the tune of ` 50,000 bn in the12 th Five Year Plan, proposed tax free bonds,development of national highways etc will alsoboost the demand for cement in the country.

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Consumer Goods Basic customs duty reduced from 7.5% to 5%

on speci ed coffee plantation and processingmachinery.

Full exemption from basic customs duty on

waste paper, LCD and LED TV panels and parts of memory card for mobile phones.

Reduction of basic customs duty on speci edraw materials for the manufacture of adultdiapers from 10% or 7.5% to 5% with

countervailing duty of 6% and nil specialcountervailing duty.

Basic customs duty on bicycles increasedfrom 10% to 30% and on bicycle parts from10% to 20%.

Basic customs duty on soya proteinconcentrate and isolated soya protein reducedfrom 30% and 15% respectively to 10%.Simultaneously, excise duty on all processedsoya food products is being reduced to 6%.

Concessional basic customs duty of 2.5%along with reduced excise duty of 6% oniodine.

Basic customs duty on probiotic productsreduced from 10% to 5%.

Coating chemical used for compactuorescent lamps is proposed to be fullyexempt from basic customs duty.

Excise duty on LED lamps reduced to 6%.

Increase in basic excise duty on cigarettes

of more than 65 mm length by adding an advalorem component of 10% to the existingspeci c rates. The ad valorem duty would

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be chargeable on 50% of the retail sale pricedeclared on the pack.

Increase in basic excise duty on hand-rolled bidis from ` 8 to ` 10 per thousand and onmachine-rolled bidis from ` 19 to ` 21 per thousand. The existing exemption availableto hand-rolled bidis for clearances up to 2 mn

bidis per annum is being retained.

The rates of duty speci ed under thecompounded levy scheme per packingmachine for pan masala, gutkha, chewingtobacco, unmanufactured tobacco and zardascented tobacco in pouches are being steppedup taking into account improvements in theef ciency of machines used by this industry.

A new centrally sponsored scheme titled

National Mission on Food Processingwould be started, in cooperation with theState Governments in FY13.

Investment-linked deduction of capitalexpenditure incurred on cold chain facility is

proposed to be provided at the enhanced rateof 150% as against the current rate of 100%.

Bee keeping and production of honey and beeswax is proposed to be added for the purposes of investment-linked deduction.

Weighted deduction at the rate of 150% of expenditure incurred on skill developmentin the manufacturing sector is proposed to

be provided in accordance with speci edguidelines.

Exemption limit for the general categoryof individual taxpayers enhanced from` 0.18 mn to ` 0.20 mn. Also, the upper limit

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of 20% tax slab raised from`

0.80 mn to` 1.00 mn.

Positive

Enhancement of the exemption limit for the general category of individual taxpayers isexpected to leave the consumers with a higher disposable income adding to the demand for consumer goods. The reduction in central exciseduty on processed soya food products, iodine and

LED lamps is likely to result in a fall in prices of these and related products.

Reduction/exemption in customs duty on coffee plantation and processing machinery, LCD and

LED TV panels, parts of memory card for mobile phones, raw materials for the manufacture of adult diapers, soya protein concentrate and isolated

soya protein, probiotic products, iodine and coating chemical used for compact uorescent

lamps is likely to boost domestic production of the nal products manufactured using the aboveraw materials/machinery, thereby providing aboost to the domestic industry.

Increase in the basic customs duty on bicyclesand bicycle parts will discourage imports of

such products, thereby protecting the domesticmanufacturers.

Increased thrust on measures to incentivise food processing by launching the National Mission on Food Processing and by increasing

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the investment-linked deduction on cold chain facilities is likely to have a positive impact on the processed food category of the consumer goods sector in the medium to long term period.

Deduction on the expenditure incurred on skill development in the manufacturing sector is likelyto impact the sector positively.

In the medium term, the consumer goods sector is expected to remain buoyant on the backdrop

of positive announcements in the FY13 Budget coupled with strong domestic consumption.

Negative announcements of an increase in basicexcise duty on cigarettes and hand-rolled bidis and increase in the rates of duty speci ed under the

compounded levy scheme on pan masala, gutkha,chewing tobacco, unmanufactured tobacco and

zarda scented tobacco in pouches are likely tohave a marginally negative impact on the sector.

However, on the overall basis, FY13 Budget is

positive for the consumer goods sector.

Gems & Jewellery

Increase basic customs duty from 2% to 4%

on standard gold bars, gold coins of purityexceeding 99.5% and platinum.

Increase basic customs duty from 5% to 10%on non-standard gold.

Increase basic customs duty from 1% to 2%

on gold ores and concentrates for use in themanufacture of gold for re ning.

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Increase excise duty from 1.5% to 3% onre ned gold.

Imposition of basic customs duty of 2% oncut and polished colored gem stones.

Full exemption from excise duty on branded

silver jewellery. Excise duty of 1% on branded precious

metal jewellery to be extended to includeunbranded jewellery.

Negative

Driven by the high spending on gold consumption,the customs duty on standard and non-standard

gold has been doubled in order to curb imports

of gold and other precious metals. To minimiseits impact on small artisans and goldsmithsand simplify operations, certain measures are

proposed to be taken. The overall additional taxburden is expected to have a negative impact on

the gems and jewellery sector, as it will make gold and jewellery more expensive. However,exempting silver jewellery from the levy of exciseduty is a positive move.

Leather

Proposal to set up ` 50 bn India OpportunitiesVenture Fund with SIDBI to aid Micro, Smalland Medium Enterprises (MSMEs).

Government has introduced PublicProcurement Policy for Micro and SmallEnterprises (MSEs) under which ministries

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and CPSEs are required to make a minimumof 20% of their annual purchase from MSEs.Also, 4% of this purchase will be earmarkedfor procurement from MSEs owned by SC/ST entrepreneurs.

The Government has proposed to provideassistance in setting up of dormitories for women workers in the 5 mega clustersrelating to handloom, power loom and leather sectors.

Marginally Positive

Since the leather sector occupies a prominent place among MSMEs, the creation of ` 50 bnVenture Fund with SIDBI and an introduction of

Public Procurement Policy for Micro and Small Enterprises are expected to have a marginally positive impact on the leather sector as it will enhance the availability of equity funding and

provide greater market access to the industry

players.

The assistance announced towards setting up of dormitories is a step towards providing a higher level of social infrastructure facilities which is a

positive for the leather industry viewed from the perspective of organising the leather industry ina structured manner.

The announcements made in the Budget would have a marginally positive impact on the leather

sector, particularly in the medium term.

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Metals & Mining Coal India Limited (CIL) has been advised

to sign fuel supply agreements with power plants which have entered into long-term Power Purchase Agreements withdistribution companies (DISCOM) andwould get commissioned on or before March31, 2015. Further, an inter-ministerial grouphas been set up to undertake periodic reviewof the allocated coal mines and shall makerecommendations on de-allocations, if

required. Full exemption of basic customs duty and

a 1% concessional Counter Vailing Duty(CVD) to steam coal for a period of twoyears i.e. till March 31, 2014.

Full exemption of basic customs duty on coalmining projects.

Reduction in the basic customs duty from10% or 7.5% to 2.5% on machinery andinstruments used in the mining sector for

surveying and prospecting of minerals. Reduction in the basic customs duty from

7.5% to 2.5% on plant and machineryimported for setting up or substantialexpansion of iron ore pellet plants or iron ore

bene ciation plants.

Reduction in the basic customs duty from7.5% to 5% on coating material used tomanufacture electrical steel.

Reduction in the basic customs duty from

2.5% or 7.5% to nil on nickel ore andconcentrate nickel oxide/ hydroxide.

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Increase in the export duty from`

3,000 per tonne to 30% ad valorem on chromium ore.

Increase in the basic customs duty from 5%to 7.5% on non-alloy, at-rolled steel.

Introduction of TDS on trading in coal,

lignite and iron ore.

Positive

A higher budgetary allocation for the

infrastructure sector would have positiveimplications for the mining as well as the metal

sector driven by demand for core metals and minerals like steel, iron ore, coal, etc. Throughthe proposals, such as power companies signing

an agreement with CIL, reducing the duty on steam coal, and exemption of basic customs dutyon coal mining projects is expected to increasedomestic supply of coal in tandem with the rising coal demand. This announcement is considered

as positive for the coal mining companies.

Further, reducing the basic customs duty on surveying and prospecting used for the survey of minerals is expected to have a positive impact on

the mining sector as it would improve the processand quality of extracting and re ning of mineralsand further encourage more players to enter this market. Reduction of import duty on plantsand machinery for iron ore, basic customs duty

on coating material as well as nickel ore will encourage more players to enter the metal and

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mining sector and consequently decrease the rawmaterial cost.

Increase in the export duty on chromium orewill encourage companies to increase itsdomestic supply. Further, introduction of TDS in coal, lignite and iron ore trading will helpthe companies to track the unaccounted money.Overall, the Budget is anticipated to have a

positive impact on the metals and mining sector.

MSMEs

To set up a ` 50 bn India Opportunities Fundwith Small Industries Development Bank of India (SIDBI).

Allocation for the Prime MinistersEmployment Generation Programmeincreased by 23% from ` 10.37 bn to ` 12.76

bn.

Under the Public Procurement Policy for Micro and Small Enterprises (MSEs),Ministries and Central Public Sector Enterprises (CPSEs) are required to make aminimum of 20% of their annual purchasefrom MSEs. Of this purchase, 4% to beearmarked for procurement from MSEsowned by SC/ST entrepreneurs.

Increase in the turnover limit from ` 6 mn to` 10 mn for SMEs for compulsory tax auditof accounts and for presumptive taxation.

Exemption of capital gains tax on sale of aresidential property, if the sale considerationis used for subscription in equity of a

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manufacturing SME company for purchaseof new plant and machinery.

Reduction in the basic customs duty to 2.5%with concessional CVD of 6% on speci ed

parts, components and raw materials for the manufacture of medical devices such asdisposables and instruments.

Full exemption from basic customs dutyand CVD to speci ed raw materials for themanufacture of coronary stents and heartvalves.

Reduction in the excise duty from 10%to 6% on matches manufactured by semi-mechanised units.

Positive

The biggest announcement for the SME sector has been an allocation of ` 50 bn to SIDBI

for venture fund. This is expected to enhanceavailability of equity to MSMEs, as credit crunch

continues to remain a major challenge for SMEs.The hike in turnover limit for compulsory taxaudit of accounts would also bring some relief tothe SMEs. To a small extent, the announcement of exemption of capital gains tax on sale of

residential property could also enhance credit availability to the SMEs. Measures announced for SME-centric sectors such as leather, handloom,

powerloom, matches, food processing, textiles etcare bene cial for the SME sectors prospects.

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Oil & Gas Cess on crude petroleum oil produced in

India increased to ` 4,500/MT from ` 2,500/MT.

Full exemption from basic duty on natural

gas and Liqui ed Natural Gas (LNG). Oil & Gas / LNG storage facilities and Oil &

Gas pipelines to be included in the eligiblesectors for Viability Gap Funding (VGF).

Marginally Positive

The Indian oil & gas sector is one of the coreindustries in the country. The increase in

petroleum cess on crude petroleum oil produced

in India is likely to adversely impact the bottom-line of oil producing companies.

The full exemption of basic duty on natural gasand LNG is likely to reduce the cost of imported

fuel for core sectors such as fertilizers and power plants. The core sectors are expected to bene t from this exemption.

Introduction of VGF for oil & gas/LNG storage facilities and oil & gas pipelines is likely to fuel the sectoral growth as many projects with higheconomic returns but low nancial returns can

possibly be executed in the coming period.

The oil & gas companies had built expectations

from the Budget for a 10-year tax holidayalongwith inclusion of crude oil and petroleum

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products under the recommended Goods and Service Tax (GST) regime. In the absence of announcement of tax holiday and low clarity on

proposed GST structure, the Budget will havea marginally positive impact on the oil & gas

sector.

Pharmaceuticals & Healthcare

Pharmaceuticals

The concessional basic customs duty of 5%with full exemption from excise duty/CVDhas been extended to six speci ed life-savingdrugs/vaccines.

List of drugs & medical devices eligible for

lower import duty and excise duty exemptionexpanded to include additional life sciencedrugs.

Advance pricing agreement proposed to beimplemented in Finance Bill, 2012.

Marginally positive

Research and development (R&D) in the pharmaceutical sector received signi cant impetus through the extension of 200% weighted deduction on in-house R & D expenditure.Capital expenditure on R & D for an industry

such as pharmaceutical is critical for the growthof the industry and the proposal is expected toboost the active pharmaceutical ingredient (API)market in India. Implementation of advance

pricing agreement is also expected to help

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the pharmaceutical industry to reduce its taxlitigation cases. On the other hand, excise dutyhike is expected to increase raw material prices

for the industry.

Healthcare The outlay for the National Rural Health

Mission (NRHM) hiked by nearly 15% to ` 208.2 bn for FY13. National Urban HealthMission (NUHM) will be launched, which

is expected to encompass primary healthcareneeds of people in the urban areas.

The Pradhan Mantri Swasthya SurakshaYojana (PMSSY) aimed at setting up of AllIndia Institute of Medical Sciences (AIIMS)-

like institutions and upgradation of existingGovernment medical colleges is beingexpanded to cover upgradation of 7 moreGovernment medical colleges.

The rate of investment-linked deduction of capital expenditure enhanced to 150% fromthe existing 100% for hospitals.

Marginally Positive

The Budget has focused towards improving

healthcare services at the rural as well as urbanregion. The increased NRHM outlay is expected to further improve access to healthcare in therural areas. Under the PMSSY scheme, theGovernment aims at setting up eight AIIMS-

like institutions and upgradation of existing Government medical colleges. The healthcare

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service in the urban region is also expected toincrease with the launch of NUHM. Enhanced rate of deduction linked to capital expenditure isexpected to increase investments in hospitals inthe coming years. These measures are expected

to have a marginally positive impact on thehealthcare sector.

Power

Allocation of tax-free bonds amounting to` 100 bn towards the power sector, out of the` 600 bn tax free bonds for nancinginfrastructure projects during FY13.

Permitting External Commercial Borrowings(ECBs) to part nance rupee debt of existing

power projects.

Coal India Limited (CIL) has been advisedto sign fuel supply agreements with power

plants which have entered into long-term Power Purchase Agreements with

distribution companies (DISCOM) andwould get commissioned on or before March31, 2015. Further, an inter ministerial grouphas been set up to undertake periodic reviewof the allocated coal mines and shall makerecommendations on de-allocations, if required.

Extension of the sunset date by one year i.e.on or before March 31, 2013 to claim 100%deduction of pro ts for 10 years.

Reduction in the rate of withholding tax oninterest payments on external commercial

borrowings from 20% to 5% for three years

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to provide low cost funds to the sector. Additional 20% depreciation in the initial

year to be extended to new assets acquired by power generation companies.

100% Counter Vailing Duty (CVD) or excise

duty exemption in plants, equipment etc usedin the initial set up of solar energy and solar thermal projects.

Full exemption of basic customs duty and a1% concessional CVD to steam coal used inthermal power projects for a period of twoyears i.e. till March 31, 2014.

Positive

The overall focus of the Government has beentowards increasing investments through theallocation of ` 100 bn tax free bonds as well asincreasing the nancing options in the sector through the introduction of ECBs as well asreducing their interest rates. This is expected toimprove the working capital requirements of thecompanies in this sector. The Government also

focuses on reducing the raw material cost throughthe agreement with CIL and reducing the dutiesimposed on the steam coal used as an input inthe thermal power plants. This measure will helpthe power generation companies to stabilise thevolatile prices of raw materials.

Proposals such as extension of the sunset date,

providing additional 20% depreciation during the initial years etc are expected to encourage

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more companies to enter the power sector or the existing companies to expand operations.

Reducing the CVD by 100% in the initial set up of solar power plants is expected to have a positiveimpact as it is expected to promote the renewable

energy generation and usage in India. This will further encourage new players or existing playersto enter into the renewable segment of the power

sector. These measures are expected to have a positive impact on the power sector.

Textiles

Automated shuttle-less looms exemptedfrom basic customs duty of 5%.

Full exemption from basic customs dutyto automatic silk reeling and processingmachinery as well as its parts.

Currently excise duty of 10% is applicable to branded readymade garments with abatementof 55% from the retail sale price. Now withthe proposed increase in duty to 12%, theabatement has been enhanced to 70%. As aresult, the incidence of duty as a percentageof the retail sale price would come downfrom 4.5% to 3.6%.

Reduction in the basic customs duty from15% to 5% on wool waste and wool tops.

Reduction in the customs duty from 10% to7.5% on titanium dioxide.

Financial package of ` 38,840 mn for waiver of loans to handloom weavers and their co-operative societies.

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New handloom cluster in Prakasam andGuntur districts of Andhra Pradesh and leather cluster in Jharkhand.

Weaver Service Center in Mizoram, Nagalandand Jharkhand.

Powerloom mega cluster in Maharashtrawith a budget allocation of ` 700 mn.

` 5,000 mn pilot scheme in the 12 th FiveYear Plan for promotion and application of geo-textiles in the North-Eastern region.

Marginally Positive

Reduction of excise duty on readymade garmentswould result in decline in the cost burden of the

manufacturers. It is expected that manufacturersmay pass on the reduced burden to the consumersby way of reduction in prices. Further, a reductionin customs duty on titanium dioxide would makeimports of titanium dioxide cheaper.

Two more mega handloom clusters wereannounced in addition to four mega handloomclusters already operational. These clusters will help the weavers in technology upgradation and

product diversi cation. Besides that, a power loom mega cluster is also proposed to be set upin Maharashtra. It is expected that the power loom cluster will have modern machinery,testing services and have a computer-aided design studio to address the need of the local artisans and weavers. In addition to this, a pilot

scheme has also been proposed for promotion of

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geo-textiles. These proposed initiatives to openclusters will have a marginally positive impact on the industry.

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CHANGE INCENTRAL PLAN OUTLAY

( ` bn) 2011-12 2012-13

RevisedEstimates

BudgetEstimates

%Change

Ministry of Agriculture 128.61 161.21 25.35

Ministry of Chemicals andFertilisers

47.45 52.76 11.19

Ministry of CivilAviation

56.21 72.93 29.75

Ministry of Coal 73.67 96.33 30.76Ministry of Commerce andIndustry

29.73 34.65 16.55

Ministry of Communicationsand InformationTechnology

151.01 213.94 41.67

Ministry of Consumer Affairs,Food and PublicDistribution

4.16 5.45 31.01

Ministry of Corporate Affairs

0.28 0.32 14.29

Ministry of Culture 8.05 8.64 7.33

Ministry of Development of North EasternRegion

0.91 2.05 125.27

Ministry of Drinking Water andSanitation

100.00 140.00 40.00

Ministry of Earth

Sciences

8.55 12.81 49.82

Ministry of Environment andForests

19.02 24.30 27.76

Ministry of ExternalAffairs

11.25 15.00 33.33

Ministry of Finance 171.30 201.32 17.52

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( ` bn) 2011-12 2012-13

RevisedEstimates

BudgetEstimates

%Change

Ministry of Food ProcessingIndustries

5.50 6.60 20.00

Ministry of Healthand Family Welfare

243.15 304.77 25.34

Ministry of HeavyIndustries andPublic Enterprises

21.33 26.48 24.14

Ministry of HomeAffairs

61.52 105.00 70.68

Ministry of Housingand Urban PovertyAlleviation

128.27 133.31 3.93

Ministry of Human ResourceDevelopment

517.72 614.27 18.65

Ministry of Information andBroadcasting

7.87 13.05 65.82

Ministry of Labour and Employment

12.54 24.70 96.97

Ministry of Law andJustice

7.72 10.50 36.01

Ministry of Micro,Small and MediumEnterprises

28.52 31.76 11.36

Ministry of Mines 19.42 29.43 51.54Ministry of MinorityAffairs

27.50 31.35 14.00

Ministry of New andRenewable Energy

29.56 33.55 13.50

Ministry of Panchayati Raj

1.97 3.00 52.28

Ministry of Personnel, PublicGrievances andPensions

1.83 2.79 52.46

CHANGE INCENTRAL PLAN OUTLAY (Contd...)

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( ` bn) 2011-12 2012-13

RevisedEstimates

BudgetEstimates

%Change

Ministry of Petroleum and Natural Gas

698.83 797.28 14.09

Ministry of Planning 13.30 21.00 57.89Ministry of Power 627.92 624.25 -0.58Ministry of RoadTransport andHighways

326.19 330.00 1.17

Ministry of RuralDevelopment

695.64 763.76 9.79

Ministry of Scienceand Technology

54.32 59.75 10.00

Ministry of Shipping 53.67 56.75 5.74Ministry of SocialJustice andEmpowerment

51.23 59.15 15.46

Ministry of Statisticsand ProgrammeImplementation

4.58 6.31 37.77

Ministry of Steel 168.57 218.02 29.33Ministry of Textiles 55.03 70.00 27.20

Ministry of Tourism 10.61 12.10 14.04Ministry of TribalAffairs

15.97 15.73 -1.50

Ministry of UrbanDevelopment

87.89 95.45 8.60

Ministry of Water Resources

6.20 15.00 141.94

Ministry of Women and ChildDevelopment

161.00 185.00 14.91

Ministry of YouthAffairs and Sports

8.84 10.41 17.76

Ministry of Railways 484.07 589.98 21.88GRAND TOTAL 5581.72 6515.09 16.72

CHANGE INCENTRAL PLAN OUTLAY (Contd...)

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RECEIPTS

( ` bn) 2011-12Revised

Estimates

2012-13Budget

Estimates

A. REVENUE RECEIPTS1. Tax Revenue

Gross Tax Revenue 9,016.64 10,776.12

Corporation Tax 3,276.80 3,732.27

Taxes on Income 1,718.79 1,957.86

Wealth Tax 10.92 12.44

Customs 1,530.00 1,866.94

Union Excise Duties 1,506.96 1,943.50

Service Tax 950.00 1,240.00

Taxes on Union Territories 23.17 23.10

Less - NCCD transferredto the National CalamityContigency Fund/NationalDisaster Response Fund

39.98 46.20

Less States' Share 2,554.14 3,019.21

1a Centre's Net Tax Revenue 6,422.52 7,710.71

2. Non-Tax Revenue

Interest receipts 201.25 192.31

Dividend and Pro ts 501.22 501.53

External Grants 34.77 28.87

Other Non Tax Revenue 499.09 912.07

Receipts of UnionTerritories

11.05 11.36

Total Non-tax Revenue 1,247.37 1,646.14

Total Revenue Receipts(1a+2)

7,669.89 9,356.85

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RECEIPTS (Contd...)

( ` bn) 2011-12Revised

Estimates

2012-13Budget

Estimates

3 CAPITAL RECEIPTSA. Non-debt Receipts

Recoveries of loans andadvances@

142.58 116.50

Miscellaneous CapitalReceipts

154.93 300.00

Total 297.51 416.50

B. Debt Receipts*

Market Loans 4,364.14 4,790.00

Short term borrowings 1160.84 90.00

External Assistance (Net) 103.11 101.48

Securities issued againstSmall Savings

-103.02 11.98

State Provident Fund (Net) 100.00 120.00

Other Receipts (Net) -158.62 22.45

Total 5,466.44 5,135.90

Total Capital Receipts

(A+B)

5,763.95 5,552.41

4. DRAW-DOWN OF CASHBALANCE

-246.64 N.A

Total Receipts (1a+2+3+4) 13,187.20 14,909.25

Financing of Fiscal De cit(3B+4)

5,219.80 5,135.90

Receipts under MSS (Net) N.A 200.00

@ excludes recoveriesof short-term loans andadvances from States, loans toGovernment servants, etc.

137.45 114.45

* The receipts are net of repayments.

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EXPENDITURE

( ` bn) 2011-12Revised

Estimates

2012-13Budget

Estimates

1. NON-PLAN EXPENDITURE1 A. Revenue Expenditure

1 Interest Payments andPrepayment Premium

2,756.18 3,197.59

2 Defence Services 1,047.93 1,138.293 Subsidies 2,162.97 1,900.154 Grants to State and U.T.

Governments553.22 642.11

5 Pensions 561.90 631.83

6 Police 333.02 356.117 Assistance to States

from National CalamityContingency Fund(NCCF)/NDRF

45.25 46.20

8 Other General Services(Organs of State, taxcollection, externalaffairs etc.)

193.95 213.82

9 Social Services(Education, Health,Broadcasting etc.)

197.09 207.84

10 Economic Services(Agriculture, Industry,Power, Science &Technology, etc.)

237.02 241.05

11 Postal De cit 55.73 57.27

12 Expenditure of U.T.without Legislature

37.35 38.75

13 Amount met from NCCF/ NDRF

-45.25 -46.20

14 Grants to Foreign Govts. 21.05 31.14

Total Revenue Non-PlanExpenditure

8,157.40 8,655.96

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EXPENDITURE (Contd...)

( ` bn) 2011-12Revised

Estimates

2012-13Budget

Estimates

1 B. Capital Expenditure1 Defence Services 661.44 795.792 Other Non-Plan Capital

Outlay96.17 239.71

3 Loans to Public Enterprises 5.93 4.654 Loans to State and U.T.

Governments0.75 0.85

5 Loans to ForeignGovernments

2.50 5.50

6 Others -3.03 -3.46

Total Capital Non-PlanExpenditure

763.76 1,043.04

Total Non-PlanExpenditure

8,921.16 9,699.00

2. PLAN EXPENDITURE2 A. Revenue Expenditure

1 Central Plan 2,525.97 3,035.28

2 Central Assistance for States & Union TerritoryPlans

936.04 1,169.85

State Plan 910.38 1,131.70Union Territory Plan 25.66 38.15

Total Revenue PlanExpenditure

3,462.01 4,205.13

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EXPENDITURE (Contd...)

( ` bn) 2011-12Revised

Estimates

2012-13Budget

Estimates

2 B. Capital Expenditure 1 Central Plan 688.09 874.992 Central Assistance for

State & Union TerritoryPlans

115.95 130.13

State Plan 100.67 110.79Union Territory Plan 15.28 19.34

Total Capital PlanExpenditure

804.04 1,005.12

Total-Plan Expenditure 4,266.04 5,210.25

Total Budget Support forCentral Plan

3,214.06 3,910.27

Total Central Assistancefor State & U.T. Plans

1,051.99 1,299.98

TOTALEXPENDITURE*

13,187.20 14,909.25

DEBT SERVICING1 Repayment of Debt** 1,239.29 1,243.022 Total Interest Payments 2,756.18 3,197.593 Total Debt Servicing (1+2) 3,995.47 4,440.614 Revenue Receipts 7,669.89 9,356.85

5 Pecentage of 2 to 4 35.90% 34.20%

Footnotes

* Excludes expenditure matched by receipts

** The gures exclude discharge of all Treasury bills, dischargeof Cash Management Bills, discharge of Ways and MeansAdvances including Overdraft, repayment under MSS and allPublic Account Disbursements (except discharge of Special

Securities issued in lieu of Subsidies).

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KEY ECONOMIC INDICATORS(Absolute Values)

2009-10 2010-11 2011-12

Gross Domestic Product at factor cost ( bn)At current market

prices

64573.52 PE 76741.48 QE 89121.78 AE

At 2004-05 prices 45076.37 PE 48859.54 QE 52220.27 AE

Output (mn tonnes)Foodgrains(mn tonnes)

218.1 244.8 250.4 b

Electricitygeneration (utilitiesonly) (bn kWh)*

771.6 811.4 653.5 e

PricesWholesale PriceIndex(All commodities,average)

130.4 143.3 155.5 c

CPI-IW (Average) 162.8 179.8 193.8 d

External Sector (US$ mn)Exports 178751 251105 242792 d

Imports 288373 369769 391459 d

Current AccountBalance (net)

-38181 R -45945 PR -32842 f

Foreign Direct

Investment (net)

17966 9360 12311 f

Monetary and FinanceMoney Supply(M3) ( ` bn)

56027 64995 722637 g

Foreign ExchangeReserves (US$ Bn.)

279.1 304.8 295.1 h

Exchange rate( ` /US$) (Average)

47.44 45.56 47.73 i

Footnotes - QE: Quick Estimates; AE: Advance Estimates;PE: Provisional Estimates; R: Revised; b: Second Advance Estimates;c: Apr-Feb-2012; d: Apr-11-Jan-12; e: Apr-Dec-11; f: Apr-Sept-11;g: Outstanding as on 24 Feb-2012; h: As on 24-Feb-2012; i: Apr-11- 29 Feb-2012; PR: Provisionally Revised

Source: RBI, CSO, Commerce Ministry, Economic Survey,

2011-12

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KEY ECONOMIC INDICATORS(Percentage Change Over Previous Year)

(%) 2009-10 2010-11 2011-12

Gross Domestic Product at factor costAt current prices 14.7 PE 18.8 QE 16.1 AE At 2004-05 prices 8.4 PE 8.4QE 6.9AE

Sectoral Growth Rates at Constant (2004-05) pricesAgriculture & allied 1.0 PE 7.0QE 2.5AE

Industry 8.4 PE 7.2QE 3.9AE

Services 10.5 PE 9.3QE 9.4AE

PricesWholesale PriceIndex(All Commodities)

3.6 9.9 8.9 c

CPI-IW (Average) 12.4 10.5 8.4 d

External SectorImports -3.5 40.5 23.5 d

Exports -5.0 28.2 29.4 d

Foreign DirectInvestment (net)

-19.7 -47.9 PR 74.9 f

Monetary and FinanceMoney Supply (M3) 16.8 16.0 13.5 g

Foreign ExchangeReserves

10.7 9.2 -1.9 h

Exchange rate( ` /US$) (Average)

3.15 -3.96 4.6 i

Footnotes - QE: Quick Estimates; AE: Advance Estimates; PE: ProvisionalEstimates; c: Apr-Feb-2012; d: Apr-11-Jan-12; e: Apr-Dec-11; f: Apr-Sept-11; g: Outstanding as on 24 Feb-2012; h: As on 24-Feb-2012; i:Apr-11- 29Feb-2012

Source: RBI, CSO, Commerce Ministry, Economic Survey,2011-12

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GLOSSARY

Appropriation Bill: This Bill entails the Parliamentsapproval for withdrawal of money from theConsolidated Fund to pay off expenses. After theDemands for Grants are voted by the Lok Sabha, the

Parliament approves this bill. Under Article 114(3) of the Constitution, no amount can be withdrawn fromthe Consolidated Fund without the enactment of sucha law by the Parliament.

Capital Expenditure: It is the expenditure incurred onacquisition of assets like land, buildings, machinery,

equipment etc and also loans and advances granted bythe Central Government to State and Union territories,Public sector enterprises and other parties. Thisexpenditure is also categorised as plan and non-plancapital expenditure.

Capital Receipts: Capital receipts include loans

raised by the Government from public which are calledMarket Loans, borrowings by the Government fromthe Reserve Bank of India and other parties throughsale of Treasury Bills, loans received from foreignGovernments and bodies and recoveries of loansgranted by Central Government to State and UnionTerritory Governments and other parties.

Consolidated Fund: All revenues received by theGovernment, loans raised by it, and also its receiptsfrom recoveries of loans granted by it, form theConsolidated Fund. All expenditure of the Governmentis incurred from the Consolidated Fund and no amountcan be withdrawn from the Fund without authorisation

from the Parliament.

Contingency Fund: It is an imprest from theConsolidated Fund, and may be used by the Governmentwithout waiting for an appropriation bill to be passed

by the Parliament. If it becomes necessary for theGovernment to incur expenditure not included in the

budget, it can do so from the Contingency Fund.

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Customs Duties: Customs duty is a type of indirecttax levied on goods imported into India as well as ongoods exported from India.

Exceptional Grant: Through the Exceptional Grantthe House of People can make provision for anexceptional grant that does not form part of the current

service of any nancial year.Excise Duties: Central excise duty is an indirect taxlevied on those goods which are manufactured in Indiaand are meant for home consumption.

Finance Bill: At the time of presentation of the AnnualFinancial Statement before the Parliament, a FinanceBill is also presented in ful lment of the requirementof Article 110(1) (a) of the Constitution, detailingthe imposition, abolition, remission, alteration or regulation of taxes proposed in the Budget. A FinanceBill is a Money Bill as de ned in Article 110 of theConstitution.

Fiscal De cit: The difference between the totalexpenditure of the Government by way of revenue,capital and loans net of repayments on the one handand revenue receipts of the Government and capitalreceipts which are not in the nature of borrowing butwhich nally accrue to the Government on the other,

constitutes scal de cit.Non-Plan Expenditure: It includes expenses thatdo not form a part of the Governments ve year

plan. These expenses consist of revenue and capitalexpenditure on defense, subsidies, interest payments,

postal de cit, pensions, police, loans to public sector

enterprises, economic services and loans as well asgrants to State Governments, Union Territories andforeign Governments.

Non-Tax Revenues: Revenues earned by theGovernment from sources other than taxes aretermed as non-tax revenues. The sources of non-tax

revenues may include; dividends and pro ts receivedfrom public sector companies, interest receipts, nes,

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penalties and fees for various services rendered by theGovernment.

Plan Expenditure: It consists of both revenueexpenditure and capital expenditure of the Centreon the Central Plan and Central Assistance to Statesand Union Territories. Plan expenditure re ects the

Governments investment in enhancing the economys productive aptitude. It arises out of schemes freshlyintroduced in an ongoing Five Year Plan (FYP)

period.

Plan Outlay: Plan Outlay refers to the amountsanctioned for expenditure on projects, schemes and

programmes announced in the Plan. The provision for this amount is made through extra budgetary resourcesand from provisions in the Demands for Grants. The

budgetary support is also re ected as plan expenditurein Government accounts.

Primary De cit: The amount by which the

Governments total expenditure exceeds its totalrevenue generated, excluding the interest payments ondebt. It is primarily the difference between the gross

scal de cit and gross interest payments.

Public Account: Besides the normal receipts andexpenditure of the Government which relate to

the Consolidated Fund, certain other transactionsenter Government accounts, in respect of which theGovernment acts more as a banker. For example,transactions relating to provident funds, smallsavings collections, other deposits, etc. The moneythus received is kept in the Public Account and theconnected disbursements are also made therefrom.

Public Debt: It refers to the total debt of