Highlights of the Union Budget presented today. Key factors to note are as follows: · Fiscal deficit numbers (actual as well as projected) are quite heartening. · There have been no major populist measures. · There have not been any major reforms announced – GST date is still uncertain and DTC is scheduled for April 2012. · Implicit in the lower projection of the subsidies is the hope that the prices of petroleum products and fertilizers may be partially decontrolled in the coming year. There is no explicit assurance of the same though. · Service tax maintained at 10% against the wide expectation of an increase. Excise duties not raised either. · The implications for various sectors are summarized in the attached document. Overall, the budget is quite incremental and not bold. Thankfully it is not populist either. Hence on the balance the sentiment post budget amongst market participants has been mildly positive. Our equity market outlook remains positive post the budget.

1. UNION BUDGET- 2011-2012
 Key highlights
Fiscal deficit for 2010-11 seen at 5.1% against 5.5% budgeted; deficit for 2011-12 projected at 4.6% of GDP
FY10-FY11 FY11-FY12 FY12-FY13 FY13-FY14
Fiscal Deficit 5.1% 4.6% 4.1% 3.5%
(Lower than the
budgeted 5.5%)
Tax to GDP ratio 9.8% 10.4% 10.8%
Public sector disinvestment target for 2011-12 is raised to Rs 40,000 cr
Gross market borrowing for 2011-12 seen at Rs 4.17 trillion. Total expenditure in 2011-12 seen at Rs12.58
trillion (1 trillion= 1 lakh cr)
Economy is expected to grow at 9% in 2012 (+/- 0.25%); Inflation seen at 5% in 2011-12
Subsidy
- Government to introduce direct cash payments for those entitled to subsidies in kerosene, cooking gas and
fertiliser by March, 2012.
- Government considering extension of nutrient-based subsidy for urea, the largest chunk of fertilisers used in
agriculture
(The amount of subsidy provided by the Govt. is Rs 1.44 trillion .The subsidy amount provided by the Govt.
appears to be less considering the rising crude prices etc. Lower estimate of subsidy, indicates that the
subsidies will be slowly more rationalized and likely to be more decontrolled.)
Indirect Tax
- Service tax levels and excise duty are maintained at 10%
- The service tax net was increased to over 320 services from 117 services currently through either the
addition of new services or the expansion of the scope of the existing services.
- Excise exemptions withdrawn on 130 items; to pay minimum excise of 1% from next year
- Peak rate of customs duty remains unchanged
Direct Tax Code will come into effect from 1st April 2012
The finance minister made no commitment regarding Goods & Service Tax
Corporate Taxation
- Corporate tax surcharge reduced from 7.5% to 5%. Hence the effective Corporate Tax rate is 32.25%.
- Minimum Alternate Tax has been increased from 18% to 18.5%.
 Other Details
Infrastructure
- Government to allow issue of Rs 30,000 cr worth of tax-free bonds by infrastructure companies in 2011-12
- Tax deduction for investment in infrastructure bonds of Rs 20,000 extended for one more year
- Investment in fertiliser plants and machinery to be treated as infrastructure investment

2. FIIs
- Foreign institutional investor limit in 5-year corporate bonds for investment in infrastructure to be raised by
$20 billion. Hence the new limit is $ 40 bn.
- Foreign individual investors allowed to invest directly in mutual funds subject to KYC requirements
 Impact on individuals
Individual Tax Slabs
Male Individual Tax Payer Female individual Taxpayer Senior Citizen Tax Payer
Slabs (Rs) Rate (%) Slabs (Rs) Rate (%) Slabs (Rs) Rate (%)
Upto 1,80,000 0 Upto 1,90,000 0 Upto Rs 2,50,000 0
(IT exemption for (Entitlement age reduced to 60
taxpayers raised from Rs from current 65. Citizens above
1.6 lakh to Rs 1.8 lakh. Tax 80 years to get higher IT
relief is about Rs 2,000 deduction limit of Rs 5 lakh from
across-the-board. ) this year)
1,80,000-5,00,000 10 1,90,000-500000 10 2,50,000-5,00,000 10
5,00,000-8,00,000 20 5,00,001-8,00,000 20 5,00,001-8,00,000 20
8,00,001 30 8,00,001 and above 30 8,00,001 and above 30
Priority sector home loans limit raised to Rs 25 lakh from Rs 20 lakh.
Interest subvention on home loans up to Rs 15 lakh. Mortgage risk guarantee corporation to insure loans to the
poor.

3. Through this budget the Finance Minister has tried to strike an appropriate balance between the requirement of growth
and the need for fiscal consolidation. Some of the key positives are:
- Reduction in fiscal deficit
- Subsidy targets are low and hence it is expected that there will be a rationalized decontrol of petroleum and
fertilizer subsidies
- Service tax and excise duties are maintained at 10%
- Surcharge is reduced, hence lower corporate tax
- Allowing foreign entities to invest in Indian MF & increasing the upper limit in corporate bond investments by
the FIIs
- Shifting the subsidy into the cash mode and not through the bond route
- Not a populist budget
There were still some issues unanswered by this budget:
- No commitment regarding the Goods & Service Tax
- No clear mention of FDI road map
This budget had a positive impact on Alpha & we continue to maintain a positive stance on Public sector banks, FMCG &
Infrastructure.

4.  Sector summary
Sector Budget Impact Remarks Alpha Exposure
(%)
BFSI -To create Rs 100 cr equity fund for ~26%
Microfinance cos.
-Banks have been asked to increase lending -Positive for all Public sector banks
to farmers
-Recapitalization of Rs 6000 cr for PSBs
-To give 3% interest subsidy to farmers in
FY12
-To bring bill to enable RBI to grant more
banking licenses
- NRI's are allowed to invest in mutual funds
-1% Interest subvention on home loans up
to Rs 15 Lakh
IT -No mention of STPI and Sec 80IA and 80IB -Negative for IT Cos ~7%
-Increase in MAT -Affecting tier-I IT companies that
have set up their SEZs who will
now be affected with an increase
in the tax rates from FY12.
Oil & Gas - Direct Cash Subsidy to be provided instead -Positive ~8%
of bonds
-Rs 300 cr to be allocated for oil palm
production
Engineering -Propose to levy MAT on developers of SEZ`s -Negative for developers of SEZ’s ~ 10%
-Railway Budget: High demand for coach,
wagons can't be met immediately
-Railway Budget: Wagon procurement target
at 18,000 units in FY12
-Railway Budget: Working on 1000 MW
captive power plant in Bihar
-Railway Budget: To spend Rs 9,583 Cr for
new line in FY12
Auto -Maintained Excise Duty at 10% -Positive for Auto ~ 4%
-National mission for electric and hybrid
vehicles to be set up to create environment-
friendly automobiles
Cigarettes -No additional taxes on cigarettes -Positive for the Sector Nil
Transport -Propose to raise service tax on air travel -Positive for aviation cos Nil
-Ship owners allowed duty free spare part -Positive for shipping cos
imports

5. Power -No excise duty on equipment for UMPPs -Encourage faster addition of Nil
-On-going metro projects will be provided power plants in the country and
financial help for speedy execution help in addressing the problem of
-Railway Budget: Planning 1320 MW thermal power scarcity
power plant in Agra -Benefit all the power generation
-Tax holiday was announced for power companies which are currently
companies under section 80-IA (4) was expanding its capacities.
extended by one-year.
Cement -Cement excise duties will be shifted to Nil
valorem basis from specific duty now
-Import duty on gypsum and coal from 5% to
2.5% -Positive for cement companies
Metals & -Export duty on export of iron ore has been -This is negative for iron ore ~4%
Mining raised to ad valorem 20% on lumps as well importing companies
as fines. -No imposition of mining tax (26%
at PBT) is a positive for mining
companies as well as steel
companies with captive mines
Textiles 10% excise duty on branded garments -Negative for textile cos ~4%
Construction & -Upped priority home loan limit to Rs 25 -Positive for real estate companies ~10%
Real Estate Lakh Vs Rs 20 Lakh who have a major exposure to
-Raised Corpus of Rural Infra Development affordable housing
Fund to Rs 18000 cr vs Rs 16000 cr -Positive for civil & construction
-FII limit in corporate bonds in Infra is being companies
raised by additional USD 20 bn
-Railway Budget: To set up rail industrial
park in Nandigram, New Bongaigaon
-Railway Budget: To build 10,000 shelters
near suburban railways
Agriculture -Reduce customs duty on micro irrigation -Positive for the sector Nil
equipment
-Private investment in Agro Processing
Should Increase
-To focus on removing supply bottlenecks in
the food sector
-To raise credit flow target to agriculture
sector to Rs 4.75 trillion
-Give 3% interest subsidy to farmers in 2011-
12
Healthcare -FY12 health sector outlay at Rs 26,760cr, up -Positive for the sector ~8%
20%
Education -Education Sector Allocated Rs 52,057 Cr In -Positive for the sector Nil
FY12

6. Telecom -Increase in MAT -Negative for the sector ~4%
FMCG -Increased spending on critical ~8%
rural infrastructure and social
security to Rs 58,000 cr. This
scheme has been driving the
disposable incomes in rural areas
which in turn would help rural
consumption.

7. Swapnil Pawar Neha Arora
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