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Excise duty will increase input costs: EmamiFrom the FMCGs point of view the Budget has been good though there are some grey areas. The increase in excise duty will increase the input costs and measures like hiking the MAT will also impact the bottomline.Source: Moneycontrol Top Headlines | 27 Feb 2010 | 7:34 am 8.3magnitude quake hits ChileA massive magnitude8.3 earthquake struck near Concepcion, Chile early on Saturday.Source: Moneycontrol Top Headlines | 27 Feb 2010 | 7:33 am Exit plans depend on each country: China, AustraliaGovernments need to coordinate exit strategies but the pace at which they unwind stimulus measures depends on their individual circumstances.Source: Moneycontrol Top Headlines | 27 Feb 2010 | 7:33 am Bhushan Steel to invest $6.07 billion on steel plantSteel maker Bhushan Steel Ltd said on Saturday it plans to invest about 280 billion rupees (USD 6.07 billion) to set up a valueadded steel plant in Karnataka.Source: Moneycontrol Top Headlines | 27 Feb 2010 | 7:33 am Industry status for realty positive for sector: ABW InfraThe Real Estate sector had been granted an Industry stature by now, the financing through banks would have been easier in this highly capital driven sector. Also opportunities for external borrowing would have magnified.Source: Moneycontrol Top Headlines | 27 Feb 2010 | 7:24 am Hike in excise duty negative for vehicle sales: MMWhat we are relieved is not about the 4% but there was some talk of 4% but for the auto industry 4% would have been a disaster, 2% is still high because for a vehicle selling at about Rs 10 lakh that is an increase of Rs 18,000 in the consumer price.Source: Moneycontrol Top Headlines | 27 Feb 2010 | 7:04 am Hiked rural spend to result in consumption rise: GodrejBroadly I am very happy because the good points of the Budget are that consumption will rise, the income tax slab changes are very positive in terms of leaving money in the hands of consumers.Source: Moneycontrol Top Headlines | 27 Feb 2010 | 6:47 am Appoiting Nilekani to oversee tech thrust a good move: TCS\"The Budget is growthoriented and is overall positive for the IT sector. Appointing Nandan Nilekani to oversee tech thrust is a good move. The Finance Minister has been making the right moves; however, implementation of the Budget has been governments biggest problem.\"Source: Moneycontrol Top Headlines | 27 Feb 2010 | 6:23 am Investmentlinked health insurance to see boost: AvivaTR Ramachandran, CEO and Managing Director at Aviva Life Insurance said that the parity in service tax was a substantial move for insurance sector, adding that investmentlinked health insurance products would definitely see growth.Source: Moneycontrol Top Headlines | 27 Feb 2010 | 6:09 am BMR Advisors: Key takeaways from Budget; Sector impactBMR Advisors analyses six major sectors like Energy, Infra, Financial Services, IT, Telecom and Pharma post Union Budget 2010.Source: Moneycontrol Top Headlines | 27 Feb 2010 | 6:02 am Budget 2010: Pranab raises tax slabs, begins stimulus rollback!The Union Budget 2010-11 proposed a sizable tax relief for individuals, but hiked the excise and MAT as part of the partial stimulus rollback.Source: Zee News : Business | 27 Feb 2010 | 5:34 am Bhushan Steel to invest $6.07 billion in steel plantThe proposed plant would have a production capacity of 0.6 million tonnes per annum, Bhushan Steel said in a statement.Source: Daily News & Analysis: Money News | 27 Feb 2010 | 2:44 am Adani Enterprises MD arrested in duty evasion caseAhmedabad/Mumbai: Central Bureau of Investigation (CBI) on Saturday said it has arrested Rajesh Adani, managing director of Adani Enterprises, a part of the Rs26,000 crore Adani group, on charges of evasion of customs duty to the tune of Rs80 lakh. “CBI arrested Rajesh Adani, one of the directors of the Adani Exports (now named Adani Enterprises),” agency spokesperson Harsh Bahal told PTI, adding that the anti-corruption branch of CBI Goa had registered a case against him and nine customs officials. The case was also registered against Adani Exports and Ganesh Benjoplast. Adani was arrested on Friday from Ahmedabad and would be produced before a magistrate for a transit remand for taking him to Goa. “Adani had in the year 2006-07 imported naptha, a petroleum product, and did not pay customs duty in Goa,” CBI joint director (western region) Rishiraj Singh told PTI in Mumbai. A case was registered in January 2008 by the Goa Anti-Corruption Bureau of the CBI. The CBI is looking into whether any other employees of the diversified group are also involved. No immediate comments could be obtained from Adani group spokesperson could be obtained. Rajesh is younger brother of group chairamn Gautam Adani, who recently completed a successful initial public offer of another group company Adani Power. The Adani Group deals with commodities trading, distribution of natural gas and port operations. Source: LatestNews-Home - Livemint.com | 27 Feb 2010 | 2:11 am Deora welcomes union budget, justifies fuel price hike - Hindustan Times
Source: Business - Google News | 27 Feb 2010 | 2:03 am GDP to break double-digit growth barrier soon: FMNew Delhi: Finance minister Pranab Mukherjee on Saturday exuded confidence the economy would soon break the double-digit growth barrier and said the stimulus measures will not be fully withdrawn until a robust recovery is achieved. Mukherjee, however, remained concerned over high food inflation and the ambiguous nature of recovery in exports due to the uncertainty prevailing in the developed economies. “...I feel the fundamentals of the economy are strong. The positives from our recent performance outweigh the negatives, so that one can hope to see the economy breaking the double-digit growth barrier in the very near future, which is essential for reducing poverty in the country,” Mukherjee said in his address to the 82nd AGM of Ficci. The finance minister has partially rolled back stimulus sops in the Budget by hiking excise duties by two percentage points across the board, and enhancing tax rates on petroleum products. On a roll-back of the emergency measures to prop up the economy, the minister said, “I am committed to fiscal consolidation in the interest of the economy’s capacity to sustain growth in the medium to long term. “But it can be fully effected when the recovery in private demand - both consumption and investment -- is sufficiently robust,” Mukherjee said. Source: LatestNews-Home - Livemint.com | 27 Feb 2010 | 1:58 am China may set minimum core capital levelChina is urging big lenders to replenish their capital after a record 9.6 trillion yuan ($1.4 trillion) surge in bank lending last year.Source: Daily News & Analysis: Money News | 27 Feb 2010 | 1:53 am Budget 2010: Little hissing, maximum fur - Moneycontrol.com
Source: Business - Google News | 27 Feb 2010 | 1:50 am Markets welcome Budget Sensex gains 238 points in weekThe Bombay Stock Exchange (BSE) benchmark Sensex, in a volatile week, shot up 237.92 points to end at 16,429.55, while welcoming Budget 2010-11 for its investor and industry-friendly measures, and lower fiscal deficit projection.Source: HindustanTimes.com - Top Business News Headlines | 27 Feb 2010 | 1:28 am Sensex gains 238 points this week - Hindu Business Line
Source: Business - Google News | 27 Feb 2010 | 1:24 am Union budget growth oriented CIIThe Puducherry unit of CII has welcomed the union budget for 2010-2011 presented by Finance Minister Pranab Mukherjee in Parliament on Friday and said it was 'growth oriented'.Source: HindustanTimes.com - Top Business News Headlines | 27 Feb 2010 | 1:17 am Union Budget 2010: Pay more for yellow sizzle - Economic Times
Source: Business - Google News | 27 Feb 2010 | 1:07 am Exit plans depend on each country - China, AustraliaINCHEON, South Korea (Reuters) - Governments need to coordinate exit strategies but the pace at which they unwind stimulus measures depends on their individual circumstances, senior officials said on Saturday on the sidelines of a G20 deputy finance ministers' meeting.Source: Reuters: Money News | 27 Feb 2010 | 1:01 am Bhushan Steel to invest $6.07 bln on steel plantMUMBAI (Reuters) - Steel maker Bhushan Steel Ltd said on Saturday it plans to invest about 280 billion rupees ($6.07 billion) to set up a value-added steel plant in Karnataka.Source: Reuters: Money News | 27 Feb 2010 | 12:59 am China may set minimum core capital level - paperBEIJING (Reuters) - Chinese regulators may order banks to shore up their core capital this year in conjunction with a possible increase in their capital adequacy ratios, the Shanghai Securities News reported on Saturday.Source: Reuters: Money News | 27 Feb 2010 | 12:54 am MD of Adani group arrestedManaging Director of Adani group Rajesh Adani was today arrested by the CBI in connection with a custom duty evasion case involving Rs 50 crore.Source: India Business News | Business News - Times of India | 27 Feb 2010 | 12:47 am AIG's Nan Shan buyer plans loan, 7.1 billion in optionsChina Strategic also disclosed that it would pay service fees to two people involved in the $2.2 billion agreement in October to buy AIG's Nan Shan Insurance.Source: Daily News & Analysis: Money News | 27 Feb 2010 | 12:36 am Indonesia bank probe: Mixed signals on government supportThe inquiry into the Bank Century bailout has dominated news in president Susilo Bambang Yudhoyono's second term.Source: Daily News & Analysis: Money News | 27 Feb 2010 | 12:30 am Despite short term setback gems industry poised to glitter EXIM BankThe slow demand revival process in the US and Europe might slow down the export growth prospects of gems and jewellery from India in short term, says a study conducted by the Export-Import Bank Of India (EXIM).Source: HindustanTimes.com - Top Business News Headlines | 27 Feb 2010 | 12:18 am More private banks on the cardsThe Finance Minister has heralded the third phase of the opening up of the private sector banking space. Mr Pranab Mukherjee announced that the Reserve Bank of India is considering giving some additional banking licences to private sectorSource: Business Line - Home Page | 27 Feb 2010 | 12:00 am Petrol, diesel turn costlierThanks to the increase in Customs and excise duties on petrol and diesel announced in the Budget proposals on Friday, consumers will now have to pay Rs 2.71 a litre and Rs 2.55 a litre moreSource: Business Line - Home Page | 27 Feb 2010 | 12:00 am FIIs lead market cheerThe stock market investors, particularly FIIs, on Friday welcomed the Budget as much for its omissions as for its commissions. An intra-day gain of 420 points and a closing gain of 175 for the Sensex made for a happy picture with lots of greenSource: Business Line - Home Page | 27 Feb 2010 | 12:00 am Bumps ahead for auto sectorThough the Finance Minister's proposed excise duty hike may not be a big challenge for the auto industry to handle, the hurdles created by fuel price hikes and rising raw material costs and the imminent change in emission norms may together queerSource: Business Line - Home Page | 27 Feb 2010 | 12:00 am Car prices go up on back of excise hikeVehicles prices are set to rise across the automobile industry from Saturday onwards, with the Government announcing a two per cent hike in excise duties across all segments in BudgetSource: Business Line - Home Page | 27 Feb 2010 | 12:00 am Tax-breaks to spur domestic mobile gear manufacturingThe tax breaks announced in Budget 2010-11 for makers of mobile phone accessories could spur mass local production of key accessories andSource: Business Line - Home Page | 27 Feb 2010 | 12:00 am Pranab takes more than he givesMiddle-class Indians will have more disposable income in their hands from the Finance Minister, Mr Pranab Mukherjee's 2010-11 Union Budget, even as they might have to shell out more for what theySource: Business Line - Home Page | 27 Feb 2010 | 12:00 am This time, Pranab plays ‘good cop-bad cop' with India IncEven as Corporate India was beginning to warm up to Mr Pranab Mukherjee's Budget proposals, the Finance Minister seems to have decided to cut their happinessSource: Business Line - Home Page | 27 Feb 2010 | 12:00 am Who praised and who frowned upon PranabThe Finance Minister's move to mop up a net revenue of Rs 23,500 crore through additional resources mostly on the indirect tax front and partly through services tax has been pilloried as fuelling inflationary pressure on theSource: Business Line - Home Page | 27 Feb 2010 | 12:00 am JLR revival helps Tata Motors post Rs 650-crore consolidated netThe turnaround of Jaguar Land Rover helped Tata Motors report a consolidated net profit of Rs 650.26 crore for the third quarter ending December 31, 2009 against a loss of Rs 2,732.59 crore for the corresponding period a year ago. The revenueSource: Business Line - Home Page | 27 Feb 2010 | 12:00 am FICCI: FM balances fiscal deficit and growth - Moneycontrol.com
Source: Business - Google News | 26 Feb 2010 | 11:45 pm Sensex breaks free after budget, gains 237 points in weekIndian stock markets, which were in stasis for much of this week, reacted positively to the budget, with a benchmark index breaking free to close 237 points higher than its previous weekly close.Source: India Business News | Business News - Times of India | 26 Feb 2010 | 11:43 pm AIG's Nan Shan buyer plans loan, 7.1 bln in optionsHONG KONG (Reuters) - China Strategic Holdings Ltd, the company involved in the purchase of AIG's Taiwan life insurance group, plans to offer a $682 million loan for the deal and grant 7.1 billion in options to four executives, it said in a stock exchange statement.Source: Reuters: Money News | 26 Feb 2010 | 11:29 pm Despite short term setback, Indian gems poised to glitterThe slow demand revival process in the US and Europe might slow down the export growth prospects of gems and jewellery from India in short term, says a study conducted by the EXIM.Source: Daily News & Analysis: Money News | 26 Feb 2010 | 11:28 pm Budget 2010: Impact on your wallet - Moneycontrol.com
Source: Business - Google News | 26 Feb 2010 | 11:10 pm Appna BazaarIndian software developers have quickly learnt the rules of the game. Close to 2 lakh desis are registered with just one app forum. Thats formidable - and its just the beginning.Source: India Business News | Business News - Times of India | 26 Feb 2010 | 11:06 pm It s a balanced growth oriented budget says USIBCThe US India Business Council has hailed India's new budget saying it lays a strong foundation for the country to attract needed investment, spur innovation and drive inclusive growth for all of its citizens. Source: HindustanTimes.com - Top Business News Headlines | 26 Feb 2010 | 9:54 pm South Korea may propose at G20 global dollar fundSeoul, which chairs the G20 this year, is informally proposing the idea to Japan, the United States and European nations.Source: Daily News & Analysis: Money News | 26 Feb 2010 | 9:36 pm U.S. Sen Dodd's bank super-cop may be doomed-sourceWASHINGTON (Reuters) - A bold proposal by Senate Banking Committee Chairman Christopher Dodd to set up a single supervisor for U.S. banks looks doomed, said a source familiar with Senate committee discussions on Friday.Source: Reuters: Money News | 26 Feb 2010 | 9:20 pm Toyota faces tough road to redemption after grillingToyota Motor Corp's president apologised to US lawmakers and ended the day in tears, marking a potential climax to his company's safety crisis but leaving it with a long road to rebuild its reputation. Source: HindustanTimes.com - Top Business News Headlines | 26 Feb 2010 | 9:17 pm Centre has chosen to remain conservativeThis government has chosen to be conservative and aimed at fiscal consolidation. And that is very good too.Source: Daily News & Analysis: Money News | 26 Feb 2010 | 9:00 pm South Korea may propose at G20 global dlr fund - reportTOKYO (Reuters) - South Korea may propose at a G20 summit in November the setting up a global pool to offer emergency dollar funds to financial institutions in the event of another economic crisis, Japan's Nikkei newspaper reported on Saturday.Source: Reuters: Money News | 26 Feb 2010 | 8:12 pm Google acts raise antitrust issues: MicrosoftThe world's largest software maker now seems keen to direct regulatory scrutiny onto Google, by far the world's biggest internet search company.Source: Daily News & Analysis: Money News | 26 Feb 2010 | 7:50 pm Microsoft says Google acts raise antitrust issuesSEATTLE (Reuters) - Microsoft Corp made its most vehement and public attack on Google Inc on Friday, calling its internet rival's actions potentially anti-competitive, and urging victims to file complaints to regulators.Source: Reuters: Money News | 26 Feb 2010 | 6:08 pm Corporate biggies line up to open bank accounts - Times of India
Source: Business - Google News | 26 Feb 2010 | 5:53 pm 2% hike in excise duty on cars & bikes; fuels to cost more - Times of India
Source: Business - Google News | 26 Feb 2010 | 5:00 pm The boldest initiative seen in a long timeThere is little doubt that finance minister Pranab Mukherjee is possibly the tallest political leader within the UPA government.Source: Daily News & Analysis: Money News | 26 Feb 2010 | 3:20 pm Completely losing the plot on educationThe finance minister made much of the substantial increase in plan allocation for social services, and indeed, at Rs 26,000 crore it does seem significant given the paltry nature of increases in this area in the past.Source: Daily News & Analysis: Money News | 26 Feb 2010 | 3:02 pm A budget to drive economic growthThis is a very balanced budget under very difficult circumstances. Our fears that there might be large rollbacks of stimulus measures have proved to be unfounded. Instead, the Finance Minister has laid out a budget to encourage growth. Let me explain.Source: HindustanTimes.com - Top Business News Headlines | 26 Feb 2010 | 1:36 pm After long wait fresh blood in banking sectorThe Reserve Bank of India (RBI) will issue fresh banking licenses to private players, including non-banking financial companies (NBFCs) provided they fulfil the requisite criteria, finance minister Pranab Mukherjee said on Friday while presenting the Union Budget for 2010-11.Source: HindustanTimes.com - Top Business News Headlines | 26 Feb 2010 | 1:32 pm Divestment is backThe government expects to raise Rs 40,000 crore by selling shares in public sector units (PSUs) in 2010-11, signalling a big-bang return of the politically sensitive disinvestment programme. See graphicsSource: HindustanTimes.com - Top Business News Headlines | 26 Feb 2010 | 1:29 pm Recapitalisation will revitalise PSU banksWe all knew that the worst was over and economic recovery was on. But the apprehension of a slowdown in recovery was still very real and was clearly a deterrent to any drastic action, particularly on the stimulus withdrawal front.Source: HindustanTimes.com - Top Business News Headlines | 26 Feb 2010 | 1:25 pm Realtors joltedReal estate, air travel and logistics players may suffer somewhat as they would have to charge service tax from their customers. See graphicsSource: HindustanTimes.com - Top Business News Headlines | 26 Feb 2010 | 1:22 pm Up in the airNew Delhi: Finance minister Pranab Mukherjee’s second effort in less than nine months is an honest attempt at consolidation and correcting the fiscal abuse of the past, but it may yet fall under the burden of scepticism emerging from the underlying macroeconomic risks and what’s been left unsaid in Budget 2010.  Road to reforms: Rameshwarji takes his daughter to school in Chhir village, Jaipur, after his wife has left for work at an NREGS site. Madhu Kapparath/Mint Together with an across-the-board increase in indirect taxes, which signalled the rollback of the fiscal stimulus, and bringing new services in the tax net, the Budget creates the basis for inflationary pressures. All the media coverage. On one easy-to-use website. Browse Livemint.com’s Budget 2010 microsite. Given the politics, especially with the opposition parties staging a walkout, the first in the history of Parliament during the presentation of a budget, it is understandable that the minister stayed away from stating the bare facts about the adjustment (consumers will end up having to pay more for a variety of offerings, though Mukherjee has tried to lessen the impact of the blow). The downside is that because he hasn’t done this, interpretations are open to exaggeration. This could mean trouble when the message sinks in. This is evident in the reaction of the markets—buoyant at first, muted later. Also Read Full marks for macroeconomic strategy Politically this can make the Congress-led United Progressive Alliance (UPA) unpopular and give the Opposition a rallying point, besides stirring disquiet among allies. It could also make individuals and companies hold off investments and defer consumption—threatening growth and the core of the government’s strategy. A reforms legacy Still, the UPA has to be complimented for seizing the political space provided by the 13th Finance Commission (TFC) to press ahead with some honest and much-needed (and politically difficult) fiscal reform even as it continues the stock-market friendly disinvestment programme. If it does not lose its nerve and effect a retreat, the UPA may well find itself in a position to add to its already enviable legacy as the political coalition that helped put in place the building blocks for a modern economy. Mukherjee has, with this Budget, already joined the pantheon of politicians such as P.V. Narasimha Rao, Manmohan Singh, P. Chidambaram and Yashwant Sinha, who pushed difficult but very critical economic reforms. Budget 2010 also marks a departure from finance bills of the UPA’s first tenure (2004-09) when the government failed to take advantage of a booming economy to undertake structural measures to cut back expenditure. This is important because the action taken report (ATR) on the recommendations of TFC submitted to Parliament on Thursday seemed to suggest that the government had deferred any response to the proposals on expenditure reform. It emerges that relying on the recommendations of TFC, a constitutional body, the government has actually moved ahead with a reordering of expenditure and committed itself to a transparent and binding medium-term fiscal reforms programme. Not only is the UPA going to reduce its borrowing by about Rs1 trillion from 2009-10, it has decided to embark on a new strategy: the government will cap its stock of internal debt at 68% of the gross domestic product and derive the fiscal deficit, gross borrowings, as a residual, instead of deriving the fiscal deficit from spending excesses as it used to do previously; since the government also plans to eliminate the revenue deficit, the gap between the government’s income through taxes and other revenues and its spending, this means that it will progressively reduce its borrowings. Not only will this guarantee a non-inflationary financing of development programmes, it will also ensure that such financing does not crowd out private investment and create an upward pressure on interest rates. It is apparent that a lot of thought has gone into this Budget. It is not, despite the Rs26,000 crore giveaways in direct tax concessions and the sustained spending on social sector programmes, by any measure a populist budget. A tax concession of about Rs60,000 for anyone earning above Rs9 lakh, a key demographic category among the middle class, would in normal circumstances be construed a sop. Instead, it is, as are the other direct tax changes, designed to ready the tax infrastructure for the introduction of the game-changing direct tax code (DTC) in April next year. Similarly, the minister has gone in for several measures—such as preferring to retain the service tax rate at 10%—in the area of indirect tax to prepare ground for the introduction of a single goods and services tax (GST). Mukherjee has also taken an initiative to usher in the much-needed institutional reform. Key among these is the move to create the information technology infrastructure that can make a success of efforts such as the implementation of GST and DTC. Another is the implementation of TFC’s recommendation to create a national mission for delivery of judicial and legal reforms. Equally significant is the UPA’s decision to press ahead on green initiatives. Accordingly, it has effected a 61% increase in the outlay to the ministry of new and renewable energy, funded new programmes for river-cleaning and give a big push to use of non-fossil fuels such as solar energy. Threat of inflation Since previous governments shied away from action on the vexing issue of expenditure reform, Mukherjee inherited a dubious legacy; matters were worsened because some of his predecessors resorted to creative accounting to mask the fiscal impact of subsidizing consumption, especially when there was a runaway rise in international fuel prices. Any effort to undo this would inevitably imply adjusting prices. Unfortunately, since this has coincided with the rollback of the fiscal stimuli that the UPA had injected over the last two years, it is likely to lend a price shock to the system—indeed, if not contained, it could spiral out of control. Inflation, as measured by the Wholesale Price Index, was already high at 8.5% in January; more worrying is the fact that food inflation continues to remain in the high double digits. Some of the inflationary effects of the Budget have already resulted in price rises in some offerings; rises in several others could follow. The list of such offerings includes fuel, cars, air tickets, cement, coal, cigarettes, consumer products, and air conditioners. The challenge  Going green: The UPA has pressed ahead with environmental initiatives in its 2010 Budget. Ramesh Pathania/Mint The Congress’ spin doctors will have to back Mukherjee and wear down the political criticism to the Budget. To its advantage, the Congress still enjoys credibility with people; but in politics, like in cricket, situations can alter dramatically and often without warning. What would also help is the fact that Mukherjee, as a CVoter survey reported in Mint on 25 February, showed enjoys personal credibility. Troubleshooters of the government have already indicated that they are prepared to take on the political opposition. The Congress has 208 seats in the Lok Sabha, needs 273 for a simple majority in the House, and it still has the backing of 276 members of Parliament—even after the withdrawal of outside support from the Samajwadi Party and the Bahujan Samaj Party. The real test for Budget 2010, however, will be the ability of the UPA to ensure strong policy response to prevent inflationary pressures from spiralling out of control. So far, it has been found wanting on that front. But now the stakes, both political and economic, are very high. Any misstep in policy would not only set back the Congress as well as the UPA, it could plunge the country into an economic crisis—that could mean missing out on a once-in-a-lifetime opportunity to break the economic shackles and deliver inclusive growth. anil.p@livemint.com Source: Home - Livemint.com | 26 Feb 2010 | 1:20 pm No impact on inflation in medium term: Finance Secretary - The Hindu
Source: Business - Google News | 26 Feb 2010 | 1:12 pm Reform-oriented, balanced and a pleasant contrast to last year While the credit goes to the finance minister for presenting a reform-oriented and balanced Budget, some part of the post-Budget rally can also be attributed to the fear psychosis of investors. Investors to a large extent were unduly concerned about budgetary proposals and their likely impact on the stock markets. Since the Indian economy is in a high growth trajectory, the economic environment has to be supportive in order to achieve the desired results. However, uncertainties attached to the limited options available with the government led to nervousness among investors. How will the budget impact sectors? Where should you invest? Find out on Livemint.com’s Budget 2010 microsite This growth-oriented Budget has put to rest several doubts as it’s forward-looking and addresses a lot of issues that were haunting investors for some time now such as the status of the economic stimulus, the duty structure, government borrowings and the fiscal deficit. Special mention needs to be made of direct and indirect tax proposals, which on the one hand, have left a good amount of money in the hands of tax payers, while on the other hand, a confidence-boosting slow rollback of stimulus measures has also begun. The borrowing target of the government and lower fiscal deficit targets were also positive surprises for the markets. Though the hike in minimum alternative tax was unexpected, the cut in the cess on corporate tax was a welcome move. The rationalization of excise and custom duties was along expected lines. The immediate difference is that from now on the Indian markets will not be one of the front- runners among the losers as domestic strength will counter the volatile and uncertain global economic scenario. This in itself is a big boost to the market as it will prepare the ground for the return of investors. Subsequently, the current pace of economic growth will help boost sentiment on bourses further. Indian investors actually needed a turning point for the market, which this Budget has justifiably delivered. Economic fundamentals will be back in the reckoning—that’s one of the immediate impacts of the Budget for the market. On a broader horizon, valuations post tax adjustments will become slightly more attractive, which will also go down well with the markets as the budgetary proposals have a positive impact on firms. Though it is fair to assume that the impact of the Budget will dominate the market for a very short period of time and the focus will shift back to global economic issues, with projections and assumptions in front of us, there would be more clarity about the economy. There will be an surge in inflation due to the rise in petroleum prices, which as per the economics secretary, will be less than 0.5%. However, the spiralling effect of this would surely hit sentiment in coming weeks, and sooner or later the fear of fiscal tightening would pop up again to haunt investors. Following the post-Budget rally, technical analysis suggests that the worst is over for now, and the market has a very limited downside going forward. As far as the trend on bourses is concerned, it is now pointing upward with a Nifty target of 5,148 in sight. What happened in the last 2 hours of trading on Friday does not mean peaking out of the trend as leading indicators are in crossover mode and clearly showing a break-out on the positive side. The fact that the rally came on huge volumes, also reinforces the view that there is scope for more gains on bourses and next week should be good. On a broader horizon, short-term technical indicators suggest that the Nifty and the Sensex could move up 4-5% in coming weeks, before they see any significant downside. Respond to this column at feedback@livemint.com Source: Home - Livemint.com | 26 Feb 2010 | 1:12 pm Aam aadmi is still the starWith finance minister Pranab Mukherjee raising spending on education and health, as well as rural and urban infrastructure, the Congress-led United Progressive Alliance (UPA) government on Friday reaffirmed its commitment to “inclusive growth”—the ruling coalition’s main economic plank. Mukherjee said 37% of the total spending in the Budget for fiscal 2011 will be on the social sector, which includes health and education, while 46% will go to infrastructure, including 25% to rural areas. “For the UPA government, inclusive development is an act of faith,” Mukherjee said in his Budget speech in Parliament. All the media coverage. On one easy-to-use website. Browse Livemint.com’s Budget 2010 microsite The finance minister increased the Plan allocation for school education to Rs31,036 crore (from Rs26,800 crore in 2009-10), for health to Rs22,300 crore (from Rs19,534 crore), urban development to Rs5,400 crore (from Rs3,060 crore), housing and urban poverty alleviation to Rs1,000 crore (from Rs850 crore) and the micro, small and medium enterprises sector to Rs2,400 crore (from Rs1,794 crore).  A promise: The 13th Finance Commission report, tabled in Parliament on Thursday, also made a strong case for inclusiveness. Madhu Kapparath / Mint The government has made “inclusive growth” its main platform, promising to make sure that the poor get a fair share of the dividend from economic expansion. The finance minister raised the allocation for the rural employment programme by Rs1,000 crore to Rs40,100 crore. He also announced the extension of the government’s health insurance scheme, the Rashtriya Swasthya Bima Yojana, to beneficiaries of the programme who put in more than 15 days of work in the preceding fiscal. Congress leaders said the Budget was aimed at the common man. Union home minister P. Chidambaram, a former finance minister, said it was “a very balanced effort marked by a mature assessment of the state of the economy and of the measures required to sustain high and inclusive growth”. Spending on the Rajiv Awas Yojana, a housing scheme for slum dwellers and the urban poor, was stepped up from Rs150 crore to Rs1,270 crore. The 13th Finance Commission report, which was tabled in Parliament on Thursday, made a strong case for inclusiveness by suggesting a higher revenue share for weaker states, special allocations for border districts and financial grants for states deficient in educational infrastructure. The government has accepted most of the proposals. Still, the hike in the Budget allocation for the government’s principal health scheme—the National Rural Health Mission—is the second lowest since its inception in 2005. Mint had reported on 18 February that the hike would be lower than last year’s. Against the 17% increase it received in 2009-10, the programme won an 11% hike in allocation to Rs15,440 crore. “Rural primary healthcare is inadequate and urban primary healthcare is anarchic—surely more resources are needed for universal healthcare,” said K. Srinath Reddy, director of the Public Health Foundation of India. liz.m@livemint.com PTI contributed to this story. Source: Home - Livemint.com | 26 Feb 2010 | 1:12 pm How the government gets and spends Rs1,10,87,49,00,00,000Taxpayers believe the economy is driven on the strength of the taxes they pay. But a closer scrutiny of government spending shows that individuals fund only 10% of the total expenses in a year. Also See Graphics With a little under one-third of the government’s annual expenses financed from market loans, we do indeed pay, but indirectly, through inflation. The fact that India spends only Rs14 out of every Rs100 on developing assets and the rest goes in funding salaries and wages of government employees is a cause for serious concern. The fact that interest payments account for one-fifth of total expenditure while only 2% is paid for police services, is a frighteningly revealing statistic in itself. Source: LatestNews-Home - Livemint.com | 26 Feb 2010 | 12:56 pm Enjoy the nice, safe Budget Laveesh Bhandari, Head, Indicus Analytics And now, the finance minister has made balloons excise duty-exempt. What a stroke of luck! Yes, you might not know it, but that’s what the fine print says. The television channels did not cover the news. Typically, balloons are manufactured by small entrepreneurs—the safari-suit wearing, betel-chewing types who don’t frequent the corridors of big business lobby groups. So now they need not pay excise tax any more. A small, good-quality balloon costs around Re1; now it could cost 90 paise. People such as me will buy more balloons, there will be greater employment and the country would reach a higher level of gross national happiness. I have seen many such items in almost all budgets—they have ranged from ‘agarbattis’ to ‘bindis’ to vests, and God knows what else, over the years. And I wonder why? Why do we have these strange items in the budget? Are they really worth it? And what about that whole notion of a simple tax regime that is moving towards uniformity of rates? Look at the range of items which are being exempted from indirect taxes in this Budget—cold storages, transporting cereals and pulses (but not fruits and vegetables), corrugated boxes, latex rubber thread. And the list goes on. The whole point of tax reforms is that we must stop fine-tuning taxes. And we in the past have seen the benefits that come with simplicity. But somehow, India’s most important annual economic event is full of subtext that is either nonsensical, or a farce, or both. And it is not just this Budget. Pick up any one over the last two decades, and you will see the same story. The budget could very well be a very simple and important document—how are the expenditure allocations being changed from last year; how are the revenues expected to keep up; and what are we doing about the difference. But what we get is a document that is full of data which confuses as much as it informs. Large expenditure on rural development is confused with stimulus, wherein the boundaries between welfare spending and investment are deliberately kept fuzzy.  Playing safe: Large expenditure on rural development is often confused with stimulus in budgets. Priyanka Parasher/Mint It claims that the government is looking into the important stuff, but does not give any details. We finally know for sure that growth in India is not affected that much either by the government’s expenditures or subsidies or international markets (it would have been far higher if the stimulus package had really made an impact, and much lower if the economy was more sensitive to international markets). In other words, rapid growth is now within the DNA of the Indian economy, and exogenous forces can only affect it a little. In such an environment, the government could have cleaned up its act so much more. But for that you cannot have play-it-safe politics. The farce enacted by the Opposition after the announcement of the fuel price hike is one such reflection of a larger phenomenon. Do not take any decision that will make anyone unhappy today, even if it makes everyone unhappy tomorrow. To cite an example, we have known about the fuel price problem for so long but play-it-safe politicians on all sides did little, and we are having to now increase prices amid already high inflation. Fertilizer prices are set to rise, healthcare costs are going to increase dramatically, government administration costs will also shoot up, inflation will spread to the rest of the economy, oil prices will rise further. And each of these problems is addressable right now. But if the government is going to play it safe, we might have a good time as well. So I am off to buy a balloon and tie it with latex rubber thread. Send your comments on the column at feedback@livemint.com Source: LatestNews-Home - Livemint.com | 26 Feb 2010 | 12:45 pm JLR revival helps Tata Motors post Rs 650-crore consolidated net - Hindu Business Line
Source: Business - Google News | 26 Feb 2010 | 12:39 pm Governance reforms, not hikes, were needed Yamini Aiyar. Centre for Policy Research But will these increases result in meeting the challenge of inclusive development? No doubt, inclusion requires increased allocations. But this is only half the battle. The real challenge for India is to ensure that increases in allocation result in effective spending and, therefore, improved outcomes. This requires effective governance and this is where Budget 2010 falls short. The crux of the problem with governance of India’s social sector is an incentive structure that significantly compromises accountability for performance. Take the issue of expenditure. Year after year, large amounts of money remain unspent, as reported by the government itself. And yet, year after year, the annual budget makes increased allocations with little consideration for expenditure performance–where then are the incentives? This is exacerbated by the fact that information on expenditures, in real time, is rarely available. Moreover, there is very little information and effort made to monitor outcomes. The problem of poor spending is inextricably linked with weaknesses in the nature and form of the implementation structures. In the current system, where Centrally sponsored schemes dominate social sector spending, funds arrive at the local level tied to specific guidelines, allowing little flexibility to accommodate local needs and priorities. Consequently, expenditure rarely reflects the real needs on the ground. Another critical weakness is the incentive structure at the local level. Teachers and doctors, for instance, are hired, paid, monitored and, therefore, accountable only to state governments. It is, of course, unrealistic to expect that the state government, which is far removed from the schools and public healthcare centres, could be effective monitors. This is why absenteeism is so high—25% among teachers and 40% among doctors. Worse, as salaried government employees, they are paid regardless of performance. What, then, are the service providers’ incentives? Think about it—if you are paid a salary, not monitored by supervisors, cannot be fired or have your pay reduced under any circumstances, would you bother showing up for work? Under these circumstances, if the Budget was to really ensure real inclusion, it would have seriously considered raising allocations with real administrative reforms. This would have included making provisions for block grants to panchayats, and increasing their powers to monitor and hold local service providers accountable. The 13th Finance Commission made some far-reaching recommendations aimed at strengthening local bodies. Budget 2010 could have leveraged this to strengthen local governments’ role in implementing social sector programmes. Not doing so is a real opportunity lost. Local governance apart, Budget 2010 could have introduced other reforms such as linking pay to performance and creating more effective systems for monitoring outcomes. In sum, the Budget is much as expected. Some increases in allocation, but increases that are unlikely to have any real consequences in the absence of real governance reforms. In his maiden speech on becoming prime minister, Manmohan Singh promised that the UPA would be a government with a real reform agenda. “No development agenda”, he said, “can be met if we do not reform the instrument in our hands.” Sadly, one term later, the instrument remains much the same. Yamini Aiyar is a senior research fellow and director of the Accountability Initiative of the Centre for Policy Research. Respond to this column at feedback@livemint.com Source: LatestNews-Home - Livemint.com | 26 Feb 2010 | 12:35 pm US sees Pakistan ’strategic shift’ in war on TalibanWashington: “The US has seen a “strategic shift” by Pakistan in the past months during its fight against Taliban militants,” a senior US official said today. Under US pressure, Pakistan is waging multiple military offensives against Islamist militant havens. Washington brands the country’s northwest tribal belt as the most dangerous place in the world and the chief sanctuary of Al-Qaeda. “In the last nine months we’ve seen a significant strategic shift in Pakistan,” a senior administration official said. “That strategic shift is the decision by the Pakistani security forces to take the fight against the Pakistani Taliban.” He highlighted the situation in the Swat valley in the northwest tribal areas of Pakistan, which have served as a rear base for Afghan Taliban militants. “If you go to Swat today, there are two Pakistani (army) divisions. They’re doing classic counterinsurgency,” the officer said. Another senior US official told reporters that recent arrests of Afghan Taliban members and leaders in Pakistan was a clear signal of the close cooperation taking place on the ground. “There have been a number of commanders as well as leaders taken off the battlefield in the last several months,” the official said Source: LatestNews-Home - Livemint.com | 26 Feb 2010 | 12:30 pm Look at the big picturePrime Minister Manmohan Singh spoke about the Union Budget in an exclusive interview with national television broadcaster Doordarshan. Edited excerpts: On fiscal consolidation, the much-awaited rollback of stimulus measures was announced in this Budget. There were expectations that this rollback would be calibrated and selective. But what we saw was…an across-the-board increase in the Central excise duty from 8% to 10%, and there are obvious fears in certain quarters that prices will go up. Do you fear this will stoke inflation? You must look at the total picture emerging from the Budget. The net revenue gain for the finance minister is only Rs20,000 crore. In an economy as large as India, this resource mobilization effort on balance should not trigger any inflationary expectations. At the same time, it gives a much-needed signal. The finance minister has not gone back to the pre-stimulus excise duty rates. He has still exercised moderation while signalling...that you cannot have all things together. Coming to the question of the deficit. A fiscal deficit of 5.5% of GDP (gross domestic product) roughly presupposes a nominal growth of 14% or so with an inflation rate that can be around 5.5% or 6% next year. Do you envisage that the growth projections have been underestimated?  Middle path: Singh says there is no harm in postponing the introduction of the direct tax code till apprehensions about it are addressed. Kamal Singh / PTI Because the duties on petroleum and diesel products have also been raised...there could be fears on this front that…they’ve been raised at an inappropriate time. I think the finance minister has mentioned that these duties were reduced during a period when the petroleum prices had gone up to $112 (around Rs5,175) per barrel. Now the prices...are much lower. Therefore, the economy has the capacity to absorb this order of adjustment in excise and customs duties without generating a wholesale inflationary spiral. There is one view that the key reform measures have been either postponed or skirted. For example, the goods and services tax (GST) has been postponed by a full year, and the direct tax code (DTC) again by one year… Let me say that our direct taxes, on the whole, do not present a problem. We will need some simplification. The DTC must be a way to control the growth impulses... But the DTC that was circulated…has aroused certain apprehensions in the mind of the business community. Those are being looked into, and I think nothing is lost by postponing the introduction of the DTC till such time that we are satisfied that all the apprehensions that have been expressed by investors and the business community have been taken care of. At the same time, the GST requires a consensus. The states have to be on board. Until the states are on board, we cannot move very far in the direction of having a GST. I sincerely hope, during this year, we will work to evolve that consensus. Even in the question of capping the debt at 68% mooted by the Finance Commission, we are now seeing the formation of a committee going into it… The finance minister has committed our government towards capping the fiscal deficit of the Centre and the states at 68% by 2014-15. This is the recommendation of the Finance Commission. The Finance Commission talked about the momentum in the economy and said that despite poor performance on the agricultural front, the economy has bounced back. What are the key provisions you think will give impetus to agriculture in this Budget? I think the finance minister has mentioned a fourfold strategy for agricultural growth. The fact is that, despite negative growth rate (in agricultural production), the economy this year will grow at least by 7.2%. In my view, it could grow at 7.5%. That’s a tribute to the resilience of the economy, the revival of the manufacturing sector, the revival of the export momentum. All these are positive factors. As far as agriculture is concerned, the finance minister has zeroed in on a fourfold strategy of doing everything possible to increase the productivity of agriculture in eastern Indian states, to strengthen the growth impulses in dryland agriculture. He has mentioned that 60,000 villages… will be taken up for increased production, particularly for oilseeds and pulses. He has also mentioned the effort to simultaneously improve food-processing activities; from 10 food parks taken up earlier, we will add to the number by five. So he has mentioned a fourfold strategy which, if implemented, should make considerable difference. One final question. Out of maximum marks of 10, how many marks would this finance minister get on this Budget? Oh, the finance minister has done an exceedingly good job. He is one of our most experienced ministers, and he is one of our seniormost party members. I compliment him for a job well done. You wouldn’t like to give a number? I don’t believe in giving numbers. That’s for the public at large. feedback@livemint.com Source: LatestNews-Home - Livemint.com | 26 Feb 2010 | 12:27 pm India needs to think big and act biggerNew Delhi: In his first interview after presenting the Budget for 2010-11, finance minister Pranab Mukherjee explained his agenda for the economy. The time has come “for India to think big and act bigger on the global stage”, Mukherjee said. Edited excerpts: If I was to use adjectives such as resilient, safe, predictable—would those be acceptable to you as a definition of today’s Budget?  Illustration: Jayachandran/Mint You opened this Budget speech by saying that it shouldn’t just be a statement of income and expenditure but you wanted to dwell on the vision statement as well. Was this learning from the last time where there was some criticism of the fact that you dwelt too much on the minutiae of the Budget and the vision thing was lacking? You are correct to some extent... I could have become just a pedestrian looking at the concerns in hand, completely ignoring the broad approach each one would like to have to reach the goal... (But) I thought that... the time has come when India must not only think big but act in a bigger manner, so that it can take its rightful place in the comity of nations. On petroleum pricing, you hiked the tax, which is fine—that is one way of increasing petrol prices. Would it not have been possible for you to articulate how you intend to deregulate oil prices? It is true. But as far as deregulation is concerned, it is an act. Frankly speaking, it is not the policy matter. In our context it has assumed a policy dimension. But frankly speaking, economically it is an action of the government. Before 2004 actually deregulation was there and that is why I have mentioned it. It is your government which actually regulated a deregulated practice. ...if you look at a paragraph which I have mentioned in my Budget speech.., my colleague, the minister of petroleum and natural gas, will address this issue (of deregulation). I had mentioned that issue, the government appointed a committee. Kirit Parikh committee’s recommendations are available with the government and they will do this. I think that is where a little bit of a disappointment comes in because you sort of kicked the ball away. I could have. On the other issue of goods and services tax now, while it’s a big move, it involves states and Constitutional amendments. You used very caveated language; these are phrases which allow a way out if something doesn’t happen, so is there any doubt in your mind? I would not say that I have a doubt in my mind but what I will say is that when I am concerned with 28 states and I’m concerned with the consensus which had to be marked amongst the various stakeholders, I should not assume that everybody will fall in line... the area of divergence has been narrowed down substantially, the area of convergence has expanded but still there are certain areas which we shall have to work on. There are certain areas where the action has been delayed inordinately, the insurance Bill, let’s say. Your government took a decision in 2004, we are sitting in 2010; that Bill hasn’t gone through and that didn’t find any mention in terms of how you or your government intend to address it. It’s the same thing for the pension and banking Bills. It is because of certain reasons... there is a problem in respect of the insurance Bill, the banking Bill and the pension Bill. What was the problem? The problem was that we didn’t have a numerical majority in both houses of Parliament without the support of the Left and other ally parties; that was one basic reason, that’s why even after the introduction in 2004 we couldn’t proceed further because after all the legislation is to be passed by Parliament. Are we then saying that this is on the backburner? I am not saying that. On all these three Bills, we are working and it will be possible to have it. Here I am little more positive because after all we ourselves have enhanced our strength from 147 to 207 today (in the Lok Sabha)... Until the land acquisition Bill is passed, infrastructure is not going to move at the desired pace that this country needs. What is the government doing there? That we are discussing because it was to be introduced, but one of our coalition partners expressed some concerns. So we are addressing those issues and I think it would be possible to get it passed. I come to one more thing which I am sure you and the ministry must be very concerned about, the way inflation has come back in the economy. We will have to deal with the supply side and the supply side bottlenecks are to be removed. That is why many proposals which I have indicated in my Budget speech and also formulated...are to improve the supply side. I agree there are cyclical factors but there is an endemic factor and that is low productivity; you need a new agricultural policy, you have been the most comprehensive reformer in the country. The fact is all our reforms have been concentrated in trade, industry and investment; in agriculture we have continued to have perhaps the most regulated sector that really needs a new deal. I entirely agree with you that we not only require a new deal, we require another Green Revolution. If we shift the same technology which is available to us, which has brought the first Green Revolution in Punjab, Haryana and western Uttar Pradesh, if I physically can shift it to the eastern part—Orissa, Bihar, West Bengal, Chhattisgarh, eastern UP—then I can have adequate production at least in the medium term; for the long term our productivity has to be increased. One of the last issues that I wanted to address today—and that is an issue that exercises the mind of the international community a lot when one talks to them—and this is the India versus China economic comparison. In 1978, as you would know, the GDP of both countries was the same. In fact, India was ahead, India had more roads, India had more railways, in several areas India was ahead of China. In 30 years they have become four times our size. Where has our policy lagged? We were too late. They began (economic reforms) in 1978, we started in 1991...There is a systematic difference between the two systems, how they operate. It is easier in the Chinese system to implement the decisions than in our system. Allow me to join in on that issue—the first 30 years of our democracy we outstripped China so democracy is not a weakness. It is a strength. Democracy is a strength because democracy helps you to sustain your progress and development, but at the same time in the decision-making process, it is slow. Please remember that. But do you at least consider that it is now imperative for India to, it is easy for a lot of Indian thinkers and leaders to say we are not in a race, we are not competing, but the fact is that you are competing in the world? The fact of the matter is it is not a question of joining the race or being in competition. The fact of the matter is I require minimum 10% growth to improve our conditions... to eradicate poverty, I require minimum 10% growth for a period of (the) next 10 years. This is a compulsion. Today I am producing 234 million tonnes of grain. In the next 10-15 years I will have to double it. There is no way because we have to feed our own people. Requirement of food and food security—it essentially means production, procurement, distribution. cnbctv18@livemint.com Source: LatestNews-Home - Livemint.com | 26 Feb 2010 | 12:25 pm Market rises to the occasionThe markets gave the Budget a thumbs-up today, mainly reflecting relief that the finance minister has rolled back only part of the fiscal stimulus. Widening income slabs that lowered tax rates for middle-income earners and the promise to rein in the fiscal deficit were the other positive signals.Source: Business Standard | Front Page Headlines | 26 Feb 2010 | 12:22 pm Pranab scores a goal for fiscal prudenceFinance Minister Pranab Mukherjee today presented a please-all Budget, that broadly focused on fiscal stabilisation.Source: Business Standard | Front Page Headlines | 26 Feb 2010 | 12:18 pm Sectoral impact: Who’s smiling and who’s not The Budget has stuck to expected lines in announcing a road map for fiscal consolidation while the focus of expenditure remains on promoting inclusive growth and infrastructure development. Here’s a view of what different Budget proposals would mean to different sectors of the economy  Mukesh Agarwal, Director, Crisil Research. The finance minister has done a fine balancing act in the Budget. While the process of fiscal prudence has been initiated by targeting a lower fiscal deficit of 5.5% of the gross domestic product (GDP) for 2010-11, the minister has attempted to maintain the growth momentum by calibrating the increase in indirect taxes and providing more purchasing power to the middle class. The intention laid down to move towards the goods and services tax regime and implement the direct taxes code by April 2011 as well as the fiscal policy strategy statement clearly outlines the direction of future policy. On the flip side, no bold expenditure reforms that would have brought lasting fiscal gains have been initiated. More measures could have been taken to strengthen the spending discipline of the government even though the budgeted revenue expenditure growth is moderate at 5.8%. The fiscal deficit correction therefore hinges on revenue buoyancy emanating from an improving growth outlook as well as cumulative inflow of Rs75,000 crore targeted from the divestment of stake in public sector undertakings and 3G spectrum auctions. The increase in duties on petrol and diesel could lead to greater inflationary pressure. Even as excise duties have been increased by 2%, the Budget attempts to stimulate consumption by offering tax concessions to the middle class that are expected to benefit 60% of taxpayers. For example, the effective benefit for individuals with a taxable income higher than Rs5 lakh per annum would be between Rs21,000-Rs52,000 per annum. The deduction of Rs20,000 per annum from salary allowed for investment in long-term infrastructure bonds is also a step in the right direction, given the huge funds required by the sector. In addition, this would induce individual savings. Indian industry would be relieved that the indirect tax cuts announced over the course of the past one year have only been partially rolled back. Most industries are likely to pass on the increase in excise duty to consumers given the momentum in the economy. Gautam Thapar would increase employment. What would you do if you were FM. Play the game, read the analysis. All onLivemint.com’s Budget 2010 microsite. The reduction in surcharge on corporate tax from 10% to 7.5% would have come as a pleasant surprise. The increase in the minimum alternate tax rate from 15% to 18% would however negatively impact some companies in the telecom services, information technology/information technology enabled services, pharmaceutical and construction sectors. The settlement of Pay Commission arrears and reduction in fertilizer subsidies has allowed the government the leeway to budget much lower borrowings in 2010-11. The targeted 15% reduction in market borrowing to Rs3,450 billion would ensure that interest rates do not increase sharply, at a time when private corporate sector investment is projected to increase and inflationary pressures would continue to exist. In sum, the Budget has something for everybody. The finance minister has done a good job in presenting a Budget focused on managing growth while not losing sight of fiscal prudence. The renewed focus on fiscal prudence, as evident in the targeted fiscal deficit of 4.1% by 2012-13, bodes well for the future. One only hopes now that execution matches pronouncements and these good intentions are paved with substantive action. Crisil, leading Indian rating agency, majority owned by S&P, partnered with Mint to analyse the impact of the budget on industry.  Anjan Ghosh, Head, Corporate Sector Ratings, ICRA. Outlining a road map for fiscal consolidation The Union Budget for 2010-11 was widely expected to signal a return to fiscal consolidation and movement towards much awaited structural reforms in areas such as implementation of a goods and services tax (GST), direct tax code (DTC), and subsidies. The Budget clearly stuck to the expected lines in announcing a road map for fiscal consolidation, including an explicit statement on reduction of government debt, timelines for implementation of DTC and GST, and partial rollback of excise duty cuts. The cut in direct tax rates, which was somewhat unexpected, would have a beneficial impact in terms of boosting private consumption and overall sentiments, although it is somewhat difficult to explain in the context of the impending introduction of the DTC. Among the other positives are the government’s statements on the need to strengthen and institutionalize a mechanism for maintaining financial stability, set up a commission to clean up financial sector laws, take steps to simplify the foreign direct investment (FDI) regime, and focus on clean energy. The emphasis on increasing transparency—whether with respect to avoiding below-the-line items in the Budget such as oil or fertilizer bonds, or with respect to use of technology for tax administration, financial governance, and directed subsidy payments—appears to be another philosophy underlying the Budget. The focus of expenditure remains on promoting inclusive growth and infrastructure development, with 46% of the Plan allocation being devoted to infrastructure. The growth in revenue expenditure has been budgeted at 6% for 2009-10. The higher target of Rs40,000 crore set for disinvestment proceeds creates fiscal space for the budgeted 30% growth in capital expenditure which, among other things, would allow a substantial increase in the expenditure on roads, recapitalization of public sector banks to the extent of Rs15,000 crore, and a considerable increase in the defence outlay. Additionally, non-budgetary support through India Infrastructure Finance Co. Ltd is expected to increase significantly in 2010-11, facilitating greater private participation in infrastructure projects The proposal to set up a coal regulatory authority and introduce competitive bidding for the allocation of coal blocks is another welcome step—one due for a long time. The Union Budget for 2010-11 has retained the previous year’s rolling target of 5.5% of gross domestic product (GDP) for the fiscal deficit in 2010-11. The forecast improvement in the fiscal deficit in 2010-11, compared with the revised estimate of 6.7% of GDP in 2009-10, relies largely on the expectation that the revenue deficit would decline from 5.3% of GDP in 2009-10 to 4% in 2010-11. However, the revenue deficit target set for 2010-11 is substantially higher than the previous fiscal’s rolling target of 3%. The corporate sector as a whole is expected to benefit from the buoyancy in the overall growth, and from the possibility of interest rates remaining under control, given that the borrowing programme is in line with market expectations. The negatives, apart from the increase in the minimum alternate tax rate, would be continued ambivalence on the vexed issue of oil price decontrol. Overall, of key importance would be the government’s ability to ensure that the overall expenditure growth is maintained within the budgeted levels of less than 9% relative to the revised estimates for 2009-10, without which the targeted fiscal consolidation would be difficult to achieve. Icra Ltd, leading indian rating agency and an affiliate/associate of Moody’s Investor Services, partnered with Mint to analyse the impact of the Budget on industry. Also See What different Budget proposals would mean to different sectors of the economy Illustrations by Shyamal Banerjee, graphics by Paras Jain. Source: Home - Livemint.com | 26 Feb 2010 | 12:16 pm Rental tax back to haunt retailersNew Delhi: The Indian retail industry fears it will be set back by nearly Rs1,000 crore in backlog payments if the government does not reconsider the service tax on rentals it has announced in the Union Budget for 2010-11. “It will have a huge impact on the retail industry if it goes through,” said Kumar Rajgopalan, chief executive of Retailers Association of India, which represents the industry. He said the association would request the government to reconsider the proposal.  The sting: The move could potentially affect not just retailers but also firms across sectors that rent out space. Ramesh Pathania/Mint But the Retailers Association went to the Delhi high court against it in 2008. Last year, the court ruled that renting of commercial space does not constitute a service. To circumvent the ruling, the government has declared in the 2010-11 Budget that the “activity of renting itself is a taxable service”, and levied a 10% duty on it. It has also said the tax has to be paid with retrospective effect from June 2007. Indeed, as “renting” itself has been made taxable, this could potentially affect not just retailers but firms across sectors that rent out space. “It’s going to be a significant one as we have to pay quite a lot of money,” said C.B. Navalkar, chief financial officer at the country’s second largest listed retailer Shopper’s Stop Ltd. Navalkar said the tax would account for about 0.8% of the company’s total revenue. “The onus is on the landlords, but obviously they will recover the tax from us to pay money to the government,” he added. But India’s biggest retailer, Pantaloon Retail (India) Ltd, said barring five cases, all the property lease agreements the company has signed specifically mention that the landlords would bear the tax if it is applicable. “Wherever the agreement says the lessee has to pay, we have to provide for it,” said Kishore Biyani, managing director of Pantaloon. “It doesn’t impact us much, but it creates disputes (with landlords) and issues.” rasul.b@livemint.com Source: LatestNews-Home - Livemint.com | 26 Feb 2010 | 12:10 pm Hike in MAT to hurt oil & IT firms mostMumbai: Large firms such as Reliance Industries Ltd (RIL) and Tata Consultancy Services Ltd (TCS) will have to shell out more in the fiscal beginning 1 April, with the government raising the rate of minimum alternate tax, or MAT. How will the budget impact sectors? Where should you invest? Find out on Livemint.com’s Budget 2010 microsite Finance minister Pranab Mukherjee has in the Budget proposed to increase MAT to 18% (of book profit) from 15%. In the 2009 budget, Mukherjee had hiked MAT to 15% from 10%. MAT was introduced by then finance minister P. Chidambaram in 1997-98 to plug a gap in the tax system that allowed companies with book profits and large capex to not pay taxes thanks to high depreciation charges. Oil and gas explorers, petroleum refineries and information technology (IT) firms, as well as companies that have set up operations in economically backward regions such as the North-East to avail tax holidays, will be the most affected by the hike, say analysts. “The biggest negative across sectors, including infrastructure, would be the increase in the minimum alternate tax,” said G.V.K. Reddy, chairman of GVK Power and Infrastructure Ltd. The additional Rs20,000 tax relief for individual investors subscribing to infrastructure bonds, however, was a positive, he said. Uday Ved, executive director and head of tax practice at consulting firm KPMG India Pvt. Ltd, said companies would actually “have to pay 19.93% MAT, including a 3% cess on their book profits, (up) from the present 16.99%, which will affect their cash flows.” Many IT firms have been paying at a 15% effective tax rate and enjoying tax benefits by operating out of software technology parks, established to promote the sector. The scheme expires next year and IT companies have been bracing for higher tax rates. S. Mahalingam, chief financial officer of TCS, India’s largest software firm, said the MAT hike would have an impact on cash flow, but it wouldn’t be significant for TCS as the company was expecting an increase in its effective tax rate to 18% in the next fiscal. The increase in MAT “would result in higher outgo of cash in the short term and would affect Indian corporates adversely,” said Surjeet Singh, chief financial officer, Patni Computer Systems Ltd. “However, this impact has been cushioned to a large extent by lowering of corporate surcharge from 10.0% to 7.5%.” Maulik Patel, head of research at brokerage KR Choksey Shares and Securities Pvt. Ltd, said there was nothing in the Budget for oil and gas exploration companies. “There was no clarity on whether the tax holiday will be applicable on the investment incurred by gas producers under Nelp 1-7 rounds or when the (Kirit) Parikh report will be implemented,” he said. These firms have been paying only MAT and, Patel estimates, the rise in the tax floor would hurt profits by 1-3%. Another energy sector analyst with the Indian arm of a foreign brokerage said, on condition of anonymity, that RIL’s profits would see “a marginal impact” as it “already enjoys so many other exemptions.” baiju.k@livemint.com Bhuma Shrivastava and Lison Joseph in Mumbai contributed to this story. Source: LatestNews-Home - Livemint.com | 26 Feb 2010 | 12:05 pm Market Mood | Cheers by some, not allMumbai: A lower fiscal deficit, an excise tax hike which had already been accounted for and a personal income tax bonanza led to a relief rally as Indian equities soared 2.5% when the finance minister presented the Union Budget. It was short-lived however as investors pared some of the gains fearing inflationary consequences and questioned the assumptions on government spending increases in the next fiscal year.  Not convinced: The initial market rally was short-lived as investors pared some of the gains, fearing inflationary consequences. Arko Datta/Reuters At the close of trading on Friday, India’s benchmark index, the Sensex, was 1.08% up from the previous close at 16,429.55, down from an intra-day high of 16,669.25, marking finance minister Pranab Mukherjee’s announcement that next year’s fiscal deficit would be capped at 5.5% and at 4.1% in the next two years. The 50-stock Nifty index closed 1.29% up at 4,922.3. The Budget clarified the fiscal road map, bringing a measure of predictability, which buoyed the markets, said Nandip Vaidya, president of equities at India Infoline Ltd, the country’s largest listed brokerage. “The expectations were not very high,” Vaidya said. “The uncertainty is over and the intent is clear and positive.” “What the market liked most was the fiscal consolidation programme,” said Alroy Lobo, chief strategist and global head of equity assets at Kotak Mahindra Asset Management Co. Ltd, which manages Rs36,781 crore. “The deficit numbers were good and there was a fair degree of short covering.” The debt markets were encouraged by the lower borrowing target of Rs3.45 trillion for the year, down from the current year’s record Rs4.5 trillion. “The budget is positive for the bond markets,” said G.A. Tadas, managing director of IDBI Gilts Ltd. “Although yields rose today because of the petroleum price increases, the borrowing is lower than expected and we should see a rally on Tuesday.” The benchmark 10-year government bond closed up 8.5 basis points to 7.885%. G. Chokkalingam, head of equities at Barclays Wealth India, said the budget left investors free to concentrate on the good macro economic fundamentals such as the projected 7.2% growth figure for this fiscal year, proposed tax reforms that will kick in next year and the thrust on infrastructure, education and health. “The era of uncertainty is over,” said Chokkalingam. “Barring issues such as a poor monsoon or global incidents, the Budget has laid a foundation of solid wealth creation.” With profit being booked later in the day, clearly not all investors agreed. “There was a lot of relief and the the assumptions made on the revenue side are fairly conservative,” said Anoop Bhaskar, head of equities at UTI Asset Management Co. Ltd, which manages Rs74,510 crore. “But investors are concerned about the assumption on the expenditure side.” The expenditure hike of 8% is one of the lowest in recent years thanks to the modest allocations for subsidies and defence. For instance, the overall subsidy bill projected for next year is 11% lower, while the sum allocated for the Mahatma Gandhi National Rural Employment Guarantee Scheme is only Rs1,000 crore higher than the present fiscal. The government expects asset sales and high-speed mobile spectrum auctions to be substantial sources of revenue next year. “There is a fair bit of reliance on the 3G auction and disinvestment figures and if there’s any slippage on that front, it will be negative,” said Lobo of Kotak. The sale of mobile spectrum, which will fetch the government Rs35,000 crore has been delayed for several months now. While the budget is seen as positive, investors said they would look at global factors such as high debt in the Euro zone and banking regulations across the world in the medium term, besides valuations. “One has to go through the fine print, but the signal is of moving to better fiscal health,” said Vetri Subramanian, head of equities at Religare Asset management Co. Pvt. Ltd, which manages Rs13,823 crore. “But valuations are still high and have not dropped to attractive levels. We remain cautious on Indian equities.” At the sectoral level, auto stocks soared the most with the BSE Auto index up 4.74% as the 2% excise tax hike was on expected lines. Banking scrips also gained a collective 2.26% after the Budget announced that the Reserve Bank of India was considering additional licences for the private sector. The top gainer among the 50 Nifty stocks was Reliance Capital Ltd—a banking licence candidate—up 8.12% to close at Rs786.45. It was followed by Tata Motors Ltd, which gained 7.21% to close at Rs715.55. Ashwin Ramarathinam contributed to this story. ravi.k@livemint.com Source: Home - Livemint.com | 26 Feb 2010 | 11:51 am Govt focus has changed to attacking tax-planning tools However, I believe that this is really a lull before the storm, since the finance minister has clearly stated that the code will be introduced with effect from 1 April 1 2011, and therefore, this Budget may have passed off peacefully only because there would be no merit in making major changes to a law that will die in a year. The aspect that should really now come back into focus is how much the government has really taken on board the concerns that several quarters had raised on the DTC, and how and when the new law would be phased in. How will the budget impact sectors? Where should you invest? Find out on Livemint.com’s Budget 2010 microsite Nevertheless, several proposals have far-reaching consequences. For once, consistent lobbying has paid off and the error in the calculation of the tax holiday for units in tax-free special economic zones (SEZ) has now been corrected retroactively. However, what tempers this is the absence of any announcement on the government’s overall policy on tax holidays for SEZ units, and whether these incentives will continue under the DTC still remains a question. Similarly, there was no mention on whether the tax holidays for units in software technology parks will be extended. Staying with tax holidays, a big boost has been given to the hospitality industry. Hotels with 2-star and above ratings set up anywhere in India that start operations after 1 April 2010 will now enjoy an investment-linked deduction. Hotels will be allowed to claim a 100% deduction of capital investments, other than on land and goodwill, in the year the investment is made. This would provide the hotels with accelerated deductions, and hence, defer tax liabilities. In cases of continued investments, the benefits will be greater. Continuing the boost for research and development (R&D) initiatives, the weighted deduction for expenses on in-house R&D has been increased to 200% from the present 150%. This is a huge incentive for firms to increase spending. Increased deductions have been allowed on R&D contributions to specified institutions and universities. Although the surcharge for companies has been reduced to 7.5% from the existing 10%, the dampener for corporate India is the increase in the rate of minimum alternate tax (MAT) from 15% to 18%. To my mind, there is no economic justification to increase the rate of MAT, particularly with the uncertainly surrounding the ability of companies to carry forward MAT credits under the DTC. The levy of MAT also marginalizes several tax incentives, including those available to the information technology sector under the software technology parks of India regime, and yet again, the government has used the MAT stick rather unfairly. In a major change proposed that could significantly impact corporate reorganization, transfer of shares of an unlisted company to a partnership firm or a company for inadequate or no consideration would create a tax liability for the buyer on the difference between the fair value of the shares and the actual consideration. This would also apply in specific situations where seller is, otherwise, exempt from capital gains tax. This would hamper internal reorganization between family members and also create several absurdities, such as in case of a transfer between a holding company and its wholly owned subsidiary. On the positive side, the conversion of a company to a limited liability partnership will not be liable to capital gains. This may, unfortunately, have a limited impact since it would only apply if the company’s turnover is less than Rs60 lakh. Continuing with the trend of amendments to overturn the impact of court rulings, the law is to be amended to clarify that non-residents will be liable to tax in India on fees for technical services received even if the services are performed outside India. This would bring several foreign companies into the tax net and increase costs for Indian companies. There have been other minor amendments in some provisions, including a change that allows high courts to condone delays in filing of appeals—a reward for inefficiency! Missing from the Budget are several changes that should have been made to improve tax administration and collection. I have always advocated that stability in the tax regime is welcome, and whatever be the reasons, the changes this time are marginal. While industry always has a long list of expectations and most of them would be disappointed on that measure, I believe that the game has changed. Profit-linked incentives and sectoral exemptions are now passé and the focus of the government has changed to attacking several tax-planning tools by introducing anti-abuse provisions. The rules of the game will now demand higher sophistication from taxpayers as well as administrators. These are the author’s personal views. Respond to this column at feedback@livemint.com Source: Home - Livemint.com | 26 Feb 2010 | 11:37 am Why stock markets were subdued But by the end of the day’s trading, the markets gave up nearly two-thirds of those gains and ended only about 1% higher. This is a rather subdued reaction, especially coming on the back of an 8% drop in the Nifty since mid-January. The markets’ attention was almost entirely focused on the fiscal deficit target for 2010-11 and the estimate of the government’s borrowing. The fiscal deficit target was exactly in line with market expectations and matched the level of deficit indicated in the medium-term fiscal policy statement last year. Besides, the finance minister also laid a road map for further reductions in the fiscal deficit in the next two years. All this is encouraging, given the markets’ recent concern about India’s high deficit and borrowing programme. For 2010-11, the net borrowing is estimated to be Rs3.45 trillion, in line with market estimates. What’s more, the government has targeted raising Rs40,000 crore from divesting stake in state-run firms next year, higher than the Rs25,000 crore it plans to raise this year. While it has initiated a withdrawal of its stimulus measures, it’s in a gradual manner and one that the markets were already expecting. A two percentage point increase in excise rates was already factored in share prices, and the decision to retain service tax rates at 10% is a marginally positive surprise. The relaxation in income-tax rates for individuals will push consumption demand and benefit sectors such as auto and consumer goods. Infrastructure spend, too, is being increased by the government and this sector will also benefit from an additional tax exemption for infrastructure bonds. The financial services and banking sector will benefit from curtailment in the net borrowing programme, apart from the plan to allow more private competition in the sector. There was the usual farm spending push which would benefit companies catering to the rural segment. There were also specific sops for companies involved in clean energy such as Suzlon Energy Ltd. One of the negatives in the Budget speech was the increase in the minimum alternate tax (MAT) rate from 15% to 18%. For MAT-paying companies such as Reliance Industries Ltd, this would result in a drop of about 3% in earnings after adjusting for the marginal reduction in corporate tax surcharge from 10% to 7.5%. Companies in the infrastructure space would be affected largely by the increase in the MAT rate. For companies that pay a full tax rate, there will be an increase of about 1% in earnings due to the reduction in corporate tax surcharge.  Retail boost: A good news for retailers is that the Budget will put more cash in the hands of individuals. Parth Sanyal/Reuters Similarly, achieving the disinvestment target of Rs40,000 crore would depend on the state of the markets next year. Given some of these uncertainties, the concern is that government may overshoot the fiscal deficit target. Of course, the markets’ reaction also needs to be seen in the light of the fact that the global markets have been subdued lately. While the Budget has taken away some of the concerns specific to India, global concerns remain and the market direction in the near term would depend on how these shape up. Auto Investors in auto stocks heaved a big sigh of relief after the finance minister announced that the increase in excise rates would be limited to 2%. This had already been factored into auto share prices. There was a concern that excise rates on diesel multi-utility vehicles will be raised even higher, based on a recommendation by the Parikh committee. This didn’t happen, leading to a rally in Mahindra and Mahindra Ltd’s shares. Auto makers will also benefit from the increase in disposable incomes. Capital goods and engineering Shares of Bharat Heavy Electricals Ltd fell despite the thrust on infrastructure spending and the broad rise in markets. It was because the markets’ expectation of a hike in customs duty to thwart Chinese competitors didn’t come through. Shares of Larsen and Toubro Ltd rose, thanks to the increase in infrastructure spend. Cement The hike in excise duty on cement from 8% to 10% was not a surprise for the sector and would mean an increase of around Rs4-5 per bag of cement. According to most analysts, companies will be able to pass on the hike. At worst, there will be a marginal impact on margins if the hike is not passed on entirely. The sector will also get affected by the introduction of a Rs50 a tonne cess on coal and an unanticipated hike in duties on diesel and petrol. This will increase freight costs. Still, cement shares were either flat or rose marginally, indicating that the excise hike was largely expected. Besides, the sector should also benefit from the increased outlay for infrastructure spending. Cigarettes ITC Ltd’s shares were among the worst hit after the Budget speech. But the market reaction seems overdone. For one, the Budget has actually reduced the excise duty on cigarettes up to 60mm length for both filter and non-filter cigarettes by 18%. A key demand of ITC for a special tax slab for smaller cigarettes has been met. But duties on cigarettes in the 60-70mm category have been hiked by 18% and for others by 11%. The quantum is not high. In the past, ITC has passed on excise hikes to customers with no real effect on demand, except when it coincided with a recessionary period. Personal and home care products While the 2 percentage point hike in excise duties was on expected lines, it comes in the backdrop of slowing demand in 2009-10. Companies have either cut prices or are offering volume discounts to spur demand. They would thus prefer to absorb higher excise duties in mass market categories such as soaps and detergents while hiking prices in less price-sensitive categories such as cosmetics. This will result in a marginal affect in profit margins of companies in this space. The hike in MAT will affect earnings of companies with manufacturing concentrated in tax-exempt locations. Retail The Budget will put more cash in the hands of individuals, inducing them to spend more. This is good news for retailers. But one amendment will sour the good feeling. Retail organizations had challenged the imposition of service tax on rentals in court and got a favourable judgement, which disallowed the tax. A retrospective amendment has been proposed, by which the activity of renting itself has been classified as a taxable service.  Graphic: Ahmed Raza Khan/Mint Pharmaceuticals Pharmaceutical companies doing in-house research will benefit from the Budget proposal to increase weighted deduction on research and development expenditure increased from 150% to 200%. Indian pharma firms have become more conservative with their research budgets, especially on the new drug discovery front. That is driven more by business considerations and a higher deduction is unlikely to change that. However, research in other fields, including bulk and generic drugs, will benefit from this move. However, the hike in MAT will see the post-tax profits of companies such as Cipla Ltd getting affected. Oil and gas That government chose to increase customs duty on petroleum products and would charge an excise duty on petrol and diesel is being seen as an indication that the Parikh committee’s recommendations may be implemented with some delay. This is reflected in the share price of Bharat Petroleum Corp. Ltd, which fell by 1.3% on Friday. Write to us at marktomarket@livemint.com Source: Home - Livemint.com | 26 Feb 2010 | 11:36 am Tata’s Jaguar Land Rover business reports profitMumbai: Spurred by cost cuts and better vehicle sales, Tata Motors Ltd’s Jaguar and Land Rover (JLR) business has registered its first quarterly profit since the country’s largest auto maker bought it in June 2008. The business reported a net profit of Rs416 crore for the three months ended 31 December.  Smooth ride: Tata Motors vice-chairman Ravi Kant. Harikrishna Katragadda/Mint JLR profits boosted Tata Motors’ consolidated net sales to Rs25,979 crore, up 48% over a year ago, and swung losses into a net profit of Rs650 crore. The company’s earning took some analysts by surprise. “The results are significantly better than what we had expected,” said Joseph George, an analyst at BNP Paribas Securities India Pvt. Ltd. George expects this trend to continue as the benefits of sourcing from low-cost countries kick in. Albeit on a low base of the previous year, the company’s domestic and export volumes increased 67.5% to 165,413 units. On the back of new models and recovery in markets such as Russia, China and the US, retail sales (direct sales to the customer) of Jaguar and Land Rover models went up 28% to 55,300 units. shally.s@livemint.com Source: Home - Livemint.com | 26 Feb 2010 | 11:26 am Suzlon to reset FCCB conversion; seeks nodMumbai: Suzlon Energy Ltd will take shareholder approval to reduce the conversion price of $500 million (Rs2,310 crore) in foreign currency convertible bonds (FCCBs) issued by the company in 2007, Suzlon said in a statement on Friday. This follows a government notification allowing firms that issued FCCBs before 27 November 2008 to reset the conversion price to a level as close as possible to market price. The board approved a reduction in the conversion price of $300 million in zero-coupon convertible bonds issued on 11 June 2007 and due June 2012 and $200 million in zero-coupon convertible bonds issued on 10 October 2007 and due October 2012, the company said in a notice to the Bombay Stock Exchange. Source: Home - Livemint.com | 26 Feb 2010 | 11:07 am Towards a better tax structure New Delhi: April 2011 is the deadline for far-reaching tax reforms that are expected to feed into the ongoing fiscal consolidation and, eventually, boost economic growth.  Uniform levy: A toll plaza on the Delhi-Gurgaon expressway. Unlike the states, the Centre wants a single GST rate to cover both merchandise and services. Ramesh Pathania / Mint Finance minister Pranab Mukherjee’s Budget proposals on both direct and indirect tax were designed to seamlessly flow into the likely architecture of the proposed direct tax code (DTC) and goods and services tax (GST), respectively. How will the budget impact sectors? Where should you invest? Find out on Livemint.com’s Budget 2010 microsite. Of the two, DTC is more under the control of the Union government, Ashok Chawla, finance secretary, said at a press conference following the Budget speech. GST, which aims to create a common market in India, would require state governments to sign on. Currently, the Centre and states are engaged in discussions to roll out GST. Mukherjee proposed to partially roll back fiscal stimulus measures by increasing the mean Central excise duty by 2 percentage points to 10%, and enhancing indirect taxes on some petroleum products. The increase in indirect taxes aim to rein in fiscal deficit, reduce government borrowings and create space for loans to drive private investment and growth in the economy.  Graphic: Yogesh Kumar / Mint Though the immediate impact of the increase in indirect taxes would be to push up the general price level in the economy, the eventual outcome would be to neutralize inflationary pressure which stems from an unchecked fiscal deficit (the excess of expenditure over revenue which is funded through borrowings). According to Kaushik Basu, chief economic adviser in the finance ministry, the Budget proposals on indirect taxes would add about 0.43% to the inflation rate as measured by the Wholesale Price Index. “Beyond a point, you are feeding into deficit,” Basu said, while explaining the rationale to increase indirect taxes. “Nothing is a free lunch in developing a budget.” Another senior official in the finance ministry, who did not want to be named, said the increase in mean Central excise to 10% was designed to be in sync with the Union government’s design of GST. The Union government, unlike the states, wants a single GST rate to cover both merchandise and services. Prior to the Budget, services were taxed at 10%, and Mukherjee pointedly remarked that he chose to leave the prevailing service tax rate at the same level. Studies commissioned by the 13th Finance Commission indicated the roll-out of GST could increase gross domestic product by almost Rs1 trillion by ironing out inefficiencies and lowering costs. A buoyant economy is expected to create a virtuous cycle by enhancing tax revenues and lowering the fiscal deficit by compressing the extent of expenditure that needs to be met through borrowings. On the direct tax side, Mukherjee provided benefits on personal income tax and also pushed further along the path to link tax exemptions for companies to investments rather than profits, both of which were suggested by DTC. The DTC builds on the move in the recent past to simplify tax law, reduce exemptions and introduce moderate rates, all of which have contributed to the recent buoyancy in direct taxes. Mukherjee’s Budget proposal to provide benefits on direct taxes are expected to boost economic growth. “(The) whole idea is a large part will go into savings. Growth depends critically on the savings rate,” Basu said. According to Budget documents, benefits on personal income tax would also boost private consumption and push economic growth forward. sanjiv.s@livemint.com Source: Home - Livemint.com | 26 Feb 2010 | 10:39 am Banks may burden customers if forced to abolish prepenalty: RBIReserve Bank Deputy Governor, Usha Thorat, said abolishing the practice of levying pre-payment penalty on loans could prompt lenders to hike interest rates to pass on their burden to customers.Source: India Business News | Business News - Times of India | 26 Feb 2010 | 9:34 am Govt hikes fuel prices for first time since JulyNEW DELHI (Reuters) - The government will raise retail motor fuel prices by close to 3 rupees (up to 7.75 percent) from midnight on Friday, the first hike since July, a move that will add to already high headline inflation and risks sparking political protests.Source: Reuters: Money News | 26 Feb 2010 | 9:16 am B M Bansal to take over as Indian Oil chiefIndian Oil, India's largest commercial organisation, will get a new head in Brij Mohan Bansal, one of its directors.Source: India Business News | Business News - Times of India | 26 Feb 2010 | 8:11 am Rupee gains 30 paise against dollarThe rupee rose by a sharp 30 paise at 46.10/11 against the dollar to snap the three-day fall on signs of increased capital inflows as the stocks rallied by 420 points.Source: India Business News | Business News - Times of India | 26 Feb 2010 | 7:27 am India Inc lauds FM for good BudgetIndian industry today welcomed the Union Budget for 2010-11 saying it was a balanced approach though it expressed disappointment over the hike in minimum alternate tax (MAT) from 15 per cent to 18 per cent.Source: India Business News | Business News - Times of India | 26 Feb 2010 | 6:07 am Maruti, Hyundai to hike car pricesWhile the country's largest car maker, Maruti Suzuki India (MSI), said its car will become costly by two per cent, Hyundai Motor India said it will result in a price rise of Rs 6,500-25,000 on average.Source: India Business News | Business News - Times of India | 26 Feb 2010 | 2:22 am
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