The new budget measures in India

Let's find out the new Budget measures in India just published by the Indian Government.

The experienced Indian finance minister, Pranab Mukherjee, presented the Budget (programming instrument of the Indian Government which defines the development policies outlined for the short-medium term, it is an equivalent of our budget) for the next financial year 2011/12.

Several objectives have been set: the strengthening and consolidation of the country's growth which will have to take place in a more balanced way, the containment of the public deficit, support for the weakest social classes, the increase in tax revenues. Based on the new budgets, Mukherjee forecast GDP growth above 9% for 2011/2012, and a reduction of the deficit from 5.1% this year to 4.6%, mainly thanks to tax revenues. The Indian Minister also speculated on a lower-than-expected debt plan, thanks to a containment of the deficit at ever lower rates for the next 3 years.

The Government, for the growth of the Indian economy, focuses above all on the growth of the agricultural and infrastructural sectors. Sustainable growth must be based above all on these two sectors considered of vital importance for the country's economy: an improvement in agricultural production and infrastructure would improve the country's productivity in the medium and long term, guaranteeing a reduction in inflation.

Specifically, to give a boost to the agricultural sector (to realize the seriousness of the problem, just think that inflation reaches double digits on the food front) the Government has developed the RKVY (Rashtriya Krishi Vikas Yojana, or National Agriculture Development Programme), plan of primary importance in the budgets, whose aim is to guarantee purchases of low-priced cereals to the poorest through the allocation of an amount equal to 78.6 billion Indian Rupees (1.3 billion Euros) compared to 67.5 in 2010/11. In India about 450 million Indians live below the poverty line with just over a dollar a day: the measures undertaken therefore intend to help the less well-off sections of the population thanks to an increase in social spending of 17% and a series of subsidized loans for agriculture. To this end, the Government plans to attract capital investment for the improvement of this industry and strengthen the food preservation industry.

Another objective of New Delhi is the improvement of infrastructures, a sector considered absolutely essential and destined to play a fundamental role in the development of the country and its economic growth. The allocated sum is equivalent to 2,140 trillion Indian Rupees (35.6 billion Euros), 23.3% higher than that earmarked for the sector in 2010-11. This figure represents 48.5% gross of the expenses envisaged by the Budget. The Government intends to attract investments in the sector, encouraging foreign private capital for faster execution of projects. To incentivize foreign investors, the interest-paying fee on loans from these funds has been reduced, to a rate of 5% from the current 20%.

Investments also concern the banking, cement, oil, energy, automobile, pharmaceutical, education (for which 24.5% more was invested than last year), the financial sector ( some modifications have been introduced Banking Regulatory Act for issuing new licenses for banks). The other measures also envisage an increase in FIIs (Foreign Institutional Investors) from 5 to 25 billion USD (18 billion Euros), which may also be invested in bonds not listed on the stock exchange for a period of three years: this measure is above all to facilitate the process of liberalization of FDI (Foreign Direct Investment).

The Budget it also intends to encourage and improve the efficiency of exports and from a tax point of view the changes will concern the adoption of a Direct Tax Code which will be effective starting from 1 April 2012, the increase in the MAT (Minimum Alternative Tax) which was raised from 18% to 18.5% but which does not have negative repercussions for companies, and the lowering of the Corporate Tax from 7.5% to 5%.

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