The new Budget measures in India

We find out about the new Budget measures in India just released by the Indian government.

In fact, India's seasoned finance minister, Pranab Mukherjee, presented the Budget (a programmatic instrument of the Government of India that defines the development policies mapped out for the short to medium term, it is an equivalent of our budget) for the coming financial year 2011/12.

Several goals have been set: strengthening and consolidating the country's growth, which is to be done in a more balanced way, containing the public deficit, supporting the weaker social classes, and increasing tax revenues. According to the new Budget, Mukherjee projected GDP growth above 9% for 2011/2012, and a narrowing of the deficit from this year's 5.1% to 4.6%, mainly due to tax revenues. The Indian minister also assumed a lower-than-expected debt plan, thanks to deficit containment at lower and lower rates for the next 3 years.

The government, for the growth of the Indian economy, relies primarily on growth in the agricultural and infrastructure sectors. Sustainable growth must be based primarily on these two sectors, which are considered vital to the country's economy.Improved agricultural production and infrastructure would improve the country's productivity in the medium and long term, ensuring a reduction in inflation.

Specifically, in order to boost the agricultural sector (to realize the severity of the problem, one only has to consider that on the food front, inflation is reaching double digits), the government has developed the RKVY (Rashtriya Krishi Vikas Yojana, or National Agriculture Development Program), a plan of primary importance in the Budget, the purpose of which is to ensure low-priced grain purchases for the poorest through the allocation of an amount of 78.6 billion Indian Rupees (1.3 billion Euros) compared to 67.5 in 2010/11. Some 450 million Indians in India live below the poverty line on little more than a dollar a day.The measures undertaken are therefore intended to help the poorer sections of the population through 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, the improvement of infrastructure, a sector considered absolutely essential and destined to play a key role in the country's development and economic growth. The amount allocated is equivalent to 2.140 trillion Indian Rupees (€35.6 billion), 23.3% higher than the amount allocated to the sector in 2010-11. This figure represents 48.5% before expenditures under the Budget. The government intends to attract investment to the sector by incentivizing foreign private capital for faster project execution. To incentivize foreign investors, the tax with interest payment on loans from these funds has been reduced to a rate of 5% from the current 20%.

Investments are also made in banking, cement, petroleum, energy, automobiles, pharmaceuticals, education (for which 24.5% more was invested than last year), the financial sector (some changes in the Banking Regulatory Act for the issuance of new bank licenses). The other measures also include an increase in FIIs (Foreign Institutional Investor) from US$5 billion to US$25 billion (€18 billion), which can also be invested in unlisted bonds for a period of three years: this measure is mainly aimed at facilitating the liberalization process of FDI (Foreign Direct Investment).

The Budget also aims to foster and improve export efficiency, and from a tax perspective, the changes will include the adoption of a Direct Tax Code that will be effective April 1, 2012, the increase in MAT (Minimum Alternative Tax) which has been raised from 18% to 18.5% but does not adversely affect businesses, and the lowering of Corporate Tax from 7.5% to 5%.

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