28th February, 2011

On the back of inflation fears and a dip in FDI, Finance Minister Pranab Mukherjee presented Budget 2011-12 in

the Parliament.

Economy

• Economic growth in 2010-11 has been swift and broad based; Significant progress in critical institutional

reforms that will set the base for a double digit growth; Government has to reconcile ecological concerns with

development aspirations

• RBI to issue new guidelines for banking sector

• Inflation still a principal concern, to fall next year; Though food inflation remains a concern, it declined

drastically from 20.2% last year to 9.3% in January; Expect RBI steps to further ease inflation in coming months

• GDP rises by 8.2% for the December, 2010; Expected to grow by 8.6% in FY11 and between 8.75% to 9.25% in

FY12

• Public Debt Management Agency Bill to be introduced next financial year

• Financial sector reforms to move forward

• Exports grown by 9.6%, imports by 17.6% in April-January 2010-11 over corresponding period last year

• High current account deficit a cause of concern; But will be lower in the coming period

• Revenue deficit fixed at 2.3% in revised estimates of 2010-11 and 1.8% in 2011-12

• Current fiscal deficit stood at 5.1% which is expected to decline to 4.6% of GDP in FY12 and further decline to

3.5% by FY13

• Central government debt in proportion to GDP will be 44.2% in 2011-12

• In 2010-11 agriculture is estimated to have grown at 5.4%, industry at 8.1% and services at 9.6%

Income, Direct, Indirect, Service Tax etc

• Priority to make taxes moderate, payment and collection simple

• Tax slab for individual (male) increased to Rs 1.8 lakh from Rs 1.6 lakh

• Senior citizen concession extended by Rs 10k to Rs 2.5 lakh; Senior citizens eligibility age reduced from 65

years to 60 years; Concession for senior citizens above 80 years extended to Rs 5.0 lakh

• No new tax exemption limit for women

• Surcharge for companies cut to 5.0%, from 7.5%

• Service tax retained at 10%; duty exemptions to be withdrawn on various items

• Service tax widened to cover hotel accommodation above Rs 1,000 per day

• Service tax on air travel increased by Rs 50 for domestic travel and Rs 250 for international travel in economy

class; On higher classes, it will be 10% flat

• Some legal services to be brought under service tax net

• Service by an individual to another individual exempted

• Net revenue loss on account of taxes and duties will be Rs 200 crore

• Service tax to result in a revenue gain of Rs 4,000 crore

• Net revenue loss on account of direct taxes will be Rs 11,500 crore

Union Budget 2011-12

Inflation still a principal concern Current fiscal deficit stood at 5.1% of GDP Surcharge for companies cut to 5.0%, from 7.5%

28th February, 2011

Income, Direct, Indirect, Service Tax etc (contd.)

• Net revenue gain on account of indirect taxes will be Rs 11,300 crore

• Minimum alternate tax raised from 18.0% to 18.5% of book profits

• Net tax to centre will be Rs 6,64,457 crore; Non-tax receipts pegged at Rs 1,25,435 crore

• Direct Tax Code Bill likely to be passed by Parliament next financial year after getting Standing Committee

report

• GST constitutional amendment bill to be introduced

• A new scheme to be introduced for refund of service tax on lines of drawback of duties.

• Standard rate of central excise duty maintained at ten percent

• Peak rate of customs duty maintained at 10% in view of the global economic situation

• Allocation for social sector increased by 17% amounting to 36.4% of total plan allocation

• Proposal to introduce self-assessment of customs duty wherein importers and exporters will themselves

assess payment of duty

• No change in CENVAT rates

• Nominal 1% central excise duty on 130 items entering the tax net

• Basic food and fuel and precious stones, gold and silver jewellery will be exempted

• Basic customs duty on agricultural machinery reduced to 4.5% from 5.0%

• Basic customs duty on raw silk reduced from 30% to 5%

• Excise and customs duty proposals to result in the net gain of Rs 7,300 crore

• Gross Tax receipts are estimated at Rs 9,32,440 crore; Non-tax revenue receipts estimated at Rs 1,25,435 crore

• Total expenditure proposed at Rs 12,57,729 crore

• Increase of 18.3% in total Plan allocation; Increase of 10.9% in the Non-plan expenditure

• Net market borrowing of the Government through dated securities in 2011-12 would be Rs 3.43 lakh crore

• Central Government debt estimated at 44.2% of GDP for 2011-12 as against 52.5% recommended by the 13th

Finance Commission

Highlights of the budget

• Corruption is a problem, which has to be tackled collectively; Group of Ministers to suggest ways for tackling

corruption; Five-fold strategy to deal with black money

• Credit flows to farmers raised by 27% from Rs 3.75 lakh crore to Rs 4.75 lakh crores

• Discussions on to further liberalise FDI policy

• FY12 disinvestment target at Rs 40,000 crore

• Rs 50 crore grant to Aligarh Muslim University centres in Murshidabad in West Bengal and Malappuram in

Kerala

• Allocation for education increased by 24%; Rs 21,000 crore allocated for Sarv Shikshya Abhiyan registering an

increase of 40%

• 1500 institute of higher learning to be connected by March 2012 with Knowledge Network; Rs 100 crore

allocated for IIT Kharagpur

• Bharat Nirman allocation increased by Rs 10,000 crore

• Rural broadband connectivity to all 2.5 lakh panchayats in three years

MAT raised from 18.0% to 18.5% FY12 disinvestment target at Rs 40,000crore

28th February, 2011

Highlights of the budget (contd.)

• Rs 8000 crore provided for development needs of J&K

• Rs 200 crore is allocated for Green India Mission

• Rs 200 crore is allocated for cleaning of rivers

• 7 Mega clusters for leather products to be set up

• 10 lakhs Aadhaar(UID) numbers to be generated everyday from 1st October

• Allocation under Rashtirya Krishi Vikas yojna (RKVY) increased to Rs. 7860 crore

• Allocation of Rs 300 crore to promote 60000 pulses villages in rainfed areas

• Rs 300 crore vegetable initiative to achieve competitive prices; Rs 300 crore to promote higher production of

nutri-cereals; Rs 300 crore to promote animal based protein; Rs 300 crore Accelerated Fodder Development

Programme to benefit farmers in 25000 villages

• Bill to amend Indian Stamp Act to introduce Rs 300 crore scheme for modernization stamp and registration

administration

• Increase in the remuneration of Anganwadi workers from Rs 1,500 per month to Rs 3,000 per month and for

Anganwadi helpers from Rs 750 per month to Rs 1,500 per month

• A National Innovation council under Shri Sam Pitroda has been set up to prepare a roadmap for innovations

in India; Additional Rs 500 crore allocated for National Skill Development Fund

• Nutrient Based Subsidy (NBS) has improved the availability of fertiliser; Government actively considering

extension of the NBS regime to cover urea

• Government to move towards direct transfer of cash subsidy to people living below poverty line in a phased

manner for better delivery of kerosene, LPG and fertilizers; Task force set up to work out the modalities for the

proposed system

Bharat Nirman allocation increased by Rs 10,000 crore Discussions on to further liberalize FDI policy

28th February, 2011

Banking & Financial Services Industry (BFSI) – Positive

• The government's focus on continuing economic growth, financial reforms and expansion of banking

network were evident in the Union Budget 2011-12. By ensuring that the banks are adequately capitalized

and have enough scope to grow their franchise and loan book, the budget ensured that banks play a major

role in the economy's growth in the coming fiscals.

• With an intention to fortify the capital base of the banks, the Government has provided a sum of Rs 20,157

cr for infusion in the Public Sector Banks to maintain Tier I (CRAR) at 8%. This move is aimed to increase

Govt. holding to 58% in Public sector banks. The Govt. plan augers well and are likely to help banks to meet

increasing credit needs.

• Move to allow FII’s and Foreign Individual Investor to invest into local Mutual Funds are the key positives

for the companies like Reliance Capital, Bajaj Financial services. Also provision to increase FII’s exposure

towards corporate bonds from Rs 20bn to Rs 40bn will attract more capital fund flows in India.

• RBI is considering giving some additional banking licenses to private sector players as well as NBFCs, for

expanding the reach of banking services. Major positive for Reliance Capital, IDFC, IFCI and other NBFCs.

• The Govt.’s move to allow 1% interest subvention for home loan up to Rs 15lac is likely to support bank’s

growth. Institutions focused towards housing and infrastructure lending such as HDFC, IDFC are likely to

see their advance book growing.

• To boost real estate lending, the Govt. has raised housing loan limit from Rs 20 lakh to Rs 25 lakh to be

classified as priority sector lending. Also provisions under Rural Housing Fund have been increased to Rs

3000cr.

• The existing interest subvention scheme of providing short term crop loans to farmers at 7 percent interest

will be continued during 2011-12. However, 3% interest subvention for those repaying their loans on time

will result into effective loan rates of 4%. Micro finance Institutions like SKS Microfinance are likely to see

growth in credit uptake with this move.

• Agriculture being the backbone of Indian economy is given due consideration by proposing a contribution

of Rs10,000 crore to NABARD’s Short-term Rural Credit Fund for 2011-12. Also, target of credit Flow to the

farmers have been raised from Rs 3, 75,000 crore this year to Rs 4, 75,000 crore in 2011-12.

• With, proposal to grant more banking license and providing incentives for speeding up agriculture and

infrastructure lending, the budget has done serious job to address supply side bottlenecks. Incentives to

boost agriculture credit will see agriculture output growing and help control soaring food inflation.

� Stocks to watch out for: IDFC, HDFC, SKS Microfinance, Reliance Capital, SBI

RBI is considering giving additional banking licenses to private sector players as well as NBFCs Increased overall FII limit for investment into Mutual funds to Rs 40bn 1% interest subvention for short term crop loan will be continued for 2011-12

28th February, 2011

Pharma – Neutral

• This budget has not much for pharmaceutical industry as there is no major policy announcement.

• Concessions provided on excise duty during the global economic meltdown have not been withdrawn;

before the economic melt-down, the excise duty was in the range of 8% to 10%. This year, the excise

duty was increased marginally from 4% to 5%.

• Medical bills will increase by 5%, as the Budget has levied service tax on hospital and diagnostic service

providers.

• Centralized AC hospitals with more than 25 beds and even diagnostic service providers are brought

under 10% service tax. The effective service tax would be 5%, as there is a 50% rebate. This move will not

impact hospital and diagnostic business segment much, however the end patients will end up paying

more.

• Weighted average R&D deduction has been increased from 175% to 200%.

• Indirect benefit to the sector will arise as the government plans to develop cold-storage chain across the

country for the agro-sector. This might be beneficial as currently, the pharma industry lacks in cold-

storage facility, which is one of the essential part when it comes to transporting drugs for long distance

destination.

� Stocks to watch out for: Cipla, Glenmark Pharma, Opto Circuits, Ranbaxy

FMCG – Positive

• With higher disposable income in urban households and a significant portion of budget allocation towards

the development of the rural sector and rural employment, the FMCG sector has a lot to gain from Union

Budget 2011 – 12.

• In this Union Budget the Finance Minister, Pranab Mukharjee increased spending on critical rural

infrastructure and social security to Rs 58,000 crore. This scheme has been driving the disposable incomes

in rural areas which in turn would help rural consumption.

• The excise duty on cigarettes has been maintained at current levels. This has provided the industry with

viable price points. The move is positive for ITC, Godfrey Phillips India Ltd.

• Adding to the joys of the FMCG sector; the Finance Minister also announced that the goods and service tax

(GST) was in its final stages of implementation. Rapid implementation of GST would result in removal of

indirect taxes and single point of taxation, resulting in reduced prices for FMCG products. The Minister,

however, also included a wide number of services in his tax net.

• A damper, however, was the increase in Minimum Alternater Tax (MAT) to 18.5% from 18% earlier. This

would prove negative for companies that pay MAT; such as Dabur and GCPL.

• Companies like Colgate, ITC, Dabur, and Godrej Consumer Products etc. which have a strong rural

distribution setup will benefit as the push in rural growth will help drive the top line of FMCG companies.

� Stocks to watch out for: Tata ITC, Colgate, Dabur, Godrej Consumer Products, Godfrey Phillips

Medical bills will increase by 5%, as the Budget has levied service tax on hospital and diagnostic service providers GST is in its final stages of implementation

28th February, 2011

Textile – Neutral

• A 100% FDI is allowed in the textile sector under the automatic route. Textile Upgradation Fund (TUF)

scheme provides an option to the power loom units to avail of 20% Margin Money subsidy in lieu of 5%

interest reimbursement on investment in TUF compatible machinery. Under the Scheme for Integrated

Textiles Park (SITP), thirty nine (39) textile park projects have been approved so far.

• 10% excise duty on branded garments - Negative for textile companies.

• Reduce basic customs duty from 5 percent to 2.5 percent on certain textile intermediates.

• Reduction of basic customs duty on certain specified inputs for manufacture of certain technical fiber and

yarn from 7.5% to 5%.

• Reduction of basic customs duty on raw silk (not thrown) from 30% to 5%.

• Handloom weavers have been facing economic stress. Consequently, many of them have not been able to

repay debts to handloom weaver cooperative societies which have become financially unviable. The

Finance Minister proposed to provide Rs 3,000 crore to NABARD, in phases for these cooperative societies.

The initiative would benefit 15,000 cooperative societies and about 3 lakh handloom weavers. The details

of the scheme would be worked out by the Ministry of Textiles in consultation with Planning Commission.

� Stocks to watch out for: Arvind Mills, Alok Industries, Garden Silk Mills

IT - Negative

• No extension of STPI (Sec.10A & 10B): The STPI tax benefits available to the IT companies is about to lapse

in March 2011. The lack of extension of the sops is bound to hurt tier-II companies that are receiving the

benefits now. Also no further sops were announced.

• MAT increase from 18% to 18.5%: IT companies that have set up their SEZs will now be affected with an

increase in tax rates from FY12. The sector also awaited some clarity on avoidance of double taxation which

was not mentioned.

� Stocks to watch out for: Wipro, HCL Tech, Hexaware, Zensar, Allied Digital, Mphasis, 3i Infotech

10% excise duty on branded garments Reduced custom duty on raw silk (not thrown) from 30% to 5% No extension of STPI

28th February, 2011

Automobiles – Positive

• Excise duty rate unchanged: The standard rate of excise duty will be maintained at 10%. Increase in excise

duty would have affected volumes as industry has forecasted growth of 10-12% in CY11 compared to 30%

in CY10.

• Higher allocation under NREGA & infrastructure schemes: NREGA wage s will be indexed to inflation which

is positive for the sector. The infrastructure allocation has been increased by 23% which is positive for the

auto sector especially CV segment: Positive for Tata Motors, Ashok Leyland, M&M.

• Minimum tax limit raise: The FM announced a relief for common man by increasing the minimum tax limit

by Rs.20000. The higher disposable income at the lower end of the spectrum will improve demand for the

sector particularly 2 wheelers.

• Rapid implementation of GST: The FM proposed to introduce the bill for the introduction of Goods and

Services Tax. GST implementation will result in removal of indirect taxes and a single point of taxation

which will result in reduced price for Auto & Auto components.

• Special incentives for hybrid vehicles made in India: Exemption of customs duty and special CVD for the

critical parts imported by domestic hybrid vehicles was proposed in the budget. In addition, a concessional

rate of excise duty of 5 percent is being prescribed to incentivize their domestic production.

� Stocks to watch out for: Hero Honda, Bajaj Auto, TVS

Oil and Gas – Negative

• Oil & Gas companies, enjoying the tax holiday, are currently required to pay Minimum Alternate Tax,

currently at 18% of book profits, during the tax holiday period. The marginal hike in MAT rate to 18.5% will

negatively impact profitability.

• Rise in customs and excise duties will negatively impact on refineries. However, as the customs and excise

duty was kept unchanged, it will not impact the profit margins of refining companies.

� Stocks to watch out for: IOC, BPCL, ONGC, Reliance Industries, GAIL

Telecom – Negative

• The expectation from this sector was basically to get tax holiday or incentives for new rollouts, as it is

essential for building and improving the telecommunication network. No such announcement was made

in this regards in the budget.

• Secondly, the sector needs clarification on whether the payments made for 3G and BWA spectrum should

be treated as revenue expenditure or amortized as license fees or treated as intangible asset. There was no

announcement in this regards and expected to be covered in the new telecom policy by DoT.

Excise duty rate unchanged at 10% Proposed to exempt custom duty for critical parts imported for hybrid vehicles Increase in MAT to 18.5% will negatively impact profitability

No tax holiday for telecom companies

28th February, 2011

• Thirdly, as telecom sector is witnessing falling ARPU, the industry expected lower service tax rates in order

to have lower tax impact. But in the budget there was no change in the service tax rate which remained at

10%.

• Also, the industry expected lower MAT rates, but in the budget the MAT rate was increased marginally from

18% to 18.5%.

� Stocks to watch out for: Bharti Airtel, Idea and Reliance Communications

Agriculture – Positive

• Finance Minister reported that the Agriculture sector has grown by 5.4%

• A task force headed by Shri Nandan Nilekani has been set-up to work out the modalities for the proposed

system of direct transfer of subsidy for kerosene, LPG and fertilisers.

• Rs 300 cr provided to promote pulses cultivation in rain-fed areas, another Rs 300 cr to promote farm

product cultivation

• Credit flows to farmers raised from Rs 3.75 lakh crore to Rs 4.75 lakh crores

• Government proposes to promote organic farming methods to enable farmers get best from their land.

• Existing interest subvention scheme on short term farm loans at 7 % interest to continue

• NABARD capital base to be strengthened; Rs 10,000 cr to be provided to it as short term credit fund.

• Capital investment in fertilizer production to be considered as infrastructure sub-sector

• Farmers to get 3% rebate on loan if payment is regular

• Interest subvention proposed to be enhanced from 2% to 3% for providing short-term crop loans to

farmers who repay their crop loan on time.

• Government to promote organic farming methods, combining modern technology with traditional

farming practices.

Agriculture and Related Sectors

• Scope of exemptions from Excise Duty enlarged to include equipments needed for storage and warehouse

facilities on agricultural produce.

• Basic Custom Duty reduced for specified agricultural machinery from 5 percent to 2.5 percent.

• Basic Custom Duty reduced on micro-irrigation equipment from 7.5 percent to 5 percent.

• Allocation of Rs 300 crore to bring 60,000 hectares under oil palm plantations. Initiative to yield about 3

lakh Metric tons of palm oil annually in five years.

• Allocation of Rs 300 crore to promote higher production of Bajra, Jowar, Ragi and other millets, which are

highly nutritious have several medicinal properties.

� Stocks to watch out for: Ruchi Soya, KS Oils, Lakshmi Energy, KRBL

Service tax unchanged at 10% Farmers to get 3% rebate on loan if payment is regular Credit target to agriculture increased to Rs 4.75lac cr from Rs 3.75lac cr

28th February, 2011

Power – Positive

• Considering the demand/ supply deficit in the country and the investment in the T&D space as a

percentage of investment in power generation, budget allocation for infrastructure has been increased by

23% Y-o-Y to Rs. 2,140bn, which will provide proportional increase in power generation.

• Besides this, there will be no excise duty on equipments for UMPP projects, which will be positive for both

power generators and domestic equipment manufacturers. Currently equipments imported for UMPP

enjoys a concessional custom duty of 2.5% and full exemption from CVD. This has created a negative

impact on domestic suppliers who are required to pay central excise duty. Thus by this excise duty

exemption, now there is level playing field for both domestic as well as international players.

• There was no focus on improving the T&D infrastructure in the country.

• In addition to this, Government Infrastructure Institutions is allowed to raise tax free bonds to the tune of

Rs. 300bn, which will be positive for this sector.

� Stocks to watch out for: Reliance Power and Tata Power

Metal and Mining – Negative

• As India is net importer of steel, in the budget, the finance minister has increased the export duty on iron

ore to 20% on lumps as well as fines. Currently, lumps are taxed at 15% and fines are taxed at 5%. This is

negative news for iron ore exporters such as Sesa Goa (90% of total sales from exports) and NMDC (15% of

total sales from iron ore exports).

• Full exemption from export duty is being provided to iron ore pellets to encourage the value addition

process for fines.

• Besides this, there is no imposition of mining tax (26% at PBT) on mining companies, thus it is a positive

for mining companies as well as steel companies with captive mines.

� Stocks to watch out for: Sesa Goa, NMDC

Retail Sector – Negative

• Although the Finance Minister cited the need to remove “bottlenecks” in distribution, which contribute the

waste of an estimated 40% of India’s agricultural food production, he made no mention of FDI

liberalization in the multi-brand retail, which would enable entry of global retailers would transform retail

trade. The service tax on lease rentals introduced last year was also retained.

• Fast tracking of augmentation of storage capacity and cold chains and continued emphasis on the food

processing sector will enable bulk manufacturing and reduce costs, which is important for the supply chain

of retailers.

� Stocks to watch out for: Pantaloon Retail, Shoppers Stop

No excise duty on equipments for UMPP projects Govt. infrastructure institutions are allowed to raise tax free bonds to the tune of Rs 300bn Increased the export duty on iron ore to 20% Service tax on lease rentals is retained for the year 2011-12

28th February, 2011

Cement – Positive

• As a measure of relief to cement industry, the Budget proposed to replace the existing excise duty rates

with composite rates having an ad valorem and specific component with some rationalization. The basic

customs duty on two critical raw materials of this industry viz. petcoke and gypsum is reduced to 2.5%.

• The cement industry has been asking to bring down import duty on gypsum and petcoke to nil from 5%

now to partly offset the rising manufacturing costs. Indian cement makers mostly use indigenous gypsum.

But, they depend upon import for good quality raw material. The move will help them to bring in more

quality gypsum from outside.

• Considering the continued emphasis on infrastructure development, affordable housing and rural

development, the overall policy is positive for the sector.

� Stocks to watch out for: ACC, Ambuja Cement, Orient Paper and Industries and Ultratech Cement

Real Estate – Neutral

• The existing scheme of 1% interest subvention has now been extended to Rs 15 lakhs for house costing up

to Rs 25 lakhs. Currently, the limit is Rs 10 lakhs for house worth up to Rs 20 lakhs. On account of increase in

prices of residential properties in urban areas, the budget also proposed to increase the existing housing

loan limit from Rs 20 lakhs to Rs 25 lakhs for dwelling units under priority sector lending.

• The Budget also proposed to provide housing finance to targeted groups in rural areas at competitive

rates, and enhanced the provision under Rural Housing Fund to Rs 3,000 crores from the existing Rs 2,000

crores.

• The surcharge on corporate tax has been reduced from 7.5% to 5.0% while MAT has been hiked from 18%

to 18.5%. This should benefit many real estate companies, as most of them are outside the purview of MAT,

but will benefit from effective reduction in corporate tax.

• On the negative front, the proposal to bring Special Economic Zone developers under the purview of

Minimum Alternate Tax was as a setback. This would affect companies having significant SEZ projects like

Anant Raj Industries.

• The Budget also did not accord the long-pending demand for industry status to the realty industry, a move

which would have made bank financing easier and cheaper for companies.

� Stocks to watch out for: DLF Limited, Indiabulls Real Estate

Petcoke & Gypsum customs duty reduced to 2.5% 1% interest rate subvention will be extended for home costing up to Rs 25lac The surcharge on corporate tax has been reduced from 7.5% to 5.0%

28th February, 2011

Engineering & Capital Goods – Positive

• Exemption of excise duty on equipments for UMPP projects is positive for power project developers and

domestic equipment manufactures. This was a significant provision considering that Indian power

equipment manufacturers have been demanding imposition of customs duty to ensure a level-playing

field vis-à-vis foreign manufacturers, while power project developers have been lobbying against it on fears

the move will dry up supply of cheaper equipment in the market.

• The Budget has also provided for full exemption from basic Customs Duty to bio-asphalt and specified

machinery used in the construction of national highways. Tunnel-boring machines required for the

construction of highways are also being included in this exemption.

• Increase in infrastructure spending would benefit large companies like L&T & BHEL. Further, increased

focus on sectors like agricultural equipments and cold storage sector also augurs well for capital goods

companies.

� Stocks to watch out for: BHEL, Larsen & Toubro, Siemens

Infrastructure – Positive

• Union Budget 2011-12‘s allocation of Rs 2, 14,000 crore for infrastructure in 2011-12, represents an increase

of 23.3% over 2010-11 and amounts to 48.5 percent of total plan allocation versus 46% last year.

• To enhance flow of funds to infrastructure sector, the FII limit for investment in corporate bonds, with

residual maturity of over five years issued by companies in infrastructure sector, is being raised by an

additional limit of USD 20bn taking the limit to USD 25bn. FIIs would also be allowed to invest in bonds of

unlisted infra-SPVs.

• IIFCL is expected to achieve cumulative disbursement target of Rs 20,000crore by March 31, 2011 and Rs

25,000 crore by March 31, 2012. Under take out financing scheme, seven projects sanctioned with debt of

Rs 1,500 crore and another Rs 5,000crore will be sanctioned during 2011-12. To boost infrastructure

development, tax free bonds of Rs 30,000crore are proposed to be issued by Government undertakings

during 2011-12 (Warehousing Corporation, NHAI, IRFC and HUDCO).

• The Budget has also provided for full exemption from basic Customs Duty to bio-asphalt and specified

machinery used in the construction of national highways. This will benefit road construction players like

IRB Infrastructure, Sadbhav Engineering, IVRCL Infrastructure, etc

• On the direct taxes front, the proposal to increase Minimum Alternative Tax rate from 18% to 18.5% of

book profits is marginally negative for the sector. Additional deduction of Rs 20,000 for investment in long-

term infrastructure bonds proposed is extended for one more year.

• The finance minister also proposed to raise the corpus of rural infrastructure development fund from Rs

16,000crore to Rs 18,000crore.

� Stocks to watch out for: GMR Infrastructure, GVK Power & Infrastructure, IVRCL Infrastructure, Pratibha

Industries, Sadbhav Engineering, Madhucon Projects and Reliance Infrastructure

Increase in infrastructure spending would benefit large companies like L&T & BHEL Union Budget allocation for infrastructure in 2011-12 represents an increase of 23.3% over 2010-11 Fully exempted basic custom duty on machineries used in construction of national highways

28th February, 2011

Views & Reactions on Union Budget

The Finance Minister presented the Budget for 2011-12 which is focused more towards controlling

inflation, fiscal consolidation and focusing on rural as well as agriculture sector. Given the macro challenges

and political compulsions, he has done a tremendous job of keeping deficit under check without imposing

additional tax burden and staying away from addressing any major issues. The budget can be termed as

growth oriented and the FinMin has taken incremental measures to boost investment into housing,

infrastructure and social sector.

On one hand, measures on the taxation and spending in key programmes would keep the consumption

story intact, while on the other some visible moves have been made to push infrastructure build up. The

long ranging reforms like roll out of GST, Direct tax code, financial sector reforms, subsidy reforms with

better targeting through unique identification number will assist in increasing the growth potential of

Indian economy.

However, the matter of concern for some was a marked absence of any radical reforms in various sectors

which many had expected. Potential downside risk still remains in the form of high inflation, fuel prices

moving beyond acceptable levels and monsoon risk which the market and investors will start looking at in

coming months.

Some also added that this Budget has not taken any imaginative decisions that can make a difference to

India. They added that no steps have been taken to enable scientific and technological advances or to

boost innovation. The government is failing to back its pronouncements with actual steps, leaving them as

mere rhetoric.

In spite of all the above mentioned points, we believe there were signs of policy reforms which would lay

foundation in attracting capital inflows in the country. It is perceived that the growth oriented Budget will

definitely help the Indian economy record nearly a double digit growth in the years to come. This implies

that our FinMin has made sure that the long term growth story remains on track while keeping a check on

all the challenges that might impact the growth drivers.

The budget can be termed as growth oriented Marked absence of any radical reforms in various sectors remains a concern