A Publication of the Embassy of India, Washington, D.C. March 1, 2011 I India RevieI w Vol. 7 Issue 3 www.indianembassy.org Finance Minister Pranab Mukherjee arrives in Parliament House to present the General Budget 2011-12, in New Delhi on February 28, 2011. India unveils Budget 2011-12 n India’s $280 billion n India’s economy n India hikes export budget for 2011-12 likely to grow by 9 pc target to $220 bn for seeks to further in 2011-12, says chief fiscal 2010-11 from advance growth of the PM’s Economic the earlier estimate and curb inflation Advisory Council of $200 bn Cover STORY federal budget to advance growth, reforms Finance Minister allows registered mutual funds to accept money from foreign investors and hikes the cap on investments in infrastructure bonds Finance Minister Pranab Mukherjee arrives in Parliament House to present the General Budget 2011-12, in New Delhi on February 28, 2011. Ministers of State of Finance S.S. Palanimanickam (left) and Namo Narain Meena (right) are also seen. ndia’s `12.58 lakh crore money toward health, infrastructure, cent. He also proposed a “very sen - 2 (`12.58 trillion or $280 billion) education, farming and defense, and ior” category of income tax payers, Union Budget for 2011-12 on outlined measures to check the fiscal above the age of 80, for whom the tax IFebruary 28 sought to address deficit. In a 110-minute Budget exemption will be up to `5 lakh. In every stakeholder with tax reliefs to Speech in the Lok Sabha, the Lower addition, he lowered the qualifying cheer households and corporates alike House of Parliament, Mukherjee said age limit for senior citizens to avail of while also promising reforms on sub - he proposed to enhance the income tax cuts to 60 from 65. sidies and foreign investment along tax exemption limit to `180,000 The Finance Minister also promised with measures to curb inflation and ($4,000) for the next financial year to bring down the fiscal deficit to 4.6 push growth. from `160,000 ($3,543) and said percent of India’s gross domestic Finance Minister Pranab corporate tax surcharge would be product (GDP) from 5.1 percent of Mukherjee also proposed more lowered to 5 percent from 7.5 per - GDP in the revised estimates, while March 2011 India Review Cover STORY hiking allocation for education by 24 The Finance Minister maintaining a high growth rate percent, health by 20 percent, infra - despite the adverse international eco - structure by 23 percent and defense said that the foreign nomic climate,” the Prime Minister by 11 percent. Mukherjee’s proposals direct investment observed. for a new subsidy regime on farm policy was being Mukherjee also laid significant nutrients and direct cash transfers to emphasis on the institutional frame - the users of fertilizers and kerosene revamped, which may work in rural and semi-urban areas by addressed a long-pending reform. result in the entry of hiking outlays for rural banks and “As an emerging economy, with a multinational firms in micro-finance units, while promising voice on the global stage, India stands 11 food parks and major initiative for at the threshold of a decade which India’s $300 billion cold chains. 3 presents immense possibilities,” the retail trade industry, The Finance Minister also allowed Finance Minister said in his speech. apart from promising all registered mutual funds to accept He set the tone for what was his money from foreign investors and sixth budget by stating that India had to liberalize norms for hiked the cap on investments in infra - bounced back after the global finan - pension, insurance and structure bonds and intra-fund trad - cial crisis with broad-based growth, banking sectors ing during the lock-in period. “To lib - even as inflation remained a matter of eralize the portfolio investment route, concern, especially food prices — it has been decided to permit SEBI even though these had dipped from (Securities and Exchange Board of over 20 percent — to around 7 per - solidation and high economic India) registered mutual funds to cent now. growth,” he said. “Our growth in accept subscriptions from foreign This apart, Mukherjee said the for - 2010-11 has been swift and broad- investors who meet the KYC (know eign direct investment policy was based. The economy is back to its your customer) requirements for being revamped, which may result in pre-crisis growth trajectory. While equity schemes. This would enable the entry of multinational firms in the agriculture has shown a rebound, Indian mutual funds to have direct country’s $300 billion retail trade industry is regaining its earlier access to foreign investors and widen industry, apart from promising to lib - momentum. Services sector the class of foreign investors in Indian eralize norms for pension, insurance continues its near double-digit run. equity market,” Mukherjee said. and banking sectors. Fiscal consolidation has been impres - On the tax front, the Finance “We are reaching the end of a sive,” the Finance Minister said. Minister proposed to keep the excise remarkable fiscal year. In a globalized The proposals drew immediate duty rates virtually unchanged, even world, with its share of uncertainties praise from Prime Minister Dr. as 130 new items were brought under and rapid changes, this year brought Manmohan Singh, who was particu - tax coverage with a nominal duty of 1 us some opportunities and many chal - larly pleased with the decision to hike percent. The customs duty rates, lenges as we moved ahead with steady the income tax limit. “The Finance however, were retained at existing steps on the chosen path of fiscal con - Minister deserves congratulations for levels. highlights of budget for 2011-12 n Growth at 8.75 percent to 9.25 percent in 2011-12. Economy n `58,000 crore ($12.8 billion) for Bharat Nirman — increase of could have performed better in 2010-11 `10,000 crore ($2.2 billion) n Goods and Services Tax rollout on April 1, 2012; bill for this n Mahatma Gandhi National Rural Employment Guarantee Scheme would be presented in Parliament this year wage rates linked to consumer price index n Independent debt management office being set up; public n Infrastructure critical for development; 23 percent higher allocation debt management bill to be introduced in Parliament in 2011-12 n Tax exemption limit raised from `160,000 to `180,000; for n Food storage capacity to be augmented; 15 more mega food parks senior citizens, qualifying age reduced from 65 to 60 years to be set up in 2011-12 n Age for below poverty line old age pension scheme to be n Cold storage facilities to be recognised as infrastructure sector reduced from 65 to 60 years n Service tax to stay at 10 percent n `164,415 crore ($36 billion) for defense; more will be given if n FIIs can invest $40 billion in corporate bonds required n Foreign investment in mutual funds allowed n Twenty-four percent increase in educational outlay March 2011 India Review Bilateral EVENTS Gary Locke meets CIM Anand Sharma US Secretary of Commerce discusses further strengthening of India-U.S. relationship in business and trade with the Indian Minister for Commerce & Industry eading delegation of U.S. billion. We hope that it will continue to companies on a business improve further given the nature of development mission to pro - engagement, and also the investments. Lmote U.S. high technology in Both ways will see an upward trend, India, U.S. Secretary of Commerce particularly the U.S. companies com - Gary Locke called on Indian Minister ing and setting up manufacturing facil - of Commerce and Industry Anand ities and participating in India’s infra - Sharma on February 7, 2011. structure building and agro-processing In their discussions, the two leaders and food processing sectors.” focussed on deepening mutually bene - Minister Sharma said the two coun - ficial trade, providing win-win oppor - Secretary Gary Locke with Minister Anand tries would continue to work toward Sharma in New Delhi on February 7. tunities for both countries. Secretary further improving bilateral trade. “This Locke and Minister Sharma had earli - said. “We welcome the significant is a follow-up to consolidate the bilat - er met during President Barack growth of investment and trade in eral economic partnership, and also Obama’s November 2010 visit to goods and services between our two strengthening the commercial dialogue India. “The US-India bilateral rela - countries, but we believe our bilateral between us. We have reviewed the tionship is stronger than ever before, commerce is far from its potential.” progress that we have made and also and President Obama’s recent visit In his remarks after the meeting, the issues of market access, non-tariff highlights the priority this administra - Minister Sharma said, “The bilateral barriers to further improve upon the tion places on this relationship,” Locke trade with the U.S. in 2010 was $50 bilateral trade,” he added. India-US Aviation Cooperation Program inister for Overseas Indian receives the internal approvals in India. Affairs and Civil Aviation The two sides discussed the benefits M Vayalar Ravi met with Gary of the ACP partnership in being able to Locke, the U.S. Commerce Secretary, identify and execute technical collabo - in New Delhi on February 7, 2011. ration projects. The Indian side said Both sides acknowledged the excellent that projects in the pipeline such as the cooperation the two countries have grant agreement for the inspector had through the Memorandum of training programme or TMODT for Agreement and India-U.S. Aviation the DGCA may be given priority.