Financial Daily from THE HINDU group of publications
Friday, July 09, 2004

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More bank finance for stock brokers
THE new private sector banks are a happy lot with the Finance Minister giving them more headroom for lending to the capital market. This move when passed into law by RBI is expected to increase banks' funding of brokers, and thereby increase the ... More

`Budget is not inflationary' — Transaction tax no impediment to stock market activities
ON a busy day after presenting the maiden Budget of the United Progressive Alliance (UPA) Government, the Finance Minister, Mr P. Chidambaram, took time off to share his views with Business Line on some of the finer aspects. He ... More

Chidambaram plays the popular tune — Tax breaks for farm sector and lower middle class
IF Mr P. Chidambaram's 1997-98 Union Budget was a `dream Budget', the one that he presented today can probably be called a `political budget', targeted primarily at the lower middle class, farmers and the Left. The Finance Minister has ... More

Thumbs down by markets
STOCK and bond prices crashed when frantic investors started a massive sell-off on realising what a blow the Finance Minister had dealt them in a "small 0.15 per cent transaction tax on every trade on the stock exchanges" as he put it. Stock ... More

Service tax on transport intermediaries hailed
THE announcement of bringing the intermediaries in the transport sector under the service tax net has been described as a step in right direction. It would set off a long needed reforms resulting in, not only streamlining the highly fragmented ... More

Adopting the Keynesian route
THE Union Budget 2004-05 has reiterated the new government's increased thrust on agriculture, infrastructure and social sectors in line with its Common Minimum Programme (CMP). The Budget has adopted the Keynesian expansionary route to maintain ... More

FDI push on telecom
LESS than six months ago, when the mobile telecom industry set an ambitious target of 100 million subscribers over the next couple of years, it had projected an FDI (foreign direct investment) requirement of Rs 50,000 ... More

Shipping industry says `ahoy!'
THE shipping industry is rejoicing over the introduction of the long-proposed tonnage tax regime in the Union Budget, with expectations looming large that the Indian shipping tonnage will significantly increase in the coming years. Although ... More

Mutual funds — Odds stacked against debt funds
BY OFFERING significant concessions on capital gains tax for securities traded on the stock exchanges, Budget 2004 appears to have made direct investing an attractive option relative to investments routed through mutual ... More

Tonnage tax at last for a smooth sailing
The method of calculation of tonnage tax will be based on a notional income schedule per day per net registered tonnes of the ship. More

Focus on rural housing; tax rebates to stay
IN line with the UPA Government's Common Minimum Programme that lays a greater stress on rural economy, the Budget 2004-05 has announced an increased allocation and easier finance for the rural housing sector. The Government aims to step up ... More

Banking on industrial growth
PRIMA facie, the Budget numbers look promising for the banking industry. Compared to the Interim Budget, target market borrowings of the government have not increased. The critical factor, however, is the credibility of ... More

IIG to beef up infrastructure
IN a move likely to give an impetus to the financial closure of infrastructure projects including airports, seaports and the tourism sector, the Finance Minister, Mr P. Chidambaram, on Thursday announced the setting up of an Inter-Institutional ... More

ONGC, GAIL to carry the can
Budget 2004-05 has not been kind either to the oil companies or the consumers. More

A rural slant
The insurance schemes proposed will help the banking industry to increase its flow of credit to small farmers. More

Power on `line
THE measures announced for attracting investments in the transmission and distribution network and acceleration of irrigation projects would be the major boosters for the capital goods industry. Irrigation ... More

Govt to facilitate crop diversification
CROP diversification, a pet theme recurring in the speeches of all finance ministers in recent years, found place in the United Progressive Alliance' s first Budget presented by Mr P. Chidambaram. "Time has come to encourage farmers to ... More

A bitter pill, says pharma sector
IT has come as an extremely bitter pill for pharmaceutical companies in the country, with Budget 2004-05 not having the strong initiatives required to give the sector "that additional push". For a sector that is poised at a significant ... More

Chaos after the wait
THERE was so much of hype created for the budget. The wait is over and the event has passed. Now the experts in various fields start giving their expert comments and criticism. These judgments would be the outcome of how that individual or his ... More

At your service, tax!
WHILE you may not see prices of household goods and durables go up in the near future, you could get bushwhacked by the new services that the Budget has brought under its purview. As Chennai-based advocate Mr K. Vaitheeswaran points out, ... More

A progressive budget
The sops given to boost sentiments of the capital markets and ease the norms for foreign institutional investors will enable corporates to raise more money through public issues. More

Striking a balance
The benefits extended towards strengthening the rural economy will help boost disposable income and generate more demand. This may take time to show up in the balance sheets of the companies. More

Spurring investments
IT is a very pragmatic, forward-thinking and long-term investment-oriented Budget. The focus clearly is to encourage long-term investment into the country that has a direct impact on growth and infrastructure. The reaffirmation of the Defined ... More

Continuance of economic reforms
THE Budget proposals for financial year 2004-05 signal continuation of economic reforms even as it outlines a thrust on agriculture and social spending in line with the policy priorities of the new Government. Importantly, the Budget seeks to ... More

Catch My Point!
"Fully faithful to the CMP," is how the Finance Minister himself described the Budget. More

Mixed response from India Inc
While complimenting the Finance Minister, Mr P. Chidambaram, for unveiling a blueprint for the overall development of the country within the framework of the national common minimum programme (CMP), it expressed concern on the proposal to levy a ... More

Move to drop Cenvat may pep up yarn market
THE Finance Minister's proposal in the Union Budget to do away with the compulsory `cenvat' duty chain for the textile sector, thereby, turning it into an optional excise duty regime at fibre, yarn, fabric and garment stage may meet the majority ... More

'Market pessimism to end soon'
FOREIGN and domestic fund managers feel confident that the Budget would have a favourable impact on the bourses in the long term. The pronouncements in the Budget indicate that the earlier fears of economic reforms grounding to a halt were ... More

Steps initiated to integrate stock, commodity markets
AMONG the clutch of proposals to broaden and deepen the capital markets as well as to strengthen the regulatory regime enunciated by the Finance Minister in his budget, initiation of steps to integrate the commodities markets and the securities ... More

FDI in aviation capped at 49% — Buying of aircraft to attract tax
THE Union Budget, while approving the February 2003 decision of the Group of Ministers to raise the foreign direct investment cap from 40 per cent to 49 per cent in the domestic civil aviation sector, has not given its nod for foreign airlines to ... More

Toyota to set up R&D centre in India
The 150 pc tax sops would allow the existing R&D centres to increase their investments. More

0.15 per cent tax to be levied on securities transactions
THE Finance Minister, Mr P. Chidambaram, abolished the tax on long-term capital gains from securities transactions. Instead, a transaction tax of 0.15 per cent will be levied on securities' transaction on stock exchanges. Short-term capital ... More

SPV for Sethusamudram canal project
THE Government will set up a Special Purpose Vehicle (SPV) to implement the Sethusamudram ship canal project, the Finance Minister, Mr P. Chidambaram announced in the Budget for 2004-05. "The SPV will raise funds for the project and the ... More

Insurance FDI limit raised to 49 pc
Divergent views have emerged on the proposed roadmap that companies will adopt for hiking the foreign partner's holding. While one segment feels the best way is a direct equity swap between the foreign and Indian partners, others feel that the foreig n partner might gradually infuse additional capital as and when required. More

IDBI gets Rs 9,000 cr to turn zero NPA
INDUSTRIAL Development Bank of India (IDBI) will be a zero NPA institution before it converts itself into a bank. The Finance Minister in his Budget presented today has set aside Rs 9,000 crore in order to clean up its balance sheet. The Rs ... More

In coalition company
THE Finance Minister, Mr P. Chidambaram, counted as one of the top few reformers that the country can boast of, appears to have a penchant for being the FM of coalition governments. And that too those with the firm support of the Left parties ... More

Captains of industry give Budget proposals a cautious welcome
R. Gopalakrishnan, Executive Director, Tata Sons: I think the key question for me is the ability to implement because Budget speeches are basically meant to inform the public about policy and how allocations will be made. I have a concern ... More

Shifting gears
LAUDING the overall encouraging stance vis--vis the automobile industry, Mr Jagdish Khattar, President, Society of Indian Automobile Manufacturers (SIAM), and Managing Director of Maruti Udyog, said the steps announced ... More

Turnover tax may spook capital gains
An efficient and cost-effective system that would serve the exchequer adeptly has been put in place. More

RBI sees no Budget trigger for change in rate, inflation outlook
THE Budget provides no reason to the Reserve Bank of India for changing its outlook of either the interest rate or the inflation expectations, RBI's Deputy Governor, Dr Rakesh Mohan, said here today. "I don't see any change in the interest ... More

Views from the bottom of a coffee cup
WITH Mr P. Chidambaram at the helm of affairs, the coffee sector in particular was eagerly anticipating a friendly Budget. However, their hopes appear to have been dashed as nothing in this Budget provides any relief to the coffee grower. ... More

Customs duty cut on metals: Major price impact unlikely
THE proposed reduction of 5 per cent customs duty on base metals including copper, lead and zinc in the Union Budget 2004-05 will not have much impact on prices and import inflows in the immediate future. The Union Finance Minister on Thursday ... More

Coop sugar sector needs tax holiday
THE co-operative sugar industry, especially in Maharashtra, was expecting categorically relief measures for its rehabilitation and revitalisation in view of its tough time during last 3 years. In light of this expected background, the industry is ... More

Water bodies renovation innovative
THE thrust given to the rural economy in general and agriculture in particular in this Budget is very correct, because an equitable and sustained high rate of growth of Indian economy cannot happen otherwise. Among the various measures ... More

Transaction tax a dampener: FISE
THE Federation of Indian Stock Exchanges (FISE) has termed the levy of 0.15 per cent tax on transaction of securities as a dampener not only for the exchanges but also for the investors and brokers. "It is definitely a worry for the ... More

Modest hike in Central Plan outlays in real terms
THE Budget has proposed a modest increase of barely 5 per cent in the Central Plan outlay for the current fiscal, after deflating the prevailing inflation rate, which is close to 6 per cent on an annualised basis. While presenting the Budget in ... More

Nothing much to glow about
ALL those who expected the Budget to address power sector reforms came away disappointed. There were no announcements for the power sector, except extension of tax benefits under Section 80IA for renovation and ... More

Smooth ride for tractors
THE excise duty exemption for tractors announced in the Union Budget today could not have come at a better time for the tractor industry and is bound to result in higher sales of tractors. The Finance Minister ... More

EQUITIES may be on weak terrain in the near-term as the turnover tax on stock market transactions could affect sentiment. It could have a bearing on trading levels in the cash and derivatives markets and may enhance ... More

No excise duty on dairy machinery
The Finance Minister, Mr P. Chidambaram, today announced that milking machines and dairy machinery of heading 84.34 will be exempt from excise duty. This would mean a net benefit of five per cent to companies like the Gujarat Co-operative Milk ... More

The jam in the Budget
WITH all the freebies thrown in to attract investment to food processing, one hopes to see significant investment and more importantly, lower prices in processed foods. The Indian processed foods industry, leaving aside Maggi, soft drinks and ... More

Disinvestment, reborn
IT IS business as usual on the disinvestment front. All speculation on the future of disinvestment and privatisation has been put to rest by the Finance Minister's statement on the subject in his Budget speech. Mr ... More

Disappointing delivery
THE 2004-05 Union Budget is more like an interim budget for the Finance Minister, Mr P. Chidambaram, who has set his sights on the next Union Budget in February 2005. If we were to believe that there was a vote for change, this Budget does not ... More

Little to build on
FOR companies in the business of construction, the 2004-05 Union Budget didn't offer much reason to cheer. The four percentage point increase in the excise duty of steel (from 8 per cent to 12 per cent) might be a ... More

Right thrust on crop diversification
THE Finance Minister, Mr P. Chidambaram, has done an excellent job of adhering to the Common Minimum Programme. He has also been able to appraise the right and specially the `left' quarters. The thrust towards agriculture sector on expected ... More

Oil and gas — Slickly left alone
THE Budget was a major disappointment for the oil and gas sector, for which the government was expected to announce several important policies. The Finance Minister has chosen not to address several issues, the most ... More

3 key areas targeted for 24.6% revenue mop-up
THE Finance Ministry is targeting a 24.6 per cent growth in the Centre's gross tax revenues during this fiscal, which, it says, can be achieved through a `marked improvement' in industrial production, `continued buoyancy' in the services sector ... More

Industry divided on price drop
PERSONAL Computers (PCs) could well see a slump in prices. But no one is sure by how much PC prices would go down. This follows the Government's announcement of full excise exemption on PCs, down from 8 per cent. ... More

A taxing scenario for media
THE cost of producing your favourite show on television or radio may just go up, as entertainment software production companies will now have to pay a 10 per cent service tax. So far television and radio content ... More

Personal finance: Thrust to direct equity investing
IN 2003-04 Budget, the then Finance Minister cut the interest on small savings and reduced the tax on dividends and long-term capital gains. The cumulative impact of these measures was to give a thrust to equity ... More

A cess to educate
A CESS of 2 per cent to finance universal access to quality basic education, which was virtually a certainty, has come through in the 2004-05 Budget. This cess will be applicable on all central taxes, including personal ... More

`Back-to-basics' theme
THE 2004-05 Budget has surprised many with some bold moves judiciously weaved in between themes of "back to basics" and providing impetus to investment and growth. The Finance Minister outlined the economic objectives of sustaining 7 per cent to ... More

A `neutral-to-negative' exercise: MFs
THE Union Budget will effectively discourage short-term punting in mutual funds, suggest asset management companies and distributors alike. Most of them discount it as "neutral-to-negative", an exercise that will have little positive impact on ... More

A mixed bag
THE Budget is a mixed bag for the steel industry. While there will be an increase in steel demand due to the overall thrust to promote infrastructure development and rural housing, the industry is worried that the ... More

Little more buoyant now
IT IS champagne time for the Indian shipping industry. The new tonnage tax regime will be providing a level-playing field for the domestic shipping companies to compete with foreign companies, as their tax liability ... More

Prices static? Not for long
SO, you thought the Budget could actually have let you off lightly? Sure, there's been no visible impact on prices of a swathe of items of daily consumption. While it was expected that the Finance Minister would bring into the excise net several ... More

FDI limit hike has insurers smiling — Service tax on risk premium for life cover is a dampener
PRIVATE insurance companies have reason to celebrate with the lifting of the sectoral cap in the insurance sector to 49 per cent in the Union Budget 2004-05, as against 26 per cent earlier. However, to offset the excitement, there was also an ... More

`More clarity on turnover tax needed'
THERE has to be more clarity on the applicability of turnover tax on fixed income transactions, Mr Milind Barve, Managing Director of HDFC Mutual Fund, has said. The Finance Minister, Mr P. Chidambaram, has identified the proposals on ... More

Sewing up the competition
DOING away with the mandatory Cenvat duty for the textiles sector, the Finance Minister has proposed an optional duty regime to enable the sector face global competition following the dismantling of the Multi-Fibre Agreement (MFA) this year-end. ... More

A lot to cheer about
TELECOM service providers and mobile handset manufacturers have more to cheer with the government announcing a slew of initiatives including extension of the 10-year tax holiday by another year, custom duty exemptions on capital good required ... More

Turnover tax seen as a blip
THE mood was one of cautious optimism kind. Optimistic because it is being termed as a Budget with a face and cautious because the `turnover tax' proposal is being looked on as a blip. "This is clearly a signal that reforms will continue. All ... More

Rural sops to get FMCGs going
THE sluggish FMCG sector may have finally found the kick-start that it was looking for in the Union Budget's thrust on agriculture and sops given for the rural economy. The Finance Ministry's skew towards the rural ... More

May impact trading volume: market players
THE Finance Minister could have discussed the proposal to introduce `transaction tax' on the securities purchased in the capital market with the capital market stakeholders for smoother acceptance of the plan, according to a capital market ... More

`VAT by 2005, a step in right direction'
THE Finance Minister's commitment to "making VAT happen" by April 2005 was welcomed by members of the Confederation of Indian Industry (CII) Southern Region (SR) as a step in the right direction. Ms Shobana Kamineni, Chairperson CII (SR) and ... More

Your dream car to become dearer
IF you were waiting till the Union Budget to purchase your dream car, expecting a price decrease in automobiles from the Budget, tough luck then. While the excise duty reduction to 16 per cent on cars did not take place, the announcement of a ... More

A limited first step
THE Finance Minister had said that he would rather be known as the Investment Minister. On this count, his Budget has scored quite a few points. First, it is the setting up of the Investment Commission. For too long, we have had a lot of ... More

Consolidation vital
THE United Progressive Alliance's first Budget builds on the CMP in a comprehensive manner. India's fiscal position has worried international investors for a long time and the Budget brings out the Government's commitment to fiscal consolidation. ... More

Slip into khadi and morph into a geek
AS always, Budget 2004 too would keep the chattering class engrossed for a few months. Excise duty on computers is proposed to be completely eliminated. This should further accelerate the steady decline in computer prices. As it is, the excise ... More

Hindujas interested in desalination project proposal
THE Hinduja group has shown interest in participating in the Rs 1,000-crore desalination project that the Finance Minister mentioned in the Budget speech. "The Finance Minister has spoken of public-private partnership. We are interested in the ... More

Budget fails to impress CETMA
THE Union Budget proposal for 2004-05 has failed to impress the consumer electronics industry, which was looking forward to fiscal sops to stay competitive in the post free trade agreements (FTA) regime. "The industry is disappointed with the ... More

`Bold decisions taken on foreign investments'
THE Chairman and Managing Director of Corporation Bank, Mr Cherian Varghese, has said that the Union Finance Minister is creating "enabling environment" for agriculture lending in the country. Mr Varghese, who was in New Delhi, told ... More

No impact on gold market; platinum prices may fall
THE entire bullion trade is totally disappointed with the General Budget 2004-05 announced on Thursday. ``Traders were expecting some major changes in the Budget such as re-export of gold and all India hallmarking system,'' Mr Suresh Hundia, ... More

- Accelerating the completion of irrigation projects and investing in rural infrastructure; - Providing farm insurance and livestock insurance; - Improving agricultural product markets, and promoting agri-businesses; - Drinking water ... More

FIPB to fly with clipped wings
BELYING rumours about closing down the Foreign Investment Promotion Board (FIPB), the Union Finance Minister, Mr P. Chidambaram, granted it a fresh lease of life, albeit with clipped wings Many of the present functions of the FIPB could go to ... More

Cap for SSI loans raised to Rs 1 cr
IN a move which is likely to benefit more small scale industry (SSI) units, the Union Budget for 2004-05 on Thursday proposed to raise the ceiling for loans under the Capital Subsidy scheme from Rs 40 lakh to Rs 1 crore. At the same time, as ... More

A bitter-sweet pill for vegoil sector
A SECTION of the country's vegetable oil industry may have reason to be disappointed with the United Progressive Alliance's maiden budget which has proposed little else than a small — five percentage point — increase in basic customs ... More

Assurance to States on VAT compensation
THE Finance Minister, Mr P. Chidambaram, today said that he would evolve a formula to determine the compensation for any loss of revenue to States arising from their proposed transition to the Value Added Tax (VAT) regime from April 1 next year. ... More

Service tax hiked to 10 pc; list expanded
THE UPA Government has expanded the service tax net to include 13 more services besides enhancing the rate from eight per cent to 10 per cent. Currently, 58 services are taxable. The new services are business exhibition services, airport ... More

An effort to reflect mandate for change
The following is the text of the Union Budget speech delivered by the Finance Minister, Mr P. Chidambaram: PART A Mr. Speaker, Sir. INTRODUCTION I rise to present the Budget for the year ... More

New deal for farmers; more funds for States
The Government proposes to launch a National Horticulture Mission. The goal is to double horticulture production from the current level of 150 million tonnes to 300 million tonnes by 2011-12. I invite States to join hands with the Government in ... More

Stress on moderation, stability in tax rates
Taxation is a key tool of fiscal policy. The NCMP has promised that "tax rates will be stable and conducive to growth, compliance and investment". Thanks to policies initiated in the 1990s, direct tax rates are now moderate and require only ... More

Textiles woven in style
THE first Budget of the new Government was on expected lines. Keeping in mind the short period that the Government has been in office, one did not expect any major structural changes. The Finance Minister, Mr P. ... More

More services annexed at a higher rate
THE revised Budget estimates for 2003-2004 indicate service tax collections at Rs 8,300 crore against the Budget estimate of Rs 8,000 crore. For 2004-2005, the Finance Minister has projected service tax collections at ... More

VAT full of promises
THE Finance Minister has made the now-customary statement on early implementation of VAT with no firm commitment. While no doubt VAT implementation is a State subject, Mr P. Chidambaram could have made a positive ... More

Watch out as the government shifts gears and piggybacks
NO `Panch Priorities' this time but Mr P. Chidambaram lists "seven clear economic objectives" under `guiding light'. PC is, however, not too enthusiastic about presenting a Budget after one-quarter of a year has ... More

No luck if you cross a `lakh'
IN MY wife's school, there was a collective jubilation by the teachers until I spoiled their party with an unsolicited nugget of information. On the personal taxation front, the Finance Minister, Mr P. Chidambaram, had ... More

Tax admin: Reforms kept in arrears
MR P. Chidambaram is undoubtedly a votary of tax reforms. He had in fact toyed with the idea of re-writing the income-tax law in his previous tenure. That was an ambitious project which could not be completed. He was ... More

`No clear theme in the Budget' — Mr Yashwant Sinha, former Finance Minister
THE BJP-led NDA coalition is now in the Opposition. That is a fact that all know, but some are still surprised about it. But when Business Line spoke to the former Finance Minister, Mr Yashwant Sinha, his reaction came as no surprise. He did ... More

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Top Stories
Budget 2004-05 — Strong step towards growth, stability and equity

A Common Minimum Budget

`Tax on transactions to affect market depth'

At your service, tax!

Mutual funds — Odds stacked against debt funds

Rs 2,000-cr cut in food subsidy

An effort to reflect mandate for change

New deal for farmers; more funds for States

Stress on moderation, stability in tax rates

Looking back
Jun. 27-Jul. 3
`Indian companies will gain from China foray'

Got an interview call? Travel by train at 50 pc discount

Modest spurt in apparel exports in April-May

Farm credit package sparks optimism among tractor makers

Foreign investors more upbeat on India: FICCI

Singapore is streets ahead of India in biotech race

Rubber shortage forces tyre cos to import more

Spices exports double in Apr-May

BIS highlights India's challenges

Cement companies adopt innovative cost-cutting measures

PSU insurers unhappy with TPAs — Mounting claims ratio, poor customer service

PM for `Chinese model' of rural business hubs

Nation-wide network to link sales tax commissionerates

Current account surplus doubled last fiscal

Increased capital investment flows boost forex kitty

Cable industry favours broadcast legislation

A bevy of economic Bills in Budget session

CII calls for cut in corporate tax

Cement majors' offtake lacklustre in June

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