Union Budget 2011: India Inc’s wishlist

NDTV Correspondent, February 28, 2011 (New Delhi)

High inflation has not only hit the common man but Indian companies are also under pressure. Most
companies are battling on the margin front and a high interest rate scenario has not helped the
situation. No wonder, Indian markets have fallen more than 10 per cent in 2011.

Corporates have pinned their hopes on Pranab Mukherjee not increasing the excise duty and
reducing the minimum alternate tax or MAT. The finance minister had hiked MAT from 15 per cent
to 18 per cent last year.

Corporates also expect the Budget to be a major statement on reforms like FDI (especially in the
retail sector), taxes (Goods and services tax) and labour laws.

Corporates also want the finance minister to increase the allocation on infrastructure that is the
biggest bottleneck for the economy. While these are the common themes, there are many industry
specific aspirations from the finance minister too. Here are the wish lists of various sectors from
this year’s Budget:

Information Technology:
The $76-billion Indian IT industry has been reaping tax benefits for over 10 years now but the
industry's lobby Nasscom's Budget wish list remains focused on tax breaks. Nasscom says profit
linked benefits under Software Technology Parks of India (STPI) scheme should be allowed for
another one year till the implementation of the Direct Tax Code in 2012. The benefits under the
STPI scheme are scheduled to end on March 31, 2011. Another key demand of the IT industry is the
reduction of Minimum Alternate Tax or MAT currently at 18 per cent. Nasscom has suggested the
government keep MAT at the levels prevalent internationally at one-third of the corporate tax rate.

Infrastructure:
Infrastrucure is a major bottleneck as far as India's growth is concerned. The sector is battling a
liquidity crunch and delayed execution. According to the Economic Survey for 2010-11, 52 per cent
of the ongoing infrastructure projects are running behind schedule (as on October, 2010). There has
been demands to raise the limit for investment in tax saving infrastructure bonds from Rs. 20,000
per annum currently. An Infra Debt Fund (IDF) with a corpus of $11 billion (Rs. 50,000 crore) has
been suggested by an expert panel headed by HDFC chief Deepak Parekh (in June, 2010).
Real Estate:
The realty sector is dogged by rising interest rates and liquidity crunch. Developers want the
government to increase the tax break for customers paying interest on home loans from the
current Rs. 1,50,000. Real estate players also seek an extension of the 1 per cent interest subsidy
to borrowers with loans of up to Rs. 10 lakh for houses costing less than Rs. 20 lakh further from
March 31 when it expires.
Healthcare/Pharma:
The $10 billion Indian pharmaceutical industry has pinned its hope on the much needed
infrastructure status, which has also being included in the DTC draft. The industry also seeks an
extension of tax holiday for hospitals from five years to ten years owing to longer pay back periods
and assistance in raising capital for setting up more healthcare infrastructure. The Indian pharma
industry is growing at 15 per cent Compound Annual Growth Rate (CAGR) and is poised to reach $20
billion by 2015.

Auto sector:
Most automobile manufacturers are facing a supply shortage, either because of their own
insufficient capacity or that of their suppliers. Raw material prices have risen by 8-10 per cent.
Interest rates have advanced 2-3 per cent and even fuel prices have risen over 10 per cent. The
auto component manufacturers have asked the finance minister to set up Rs. 7,500 crore
technology upgradation and development fund for the next five year period which would give them
access to soft loans. They also want import duty on steel and aluminium alloys to be done away
with. The auto industry’s expectations from the Budget include lower corporate tax rates, lowering
of the minimum alternate tax or MAT to 15 per cent and a speedy introduction of the GST.

Banking sector:
The biggest demand of the banking sector is tax breaks on longer tenor deposits to help deposit
growth. Bankers also expect the government to announce subsidies for no-frills or zero balance
accounts. Banks expect the government to come out with a roadmap for takeout financing that will
address the issue of infrastructure lending. The banking industry also wants government subsidy or
concessions on interest rates provided on lending to State Electricity Boards given their weak
financial health. Other demands include raising the limit of refinancing from IIFCL (India
Infrastructure Finance Company Limited) to commercial bank loans for Public-Private Partnership
projects in critical sectors. Banks also expect recapitalisation of public sector units, which will help
strengthen Tier I capital of PSU banks.