India's image as investment hub to be hit: Experts

As the horrendous week that saw terrorists striking in the heart of downtown Mumbai draws to a close, the ripple effects would make their presence felt, no doubt.

Speaking on the aftermath of the Mumbai terror attacks, KR Bharat of Advent Advisors said the situation was quite bleak even before the attacks. “The complete impact of the attack will hit us in a few days. We see economic slowdown in India. So, there is an urgent need of reforms in the security and economic space.”

Ashok Wadhwa, Managing Director and CEO, Ambit Holdings Private, said events of the last two days were absolutely catastrophic. “The impact of such a serious attack cannot be marginal. I think the terror attacks are likely to hit sentiment immensely. The attacks are too serious to impact India's image as an investment destination.”

Anand Tandon, Director-Equities, Brics Securities, said he is not extremely bullish at the moment. “The attack has harmed the prospects of commerce and industry. However, equity markets are not likely to see any longer-term impact. But ramifications will be seen economically and geopolitically.”

Q: How do you see the road forward from here given what has happened this week and the impact as you see it?

Bharat: If we go back three days in time before these horrendous events unfolded in Mumbai, the situation was bleak enough then. Nobody was calling for any great level of economic recovery either in the Western World or indeed in India and conventional wisdom was that the markets would drift downwards. The recession in the Western world was there for at least a couple of years if not greater.

People were looking at interest rates coming off in India in order to get some growth momentum going, so things were looking bleak and then this event happened and now people are analyzing this even and what will the impact be. My answer is regardless of what kind of brave face we put on it, the reality is going to hit us maybe in two-three days time and what is in front of us is not a pretty picture.

On the economic front there is clearly a slowdown in India and on the geo-political front, if we ignore this and talk about the spirit of Mumbaikars and how things should come back to normal; I think we are doing ourselves and our country a great injustice. This is a time for a lot of debate and for a lot of reform not only in the economic space but also in the security and geo-political space.

So the situation is not looking good and I am not saying this is only because of the horrific incidence affected me because I know quite a few people who have not been able to make it which is why I am saying let's go back to three days ago, situation was bad enough then and I don’t see how its got better, its got infinitely worse.

Q: It appears that global markets are trying to put in some kind of a countertrend rally in place into the end of the year even the S&P (Standard & Poor’s) rallied almost 20% from its November lows. Do you think that will fructify a smart bear rally kind of a move or is that being too optimistic in your eyes?

Bharat: I do not know there will be bear market rally as we go along but whether it will last ten days or twenty days I cannot tell. To me what seems to be obvious is the fact that there is a huge economic slowdown. I think the repercussions of what’s happened in the US are going to be felt not just in the US but in the rest of the developed world as well which will have impact in turn on emerging economies.

From anecdotal evidence, I speak to people in Singapore and in the US; the situation is not good at all. People don’t drive as much as they use to, people certainly don’t shop as much as they used to and banks are now under tremendous pressure to cut down on the size of their balance sheet and the entire Fed package – its not just an injection of liquidity into the system for people to do as they feel fit. It is the bailout package for banks to meet their immediate liabilities and the point is that while this will help the banks to meet immediate liabilities, the liabilities are becoming due in six-nine and twelve months going forward. I am not even talking beyond that – there is yet no provision made. So, banks will have no choice but to further contract the size of their balance sheets which means they will need to start withdrawing loans from the “good borrowers” as well which in turn means contraction of economy, recession etc as I do not need to say that far more competent people than I have outlined what’s going to happen from an economic perspective.

Therefore, in the light of that it is difficult to see why people would commit increasing amount of money assuming indeed that they have that liquidity to commit to equity markets. Having said that valuations will come to a stage where people will say, we cannot go any further than this. What I am trying to say is we have not come to that stage yet either in those markets or indeed in India on the back of liquidity by and large and if there are bear market rallies – great. But the overall trend to me is clear that this market will drift downwards over time and I am only hoping volatility is not as high as it seems to be because this is going to be prolonged and therefore the slower the pace of the fall the better for all of us. If it’s going to be extremely volatile then the pain is going to be much more than what people would like to bear.

Q: What’s your sense, unfortunate that the incidences of this week are? How do you access the limited economic and financial market impact of it going forward?

Wadhwa: It’s a horrible time for everybody, it’s a horrible time for us in India, it’s a horrible time for those who are watching this event within India or outside India and for sure the impact of such catastrophic immense cannot be marginal. I think we were all already reeling from serious troubles emerging out of global events and then going themselves into local events and I think this come at absolutely the wrong time. I believe it will hurt the sentiment immensely, I believe it will seriously impact India’s image as a country where you really want to invest.

Just a day before yesterday I had a long discussion with the group of CIO (Chief Information Officer) who came to see me and I was telling them that it doesn’t matter if the FII (Foreign Institutional Investor) money is looking at moving out of India. In my few trips over the last few weeks, I have seen serious amount of large multinationals who have strategic intent of investing in India, looking at India very seriously and dare say that the events of last two days must shake them and must get them to start seriously thinking about whether India is worth looking at a long-term destination.

Q: How much of a slowdown are you expecting from the current level of GDP growth and your take is that the market has not entirely priced it in even with the crunching fall its had over the last couple of months?
Bharat: I think so; I think the level of pessimism that you see in other emerging markets is not yet matched in India and China. I think these two markets the level of optimism is higher than that we see in other emerging markets. But is that because these two economies will do better or is that because we are still indulging in wishful thinking is a point for debate but the reality is when I speak to entrepreneurs, to promoters to find out exactly what is happening on the ground as it were, the feedback is that there is just no money coming forth from the banking system for example without mentioning names a company as of last year did a turnover of Rs 700 crore and is likely even in this difficult environment to do a turnover of Rs 1,100 crore for the last seven-months their application for increased working capital limits are still under process. So, how do you expect them to achieve a 40-50% growth if they are not getting support from the bank? It is not that they are not getting support from the bank because the bank doesn’t like them but the bank has its own compulsion.

We have to make serious efforts not just to push liquidity into the banking system but to get that liquidity out of banks and into corporate India which needs that liquidity to bring forth future growth. This is something that has been happening over the last three-four months and the fact that companies have been complaining increasingly getting support from the banking system. I am not talking about real estate companies; I am talking about companies that are in other sectors.

Therefore, I am actually much more sanguine than most about what kind of GDP growth rates we will get. We will still be better than most of the rest of the world. I don’t want to put a number to it but I would imagine this fiscal year the number maybe 6.5% but next year will be significantly lower, maybe 5% is what we can realistically expect but that is something that the market has pretty much factored in.

The issues going forward now are how we are going to reform our system financial, economic as well as geo-political that is what most people are going to wait and watch.

Q: What’s your sense of how things move from here even globally? Do you think the market can put in a bit of an effort after a dismal 2008 and try and move up a bit from here or do you think most markets will grind down and form newer lows? What’s your sense?

Wadhwa: I personally believe that the FY08-09 from an India perspective in many ways the markets will have hopefully reached the bottom or the near-bottom of it. If the Indian economy has to grow at 7.25% this year and even if there is a slower growth next year certainly in the first half, I would argue that certainly on relative basis we would have performed better than most world economies and - how low can the market go below that?

So I am more optimistic than most people in terms of the recovery. I continue to believe that the rest of this fiscal year will be extremely slow year and will be pretty range bound on the lower side that we been witnessing the markets. But I am equally optimistic that come the New Year and certainly maybe in the second half of the New Year which in the second half of FY09-10 we should see a more positive movement in the market and therefore our belief is that those who are long-term investors should see serious value in the market either right now or soon and should continue providing support to the market at those levels.

Q: I want to ask you about one sector which is getting more and more punishment. There is no recovery inside; Unitech is a good case in point. The stock is down 50% in the series again. It’s down to Rs 20 now. Does the market sense any major bad news which is coming for some of these large companies?

Bharat: What’s happening in this sector is pretty obvious. Everybody got carried away just like they did in the stock market and people started convincing themselves that prices in India whether they are stock prices or real estate prices could only go one way and you could virtually double your money every month. People had completely fooled themselves so valuations got way ahead of themselves.

Now it’s the reverse that’s happening; people are in such a state of panic; margin calls, people holding stock at ridiculously high prices and now when it’s too late perhaps people are saying, whatever I can get out, let me get out and get in whatever liquidity I can back into the system and today therefore for most companies prices are far below intrinsic worth of these companies. In some cases companies have as much cash as their market cap is. But that’s what sentiment is all about and the added problem as you very correctly pointed out is that to my mind certainly there will be a few defaults in the sector; you will have some companies going burst. We don’t know which they are; I don’t track that sector too closely and in any case I do not comment on individual companies so we don’t know and if people believe that even or two could go burst out of maybe a dozen or two dozen all two dozen of those companies tend to get punish because it’s a heard mentality. People say, lets just get the hell out of this sector and either keep money in our pocket and maybe put it in a defensive sector and that’s what you see happening.

When does it turn, if we go back to what Mr. Wadhwa was saying earlier – when is a good time to buy? I think the answer that most people have given whether it’s correct or not is irrelevant. If this is what the majority thinks, the answer is wait and watch and when we see concrete evidence of a turnaround globally or domestically then we will think of buying stocks and I can go long with that view and I am not as optimistic as a lot of people who recently be coming on your show.

I think in the five year bull market not one person ever called me and asked me – when do you think the market is going to turn? When should I sell? Whereas in the last nine months everyday I get five calls asking – when do you think its going to turn, when should we buy? I think we are not used particularly in the recent past as a nation to believe that if a bull market can last for five years a bear market will not necessarily will go away in one year’s time and that’s the way I look at it.

Q: A question on the sectors which got punished on Friday, hotels, aviation? Do you see this as an opportunity the knee jerk reaction to the panic attack or the terror attack or do you think these sectors needs to genuinely adjust downwards?

Tandon: Obviously there was a huge knee jerk down which was justifiable because the traffic will slowdown. But this would be the time when many of the hotel companies will be trading below their intrinsic value of property by a significant margins and I do not think their earning part is going forever.

Aviation is a different story; I think the aviation has not made economic value and until and unless you see sustained falls in fuel prices as well as increased seat usage. I think that will be the sector which will always remain some optimal.

Mumbai terror to impact capital flows: Mark Konyn

Mark Konyn, CEO, RCM, a company of Allianz Global Investors
, said investor sentiment will be hit in the short-term because of the Mumbai terror strikes. "Since foreigners have been targeted, it might have a dampening effect on tourism. The overall perception towards India will be hit and international capital flows will be under significant pressure."

Q: Give us a word on the kind of terror attacks you have been hearing of and reading about in Mumbai and whether you think that is going to make any medium-term impact or long-term impact on FII sentiment?

A: Certainly, and the world has been shocked by the images that we have been getting out of Mumbai.

Typically, when we have seen similar outrages in other parts of the world, it does immediately hit investor sentiment but depending on how quickly things get back to normal, it proves to be typically quite short lived.

The worrying aspect here is that uncharacteristically these attacks and outrages have been targeted directly at foreigners and venue sites which are frequented by foreigners in Mumbai. So, I think that is one aspect that foreign visitors and travellers will be looking at.

It may have a dampening effect in terms of how quickly international investors come back into the market. Of course, most international investors have pulled back significantly this year in any event with some USD 13.5 billion or so already withdrawn from the Indian market.

Q: Relatively speaking, in a world which is just basically trying to get back on its feet in terms of liquidity, do you think it puts India to relative disadvantage or do you think that would be overstating the case?

A: It clearly is not going to help overall perception and risk appetite, but it is difficult to assess in these types of situations. However, in any event, international capital flows, we are talking about the equity markets, are already under significant pressure. We have got the threat of deflation now as a result of all this deleverage which is at play in global markets.

We have seen central banks internationally trying to throw a lot of money at the problem, trying to improve liquidity, certainly take positions from the government’s perspective to improve solvency and the net effect is quite marginal. This is because of the tremendous amount of leverage that was built up in the financial system particularly in the United States; it is starting to unwind. So as liquidity looks like it is improving, corporations, individuals, financial institutions, in particular, are taking the opportunity to try and draw down some of that debt and reduce their obligations.

The net result is that we are not seeing any flow through in terms of confidence, in terms of the way the banks are lending to each other and to end-users and the way in which credit markets are behaving generally.

So without that improvement, international capital flows are going to be pretty scarce over the next six months, we would estimate. Thus, in that environment, emerging markets generally don’t perform well and as we know, the Indian economy has been quite extensively dependent at the margin on international fund flow.

So, clearly they are going to be lacking anyway. To what extent this outrage that we have seen over the last few days in India has an impact that remains to be seen but one would expect it not really to disrupt the picture too significantly and certainly not longer-term. We wouldn’t expect to see any disruption. The issue really remains how quickly can the world economy get back on its feet.

Q: As we end this year, which has been a very bad one for global equities, and as we head into 2009, what is your feeling, this year has been a write off, but in 2009 do you see any reconstruction happening or it to be another difficult year for equities globally?

A: I think sort of something for emerging markets and the markets in this region including India in that sort of echoing some of the comments from the previous interview that if you think about last year, it was characterized by indiscriminant buying where euphoria really got the best of many international investors and were buying into emerging markets with literally regard to fundamentals.

This year there has been indiscriminant selling and the reverse of that now we are seeing many companies beaten down to very low multiples almost to the point where valuations really aren’t the issue. As we go into the next year, there will be opportunities for those who see the longer-term picture to pick up companies on pretty good multiples and valuations.

To benefit coming into the second half of next year, of course predicated on the assumption that as the US pulls out of this recession in the second half of next year and indication start to emerging earlier than that, investor sentiment comes back and investors start to dial up their risk rating a bit and are willing to step away from the most secured investments. At the moment this flight to quality has rally crowded out all other asset classes. The strength in the dollar up until this week was largely a reflection of that both in terms of the deleverage but also in terms of the flight to US treasuries which almost risks a bubble marking in US treasuries as money continues to flock to what is considered as the safest asset class globally. However, I would say that going into ’09 it is still tough the second half prospects of making some money particularly in some of these emerging markets where companies are doing pretty well.

Inflation at 11.89%; Experts expect RBI to raise rates

Inflation for the week ended July 12 is at 11.89 % versus 11.91%.

Inflation for week-ended May 17 was revised to 8.66%, it had earlier been estimated at 8.10%.

So, what do experts see RBI doing next?

Mohan Shenoi, Treasury-Head, Kotak Mahindra Bank, said the chances of RBI pursuing a wait-and-watch policy has increased substantially as WPI has reached a plateau after a rapid rise and international crude oil prices also seems to be coming down. “RBI might just focus on managing liquidity and give the policy rate hike a pass this time. However, the RBI might make some announcements on CRR in order to curb liquidity and to show that inflation is still a concern.”

RVS Sridhar, Senior Vice President‑Treasury, Axis Bank, expects a repo rate hike by RBI. “I don’t see a hike in CRR. There will be some volatility in the next few weeks or months depending on the trajectory of inflation and the expectations on RBI action. Crude oil coming down and should be a great help in these conditions.” He sees interest rates for 10-year bond yields at around 9.25%.

Shubhada Rao, Chief Economist, Yes Bank, said these last two weeks’ numbers definitely point to some stability in the week-over-week increase in prices. “It is going to need significant effort to bring down the week-over-week index number much lower. If the current trend of marginal week-over-week increase continues for a larger part of the year, we could see inflation peaking at around 14-14.5%. Beyond that we could see it lowering. On the flipside, the patchy performance of monsoon is something that we need to watch out for.”

She sees inflation arising in primary articles. “There should be some relief on manufactured product prices. I expect double-digit inflation for a larger part of the current fiscal because the index has risen much higher in the last six week.”

She does not see a rate or CRR action by RBI. She sees rate action between two policy periods, i.e. between July and October.

Inflation Internals:
Primary articles up 0.6%
Food Articles up 0.6%
Coffee up 8% and Fruits and Vegetables up 2%
Moong and Jowar up 1%
Tea down 2% and Spices down 1%
Non-Food Articles up 0.8%
Sunflower and Raw Rubber up 3%
Rape and Mustard Seeds up 2%
Fuel, Power, Light and Lubricants was unchanged
Manufactured Products up 0.05%
Textiles down 0.1%
Tyre and Cord up 1%
Basic Metals and Alloys up Marginally
Lead Ingots up 6% and Zinc Ingots up 3%
Machine and Machine Tools up 0.2%
Electrical and Elec Equipment up 0.2%
Edible Oil down 0.3%, Oil Cakes up 0.6%
Synthetic Resins and Plastic Materials up 0.2%
Electical Industrial Machinery up 0.4%

Soros: Credit default swaps are the next Damocles sword

International financier George Soros thinks the financial tension in the markets is going to ease, but there are still a number of land mines left to navigate around. Case in point: credit default swaps, or CDSs, a synthetic financial instrument that acts as an insurance policy against debt defaults.


"This is a totally unregulated market hanging like a Damocles sword over the financial system," Soros told reporters on a conference call hosted by the New America Foundation Friday. "You don't know whether your counterparty is good for its payment or not."

This is a concern that others in the financial markets have expressed. Jonathan Sablone, partner at Nixon Peabody LLP in Boston, discusses it in my "An open book?" news story in The Deal magazine.

Soros suggested that there is an active and unregulated $45 trillion CDS market that has become unhinged from actual hedging against defaults. Regulators and industry players need to create a clearinghouse or exchange where these swaps can be settled according to well established rules, which is critical to avoid an implosion, Soros adds. "Until that happens the market is nervous and creates this counterparty risk," he said. "People who have these contracts need to know whether or not the counterparties are good or not, and you will only know that when you know who the counterparties are."

He contends that the amount invested in the CDS market is roughly equal to half the entire U.S. household wealth or 5 times the U.S. national debt.

The biggest player, Soros points out, is J.P. Morgan Chase & Co., which has roughly $16 trillion to $18 trillion in CDSs while Bear Stearns Cos. has $2.5 trillion CDSs. But Soros notes that a large chunk of these financial instruments are held by individual hedge funds. Hedge funds holding CDS obligations both as parties and counterparties and observers are concerned that the inability of highly leveraged counterparties to meet their obligations on such instruments could lead to a "cascade" failure through the system.

Soros says he takes a middle-of-the-road approach to market regulation. "I have found myself to be a critic of both market fundamentalism in the West and a critic of state regulation in the former Soviet Union," Soros said. "We have to stop swinging from one extreme to the other." - Ron Orol

Key Features of Budget 2008-2009

THE ECONOMY : AN OVERVIEW
! The Gross Domestic Product increased by 7.5 per cent, 9.4 per cent and 9.6 percent
in first three years, of the UPA Government resulting in an unprecedented average
growth rate of 8.8 per cent. The drivers of growth continue to be 'services' and
'manufacturing' which are estimated to grow at 10.7 per cent and 9.4 per cent
respectively.
! Growth rate in agriculture for 2007-08 is estimated at 2.6 per cent.
! Food grain production in 2007-08, estimated at 219.32 million tonnes-an all time
record. Rice production at 94.08 million tonnes, maize at 16.78 million tonnes,
soya bean at 9.45 million tonnes, cotton at 23.38 million bales each, an all time
record.
! Rashtriya Krishi Vikas Yojana launched with an outlay of Rs. 25,000 crore, National
Food Security Mission with an outlay of Rs. 4,882 crore under National Policy for
Farmers in the Eleventh Five Year Plan.

THE GROWTH STORY : FASTER AND MORE INCLUSIVE
! Agricultural credit poised to reach Rs. 2,40,000 crore by March, 2008.
! 11.4 crore children covered under Mid Day Meal Scheme, the largest school lunch
programme in the world.
! Under National Rural Health Mission 8,756 primary health centres have been made
24x7 .
! 1,82,000 girls enrolled in residential schools under Kasturba Gandhi Balika
Vidyalaya Scheme.

BHARAT NIRMAN
! Bharat Nirman has made impressive progress in 2007-08 with 290 habitations
provided with drinking water each day, 17 habitations connected through all weather
road, 52 villages provided telephones, 42 villages electrified & 4,113 rural houses
completed each day.

ELEVENTH FIVE YEAR PLAN: THE CRUCIAL SECOND YEAR
! GBS 2008-09 at Rs.2,43,386 crore higher by Rs. 38,286 crore over 2007-08. Central
Plan allocation at Rs.1,79,954 crore, an increase of 16 percent over 2007-08; Bharat
Nirman to get Rs. 31,280 crore.
! Sarva Shiksha Abhiyan (SSA): Sarva Shiksha Abhiyan provided Rs.13,100 crore
with the focus to shift from access and infrastructure at the primary level to enhancing
retention and improving quality of learning. Mid-day Meal to get Rs. 8,000 crore;
secondary education to get Rs. 4,554 crore.
! Jawahar Navodaya Vidyalaya : Rs. 130 crore provided in 2008-09, to establish
Navodaya Vidyalaya in 20 districts having large concentration of Scheduled Castes
& Scheduled Tribes.
! Kasturba Gandhi Balika Vidyalaya: Funds (as part of SSA) provided for additional
410 Vidyalayas in educationally backward areas. Rs. 80 crore allocated to set up
new or upgrade existing hostels attached to Balika Vidyalaya.
! National Means-cum-Merit Scholarship: Rs. 750 crore allocated to build up a corpus
of Rs.3,000 crore in four years. 1,00,000 Scholarship to be awarded beginning
2008-09.
! Nehru Yuva Kendra: Rs. 10 crore allocated in 2008-09 to set up a Kendra in 123
districts, and to cover recurring expenditure in the first year.
! Mid Day Meal Scheme: Extended to upper primary classes in Government and
Government aided schools in all blocks which will benefit 2.5 crore children taking
the total number of children covered under the scheme to 13.9 crore.
! Institutes of Higher Education: India to become a knowledge society, three IISERs
at Mohali, Pune and Kolkata; and an IIIT at Kanchipuram have started
functioning.Government to set up 16 Central Universities in each of the hitherto
uncovered states; three IITs in Andhra Pradesh, Bihar and Rajasthan; two IISERs
at Bhopal and Tiruvananthapuram; and two Schools of Planning and Architecture
at Bhopal and Vijayawada: Rs. 5 crore grant provided to Deccan College, Postgraduate
and Research Institute, Pune.
! Science and Technology: Rs.85 crore allocated for Innovation in Science Pursuit
for Inspired Research (INSPIRE); which will include scholarships for young learners
(10-17 years), scholarships for continuing science education (17-22 years) and
opportunities for research careers (22-32 years); Rs. 100 crore provided for
establishing the National Knowledge Network.
! Health Sector: Rs.16,534 crore allocated, for the sector marking an increase of
15% over 2007-08.
National Rural Health Mission (NRHM): 462,000 Associated Social Health
Activitists have been trained, 177,924 villages have sanitation committees functional
and 323 district Hospitals have been taken up for upgradation. Allocation to NRHM
has been increased to Rs. 12,050 crore.
! HIV/AIDS: The National Aids Control Programme provided Rs.993 crore.
! Polio: Drive to eradicate polio continues with revised strategy and focus on the
high risk districts in Uttar Pradesh and Bihar. Rs. 1,042 crore allocated in 2008-09.
! Rashtriya Swasthya Bima Yojana : Rashtriya Swasthya Bima Yojana to provide
health cover of Rs.30,000 for every worker in the unorganised sector falling under
the BPL category and his/her family. The Yojana will be launched in Delhi and in
the States of Haryana and Rajasthan on April 1, 2008. Rs.205 crore provided as the
Centre's share of the premia in 2008-09.
! National Programme for the Elderly: National Programme for the Elderly to be
started in 2008-09 with a Plan outlay of Rs.400 crore. Two National Institutes of
Ageing, eight regional centres, and a department for geriatric medical care in one
medical college/tertiary level hospital in each State to be established during the
Eleventh Plan period.
! Integrated Child Development Services (ICDS): Allocation for ICDS enhanced
from Rs.5,293 crore in 2007-08 to Rs.6,300 crore in 2008-09; Remuneration of
Anganwadi workers being increased from Rs.1,000 per month to Rs.1,500 per
month; remuneration of Anganwadi Helpers increased from Rs.500 per month to
Rs.750 per month; over 18 lakh Anganwadi workers and helpers to benefit; 5,959
ICDS projects and 932,000 Anganwadi and mini-Anganwadi centres functional
under ICDS at the end of December 2007.

Flagship Programmes
! National Rural Employment Guarantee Scheme (NREGS): NREGS to be rolled
out to all 596 rural districts in India with provision of Rs.16,000 crore; More money
will be provided to meet the legal guarantee of employment as demand rises.
! Jawaharlal Nehru National Urban Renewal Mission (JNNURM): Allocation for
JNNURM increased to Rs.6,866 crore in 2008-09 from Rs.5,482 crore in 2007-08.
! Rajiv Gandhi Drinking Water Mission: Allocation for Rajiv Gandhi Drinking Water
Mission enhanced to Rs.7,300 crore in 2008-09 as against Rs.6,500 crore in
2007-08;
! Total Sanitation Campaign to be provided Rs.1,200 crore in 2008-09.
! Desalination Plant near Chennai: Rs.300 crore in 2008-09 for a desalination plant
near Chennai to be set up under public private partnership.
! North Eastern Region (NER): Ministry of Development of North Eastern Region
to be provided Rs. 1,455 crore. Including this amount, total Budget allocation for
NER, to increase to Rs.16,447 crore in 2008-09 from Rs.14,365 crore in 2007-08.
! Development and Finance Corporations: Additional equity contributions proposed
for National Minorities Development and Finance Corporation Rs. 75.00 crore,
National Finance and Development Corporations for weaker sections
comprising Safai Karamcharis, Scheduled Castes and Backward Classes. Rs. 106.50
crore, National/State Scheduled Tribes Finance and Development Corporations
Rs. 50.00 crore, National Handicapped Development Corporation Rs. 9.00 crore.
! Scholarships: Pre- and post-matric scholarship programmes announced in previous
Budgets for SC, ST, OBC and minorities to get further funds in 2008-09: Scheduled
Castes (Rs.804 crore), Scheduled Tribes (Rs.195 crore), Other Backward Classes
(Rs.164 crore) and Minorities (post-matric) (Rs.100 crore).
! Rajiv Gandhi National Fellowship Programme supporting SC and ST students
pursuing M.Phil and PhD courses allocated Rs.75 crore in 2008-09.
! Minorities: Allocation to the Ministry of Minority Affairs increased from Rs.500
crore in 2007-08 to Rs.1,000 crore in 2008-09; Report of the Justice Rajindar
Sachar Committee taken up for speedy implementation.

Women and Children
! Rs, 11,460 crore has been provided for 100% women specific programmes and
Rs. 16,202 crore for schemes where at least 30 per cent allocation is for women
specified programmes.
! Allocation for Ministry of Women and Child Development enhanced by 24% to
Rs. 7,200 crore in 2008-09.

Self Help Groups
! Life Insurance Corporation of India being asked to scale up Janashree Bima Yojana
scheme to cover all women self help groups that are credit-linked to the banks; of
Rs. 500 crore proposed to be contributed to the corpus of the Social Security Fund
with annual contributions to be made as the scheme is scaled up.

Supplement to GBS:
! Rs.8,365 crore provided as additional funds for Plan 'B' through two supplementaries
in 2007-08; additional resources to the tune of Rs.10,000 crore to be mobilized
under Plan 'B' for Plan Capital expenditure in 2008-09 also.

Agricultural Credit:
! Growth of agricultural credit set to exceed target set for 2007-08. For 2008-09,
target set at Rs.280,000 crore, with short-term crop loans continued to be disbursed
at 7 per cent per annum; initial provision of Rs.1,600 crore made for interest
subvention in 2008-09.

Investment in Agriculture:
! Gross Capital Formation (GCF) in agriculture as a proportion of GDP in the
agriculture sector improves from a low of 10.2 per cent in 2003-04 to 12.5 per cent
in 2006-07; Target to raise it to 16 per cent during the Eleventh Plan to achieve the
growth rate of 4 per cent.

Water Resources:
! Accelerated Irrigation Benefit Programme (AIBP): 24 major and medium irrigation
projects and 753 minor irrigation schemes to be completed in 2007-08, creating
additional irrigation potential of 500,000 hectare; Outlay for 2008-09 increased to
Rs. 20,000 crore, from Rs.11,000 crore in 2007-08.
! Rainfed Area Development Programme finalised and to be implemented in
2008-09 with an allocation of Rs.348 crore. Priority to those areas that have not
been beneficiaries of watershed development schemes.
! Centrally Sponsored Scheme on Micro Irrigation: Rs.500 crore being allocated in
2008-09 with a target of covering 400,000 hectare.
! Water bodies: Agreements for a total sum of US$738 million signed with the World
Bank by the Governments of Tamil Nadu, Andhra Pradesh and Karnataka to repair,
renovate and restore water bodies. Similar agreements to be signed between the
World Bank and the Governments of Orissa, West Bengal and some other States.
! Irrigation and Water Resources Finance Corporation: 14 irrigation projects
approved as National Projects by Government; Irrigation and Water Resources
Finance Corporation (IWRFC) proposed to be set up with initial capital of Rs.100
crore contributed by the Central Government, to fund long-gestation major and
medium irrigation projects.
! National Horticulture Mission (NHM): NHM covering 340 districts in 18 States
and two Union Territories, provided Rs.1,100 crore in 2008-09.
! Soil testing: 500 soil testing laboratories to be set up during the Eleventh Plan with
Government assistance of Rs.30 lakh per laboratory; one-time allocation of Rs.75
crore to the Ministry of Agriculture in order to provide one fully-fitted mobile soil
testing laboratory each to 250 districts of the country.
! Plantation Crops: Special Purpose Tea Fund for re-plantation and rejuvenation to
be provided Rs.40 crore in 2008-09; similar support to cardamom, rubber and coffee;
crop insurance scheme for tea, rubber, tobacco, chilli, ginger, turmeric, pepper and
cardamom to be introduced.
! National Plant Protection Training Institute at Hyderabad to be converted and
upgraded into an autonomous National Institute of Plant Health Management.
! Crop Insurance: National Agriculture Insurance Scheme (NAIS) to be continued
in its present form for Kharif and Rabi 2008-09. Rs.644 crore provided for the
scheme.
! Weather Based Crop Insurance Scheme implemented as a pilot scheme in selected
areas of five States to be continued; Rs.50 crore provided for this purpose in 2008-09.
! Subsidy for Fertilizers: Government to continue to provide fertilisers to farmers at
subsidized prices; Proposals to move to a nutrient based subsidy regime and
alternative methods of delivery being examined.
! Cooperative Credit Structure: Prof. Vaidyanathan Committee's report on reviving
the short-term cooperative credit structure under implementation in 17 states.
Rs. 1185 crore has been released so far by the Central Government to four States.
Central Government and State Government have reached an agreement to implement
the report on reviving the long term cooperative credit structure. Central
Government’s share will be Rs. 2,642 crore or 86 per cent of the total burden.
! Scheme of Debt Waiver and Debt Relief for farmers:
" Scheme to cover all loans disbursed by scheduled commercial banks, regional
rural banks and cooperative credit institutions up to March 31, 2007 and
overdue as on December 31, 2007 are covered under the scheme;
" Complete waiver of all loans that were overdue on December 31, 2007 and
which remained unpaid until February 29, 2008 for marginal farmers and
small farmers;
" one time settlement (OTS) scheme in respect of other farmers for all loans
that were overdue on December 31, 2007 and which remained unpaid until
February 29, 2008; Rebate of 25 per cent against payment of the balance of
75 per cent under OTS;
" Agricultural loans restructured and rescheduled by banks in 2004 and 2006
through special packages also eligible, either for a waiver or an OTS on the
same pattern;
" Implementation of the debt waiver and debt relief scheme to be completed
by June 30, 2008; Farmers availing the relief would be entitled to fresh
agricultural loans from banks in accordance with normal rules.
" About 3 crore small and marginal farmers and about one crore other farmers
to benefit from the scheme; Total value of overdue loans being waived
estimated at Rs.50,000 crore and the OTS relief estimated at Rs.10,000 crore.

INVESTMENT, INFRASTRUCTURE, INDUSTRY AND TRADE
! Saving rate and investment rate estimated to be 35.6 per cent and 36.3 per cent,
respectively, by the end of 2007-08; between April- December 2007-2008. FDI
amounted to US$ 12.7 billion and FII to US$ 18 billion.
! Support to Central Public Sector Enterprises (CPSEs): Government to provide
Rs.16,436 crore as equity support and Rs.3,003 crore as loans to CPSEs in 2008-
09; 44 CPSEs listed as on date; Government policy is to list more CPSEs in order
to unlock their true value and improve corporate governance.
Rural Infrastructure Development Fund
! Corpus of RIDF-XIV to be raised in 2008-09 to Rs.14,000 crore, with a separate
window for rural roads.

Manufacturing Sector
! Growth in capital goods still very high at 20.2 per cent. Goal to take manufacturing
growth rate to double digit through more reforms.

Power
! Against Eleventh Plan target for additional power generation capacity of 78,577
MW Commercial Operation Date (COD) on about 10,000 MW to be achieved by
end March 2008.
! Ultra Mega Power Project (UMPP): Fourth UMPP at Tilaiya to be awarded shortly;
Chhattisgarh, Karnataka, Maharashtra, Orissa and Tamilnadu urged to bring five
more UMPPs to the bidding stage by extending the required support.
! Rajiv Gandhi Grameen Vidyutikaran Yojana to be continued during the Eleventh Plan
period with a capital subsidy of Rs.28,000 crore; allocation of Rs.5,500 crore for
2008-09.
! Accelerated Power Development and Reforms Project: Rs.800 crore to be provided
in 2008-09, A National Fund for transmission and distribution reform to be created.

Roads
! National Highway Development Programme (NHDP): Allocation for NHDP
enhanced to Rs.12,966 crore in 2008-09 from Rs.10,867 crore in 2007-08;
Completion rate in the Golden Quadrilateral is 96.48 per cent and in the North
South, East West Corridor project is 23.36 per cent; Special attention being paid to
SARDP-NE; programme devised for the North Eastern region; 180 kms of roads
completed in 2007-08 and 300 kms. of road targetted for completion in 2008-09.

Oil and Gas
! Seventh round of bidding under the New Exploration Licensing Policy; bids invited
for 57 exploration blocks; estimated to attract investment of the order of US$3.5
billion to US$8 billion for exploration and discovery.

Coal
! 53 coal blocks with reserves of 13,842 million tonnes allotted during April-January
2007-08 to Government and private sector companies; new Coal Distribution Policy
notified in October 2007; coal regulator to be appointed.

Information Technology
! Allocation to the Department of Information Technology enhanced to Rs.1,680
crore in 2008-09 from Rs.1,500 crore in 2007-08; Two Schemes for establishing
100,000 broadband internet-enabled Common Service Centres in rural areas and
State Wide Area Networks (SWAN) with Central assistance under implementation;
new scheme for State Data Centres also approved; Rs.75 crore provided for the
common service centres; Rs.450 crore provided for SWAN and Rs.275 crore for
the State Data Centres.

Textiles
! Schemes for Integrated Textile Parks (SITP) and the Technology Upgradation Fund
(TUF) to be continued in the Eleventh Plan period; Provision for SITP being
maintained at Rs.450 crore in 2008-09; Provision for TUF to be increased to
Rs.1,090 crore in 2008-09 from Rs.911 crore in 2007-08.
! Handloom sector: 250 clusters being developed and 443 yarn banks established
under the cluster approach to the development of the handloom sector; Over 17
lakh families of weavers to be covered under the health insurance scheme by March
2008; Allocation being increased to Rs.340 crore in 2008-09; Infrastructure and
production being scaled up by taking up six centres for development as megaclusters;
Varanasi and Sibsagar to be taken up for handlooms, Bhiwandi and Erode
for powerlooms, and Narsapur and Moradabad for handicrafts; Each mega-cluster
to require about Rs.70 crore; Initial provision of Rs.100 crore made in 2008-09.

Micro, Small and Medium Enterprises
! A risk capital fund being created in the Small Industries and Development Bank of
India (SIDBI); Credit Guarantee Trust with SIDBI had extended guarantees to
89,129 units for an amount of Rs.2,479 crore as on January 31, 2008; SIDBI to
reduce the guarantee fee from 1.5 per cent to 1 per cent and the annual service fee
from 0.75 per cent to 0.5 per cent for loans up to Rs.5 lakhs.

Foreign Trade
! Relief given to exporters in three tranches amounting to over Rs.8,000 crore; Interest
cost of sterilization through market stabilization bonds (MSS), which is in a sense,
subsidy to the export sector, estimated at Rs.8,351 crore for the year 2007-08.

FINANCIAL SECTOR
! Financial Inclusion: Two recommendations of the Committee on Financial Inclusion
proposed to be accepted viz (i) to advise commercial banks, including RRBs, to
add at least 250 rural household accounts every year at each of their rural and
semi-urban branches; and (ii) to allow individuals such as retired bank officers,
ex-servicemen etc to be appointed as business facilitator or business correspondent
or credit counselor; banks to be encouraged to embrace concept of Total Financial
Inclusion; Government to request all scheduled commercial banks to follow the
example set by some public sector banks and meet the entire credit requirements
of SHG members, namely, income generation activities, social needs like housing,
education, marriage etc., and debt swapping.
! (i) Fund of Rs.5,000 crore to be created in NABARD to enhance its refinance
operations to short term cooperative credit institutions;
(ii) Two funds of Rs.2,000 crore each to be created in SIDBI - one for risk capital
financing and other for enhancing refinance capability to the MSME sector.
(iii) Fund of Rs.1,200 crore to be created in NHB to enhance its refinance operations
in the rural housing sector.
These funds are to be governed by the general guidelines that are now applicable
to RIDF with some modifications.
! Differential Rate of Interest (DRI) scheme: Borrower's eligibility criteria for loan
under the DRI scheme to the weaker sections of the community engaged in gainful
occupations enhanced.

Capital Markets
! Measures to expand the market for corporate bonds: Exchange-traded currency
and interest rate futures to be launched and transparent credit derivatives market to
be developed with appropriate safeguards; Tradability of domestic convertible bonds
to be enhanced through the mechanism of enabling investors to separate the
embedded equity option from the convertible bond, and trade it separately;
Development of a market-based system for classifying financial instruments based
on their complexity and implicit risks to be encouraged.
! Permanent Account Number (PAN): Requirement of PAN extended to all
transactions in the financial market subject to suitable threshold exemption limits.
! National market for securities: Empowered Committee of State Finance Ministers
to be requested to work with the Central Government to create pan Indian market
for securities that will expand the market base and enhance the revenues of the
State Governments.

OTHER PROPOSALS
! Skill Development Mission: A non-profit corporation to be established with the
entrusted mission to address the challenge of imparting the skills required by a
growing economy; Rs.15,000 crore proposed to be garnered as capital from
Governments, public and private sector, and bilateral/multilateral sources;
Government's equity in the proposed non-profit corporation to be Rs.1,000 crore
to begin with.
! Industrial Training Institutes: 238 ITIs being upgraded under the World Bank
assisted scheme; Under the PPP scheme, 309 ITIs have been identified in 29 States
with corresponding industry partners and agreements signed in 244 cases; Rs.750
crore set apart in 2008-09 in anticipation of upgrading 300 more ITIs.
! Sainik Schools: Rs.44 crore allocated to the 22 Sainik Schools at the rate of Rs.2
crore each, for immediate improvement of infrastructure including classrooms,
laboratories, libraries and facilities for physical education.
! Public Distribution System: Rs.32,667 crore being provided next year for food
subsidy under PDS and other welfare programmes; State of Haryana and the Union
Territory of Chandigarh to introduce, on a pilot basis, a smart card based delivery
system to deliver food grains under the PDS.
! Unorganised Sector Workers: In anticipation of the Unorganised Sector Workers'
Social Security Bill, 2007 being made into law, three schemes designed to provide
social security to workers in unorganised sector in a phased manner introduced;
(i) Aam Admi Bima Yojana to provide insurance cover to poor households; in the
first year of the Yojana, LIC to cover one crore landless households by September
30, 2008; Rs.1,500 crore placed with LIC; Additional sum of Rs.1,000 crore to be
placed with LIC in 2008-09 to cover another one crore poor households in the
second year;
(ii) Rashtriya Swasthya Bima Yojana to be implemented with effect from April 1,
2008; Indira Gandhi National Old Age Pension Scheme enlarged with effect from
November 19, 2007 to include all persons over 65 years falling under the BPL
category expanding beneficiary cover from 87 lakh to 157 lakh; Rs. 3,443 crore
being allocated in 2008-09 as against Rs.2,392 crore in 2007-08.
! Housing for the Poor: 41.13 lakh houses constructed up to December 2007 under
Indira Awas Yojana (IAY) against a target of 60 lakh houses; Cumulative number
of houses constructed under IAY to be 51.77 lakh by end March 2008; Subsidy per
unit in respect of new houses sanctioned after April 1, 2008 to be enhanced from
Rs.25,000 to Rs.35,000 in plain areas and from Rs.27,500 to Rs.38,500 in hill/
difficult areas to reflect the higher cost of construction; Subsidy for upgradation of
houses to be increased from Rs.12,500 per unit to Rs.15,000; Public sector banks
to be advised to include IAY houses under the differential rate of interest (DRI)
scheme and lend up to Rs.20,000 per unit at an interest rate of 4 per cent.
! Defence: Allocation for Defence to be increased by 10 per cent from Rs.96,000
crore to Rs.105,600 crore.
! Backward Regions Grant Fund: Allocation for 2008-09 kept at same level as current
year at Rs.5,800 crore; 45 per cent of the amount likely to be allocated to the States
of Bihar, Orissa and Uttar Pradesh.
! Climate Change: Permanent institutional mechanism to be established for
development and coordination role in exploration and implementation of ideas.
! Sixth Central Pay Commission: to submit its report by March 31, 2008.
! Commonwealth Games: to be provided Rs.624 crore in 2008-09.
! Institutions of Excellence: Special grant of Rs.100 crore awarded to three institutions
of excellence for 2008-09
(i) Mahatma Phule Krishi Vidyapeeth, Rahuri, Maharashtra;
(ii) University of Mysore, Mysore; and
(iii) Delhi University, Delhi.
! India's Soft Power: Rs.75 crore grant to Indian Council of Cultural Relations to
design and implement a programme to achieve the objective of projecting the 'soft
power' of India in music, literature, dance, art, cuisine and especially films.
! Tiger Protection: One time grant of Rs.50 crore to the National Tiger Conservation
Authority to redouble efforts to protect the tiger; Bulk of grant to be used to raise,
arm and deploy a special Tiger Protection Force.
! Monitoring and Evaluation: Central Plan Schemes' Monitoring System (CPSMS)
to be put in place and implemented as Plan scheme; a comprehensive Decision
Support System and Management Information System also to be established to
generate and monitor scheme-wise and State-wise releases for about 1,000 Central
Plan and centrally sponsored schemes in 2008-09; Concurrent evaluation started
by some ministries to be supplemented by independent evaluations conducted by
research institutions.

BUDGET ESTIMATES
! Plan Expenditure estimated at Rs.243,386 crore.
! Non-Plan Expenditure estimated at Rs.507,499 crore.
! Revenue deficit for 2007-08 to be 1.4 per cent (against a BE of 1.5 per cent) and
the fiscal deficit to be 3.1 per cent (against a BE of 3.3 per cent); Revenue receipts
of Central Government for 2008-09 projected at Rs.602, 935 crore and revenue
expenditure at Rs.658,119 crore; Revenue deficit for 2008-09 estimated at Rs.55,184
crore, which amounts to 1.0 per cent of GDP; Fiscal deficit for 2008-09 estimated
at Rs.133,287 crore which is 2.5 per cent of GDP; elimination of Revenue Deficit
may need one more year; because of the conscious shift in expenditure in favour of
health, education and the social sector.
! Thirteenth Finance Commission to be requested to revisit the roadmap for fiscal
adjustment and suggest a suitably revised roadmap, after the obligations on
account of the Sixth Central Pay Commission become clear.

TAX PROPOSALS
! Tax to GDP ratio that was 9.2 per cent in 2003-04, set to rise to 12.5 per cent at the
end of 2007-08.
! Set to achieve the Budget Estimates of indirect taxes and exceed the Budget
Estimates of direct taxes.

Indirect Taxes
Customs duties
! No change in the peak rate of customs duty.
! Customs duty on Project Imports to reduce from 7.5 per cent to 5 per cent; 4 per
cent special CVD to be imposed on a few specified projects in the power sector.
! Customs duty being reduced on steel melting scrap and aluminium scrap from 5
per cent to nil.
! Customs duty to be reduced from 10 per cent to 5 per cent on certain specified life
saving drugs and on the bulk drugs used for the manufacture of such drugs. They
are also being exempted from excise duty or countervailing duty.
! Customs duty is being reduced on vitamin premixes and mineral mixtures from 30
per cent to 20 per cent and on phosphoric acid from 7.5 per cent to 5 per cent to
reduce cost of manufacture of dairy and poultry feeds
! Customs duty being reduced on bactofuges from 7.5 per cent to nil for the benefit
of dairy industry and to increase shelf life of milk
! Specified parts of set top boxes and specified raw materials for use in the IT/
electronic hardware industry to be exempted from customs duty.
! Customs duty on convergence products to be reduced from 10 per cent to 5 per
cent to establish parity between devices used in the information/ communication
sector and the entertainment sector
! Customs duty being reduced on specified machinery from 7.5 per cent to 5 per cent
to provide fillip to the manufacture of sports goods; duty also being exempted on
specified raw materials for sports goods.
! Customs duty to be exempted on rough cubic zirconia and being reduced on polished
cubic zirconia from 10 per cent to 5 per cent, in order to encourage value addition
and exports by gem and jewellery industry; Customs duty on rough coral being
reduced from 10 per cent to 5 per cent.
! Customs duty removed on helicopter simulators to facilitate training of helicopter
pilots
! Customs duty reduced on crude and unrefined sulphur from 5 per cent to 2 per
cent, in order to support domestic fertiliser production
! Customs duty exemption is proposed to be withdrawn on naphtha for use in the
manufacture of polymers in order to correct price distortions and revenue losses.
Naphtha for use in the manufacture of polymers will be subjected to normal rate of
5 per cent. Naphtha imported for the production of fertilisers will continue to be
exempt from import duty.
! Export duty on chrome being increased from Rs.2,000 per metric tonne to Rs.3,000
per metric tonne in order to conserve and make it available for value added
manufacture in India.

Excise duty
! General CENVAT rate on all goods reduced from 16 per cent to 14 per cent to give
a stimulus to the manufacturing sector.
! Excise duty on all goods produced in the pharmaceutical sector reduced from 16
per cent to 8 per cent.
! Excise duty reduced on buses and their chassis from 16 per cent to 12 per cent.
! Excise duty reduced on small cars from 16 per cent to 12 per cent and on hybrid
cars from 24 per cent to the general revised rate of 14 per cent.
! Excise duty reduced on two wheelers and three wheelers from 16 per cent to
12 per cent.
! Excise duty to be reduced on paper, paper board and articles made therefrom
manufactured out of non-conventional raw materials by units not having an attached
bamboo/wood pulp making plant from 12 per cent to 8 per cent with a further
reduction on clearances up to 3,500 MT from 8 per cent to nil. Excise duty on
certain varieties of writing, printing and packing paper is to be reduced from 12
per cent to 8 per cent.
! Excise duty is to be reduced from 16 per cent to nil on a few mass consumption
items including composting machines, wireless data cards, packaged coconut water,
tea and coffee mixes, and puffed rice.
! Excise duty reduction from 16 per cent to 8 per cent on a few more items including
water purification devices, veneers and flush doors, sterile dressing pads etc,.
specified packaging material and breakfast cereals.
! Anti AIDS drug, Atazanavir, as well as bulk drugs for its manufacture are to be
exempted from excise duty.
! Excise duty being exempted on end-use basis, on refrigeration equipment (consisting
of compressor, condenser units, evaporator, etc) above 2 TR (tonne refrigeration)
utilising power of 50 KW and above.
! Excise duty rates on bulk cement and packaged cement brought on par; bulk cement
to attract excise duty of Rs.400 per Metric Tonne or 14 per cent ad valorem,
whichever is higher; cement clinkers excise duty at Rs.450 per Metric Tonne.
! Excise duty being increased on packaged software from 8 per cent to 12 per cent,
bringing at par with customised software attracting a service tax of 12 per cent.
! Excise duty on both filter and non-filter cigarettes brought on par by applying
higher rates on non-filter cigarettes.
! Ad valorem part of the excise duty on unbranded petrol and unbranded diesel being
abolished and replaced by an equivalent specific duty of Rs.1.35 per litre; there
will be only a specific duty of Rs.14.35 per litre on unbranded petrol and Rs.4.60
per litre on unbranded diesel; there will be no impact on retail prices.
! NCCD of 1 per cent removed on polyester filament yarn and the levy shifted to
cellular mobile phones.

Service tax
! Four services brought under service tax net namely, asset management service
provided under ULIP, services provided by stock/commodity exchanges and clearing
houses; right to use goods, in cases where VAT is not payable; and customised
software, to bring it on par with packaged software and other IT services.
! Threshold limit of exemption for small service providers increased from Rs.8 lakhs
per year to Rs.10 lakh per year; about 65,000 small service providers go out of the
tax net.

Direct Taxes
! Threshold limit of exemption from personal income tax in the case of all assesses
increased to Rs.150,000. The slabs and rates of tax are :
Up to Rs.150,000 NIL
Rs.150,001 to Rs.300,000 10 per cent
Rs.300,001 to Rs.500,000 20 per cent
Rs.500,001 and above 30 per cent
! In case of a woman assessee, the threshold limit increased from Rs.145,000 to
Rs.180,000; for a senior citizens, the threshold limit increased from Rs.195,000 to
Rs.225,000.
! No change in the corporate income tax rates.
! No change in the rate of surcharge.
! Senior Citizen Saving Scheme 2004 and the Post Office Time Deposit Account
added to the basket of saving instruments under Section 80C of the Income Tax
Act.
! Additional deduction of Rs.15,000 allowed under Section 80D to an individual
paying medical insurance premium for his/her parent or parents.
! Income Tax Act to be amended to provide that reverse mortgage would not amount
to "transfer"; and the stream of revenue received by the senior citizen would not be
"income".
! Tax income arising from saplings or seedlings grown in a nursery exempted.
! Business of production of seeds and manufacture of agricultural implements added
to the list of companies allowed weighted deduction of 150 per cent on any
expenditure on in-house scientific research.
! Benefit of amortisation of certain preliminary expenses under Section 35D allowed
to assessees in the services sector.
! Corporate debt instruments issued in demat form and listed on recognised stock
exchanges exempted from TDS.
! Crèche facilities, sponsorship of an employee-sportsperson, organising sports events
for employees and guest houses excluded from the purview of FBT.
! Parent company allowed to set off the dividend received from its subsidiary company
against dividend distributed by the parent company; provided that the dividend
received has suffered DDT and the parent company is not a subsidiary of
another company.
! Insert a new sub-section (11C) in Section 80-IB to grant a five year tax holiday to
hospitals located in any place outside the urban agglomerations especially in tier-
2 and tier-3 towns; this window will be open for the period April 1, 2008 to March
31, 2013.
! Five year holiday from income tax being granted to two, three or four star hotels
established in specified districts having UNESCO-declared 'World Heritage Sites';
the hotel should be constructed and start functioning during the period
April 1, 2008 to March 31, 2013.
! Coir Board included in Section 10(29A) and exempted from income tax.
! Rate of tax on short term capital gains under Section 111A & Section 115AD
increased to 15 per cent.
! STT paid to be treated like any other deductible expenditure against business income;
Levy of STT, in the case of options to be only on premium, where the option is not
exercised; liability to be on the seller; where the option is exercised, levy to be on
the settlement price and the liability on the buyer; no change in the present rates.
! Commodities Transaction Tax (CTT) to be introduced on the same lines as STT on
options and futures.
! Law being amended to exclude entities carrying on regular trade, commerce or
business or providing services in relation to any trade, commerce or business and
earning incomes from claiming that their purposes also fall under "charitable
purpose"; Genuine charitable organisations not to be affected in any way.
! Banking Cash Transaction Tax (BCTT) being withdrawn with effect from
April 1, 2009.

CST and a Roadmap towards GST
! Central Sales Tax rate being reduced from 3 per cent to 2 per cent from
April 1, 2008.
! Roadmap for Goods and Service Tax being prepared for introduction of GST from
April 1, 2010.

Indian IPOs Grey Market Premiums on 10-01-08

Following are the latest Grey Market Prices of the Indian IPO’s as on 10th January, 2008.

Reliance Power IPO Grey Market Premium : Rs 350 to Rs 370

Future Capital Holdings IPO Grey Market Premium : 570 to 580

J. Kumar Infra Projects IPO Grey Market Premium : Rs 22 to 25

Aries Agro IPO Grey Market Premium : Rs 18 to Rs. 20.

Porwal Auto-components IPO Grey Market Premium : Discount

Precision Pipes & Profiles IPO Grey Market Premium : Rs 20 to Rs 25

Grey market prices only serve as an indicative premium above the expected listing price and cannot be take as definitive.