Infrastructure

• Infrastructure allocation increased by 23% to Rs2.14tn

• FII limit for investment in corporate bonds issued by infra companies raised by US$20bn

Real Estate

• Increase in home loan size to Rs2.5mn, to be characterised as priority sector loan:

Marginally positive for regional players like Purvankara, Unitech, HDIL, Sobha Developers

• Implementation of MAT on SEZ developers and units operating in those areas:

Negative for DLF

Information Technology

• MAT increased from 18% to 18.5%• MAT to be levied on companies operating in

SEZ• Marginally negative for large sized and select

mid-cap cos having material SEZ presence. No P&L impact, only CF impact

• Unexpected moves have hurt the IT companies in the form of higher taxes after the proposed higher Minimum Alternate Tax (MAT) rate of 18.5% for units operating in Special Economic Zones (SEZ) and on developers of the SEZs.

IT INDUSTRY

•IT companies have been migrating to special economic zones as tax breaks under the Software Technology Parks of Indian (STPI) scheme will come to end this year under which companies operating in these units had been given a 10-year tax break that was to end in 2010.

STEEL INDUSTRY- POSITIVE:

• Hike in Iron Ore export duty to 20% came in as a surprise, which will provide the much needed respite to domestic producers, as their margins were under pressure on grounds of high raw material prices.

• The domestic steel industry is expected to grow at a CAGR of 10% in next five years against the average annual growth of 8% achieved between 1991-2010.

OIL & GAS INDUSTRY –NEGATIVE:

• No cut in customs duty on crude oil• No reduction in excise duty on petrol/diesel• Proposed a system of direct transfer of

Kerosene & LPG• The issue of Diesel Deregulation was not taken

in the budget and no proposal was provided to deregulate it on the backing of rising inflation

Banking

• FY12 fiscal deficit targeted at 4.6% of GDP with net market borrowing of Rs3.43tn.

• Interest rate subvention of 1% on housing loans upto Rs1.5mn on property value of upto Rs2.5mn

• Additional 1% interest subvention (cumulative 3%) for farmers who repaid their crop loans on time

• New banking licenses for few private players and NBFC

TEXTILES

• Union Budget 2011-12 has been positive for the Textile Sector.

• The Finance Minister has proposed to provide Rs. 3,000 crore to NABARD, which will benefit 15,000 cooperative societies and about 3 lakh handloom weavers.

• The optional levy of duty on garment and made-ups industry has been converted into mandatory duty of 10%.

PHARMA INDUSTRY-NEUTRAL

• In Budget 2011-12, Government didn’t focus to reduce healthcare cost as they made no proposals on reducing excise duty

• tax holiday on healthcare infrastructure and weighted deduction for expenses incurred outside R&D facility like overseas trials, preparations of dossiers, consulting & legal fees on healthcare and pharmaceutical sector.

• However, FM proposed to step up the plan allocations for Healthcare in 2011-12 by 20% to Rs. 26,760 crore as against Rs 22,300 crore in 2010-11.

FERTILIZERS INDUSTRY-POSITIVE:

• Fertilizer remains a prominent sector in Budget 2011-12. Government proposed to include capital investment in fertilizer production as an infrastructure sub-sector as the sector requires higher capital.

• Also, to ensure greater efficiency, cost effectiveness and better delivery for fertilizers, the Government proposes that it will take move towards direct transfer of cash subsidy to people living below poverty line in a phased manner.

• This is a positive move by the government and will benefit both farmers and companies in the industry.

AVIATION INDUSTRY-NEGATIVE:

• Overall the Union budget has been NEGATIVE for the aviation industry as the domestic air travel will cost more from the next financial year with the government raising service tax on it by Rs 50 and Rs 250 for domestic and international journeys respectively.

• However, there was relief to the Air India as the Finance Minister made a budgetary support of Rs 1,200 crore to the ailing national carrier as additional equity infusion.

Hospitality

• Hotel accommodation in excess of Rs1,000/day and AC restaurants that serve liquor brought under 10% service tax

• To impact most organized sector players but

likely to be passed on to consumers

Sectoral impact Automobiles

• Increased budgetary allocations to agriculture and rural development schemes

Imp: Positive for rural demand: M&M, Maruti and Hero Honda to be major beneficiary

• No hike in excise duties• Reduction in custom duty on carbon black

feed from 5% to 2.5%

Highlights of the Budget 2011/12

POLICY REFORMS• Raised foreign institutional investor limit in 5-

year corporate bonds for investment in infrastructure by $20 billion

• Food security bill to be introduced this year• To boost infrastructure development with tax-

free bonds of 300 billion rupees

• He brought down the eligibility age for senior citizen's tax exemption to 60 years from 65. Mukherjee also announced that exemption for senior citizens would be Rs. 2.5 lakh from the present Rs. 2.4 lakh.

• He also announced a special category of tax-paying senior citizens. Those 80 or above would get an exemption of Rs. 5 lakh

Price

• Service tax retained at 10 percent• Computer parts and mobile accessories to get

cheaper• LED TVs to get cheaper• Diapers to get cheaper• Hybrid car to go cheaper• Domestic air tickets to get costlier• Hotel stay to get costlier• Medical expenses (with AC rooms) to go up

Positive impact of budget• Current surcharge of 7.5 per cent on domestic companies

proposed to be reduced to 5 per cent• Allocation to Sarva Shiksha Abhiyan increase by 40 per cent to

Rs 21,000 crore• Allocation for education increased by 24 per cent over current

year• Allocation of Rs 2,14,000 crore for infrastructure in 2011-12;

an increase of 23.3 per cent over 2010-11• Surcharge for companies cut to 5 per cent, from 7.5 per cent• Citizens over 80 years to have exemption limit of Rs 5 lakh• Tax exemption limit for senior citizens raised to Rs 2.5 lakh

from 2.4 lakh

• Crude palm used in sports exempted from customs duty to be positive for palm oil companies

• Duty reduced on hybrid & electric cars along with batteries imported for such vehicles

• Basic customs duty on agricultural machinery reduced to 4.5 per cent from 5 per cent

• No import duty on ship parts positive for SCI• Special incentives for hybrid vehicle makers if

manufacturing done in India to be positive for auto companies

Negative impact of budget• Rate of MAT proposed to be increased from 18

per cent to 18.5 per cent of book profits• Lower rate of Central Excise Duty enhanced

from 4 per cent to 5 per cent• AC restaurants serving liquor to come under

service tax net• Health Check-Ups in Private hospitals to

become expensive

• Travel, Healthcare to become expensive due to increased service tax

• Branded clothes may cost more• EXPENSIVE: International Air Travel• EXPENSIVE: Domestic Air Travel• Tax on life insurance service providers could

be negative for insurance companies

Thanking you