INTRODUCTION

The Union Budget of India, referred to as an annual Financial Statement in Article 112 of the Constitution of India is an annual budget of the Republic of India, which is presented each year by the Finance Minister of India in the Parliament. The Union budget has to be passed by the House before it can come into effect on April 1, the start of India's financial year. The Union Budget 2012-13 will be presented on 16th March 2012 by the Union Finance Minister Pranab Mukherjee Monetary policy Putting it in the context of what the advisory council reports says, quite clearly monetary policy has begun to do its bit in terms of demand and its correction getting lower. Essentially, the thrust has to come from the fiscal side, fiscal consolidation is the top most priority. Having said so, we still need to see growth led by investments and that to my mind will come about with more monetary conditions easing. To start off with, we did see a CRR cut. Given the tight liquidity conditions in the economy currently and OMOs on the table we do not rule out a CRR cut as well getting announced in the forthcoming review of the monetary policy. But more importantly as far as the rate cycle is concerned, we perhaps have been slightly more aggressive in our expectations. We are expecting a rate cut in March. The Budget is getting announced one day after the monetary policy review, but needles to say RBI would have a fair sense through its government borrowing program as what the fiscal number is going to be. So, RBI could start cutting rates by March 15 policy. GDP I think broadly we are in line in terms of at least the GDP projections. We do see a marginal improvement going forward in the forthcoming fiscal year, the reason being in terms of some improvement in the investment climate, as also consumptions which had been suffering over the last two quarters also showing some recovery. So in terms of GDP, we are quite in line with the estimates; we are at 7.4% for the FY13 and at 7.1% in the current year, we are quite in sync with what the PMEAC has to say. As far as inflation is concerned, it seems difficult to achieve a sub 6% kind of a target. I would believe that upside risks on inflation continue to remain, be it through oil prices, suppressed inflation domestically as a result of wage and also some kind of a base effect wearing off. What happens if we do not have agriculture output which is in tandem with expectations especially when the food security bill is going to be on anvil, so there would be pressure son food prices going forward, there would be pressures through oil. Overall, I think inflation would correct from 9% average range to about 6-7% range. There is a correction of 200 basis points, but the upside risks remain

Commercial Office Real Estate

1. The implementation of the revised DTC will have strong implications on SEZs. The industry requires clarity on the issues that may emerge, and how businesses would be promoted in Special Economic Zones. 2. Taking cues from the healthy growth of IT/ITES in Tier I cities and its effect on the growth of employment, the Government should actively roll out an incentive-based IT policy (such as STPI) for Tier 2 and Tier 3 towns as well Residential Real Estate 1. Last year, a 1% interest rate subsidy was provided for loans towards affordable housing. The scope of this subsidy should be amplified and broadened to include a wider price band of budget housing to benefit home buyers, especially in lower income groups 2. More funds should be allocated to the Rajiv Awas Yojana (RAY) for urban housing targeted at the EWS and the LIG sections 3. Enact provisions for Special Residential Zones (SRZs) to incentivise the growth of housing stock at targeted locations Retail Real Estate 1. Relax FDI upto 51% into multi-brand retailing. Indian retail will benefit greatly from increased spending in back-end logistics infrastructure and growth of organised retail Infrastructure 1. Increase infrastructure spending in urban areas with a view to unlock the value of neglected and hidden land assets in suburban and peripheral districts 2. Increase outlay to Jawaharlal Nehru National Urban Renewal Mission (JNNURM) Policy 1. Grant industry status to real estate, since the sector is a major driver for economic growth and generates countless jobs across its various verticals and associated industries 2. Relax norms for repatriation of FDI in real estate. The market environment needs to be rendered more investment-friendly 3. Enact legislation on REITs to provide exit opportunities to real estate investors 4. Bring out strong and convincing evidence of intention to implement the proposed real estate regulator in 2012, and provide single-window clearance for real estate development projects

POWER SECTOR

Power sector players are in for a major haul. CNBC-TV18 has learnt that customs duty is likely to be hiked on power equipment import with prospective effect. Sources indicate that the duty rejig will most possibly be enforced post Budget 2012-13. Currently, projects with less than 1,000 MW generation capacity attract nearly 5% import duty while the rest enjoy duty-free import of equipment. Domestic power equipment makers such as BHEL and L&T have been demanding levy of 14% duty on imported electrical equipment in order to provide them a cushion against local taxes. These firms have been facing stiff competition from cheaper overseas gear, mainly from China. According to CNBC-TV18 sources, all projects prior to cabinet decision will be exempt from duty apart from the mega and provisional mega projects. This means that all those projects that have the mega project status currently, and until cabinet note is passed, can import equipment at zero-duty. It is learnt that the power ministry will be notifying to the revenue department, a list of such projects that need to be exempt from duty. Here is the twist: Once the Cabinet decision is taken, the mega power policy that provided for the duty benefits will become inapplicable to new projects and the regime will cease to exist. Therefore, future projects that are announced after the cabinet decision will not get mega status and thus will have to pay up more as custom duty for imported equipment. Till date, 1.33 lakh MW projects have been granted mega status and 28000 MW projects from the private sector have received the provisional mega status. The news comes at a time when power companies are known to have cancelled equipment orders worth nearly Rs 6000 crore in the past few months. This had distressed domestic equipment suppliers as very few contracts have been awarded in the current fiscal. Competition from China has only be adding to their woes. Sector majors and industry analysts are hopeful of a revival in demand soon and the duty rejig is likely to positive for the domestic industry as companies may then opt for local players such as Alstom or BHEL to place equipment order with. Though the final decision is still pending on the matter, a timeline up to April 1, 2012 is what is shining through.

EXPECTATION

Centre is planning to increase the income tax exemption for up to Rs 3 lakh paid as interest on housing loans in one year as compared to the current limit of Rs 1.5 lakh with the aim to strengthen housing sector credit. The tax exemption slab is expected to be increased from the present Rs 1.8 lakh to Rs 3 lakh, in case the proposed recommendation of a Yashwant Sinha-led parliamentary standing committee on finance get cleared in the Union Budget for the year 2012-13. Agriculture Ministry has demanded lowering of interest rate on crop loans to 3% for those farmers who pay in time, from the existing 4%. The micro, small and medium enterprises (MSMEs) sector is seeking separate consultations with them in the run-up to the Union Budget 2012-13. Stock exchanges have pitched for abolition of the Securities Transaction Tax (STT) on equity trades.

 Ministry of Petroleum & Natural Gas has requested the Union Finance Ministry to lower the excise duty on branded diesel in the upcoming Budget due to the strong decline in the sale of the fuel. Companies Bill is expected to be unveiled in Budget Session Union Budget 2012 is expected to witness Union Finance Minister Mr Pranab Mukherjee attempt to push the entrepreneurs for more investment by introducing major investor-friendly policies. The Central government may incentivise the pharma sector to boost the higher spending in research and development and also to lower the taxes and duties on life saving drugs and active pharmaceutical ingredients (API) to offer fillip to the growth of the industry Centre may unveil a series of measures in the Union Budget 2012-2013 to help the export sector and also the micro, small and medium enterprises (MSMEs) in India. Association of Biotechnology Led Entrepreneurs (ABLE) has demanded various fiscal and tax incentives from the Union Budget.

EXPECTATION OF COMMON MAN

a) Subsidy on Gas, Oil, Fertilizer, Food etc. b) Subsidies in FDI norms in sectors like Retail, Media and BFSI etc. c) Relaxation in service taxes. d) Tax reforms like implementation of GST and DTC

FOOD SECTOR

NEW DELHI: The Federation of Indian Chambers of Commerce and Industry (FICCI) has demanded reduction in the present 10% of the central value-added tax (CENVAT) on a number of categories of items produced by the food processing industry in Union Budget. The industry chamber has developed a pre-budget memorandum showing keenness for the food processing and agriculture sectors in regard to the presentation of the Union Budget 2012-13. The Budget will be tabled by Union Finance Minister Mr Pranab Mukherjee on March 16. FICCI wants the Finance Minister to put the packaged drinking water, which is considered as common man's product, in the nil category, and also exempt biscuits from VAT, or at least reduce the rate of VAT on them. It feels that an overall macro view is mandatory in place of emphasising on the revenuegenerating potential of levying excise duty on the products. Centre is unable to do away with the excise duty fully even after taking the revenue aspect into account, it must lower the excise duty in a calibrated manner.

FICCI is of the opinion that biscuits needs to be treated as merit goods and be secured in a more rational manner, just in a similar case like bread. Biscuits are product of mass consumption across the country and cut across all economic groups and geographical boundaries. They are consumed in larger quantities in the rural region of India and the brands that are sold at lower price points have more takers in the lower-income group.

Bonanza for salaried class in Budget 2012-13?

New Delhi: Union Budget 2012-13 may bring cheer to the salaried class as the Centre is said to be mulling a restructuring of the income tax slab. According to reports, Monday, Union Finance minister Pranab Mukherjee may announce a rejig in income tax slabs and also increase the income tax exemption limit from the existing Rs 1.8 lakh to at least Rs 2 lakh. A newspaper report said that the new tax slabs could be in line with the Direct Taxes Code Bill, which was introduced in Parliament in 2010. The proposed bill says that incomes between Rs 2-5 lakh be taxed 10 percent, Rs 5-10 lakh be taxed 20 percent and incomes above Rs 10 lakh per annum to be taxed 30 percent. The present tax structure is that incomes between Rs 1.8 lakh and Rs 5 lakh are taxed 10 percent, those between Rs 5-8 lakh taxed 20 percent while 30 percent tax is slapped on incomes above Rs 8 lakh. Clearly, the government appears in mood to provide succor to the aam admi as the proposed tax restructuring will lead to an increase in disposable incomes, consumption spending and savings. Companies for no change in tax rates in 2012-13 Budget New Delhi: Reeling under the impact of global slowdown and a high interest rate regime, India Inc on Monday demanded that tax rates be retained at existing levels even as finance minister Pranab Mukherjee expressed concerns about challenges facing the economy. In their customary pre-Budget meeting with Mukherjee, industry leaders also demanded that healthcare services be kept outside service tax ambit, and privatise coal mines. There are various challenges before us, including keeping inflation and fiscal and revenue deficit to manageable levels... which we all have to address collectively, Mukherjee said in his address to the industry leaders. At the meeting, business leaders suggested that service tax base may be widened with a negative list, besides exempting infrastructure companies and SEZ units from MAT. We have made a case for retaining tax rates at the present level. There should be no increase in corporate tax, service tax and excise, Ficci president R V Kanoria said in the Budget expectation. Mukherjee is likely to unveil the Budget proposals for 2012-13 mid-March in Lok Sabha.

He also made a case for privatisation of coal mines, stimulating demand through fiscal measures and revisiting the concept of dividend distribution tax (DDT). CII National Committee on Healthcare chairman Naresh Trehan sought infrastructure status for the healthcare sector as that would encourage companies in setting up hospitals in smallers cities and towns. Besides finance and commerce ministry officials, the meeting was attended by ITC Ltd chairman Y C Deveshwar, HUL MD and CEO Nitin Paranjpe, Suzlon Energy founder Tulsi Tanti and representatives of industry chambers. The industry leaders also sought infrastructure status for aviation, telecom and education sectors, and continuation of interest rate subvention scheme for exporters till 31 March, 2013. In order to improve healthcare, the industry suggested that a benefit of tax deduction of Rs. 10,000 be given to citizens for preventive health check-up. Industry representatives were in favour of a reduction in interest rates by 50 basis points to stimulate investment sentiment and stimulate demand. They also demanded that exports be included in priority sector lending by banks and duty on readymade garments be either reduced or withdrawn. Company bosses also sought clarity on the timeline for introduction of Goods and Services Tax (GST), besides rationalisation of MAT a levy that was introduced to bring zero-tax paying companies into the net. At present, companies pay MAT at 18.5%. They also suggested implementation of the Direct Taxes Code (DTC) in its entirety to help arrest cases of tax evasion. FIEO president M Rafeeq Ahmed said, Interest rate for the MSME sector should be capped at seven per cent and others at nine per cent and subvention should be provided to all sectors of exports at least till March 2013. FIEO also sought complete exemption of excise duty on handmade carpets, reduction of excise duty on man-made fibres to four per cent (from current 10 per cent), and exemption of service tax on currency conversion for exports. NEW DELHI: Iron ore producers may get incentives in the next Budget for adding value to the mineral, a move aimed at encouraging its conservation for domestic use. "The government may announce incentives for the iron ore miners to encourage more valueaddition and pelletisation. The Steel Ministry has already sent a proposal to the Finance Ministry in this regard," a source said. The government in the Budget for the current fiscal had raised the export duty on iron ore, both fines and lumps, to 20 per cent from five per cent and 15 per cent, respectively and fully-exempted exports of iron ore pellets from any duty.

Justifying the hike in duty, Finance Minister Pranab Mukherjee had said, "This (iron ore) is a natural resource which needs to be conserved," and added that exemption of any duty on pellets is "to encourage the value addition process for fines". Pellets are produced in globules form from very fine iron ore and mostly used for the production of sponge iron. However they are also used in blast furnaces in some countries. Sources said the government is considering providing tax- holidays to miners to encourage setting up pellet capacities. They, however, he did not go into the specifics. Though India is the one of the top exporters of iron ore in the world, its pellet making capacity is nothing significant. Against the world's 388 million tonnes of pellet production in 2010, India's contribution was just 18 million tonnes. The government's initiative has paid off as iron ore exports fell by nearly 30 per cent during the April-November period to just 40 million tonnes from 51 million tonnes during a year ago. Meanwhile, the government further increased export duty on iron ore to 30 per cent towards the end of 2011. Sources said around 25 million tonne pellet capacity is in the pipeline in the country and if government provides further incentives to the miners, more capacity would certainly come.
Wellness Health Tourism To encourage the growth of medical tourism, the government should provide a variety of incentives, including lower import duties and higher depreciation rates on medical equipment, as well as expedited visas for overseas patients seeking medical care in India. ``Budget 2012 needs to promote Health & Wellness sector by rendering service tax on all fitness & Spa services. Ayurvedic treatments need to be included in medical insurance claim Infrastructure - Without any dichotomy - the future growth prospects of the Indian economy lingers primarily on the infrastructure investment and timely execution of the projects. Thus, one such initiative would be to develop a huge amount of long-term corpus towards infrastructure development through dedicated debt funds (the most recent example being tax-saving infra bonds).According to RICS India, in order for India to achieve its envisaged 10% growth during the coming financial year, the requirement for sustainable infrastructure development is crucial to provide impetus to the economic activities and achieve optimum resource utilization. To overcome slow growth, the government should take steps to up its allocation for the infrastructure sector from the 2011-12 budgetary allocation of Rs 2,140 billion. The sector, which saw a muted growth in 2011, hurt by the double whammy of slow policy-making and low private sector investment, hopes growth will be there in the year 2012. Increase infrastructure spending in urban areas with a view to unlock the value of neglected and hidden land assets in suburban and peripheral districts`. Increase outlay to Jawaharlal Nehru National Urban Renewal Mission (JNNURM). Grant industry status to real estate, since the sector is a major driver for economic growth and generates countless jobs across its various verticals and associated industries. Relax norms for repatriation of FDI inreal estate . The market environment needs to be rendered more investment-friendly. Enact legislation on REITs to

provide exit opportunities toreal estate investors. Bring out strong and convincing evidence of intention to implement the proposed real estate regulator in 2012, and provide single-window clearance for real estate development projects.