India’s Budget Highlights 2011 – Canada can gain from it

India has unveiled a $273.4 Billion budget for the year 2011-2012. . Two key sectors that will be of interest to Canada are infrastructure, and Mutual Funds. Defence and commodities continue to be highly untapped markets for Canadian companies. Here is  2 minute version of it more details  below.

The budget has set about a lot of enabling factors for foreign investors to participate more directly in the Indian markets, whether it be through an increase in capacity allocated for the infrastructure funds, or it be through a reduction in withholding taxes or for the ability to directly invest in Indian mutual funds.”-WSJ

-India emerged relatively unscathed from the recent global downturn thanks to the government’s stimulus and robust consumer demand, especially in the vast rural areas. The government estimates economic growth will rise to 8.6% this fiscal from 8% last year.

-The limit for foreign institutional investors to invest in corporate bonds specifically targeted for infrastructure has been raised to $25 billion from $5 billion earlier.

-India has laid out a target to spend $1 trillion for infrastructure projects in the five-year project that will begin April 1, 2012.

-India will open its gates for foreign investors to invest in equity schemes of domestic mutual funds.

-This would liberalize the portfolio investment route and would enable Indian mutual funds to have direct access to foreign investors. The new policy would widen the class of foreign investors in Indian equity market, which had hitherto been restricted to only Foreign Institutional Investors (FIIs), sub-accounts registered with SEBI and NRIs.

India will be World’s No. 1 economy by 2050: CITI Financial Read the report from CITI financial on the top 10 economies in 2050 with India, China, US among the top three, No European country on the list. A reminder to us in Canada on the need for us to realign our global strategic priorities and our need to further engage India and China towards our long terms foreign markets penetration and sustainability


If you are interested in more details of the budget, the financial numbers are here:

Following are the highlights of the budget: (Source: Reuters) by Numbers:


* Gross market borrowing for 2011-12 seen at 4.17 trillion rupees (Reuters forecast 4.5 trillion rupees)

* Net market borrowing for 2011-12 seen at 3.43 trillion rupees (Reuters forecast 3.77 trillion rupees)

* Revised gross market borrowing for 2010-11 at 4.47 trillion rupees


* Fiscal deficit seen at 5.1 percent of GDP in 2010-11

* Fiscal deficit seen at 4.6 percent of GDP in 2011-12

* Fiscal deficit seen at 3.5 percent of GDP in 2013-14


* Total expenditure in 2011-12 seen at 12.58 trillion rupees

* Plan expenditure seen at 4.41 trillion rupees in 2011-12, up 18.3 percent


* Gross tax receipts seen at 9.32 trillion rupees in 2011-12

* Corporate tax receipts seen at 3.6 trillion rupees in 2011-12

* Tax-to-GDP ratio seen at 10.4 percent in 2011-12; seen at 10.8 percent in 2012-13

* Customs revenue seen at 1.52 trillion rupees in 2011-12

* Factory gate duties seen at 1.64 trillion rupees in 2011-12

* Non-tax revenue seen at 1.25 trillion rupees in 2011-12

* Service tax receipts seen at 820 billion rupees in 2011-12

* Revenue gain from indirect tax proposals seen at 113 billion rupees in 2011-12

* Service tax proposals to result in net revenue gain of 40 billion rupees in 2011-12


* Subsidy bill in 2011-12 seen at 1.44 trillion rupees

* Food subsidy bill in 2011-12 seen at 605.7 billion rupees

* Revised food subsidy bill for 2010-11 at 606 billion rupees

* Fertiliser subsidy bill in 2011-12 seen at 500 billion rupees

* Revised fertiliser subsidy bill for 2010-11 at 550 billion rupees

* Petroleum subsidy bill in 2011-12 seen at 236.4 billion rupees

* Revised petroleum subsidy bill in 2010-11 at 384 billion rupees

* State-run oil retailers to be provided with 200 billion rupee cash subsidy in 2011-12


* Inflation seen at 5 percent in 2011-12

* Economy expected to grow at 9 percent in 2012, plus or minus 0.25 percent


* Standard rate of excise duty held at 10 percent

* Service tax rate kept at 10 percent

* To widen scope of service tax

* To raise minimum alternate tax to 18.5 percent from 18 percent

* Iron ore export duty raised to 20 percent

* Personal income tax exemption limit raised to 180,000 rupees

* To reduce surcharge on domestic companies to 5 percent


* Disinvestment in 2011-12 seen at 400 billion rupees


* Foreign direct investment policy to be liberalised further in 2011-12

* To create infrastructure debt funds

* To boost infrastructure growth with tax-free bonds of 300 billion rupees

* 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 permit Securities and Exchange Board of India (SEBI) registered mutual funds to access subscriptions from foreign investments

* Public debt bill to be introduced in parliament soon


* To allocate more than 1.64 trillion rupees to defence sector in 2011-12

* Corpus of rural infrastructure development fund raised to 180 billion rupees in 2011-12

* To provide 201.5 billion rupees capital infusion in state-run banks in 2011-12

* To allocate 520.5 billion rupees for the education sector

* To raise health sector allocation to 267.6 billion rupees


* To focus on removal of supply bottlenecks in the food sector in 2011-12

* To raise target of credit flow to agriculture sector to 4.75 trillion rupees

* Gives 3 percent interest subsidy to farmers in 2011-12

* Cold storage chains to be given infrastructure status

* Capitalisation of National Bank for Agriculture and Rural Development (NABARD) of 30 billion rupees in a phased manner

* To provide 3 billion rupees for 60,000 hectares under palm oil plantation

* Actively considering new fertiliser policy for urea


* “Fiscal consolidation has been impressive. This year has also seen significant progress in those critical institutional reforms that will pave the way for double digit growth in the near future.”

* “At times the biggest reforms are not the ones that make headlines, but the ones concerned with details of governance which affect the everyday life of aam aadmi (common man). In preparing this year’s budget, I have been deeply conscious of this fact.”

* Food inflation remains a concern

* Current account deficit situation poses some concern

* Must ensure that private investment is sustained

* “The economy has shown remarkable resilience.”


* “Certain events in the past few months may have created an impression of drift in governance and a gap in public accountability … such an impression is misplaced.”

* Corruption is a problem, must fight it collectively