Speech of Minister of Finance

 
Budget  2011-2012
 
Speech  of
Pranab Mukherjee
Minister of Finance
 
February  28,  2011
 
 
Madam Speaker,
            I rise to present the Union Budget for 2011-12.
            We are reaching the end of a remarkable fiscal year. In a globalised world with its share
of uncertainties and rapid changes, this year brought us some opportunities and many challenges
as we moved ahead with steady steps on the chosen path of fiscal consolidation and high
economic growth.
2.         Our growth in 2010-11 has been swift and broad-based. The economy is back to its pre-
crisis growth trajectory. While agriculture has shown a rebound, industry is regaining its earlier
momentum. Services sector continues its near double digit run. Fiscal consolidation has been
impressive. This year has also seen significant progress in those critical institutional reforms that
would set the pace for double-digit growth in the near future.
3.         While we succeeded in making good progress in addressing many areas of our concern,
we could have done better in some others. The total food inflation declined from 20.2 per cent in
February 2010 to less than half at 9.3 per cent in January 2011, but it still remains a concern. In
the medium term perspective, our three priorities of sustaining a high growth trajectory; making
development more inclusive; and improving our institutions, public delivery and governance
practices, remain relevant. These would continue to engage the Indian policy-planners for some
time. However, there are some manifestations of these challenges that need urgent attention in
the short term.
4.         Though we have regained the pre-crisis growth momentum, there is a need to effect
adjustments in the composition of growth on demand and supply side. We have to ensure that
along with private consumption, the revival in private investment is sustained and matches pre-
crisis growth rates at the earliest. This requires a stronger fiscal consolidation to enlarge the
resource space for private enterprise and addressing some policy constraints.  We also have to
improve the supply response of agriculture to the expanding domestic demand. Determined
measures on both these issues will help address the structural concerns on inflation management.
It will also ensure a more stable macroeconomic environment for continued high growth.
5.         The UPA Government has significantly scaled up the flow of resources to rural areas to
give a more inclusive thrust to the development process. The impact is visible in the new
dynamism of our rural economy. It has helped India navigate itself rapidly out of the quagmire of
global economic slowdown. Yet, there is much that still needs to be done, especially in
rural India. We have to reconcile legitimate environmental concerns with necessary
developmental needs.  Above all, there is the 'challenge of growing aspiration' of a young India.
6.         To address these concerns, I do not foresee resources being a major constraint, at least
not in the medium-term. However, the implementation gaps, leakages from public programmes
and the quality of our outcomes are a serious challenge.
7.         Certain events in the past few months may have created an impression of drift in
governance and a gap in public accountability. Even as the Government is engaged in addressing
specific concerns emanating from some of these events in the larger public interest and in
upholding the rule of law, such an impression is misplaced. We have to seize in these
developments, the opportunity to improve our regulatory standards and administrative practices.
Corruption is a problem that we have to fight collectively.
8.         In a complex and rapidly evolving economy, the Government can not profess to be the
sole repository of all knowledge. Indeed, in a democratic polity, it stands to benefit from inputs
from colleagues on both sides of the House. They must lend their voice and expertise to
influence public policy in the wider national interest. In some areas, good results depend on
coordinated efforts of the Centre and the State Governments and in some others, on favourable
external developments.
9.         I see the Budget for 2011-12 as a transition towards a more transparent and result
oriented economic management system in India. We are taking major steps in simplifying and
placing the administrative procedures concerning taxation, trade and tariffs and social transfers
on electronic interface, free of discretion and bureaucratic delays. This will set the tone for a
newer, vibrant and more efficient economy.
10.       At times the biggest reforms are not the ones that make headline, but the ones concerned
with the details of governance, which affect the everyday life of aam aadmi. In preparing this
year's Budget, I have been deeply conscious of this fact. I am grateful for the able guidance of
the Hon’ble Prime Minister and the strong support lent by UPA Chairperson Smt. Sonia Gandhi
in my endeavour. I would now begin with a brief overview of the economy.
I. Overview of the Economy
11.       On last Friday, I laid on the table of the House the Economic Survey 2010-11, which
gives a detailed analysis of the economic situation of the country over the past 12 months. The
Gross Domestic Product (GDP) of India is estimated to have grown at 8.6 per cent in 2010-11 in
real terms. In 2010-11 agriculture is estimated to have grown at 5.4 per cent, industry at 8.1 per
cent and services at 9.6 per cent. All three sectors are contributing to the consolidation of growth.
More importantly, the economy has shown remarkable resilience to both external and domestic
shocks.
12.       Our principal concern this year has been the continued high food prices. Inflation
surfaced in two distinct episodes. At the beginning of the year, food inflation was high for some
cereals, sugar and pulses. Towards the second half, while prices of these items moderated and
even recorded negative rates of inflation, there was spurt in prices of onion, milk, poultry and
some vegetables. Of late prices of onion have crashed in wholesale markets and we have had to
remove the ban on their exports.
13.       Despite improvement in the availability of most food items, consumers were denied the
benefit of seasonal fall in prices normally seen in winter months. These developments revealed
shortcomings in distribution and marketing systems, which are getting accentuated due to
growing demand for these food items with rising income levels. The huge differences between
wholesale and retail prices and between markets in different parts of the country are just not
acceptable. These are at the expense of remunerative prices for farmers and competitive prices
for consumers.
14.       Monetary policy stance in 2010-11, while being supportive of fiscal policy, has
succeeded in keeping core-inflation in check. As the transmission lag in monetary policy tends to
be long, I expect the measures already taken by the RBI to further moderate inflation in coming
months.
15.       The developments on India's external sector in the current year have been encouraging.
Even as the recovery in developed countries is gradually taking root, our trade performance has
improved. Exports have grown at 29.4 per cent to reach US Dollar 184.6 billion, while imports at
US Dollar 273.6 billion have recorded a growth of 17.6 per cent during April-January 2010-11,
over the corresponding period last year. The current account deficit is around the
2009-10 level and poses some concerns because of the composition of its financing.
16.       Policy making in a globalised world has to take into account the likely international
developments. To realise the desired outcomes, it is important that there is convergence in
expectations of our investors, entrepreneurs and consumers on the macroeconomic prospects of
the economy. Against this backdrop, the Indian economy is expected to grow at 9 per cent with
an outside band of +/- 0.25 per cent in 2011-12. I expect the average inflation to be lower next
year and the current account deficit smaller and better managed with higher domestic savings
rate and stable capital flows. While, like last year, I seek the blessings of Lord Indra to bestow
on us timely and bountiful monsoons, I would pray to Goddess Lakshmi as well. I think it is a
good strategy to diversify one's risks.
II. Sustaining Growth
17.       In my last Budget, I had started rolling back the fiscal stimulus implemented over 2008-
09 and 2009-10 to mitigate the impact of the global financial crisis on economic slowdown in
India. In the course of the year, I have moved further on that path. I believe that a part of the
current recovery must be stored away to build future resilience. Indeed, a counter cyclical fiscal
policy is our best insurance against external shocks and localised domestic factors.
Fiscal Consolidation
18.       The experience with Fiscal Responsibility and Budget Management Act, 2003 (FRBM
Act) at Centre and the corresponding Acts at State level show that statutory fiscal consolidation
targets have a positive effect on macroeconomic management of the economy. In the course of
the year the Central Government would introduce an amendment to the FRBM Act, laying down
the fiscal road map for the next five years.
19.       The Thirteenth Finance Commission has worked out a fiscal consolidation road map for
States requiring them to eliminate revenue deficit and achieve a fiscal deficit of 3 per cent of
their respective Gross State Domestic Product latest by 2014-15. It has also recommended a
combined States’ debt target of 24.3 per cent of GDP to be reached during this period. The States
are required to amend or enact their FRBM Acts to conform to these recommendations.
20.       The Government has been in the process of setting-up an independent Debt Management
Office in the Finance Ministry. A Middle Office is already operational. As a next step, I propose
to introduce the Public Debt Management Agency of India Bill in the next financial year.
Tax Reforms
21.       The introduction of the Direct Taxes Code (DTC) and the proposed Goods and Services
Tax (GST) will mark a watershed. These reforms will result in moderation of rates,
simplification of laws and better compliance.
22.       As Hon'ble Members are aware, the Direct Taxes Code Bill was introduced in Parliament
in August, 2010.  After receiving the report of the Standing Committee, we shall be able to
finalise the Code for its enactment during
2011-12. This has been a pioneering effort in participative legislation.  The Code is proposed to
be effective from April 1, 2012 to allow taxpayers, practitioners and administrators to fully
understand the legislation and adjust to the revised procedures.
23.       Unlike DTC, decisions on the GST have to be taken in concert with the States with whom
our dialogue has made considerable progress in the last four years. Areas of divergence have
been narrowed. As a step towards the roll-out of GST, I propose to introduce the Constitution
Amendment Bill in this session of Parliament. Work is also underway on drafting of the model
legislation for the Central and State GST.
24.       Among the other steps that are being taken for the introduction of GST is the
establishment of a strong IT infrastructure. We have made significant progress on the GST
Network (GSTN).  The key business processes of registration, returns and payments are in
advanced stages of finalisation. The National Securities Depository Limited (NSDL) has been
selected as technology partner for incubating the National Information Utility that will establish
and operate the IT backbone for GST. By June 2011, NSDL will set up a Pilot portal in
collaboration with eleven States prior to its roll out across the country.
Expenditure Reforms
25.       The effective management of public expenditure is an integral part of the fiscal
consolidation process. Expenditure has to be oriented towards the production of public goods and
services. The extant classification of public expenditure between plan, non-plan, revenue and
capital spending needs to be revisited. This is necessary as one recognises the importance of
service sector and the knowledge economy for our development.  A Committee under Dr. C.
Rangarajan has been set up by the Planning Commission to look into these issues.
Subsidies
26.       During the year 2010-11, the Nutrient Based Subsidy (NBS) policy was successfully
implemented for all fertilisers except urea.  The policy has been well received by all
stakeholders, and the availability of fertilisers has improved. The extension of the NBS regime to
cover urea is under active consideration of the Government.
27.       The Government provides subsidies, notably on fuel and food grains, to enable the
common man to have access to these basic necessities at affordable prices. A significant
proportion of subsidised fuel does not reach the targeted beneficiaries and there is large scale
diversion of subsidised kerosene oil. A recent tragic event has highlighted this practice. We have
deliberated for long the modalities of implementing such subsidies. The debate now has to make
way for decision. To ensure greater efficiency, cost effectiveness and better delivery for both
kerosene and fertilisers, the Government will move towards direct transfer of cash subsidy to
people living below poverty line in a phased manner.
28.       A task force headed by Shri Nandan Nilekani has been set-up to work out the modalities
for the proposed system of direct transfer of subsidy for kerosene, LPG and fertilisers. The
interim report of the task force is expected by June 2011. The system will be in place by March
2012.
People’s Ownership of PSUs
29.       The Government's programme to broadbase the ownership of Central Public Sector
Undertakings (CPSUs) has received an overwhelming response. The six public issues of CPSUs
in the current financial year have attracted around 50 lakh retail investors.
30.       As against a target of `40,000 crore, the Government will raise about `22,144 crore from
disinvestment in 2010-11. A higher than anticipated realisation in non-tax revenues has led us to
reschedule some of the divestment issues planned for the current year.  I intend to maintain the
momentum on disinvestment in 
2011-12 by raising `40,000 crore. Let me reiterate here that the Government is committed to
retain at least 51 per cent ownership and management control of the CPSUs, as stated earlier in
my Budget speech for 2009-10.
Investment Environment
Foreign Direct Investment
31.       To make the FDI policy more user-friendly, all prior regulations and guidelines have
been consolidated into one comprehensive document, which is reviewed every six months. The
last review has been released in September 2010. This has been done with the specific intent of
enhancing clarity and predictability of our FDI policy to foreign investors. Discussions are
underway to further liberalise the FDI policy.
Foreign Institutional Investors
32.       Currently, only FIIs and sub-accounts registered with the SEBI and NRIs are allowed to
invest in mutual fund schemes. To liberalise the portfolio investment route, it has been decided
to permit SEBI registered Mutual Funds to accept subscriptions from foreign investors who meet
the KYC requirements for equity schemes. This would enable Indian Mutual Funds to have
direct access to foreign investors and widen the class of foreign investors in Indian equity
market.
33.       To enhance the flow of funds to the infrastructure sector, the FII limit for investment in
corporate bonds, with residual maturity of over five years issued by companies in infrastructure
sector, is being raised by an additional limit of US Dollar 20 billion taking the limit to US Dollar
25 billion. This will raise the total limit available to the FIIs for investment in corporate bonds to
US Dollar 40 billion. Since most of the infrastructure companies are organised in the form of
SPVs, FIIs would also be permitted to invest in unlisted bonds with a minimum lock-in period of
three years. However, the FIIs will be allowed to trade amongst themselves during the lock-in
period.
Financial Sector legislative Initiatives
34.       The financial sector reforms initiated during the early 1990s have borne good results for
the Indian economy.  The UPA Government is committed to take this process
further.  Accordingly, I propose to move the following legislations in the financial sector:
(i)      The Insurance Laws (Amendment) Bill, 2008;
(ii)     The Life Insurance Corporation (Amendment) Bill, 2009;
(iii)    The revised Pension Fund Regulatory and Development Authority Bill, first
introduced in 2005;
(iv)    Banking Laws Amendment Bill, 2011;
(v)     Bill on Factoring and Assignment of Receivables;
(vi)    The State Bank of India (Subsidiary Banks Laws) Amendment Bill, 2009; and
(vii)   Bill to amend RDBFI Act 1993 and SARFAESI Act 2002.
35.       In my last Budget speech, I had announced that Reserve Bank of India would consider
giving some additional banking licences to private sector players.  Accordingly, RBI issued a
discussion paper in August, 2010, inviting feedback from the public. RBI has proposed some
amendments in the Banking Regulation Act. I propose to bring suitable legislative amendments
in this regard in this session. RBI is planning to issue the guidelines for banking licences before
the close of this financial year.
Public Sector Bank Recapitalisation
36.       During the year 2010-11, the Government is providing a sum of `20,157 crore for
infusion in the Public Sector Banks to maintain Tier I Capital to Risk Weighted Asset Ratio
(CRAR) at 8 per cent and increase government equity in some banks to 58 per cent.  I propose to
provide a sum of `6,000 crore for the year 2011-12 to enable Public Sector Banks to maintain a
minimum Tier I CRAR at 8 per cent.
Recapitalisation of Regional Rural Banks
37.       As a part of financial strengthening of Regional Rural Banks, an amount of `350 crore
was given to these banks during this year. I propose to provide `500 crore during 2011-12 to
enable them maintain a CRAR of at least 9 per cent as on March 31, 2012.
Micro Finance Institutions
38.       The Micro Finance Institutions (MFIs) have emerged as an important means of financial
inclusion.   Creation of a dedicated fund for providing equity to smaller MFIs would help them
maintain growth and achieve scale and efficiency in operations. I propose to create in the course
of the year, "India Microfinance Equity Fund" of `100 crore with SIDBI.  To empower women
and promote their Self Help Groups (SHGs), I propose to create a “Women’s SHG’s
Development Fund” with a corpus of `500 crore. The Committee set up by RBI to look into
issues relating to micro finance sector in India has submitted its report. The Government is
considering putting in place appropriate framework to protect the interests of small borrowers.
Rural Infrastructure Development Fund
39.       The Rural Infrastructure Development Fund (RIDF) is an important instrument for
routing bank funds for financing rural infrastructure. This is popular among State
Governments.  I propose to raise the corpus of RIDF XVII to `18,000 crore in 2011-12
from `16,000 crore in the current year. The additional allocation would be dedicated to creation
of warehousing facilities.
Micro, Small and Medium Enterprises
40.       Micro and Small enterprises play a crucial role in furthering the objective of equitable
and inclusive growth. Last year, `4,000 crore was provided to SIDBI for refinancing incremental
lending by banks to these enterprises.  For the year 2011-12, I propose to provide `5,000 crore to
SIDBI for the same purpose out of the shortfall of banks on priority sector lending targets.
41.       Handloom weavers have been facing economic stress. Consequently, many of them have
not been able to repay debts to handloom weaver cooperative societies which have become
financially unviable. I propose to provide `3,000 crore to NABARD, in phases for these
cooperative societies. The initiative would benefit 15,000 cooperative societies and about 3 lakh
handloom weavers. The details of the scheme would be worked out by the Ministry of Textiles in
consultation with Planning Commission.
42.       I am happy to report that the outstanding loans to minority communities which stood at
13 per cent of total priority sector lending at the end of last year have increased to 13.6 per cent
in the current year. I have directed the Public Sector Banks to achieve the target of 15 per cent at
the earliest.
Housing Sector Finance
43.       To further stimulate growth in housing sector, I am liberalising the existing scheme of
interest subvention of 1 per cent on housing loans by extending it to housing loan upto `15 lakh
where the cost of the house does not exceed `25 lakh from the present limit of `10 lakh and `20
lakh respectively.
44.       On account of increase in prices of residential properties in urban areas, I propose to
enhance the existing housing loan limit from `20 lakh to `25 lakh for dwelling units under
priority sector lending.
45.       To provide housing finance to targeted groups in rural areas at competitive rates, I
propose to enhance the provision under Rural Housing Fund to `3,000 crore from the
existing `2,000 crore.
46.       Credit enablement of Economically Weaker Sections (EWS) and LIG households is a
serious challenge. To address this issue, I propose to create a Mortgage Risk Guarantee Fund
under Rajiv Awas Yojana. This would guarantee housing loans taken by EWS and LIG
households and enhance their credit worthiness.
47.       To prevent frauds in loan cases involving multiple lending from different banks on the
same immovable property, the Government has facilitated setting up of Central Electronic
Registry under the SARFAESI Act, 2002. This Registry will become operational by March 31,
2011.
Financial Sector Legislative Reforms Commission
48.       In pursuance of the announcement made in Budget 2010-11, the Government has set up a
Financial Sector Legislative Reforms Commission under the Chair of Justice B. N. Srikrishna. It
would rewrite and streamline the financial sector laws, rules and regulations and bring them in
harmony with the requirements of a modern financial sector. The Commission will complete its
work in 24 months.
49.       The Companies Bill introduced in the Parliament in 2009 has been received from the
Parliamentary Standing Committee. The proposed bill will be introduced in the Lok Sabha in the
current session.
Agriculture
50.       Agriculture development is central to our growth strategy. Measures taken during the
current year have started attracting private investment in agriculture and agro-processing
activities. This process has to be deepened further.
51.       In the Budget for 2010-11, I had delineated a four-pronged strategy covering agricultural
production, reduction in wastage of produce, credit support to farmers and a thrust to the food
processing sector.  These initiatives have started showing results but there are other issues in our
food economy that require attention. The recent spurt in food prices was driven by increase in the
prices of items like fruits and vegetables, milk, meat, poultry and fish, which account for more
than 70 per cent of the WPI basket for primary food items.  Removal of production and
distribution bottlenecks for these items will be the focus of my attention this year. I propose to
make allocations for these schemes under the ongoing Rashtriya Krishi Vikas Yojana (RKVY)
for an early take off. The total allocation of RKVY is being increased from `6,755 crore in 2010-
11 to `7,860 crore in 2011-12.
Bringing Green Revolution to Eastern Region
52.       The Green Revolution in Eastern Region is waiting to happen. To realize the potential of
the region, last year's initiative will be continued in 2011-12 with a further allocation of `400
crore. The program would target the improvement in the rice based cropping system of Assam,
West Bengal, Orissa, Bihar, Jharkhand, Eastern Uttar Pradesh and Chhattisgarh.
Integrated Development of 60,000 pulses villages in rainfed areas
53.       Government's initiative on pulses has received a positive response from the farmers. As
per the second advance estimates, a record production of 165 lakh tonnes of pulses is expected
this year as against 147 lakh tonnes last year. While consolidating these gains, we must strive to
attain self-sufficiency in production of pulses within next three years. I propose to provide an
amount of `300 crore to promote 60,000 pulses villages in rainfed areas for increasing crop
productivity and strengthening market linkages.
Promotion of Oil Palm
54.       The domestic production of edible oil meets only about 50 per cent demand. The gap in
supply is met through imports, which are often at high prices due to the quantum of our
requirement. Our recent interventions and good rains are expected to result in a higher oilseeds
production of 278 lakh tonnes in 2010-11 as against 249 lakh tonnes in 2009-10. To achieve a
major breakthrough, we have to pay special attention to oil palm as it is one of the most efficient
oil crops. I propose to provide an amount of `300 crore to bring 60,000 hectares under oil palm
plantation, by integrating the farmers with the markets. The initiative will yield about 3 lakh
metric tonnes of palm oil annually in 5 years.
Initiative on Vegetable Clusters
55.       The growing demand for vegetables has to be met by a robust increase in the productivity
and market linkage. An efficient supply chain, to provide quality vegetables at competitive prices
will have to be established. I propose to provide an amount of `300 crore for implementation of
vegetable initiative to set in motion a virtuous cycle of higher production and incomes for the
farmers. To begin with, this programme will be launched near major urban centres.
Nutri-cereals
56.       While we ensure food for all, we must also promote balanced nutrition. Bajra, jowar, ragi
and other millets are highly nutritious and are known to possess several medicinal properties.
The availability and consumption of these Nutri-cereals is, however, low and has been steadily
declining over recent years.  A provision of `300 crore is being made to promote higher
production of these cereals, upgrade their processing technologies and create awareness
regarding their health benefits. This initiative would provide market linked production support to
ten lakh millet farmers in the arid and semi-arid regions of the country. The programme would
be taken up in 1000 compact blocks covering about 25,000 villages.  This will help improve
nutritional security and increase feed and fodder supply for livestock.
National  Mission for Protein Supplements
57.       The consumption of foods rich in animal protein and other nutrients has risen of late, with
demand growing faster than production. The National Mission for Protein Supplements is being
launched in 2011-12 with an allocation of `300 crore. It will take up activities to promote animal
based protein production through livestock development, dairy farming, piggery, goat rearing
and fisheries in selected blocks.
Accelerated Fodder Development Programme
58.       Adequate availability of fodder is essential for sustained production of milk. It is
necessary to accelerate the production of fodder through intensive promotion of technologies to
ensure its availability throughout the year. I propose to provide `300 crore for Accelerated
Fodder Development Programme which will benefit farmers in 25,000 villages.
59.       Hon'ble Members may be curious as to why all these new initiatives are being launched
with an allocation of `300 crore. Well, the number 3 happens to be my lucky number !
National  Mission for Sustainable Agriculture
60.       While the need to maximize crop yields to meet the growing demand for food grains is
critical, we have to sustain agricultural productivity in the long run. There has been deterioration
in soil health due to removal of crop residues and indiscriminate use of chemical fertilizers, aided
by distorted prices.
61.       To address these issues, the Government proposes to promote organic farming methods,
combining modern technology with traditional farming practices like green manuring, biological
pest control and weed management.
Agriculture Credit
62.       To get the best from their land, farmers need access to affordable credit. Banks have been
consistently meeting the targets set for agriculture credit flow in the past few years.  For the year
2011-12, I am raising the target of credit flow to the farmers from `3,75,000 crore this year
to `4,75,000 crore in 2011-12.  Banks have been asked to step up direct lending for agriculture
and credit to small and marginal farmers.
63.       The existing interest subvention scheme of providing short term crop loans to farmers at
7 per cent interest will be continued during 2011-12.  In the last budget, I had provided an
additional 2 per cent interest subvention to those farmers who repay their crop loans on time. The
response to this scheme has been good. In order to provide further incentive to these farmers, I
propose to enhance the additional subvention to 3 per cent in 2011-12.  Thus, the effective rate of
interest for such farmers will be 4 per cent per annum. 
64.       In view of the enhanced target for flow of agriculture credit, I propose to strengthen
NABARD's capital base by infusing `3000 crore, in a phased manner, as Government
equity.  This would raise its paid-up capital to `5,000 crore. To enable NABARD refinance the
short-term crop loans of the cooperative credit institutions and RRBs at concessional rates, I
propose a contribution of `10,000 crore to NABARD’s Short-term Rural Credit Fund for 2011-
12 from the shortfall in priority sector lending by Scheduled Commercial Banks.
Mega Food Parks
65.       Despite growing production of vegetables and fruits, their availability is inadequate due
to bottlenecks in retailing capacity. An estimated 40 per cent of the fruit and vegetable
production in India goes waste due to lack of storage, cold chain and transport infrastructure. To
address these issues, the Eleventh Plan target for number of Mega Food Parks was set at 30. So
far, 15 such parks have been sanctioned. During 2011-12, approval is being given to set up 15
more Mega Food Parks.
Storage Capacity and Cold Chains
66.       The years 2008 to 2010 saw very high levels of foodgrain procurement. On January 1,
2011, the foodgrain stock in Central pool reached 470 lakh metric tonnes, 2.7 times higher than
174 lakh metric tonnes on January 1, 2007. The storage capacity for such large quantities
requires augmentation. Process to create new storage capacity of 150 lakh metric tonnes through
private entrepreneurs and warehousing corporations has been fast tracked. Decision to create 20
lakh metric tonnes of storage capacity under Public Entrepreneurs Guarantee (PEG) Scheme
through modern silos has been taken. While we will be able to add about 2.6 lakh tonnes of
capacity by March 2011, based on existing sanctions, the addition will reach 40 lakh tonnes by
March 2012. During 2010-11, another 24 lakh metric tonnes of storage capacity has been created
under the Rural Godown Scheme.
67.       Investment in cold storage projects is now gaining momentum.  During this year, 24 cold
storage projects with a capacity of 1.4 lakh metric tonnes have been sanctioned under National
Horticulture Mission. In addition, 107 cold storage projects with a capacity of over 5 lakh metric
tonnes have been approved by the National Horticulture Board.
68.       To attract investment in this sector, henceforth, capital investment in the creation of
modern storage capacity will be eligible for viability gap funding scheme of the Finance
Ministry. It is also proposed to recognize cold chains and post-harvest storage as an
infrastructure sub-sector.
Agriculture Produce Marketing Act
69.       The recent episode of inflation in vegetables and fruits has exposed serious flaws in our
supply chains. The government regulated mandis sometimes prevent retailers from integrating
their enterprises with the farmers. There is need for the State Governments to review and enforce
a reformed Agriculture Produce Marketing Act urgently.
Infrastructure and Industry
70.       Infrastructure is critical for our development. For 2011-12, an allocation of
over ` 2,14,000 crore is being made for this sector, which is 23.3 per cent higher than current
year. This amounts to 48.5 per cent of the Gross Budgetary Support to plan expenditure.
71.       Our experience with PPP model for creation of public sector assets in the country has
been good. We have recently launched the National Capacity Building Programme to enhance
capacities of public functionaries in identifying, conceptualising, structuring and managing PPPs.
It is our endeavour to come up with a comprehensive policy that can be used by the Centre and
the State Governments in further developing public-private partnerships.
72.       Government established India Infrastructure Finance Company Limited (IIFCL) to
provide long term financial assistance to infrastructure projects. It is expected to achieve a
cumulative disbursement target of `20,000 crore by March 31, 2011 and `25,000 crore by March
31, 2012. The take out financing scheme announced in the Budget 2009-10 has been
implemented and seven projects have been sanctioned with a debt of `1,500 crore.
Another `5,000 crore will be sanctioned during 2011-12.
73.       In order to give a boost to infrastructure development in railways, ports, housing and
highways development, I propose to allow tax free bonds of `30,000 crore to be issued by
various Government undertakings in the year 2011-12. This includes Indian Railway Finance
Corporation `10,000 crore, National Highway Authority of India `10,000 crore, HUDCO `5,000
crore and Ports `5,000 crore.
74.       To attract foreign funds for the infrastructure financing, I propose to create Special
Vehicles in the form of notified infrastructure debt funds. I will come to the details in Part B of
my speech.
National Manufacturing Policy
75.       For sustained growth of GDP and productive employment for younger generation, it is
imperative that the growth in manufacturing sector picks up. We expect to take the share of
manufacturing in GDP from about 16 per cent to 25 per cent over a period of ten years.
Government will come out with a manufacturing policy, which will bring down the compliance
burden on the industry through self-regulation and help make Indian industry globally
competitive.
76.       To address the need for greater transparency and accountability in procurement policy
and allocation, pricing and utilisation of natural resources, the Government has set up two
committees. The recommendations will be available within three months.
77.       A Group of Ministers has been set up to consider all issues relating to reconciliation of
environmental concerns emanating from various departmental activities including those related
to infrastructure and mining. This Group will also suggest changes in the existing statutes, rules,
regulations and guidelines and make its recommendations in a time bound manner.
78.       The Indian automobile market is the second fastest growing in the world and has shown
nearly 30 per cent growth this year.  World over, substantial investments are being made in the
field of hybrid and electric mobility.  To provide green and clean transportation for the masses,
National Mission for Hybrid and Electric Vehicles will be launched in collaboration with all
stakeholders.
79.       The funding of 15,260 modern low floor and semi-low floor buses under JNNURM,
besides adding to passenger comfort, has transformed the urban transport across India. In 2011-
12, Delhi Metro Phase-III and Mumbai Metro Line III are proposed to be taken up. The ongoing
Metro projects of Bengaluru, Kolkata and Chennai will be provided financial assistance for
speedy implementation.
80.       Investment in fertilizer sector is capital intensive and is considered high risk. It is
proposed to include capital investment in fertiliser production as an infrastructure sub-sector.
Exports
81.       The Task Force on Transactions Cost set up by the Department of Commerce to identify
and suggest ways to achieve improvement in efficiency of our export processes, has completed
its work. Twenty one suggestions made by the Task Force have already been implemented.
Action on remaining two will be taken in next few months. This will mitigate transactions cost
by about `2,100 crore.
82.       To quicken the clearance of the cargo by Customs authorities and further modernise the
Customs administration, I propose to introduce self-assessment in Customs.  Under this,
importers and exporters will themselves assess their duty liabilities while filing their declarations
in the EDI system.  The Department will verify such assessments on a selective system driven
basis.
83.       There have been considerable difficulties in the sanction of refunds relating to tax paid on
services used for export of goods.  I propose to shortly introduce a scheme for the refund of these
taxes on the lines of drawback of duties in a far more simplified and expeditious manner.  A new
scheme is also being introduced by which units in SEZs will be able to obtain tax-free receipt of
services wholly consumed within the zone and get their refunds in a much easier manner.
84.       Mega clusters have large employment and export potential. I propose to extend the Mega
Cluster Scheme for development of leather products. Seven mega leather clusters would be set
up during the year 2011-12. I also propose to include Jodhpur for the development of a
handicraft mega cluster.
Black Money
85.       The generation and circulation of black money is an area of serious concern. To deal with
this problem effectively, Government has put into operation a five-fold strategy which consists
of Joining the global crusade against 'black money'; Creating an appropriate legislative
framework; Setting up institutions for dealing with illicit funds; Developing systems for
implementation; and Imparting skills to the manpower for effective action.
86.       We secured Membership of the Financial Action Task Force (FATF) in June last year.
This is an important initiative of G-20 for anti-money laundering. We have also joined the Task
Force on Financial Integrity and Economic Development, Eurasian Group (EAG) and Global
Forum on Transparency and Exchange of Information for Tax Purposes.
87.       During the year, we have concluded discussions for 11 Tax Information Exchange
Agreements (TIEAs) and 13 new Double Taxation Avoidance Agreements (DTAAs) along with
revision of provisions of 10 existing DTAAs. To effectively handle the increase in tax
information exchange and transfer pricing issues, Foreign Tax Division of CBDT has been
strengthened. A dedicated Cell for exchange of information is being set up to work on this
agenda.
88.       The amendment in our Money Laundering Legislation in 2009 has significantly increased
its scope and application. The number of cases registered under this law has increased from 50
between 2005 to 2008 to over 1200 by January this year. The strength of the Enforcement
Directorate has been increased three-fold to deal effectively with the increased workload.
89.       The Ministry of Finance has commissioned a study on unaccounted income and wealth
held within and outside our country. It would suggest methods to tax and repatriate this illicit
money.           
90.       Trafficking in narcotic drugs is also a contributor to the generation of black money. To
strengthen controls over prevention of trafficking and improve the management of narcotic drugs
and psychotropic substances, I propose to announce a comprehensive national policy in the near
future.
III. Strengthening Inclusion
91.       The UPA Government has engineered a major directional change in public policy by its
focus on inclusive development. Creation of legal entitlements for an individual's right to work
has added to resilience and dynamism in our rural economy. The right to information and the
right to education are effective tools of empowerment for removing social imbalances.  The
country has carried for long enough the burden of hunger and malnutrition. After detailed
consultations with all stakeholders including State Governments, we are close to the finalisation
of National Food Security Bill (NFSB) which will be introduced in the Parliament during the
course of this year. The proposed allocation of ` 1,60,887 crore for social sector in 2011-12 is an
increase of 17 per cent over current year. It amounts to 36.4 per cent of the total plan allocation.
Bharat Nirman
92.       The UPA Government's flagship programmes have been the principal instrument for
implementing its agenda for inclusive development. For the year 2011-12, Bharat Nirman, which
includes Pradhan Mantri Gram Sadak Yojna (PMGSY), Accelerated Irrigation Benefit
Programme, Rajiv Gandhi Grameen Vidyutikaran Yojna, Indira Awas Yojna, National Rural
Drinking Water Programme and Rural telephony have together been allocated `58,000 crore.
This is an increase of `10,000 crore from the current year. A plan has been finalised to provide
Rural Broadband Connectivity to all 2,50,000 Panchayats in the country in three years.
MGNREGA
93.       In pursuance of my earlier budget announcement to provide a real wage of `100 per day,
the Government has decided to index the wage rates notified under the MGNREGA to the
Consumer Price Index for Agricultural Labour. The enhanced wage rates have been notified by
the Ministry of Rural Development on January 14, 2011. It has resulted in significant
enhancement of wages for the beneficiaries across the country.
94.       The Anganwadi workers and Anganwadi helpers are the backbone of Integrated Child
Development Services Scheme.  I am happy to announce an increase in the remuneration of
Anganwadi workers from `1,500 per month to `3,000 per month and for Anganwadi helpers
from `750 per month to `1,500 per month.  This will be effective from April 1, 2011. Around 22
lakh Anganwadi workers and helpers will benefit from the increase.
Scheduled Castes and Tribal Sub-plan
95.       In the Budget for 2011-12, for the first time, specific allocations are being earmarked
towards Scheduled Castes Sub-plan and Tribal Sub-plan.  These will be shown in the Budget of
the relevant Ministries and Departments under separate minor heads of account. Further, I
propose to increase the Budget allocation for primitive tribal groups from `185 crore in 2010-11
to `244 crore in 2011-12.
Education
96.       Our “demographic dividend” of a relatively younger population compared to developed
countries is as much of an opportunity as it is a challenge. Over 70 per cent of Indians will be of
working age in 2025. In this context, universalising access to secondary education, increasing the
percentage of our scholars in higher education and providing skill training is necessary. For
education, I propose an allocation of ` 52,057 crore, which is an increase of 24 per cent over the
current year.
Sarva Shiksha Abhiyan
97.       The existing operational norms of Sarva Shiksha Abhiyan have been revised to
implement the right of children to free and compulsory education which has come into force with
effect from April 1, 2010. For the year 2011-12, I propose to allocate `21,000 crore which is 40
per cent higher than `15,000 crore allocated in the Budget for 2010-11. A revised Centrally
Sponsored Scheme “Vocationalisation of Secondary Education” will be implemented from 2011-
12 to improve the employability of our youth.
98.       Empowerment flows from Education. While the Scheduled Castes and Scheduled Tribes
had access to post matric scholarships, there was so far a lack of pre matric scholarship scheme.
In 2011-12, I propose to introduce a scholarship scheme for needy students belonging to the
Scheduled Castes and Scheduled Tribes studying in classes ninth and tenth. It would benefit
about 40 lakh Scheduled Caste and Scheduled Tribe students.
National Knowledge Network
99.       Approved in March 2010, the National Knowledge Network (NKN) will link 1500
Institutes of Higher Learning and Research through an optical fibre backbone. During the current
year, 190 Institutes will be connected to NKN. Since the core will be ready by March 2011, the
connectivity to all 1500 institutions will be provided by March 2012.
Innovations
100.     To move beyond the formal R&D paradigm, a National Innovation Council under Shri
Sam Pitroda has been set up to prepare a roadmap for innovations in India. The process of setting
up State Innovation Councils in each State and Sectoral Innovation Councils aligned to Central
Ministries is underway.
101.     The Government has been providing special grants to recognise excellence in universities
and academic institutions. In the course of 2011-12, I propose to provide:
•`50 crore each to upcoming centres of Aligarh Muslim University at Murshidabad
in West Bengal and Malappuram in Kerala;
•        `100 crore as one-time grant to the Kerala Veterinary
and Animal Sciences University at Pookode, Kerala;
•        `10 crore each for setting up Kolkata and Allahabad Centres of Mahatma Gandhi
Antarrashtriya Hindi Vishwavidyalaya, Wardha;
•        `200 crore as one time grant to IIT, Kharagpur;
•        `20 crore for Rajiv Gandhi National Institute of Youth Development,
Sriperumbudur, Tamil Nadu
•        `20 crore for IIM, Kolkata, to set up its Financial Research and Trading Laboratory;
 •        `200 crore for Maulana Azad Education Foundation;
•        `10 crore for Centre for Development Economics and Ratan Tata Library, Delhi
School of Economics, Delhi; and
•        `10 crore for Madras School of Economics.
Skill Development
102.     I am happy to inform the House that National Skill Development Council (NSDC) is well
on course to achieve its mandate of creation of 15 crore skilled workforce two years ahead of
2022, the stipulated target year. It has already sanctioned 26 projects with a total funding of `658
crore. These projects alone are expected to create more than 4 crore skilled workforce over the
next ten years. In the current year, skill training has so far been provided to 20,000 persons. Of
these, 75 per cent have found placements. I will provide an additional `500 crore to the National
Skill Development Fund during the next year.
103.     National celebrations of 150th Birth Anniversary of Gurudev Rabindranath Tagore will
commence from May 7,  2011 in New Delhi. Important events will be held in several countries
in Europe,America and Asia. A series of events are also proposed to be organized under the aegis
of joint India-Bangladesh Celebrations Committee. An international award with prize money
of `1 crore is being instituted for promoting values of Universal Brotherhood in the memory of
Gurudev Rabindranath Tagore.
Health
104.     For health, I propose to step up the plan allocations in 2011-12 by 20 per cent to `26,760
crore. The Rashtriya Swasthya Bima Yojana has emerged as an effective instrument for
providing a basic health cover to poor and marginal workers. It is now being extended to
MGNREGA beneficiaries, beedi workers and others. In 2011-12, I propose to further extend this
scheme to cover unorganized sector workers in hazardous mining and associated industries like
slate and slate pencil, dolomite, mica and asbestos etc.
Financial Inclusion
105.     In my last budget speech I had advised Banks to provide banking facilities to habitations
having a population of over 2000 by March, 2012.  The Banks have identified about 73,000 such
habitations for providing banking facilities using appropriate technologies. A multi-media
campaign, “Swabhimaan”, has been launched to inform, educate and motivate people to open
bank accounts. During this year, banks will cover 20,000 villages. Remaining will be covered
during 2011-12.
Unorganised sector
106.     I had announced a co-contributory pension scheme “Swavalamban” in the Budget 2010-
11. This scheme has been welcomed by the workers in unorganised sector. Over 4 lakh
applications have already been received. On the basis of the feedback received, I am relaxing the
exit norms whereby a subscriber under Swavalamban will be allowed exit at the age of 50 years
instead of 60 years, or a minimum tenure of 20 years, whichever is later. I also propose to extend
the benefit of Government contribution from three to five years for all subscribers of
Swavalamban who enroll during 2010-11 and 2011-12. An estimated 20 lakh beneficiaries will
join the scheme by March 2012.
107.     Under the on-going Indira Gandhi National Old Age Pension Scheme for BPL
beneficiaries, the eligibility for pension is proposed to be reduced from 65 years at present to 60
years. Further, for those who are 80 years and above, the pension amount is being raised
from ` 200 at present to ` 500 per month.
Environment and Climate Change
Forests
108.     Protection and regeneration of forests has great ecological, economic and social value.
Our Government has launched an ambitious ten-year Green India mission. I propose to
allocate `200 crore from the National Clean Energy Fund to begin its implementation in 2011-12.
Environmental Management
109.     Environmental pollution has emerged as a serious public health concern across the
country. I propose to allocate `200 crore from the National Clean Energy Fund as Centre's
contribution in 2011-12 for launching environmental remediation programmes.
Cleaning of Rivers and Lakes
110.     A number of projects under the National Ganga River Basin Authority have been
approved in 2010-11. This momentum will be further stepped up. There are many rivers and
lakes of cultural and historical significance that need to be cleaned. In the course of the year
2011-12, I propose to provide a special allocation of `200 crore for the clean-up of some
important lakes and rivers other than theGanga.
Some Other Initiatives
111.     In order to boost development in the North Eastern Region and Special Category States,
the allocation for special assistance has been almost doubled to `8,000 crore for 2011-12. Out of
this, `5,400 crore has been allocated as untied Special Central Assistance. 
112.     The Government’s special support to Jammu & Kashmir is anchored in `28,000 crore
Prime Minister's Reconstruction Plan. In addition, for the current year, about `8,000 crore has
been provided for the State's development needs. A Task Force to assess infrastructure needs that
can be addressed within a time horizon of 24 months for Ladakh and Jammu regions of the State
has recommended projects amounting to `416 crore and `497 crore, respectively. I am
providing `100 crore for Ladakh and `150 crore for Jammu for these identified projects in 2011-
12.
113.     To give a boost to the development of backward regions, the allocation under the
Backward Regions Grant Fund has been increased from `7,300 crore to `9,890 crore amounting
to an increase of over 35 per cent.
114.     To address problems related to Left Wing Extremism affected districts, an Integrated
Action Plan (IAP) for 60 selected tribal and backward districts has been launched in December
2010. The scheme is being implemented with  100 per cent block grant of `25 crore and `30 crore
per district during the years 2010-11 and 2011-12, respectively. The allocated funds are placed at
the disposal of the district level committees who in consultation with local MPs will have the
flexibility to spend the amount on development schemes as per the local needs.
115.     In recognition of the sacrifices made by Central Para-military Forces engaged in tackling
Left Wing Extremism, a lump sum ex-gratia compensation of `9 lakh for 100 per cent disability
will now be granted to personnel of the Defence and para-military forces who are discharged
from service on medical grounds on account of disability attributable to or aggravated in
government service. For personnel with disability ranging from 20 to 99 per cent, a proportionate
amount would be given.
116.     In the Budget 2011-12, a provision of `1,64,415 crore has been made for Defence
services which include `69,199 crore for capital expenditure. Needless to say, any further
requirement for the country's defence would be met.
117.     In order to speed up delivery of justice, the Plan provision for Department of Justice for
2011-12 has been increased three-fold to `1,000 crore. The enhanced provision will help in
building judicial infrastructure and the project on E-courts.
Census 2011
118.     The 15th Census in the country is being conducted from 9th February. It is the largest
administrative exercise in the country providing statistical data on different socio-economic
parameters of population.
119.     In response to the overwhelming demand for enumeration of castes other than Scheduled
Castes and Scheduled Tribes in Census 2011, it has been decided to canvass ‘caste’ as a separate
time bound exercise. This exercise will start in June 2011 and will be completed by 30th
September 2011.
IV. Improving Governance
            I now turn to some important measures being taken for improving governance.
UID Mission
120.     The UID Mission has taken off and Aadhaar numbers are being generated in large
numbers. So far 20 lakh Aadhaar numbers have been given and from 1st October 2011, ten lakh
numbers will be generated per day. The stage is now set for realising the potential of Aadhaar for
improving service delivery, accountability and transparency in governance of various schemes.
IT Initiatives
121.     The backbone of an efficient tax administration is a robust IT infrastructure and its
deployment for enhanced taxpayer services.  Towards this objective, both  the Central Boards of
Direct Taxes (CBDT) and Excise and Customs (CBEC) have put in place the following
measures:
•        The on-line preparation and e-filing of income tax returns, 
e-payment of taxes through 32 agency banks, ECS facility for electronic clearing of
refunds directly in taxpayers’ bank accounts and electronic filing of TDS returns
 are now available throughout the country. These measures have empowered
taxpayers to meet their tax obligations without visiting an income tax office. 
•        The Centralized Processing Centre (CPC) at Bengaluru has increased its daily
processing capacity from 20,000 to 1.5 lakh returns in 2010-11.  This project has
won a Gold Award for 
e-Governance in 2011.  Two more CPCs will become operational in Manesar and
Pune by May 2011 and a fourth CPC will come up in Kolkata in 2011-12. 
•        With the completion of its IT Consolidation Project, CBEC can now centrally host
its key applications in Customs, Central Excise and Service Tax.  The Customs
EDI system now covers 92 locations across the country.  CBEC's e-Commerce
portal ICEGATE, has also been conferred a Gold Award for e-Governance.
•        The 'Sevottam' concept has been adopted by both Boards. The three pilot projects
of Aaykar Seva Kendras (ASKs) under CBDT have come of age.  CBDT will
commission eight more such centres this year.  In 2011-12, another fifty ASKs will
be set up across the country.  CBEC has also launched a similar initiative and four
of their pilot projects have been commissioned.
•        The electronic filing of Tax Deduction at Source (TDS) statements has stabilized.
The Board shall soon notify a category of salaried taxpayers who will not be
required to file a return of income as their tax liability has been discharged by their
employer through deduction at source.
•        CBDT will provide a separate web-based facility to enable a direct, stand-alone
interface for taxpayers with the Income Tax Department so that they can report and
track the resolution of their refunds and credit for prepaid taxes. 

122.     Mission Mode Projects for computerization of Commercial Taxes in States that I

announced in my last Budget, will allow States to align with the roll out of GST.  Funds have
been released for 31 projects received from the States and Union Territories. Most of the States
and UTs have already enabled the facility of dealers making electronic payments. A number of
States have already started accepting Electronic Tax Returns and issuing forms required for
inter-state trade.
123.     With the development of the economy, the need to review the provisions of the Indian
Stamp Act, 1899 has been felt over the years. I propose to introduce a Bill shortly to amend the
Indian Stamp Act.
124.     Five years ago, we took an initiative to introduce a modern and people-friendly e-
stamping facility in the country. Only six States have introduced this system so far. I propose to
launch a new scheme with an outlay of `300 crore to provide assistance to States to modernise
their stamp and registration administration and roll out e-stamping in all the districts in the next
three years.
125.     I propose to introduce a new simplified return form 'Sugam' to reduce the compliance
burden of small taxpayers who fall within the scope of presumptive taxation. 
126.     The increase in scope of cases admitted by the Settlement Commissions has provided
relief to several taxpayers.  This has also increased the workload of the Commission.  To fast
track the disposal of cases, three more Benches of the Commission are being set up.
127.     Substantial amounts of revenue in both direct and indirect taxes, remain locked up in
appeals at different levels. Both Boards also invest substantial effort and money in litigation with
their employees. In keeping with the National Litigation Policy, several steps have been initiated
in 2010-11 for reducing litigation and focusing attention on high revenue cases. Instructions have
been issued raising limit of tax effects below which, tax disputes will not be pursued by
Government in higher Courts of Appeal.  These measures would enhance productivity of
resources employed in raising revenue.
Corruption
128.     A Group of Ministers has been constituted to consider measures for tackling corruption.
The Group has been tasked with addressing issues relating to State funding of elections, speedier
processing of corruption cases of public servants, transparency in public procurement and
contracts, discretionary powers of Central ministers and competitive system for exploiting
natural resources. The Group will make its recommendations in a time bound manner.
Performance Monitoring and Evaluation System
129.     Pursuant to the recommendations of Second Administrative Reforms Commission, the
Government has set up a Performance Monitoring and Evaluation System (PMES) to assess the
effectiveness of Government departments in their mandated functions. It involves preparation of
a Results Framework Document (RFD) by each department, highlighting its objectives and
priorities for the financial year and achievements against pre-specified targets at the end of the
year. This document would be available for public information on the departmental websites. In
the first phase, 62 departments have been covered under PMES. 
TAGUP
130.     In pursuance of the announcement made in the Budget 2010-11, I had set up a
Technology Advisory Group for Unique Projects (TAGUP). The Group has submitted its report
and its recommendations have been accepted in principle. The modalities of implementation are
being worked out.   
131.     Indian Rupee now has a new symbol which has been notified for use by the Central and
State Governments, business entities and the general public. A new series of coins carrying this
symbol will be issued shortly. The Government has approached Unicode Standards Authority for
inclusion of the symbol in international standards.
V. Budget Estimates 2011-12
            I now turn to the Budget Estimates for 2011-12.
132.     The Gross Tax Receipts are estimated at `9,32,440 crore which is an increase of 24.9 per
cent over the Budget Estimates for 2010-11. After devolution to States, the net tax to Centre in
2011-12 is`6,64,457 crore. The Non Tax Revenue Receipts for 2011-12 are estimated
at `1,25,435 crore.
133.     The total expenditure proposed for 2011-12 is `12,57,729 crore, which is an increase of
13.4 per cent over the Budget Estimates for 2010-11.  The Plan Expenditure at `4,41,547 crore
marks an increase of 18.3 per cent and the Non Plan Expenditure at `8,16,182 crore is an increase
of 10.9 per cent over BE 2010-11.  As 2011-12 is the last year of the Eleventh Plan, I am happy
to share that Eleventh Plan expenditure in nominal terms is more than 100 per cent of the
expenditure envisaged for the Plan period.
134.     The total plan and non-plan transfers of `2,01,733 crore to States and UT Governments in
2011-12 have increased by 23 per cent over the Budget Estimates  2010-11. This includes grants
of`13,713 crore in 2011-12 to local bodies as per the recommendation of the Thirteenth Finance
Commission.
135.     Hon'ble Members are aware that in the course of 2010-11, I had the opportunity to effect
a further improvement in the fiscal balance, due to the higher than anticipated non-tax revenues
from 3G spectrum auctions. I chose to do that and much more. While I provided additional
resources of about `50,000 crore to critical infrastructure and social sectors and also to meet the
expenditure on subsidies, I have brought down the fiscal deficit from 5.5 per cent to 5.1 per cent
of the GDP for 2010-11. For 2011-12, I have kept it at 4.6 per cent of GDP, which improves
upon my own target for 2011-12 indicated in the fiscal road map presented in the last Budget. In
the Medium Term Fiscal Policy Statement being presented to the House today, the rolling targets
for fiscal deficit are placed at 4.1 per cent for 2012-13, and 3.5 per cent for 2013-14.
136.     There has been some concern expressed regarding the stickiness of Government's
revenue deficit in the post-global crisis phase of the economy. For 2010-11 as against a target of
4 per cent, the revenue deficit is estimated at 3.4 per cent of GDP. In the past few years the
transfers to States and other developmental expenditure have grown significantly. These are
classified as revenue expenditure even though a considerable part of the expenditure from these
transfers is in the nature of capital expenditure. In 2010-11, `90,792 crore from such revenue
expenditures were in the nature of capital expenditure. Similarly, in 2011-12 grants-in-aid for
creation of capital assets, which are now shown separately in the Budget documents, are
about `1.47 lakh crore. Taking these budget provisions into account, the “effective revenue
deficit” is estimated at 2.3 per cent in the Revised Estimates for 2010-11 and 1.8 per cent
for 2011-12.
137.     In my last Budget, I had stated that Government would avoid issuing bonds in lieu of
subsidies to oil and fertiliser companies. I have adhered to this decision, thereby bringing all
subsidy related liabilities into our fiscal accounting.
138.     The fiscal deficit of 4.6 per cent of GDP in 2011-12 works out to `4,12,817 crore.  Taking
into account the various other financing items for fiscal deficit, the net market borrowing of the
Government in 2011-12 would be `3.43 lakh crore.  In addition, `15,000 crore is proposed to be
financed through Treasury Bills. Accordingly, the Central Government debt as a proportion of
GDP is estimated at 44.2 per cent for 2011-12 as against 52.5 per cent recommended by the
Thirteenth Finance Commission.
  
PART - B
Madam Speaker,
            I shall now present my tax proposals.
139.     In the formulation of these proposals, my priorities are directed towards making taxes
moderate, payments simple for the taxpayer and collection of taxes easy for the tax collector.  
VI. Direct Taxes
            I shall now deal with direct taxes.
140.     As Government's policy on direct taxes has been outlined in the DTC, which is before
Parliament, I have limited my proposals to initiatives that require urgent attention.
141.     Last year I provided relief to individual taxpayers by broadening the tax slabs.  To take us
closer to DTC rates, I propose to enhance the exemption limit for the general category of
individual taxpayers from `1,60,000 to `1,80,000 this year. This measure will provide a uniform
tax relief of `2,000 to every taxpayer of this category.
142.     Senior citizens deserve our special attention. For them, I propose
•        to reduce the qualifying age, from 65 years to 60 years;  
•        to enhance the exemption limit from `2,40,000 to `2,50,000; 
•        To create a new category of Very Senior Citizens, eighty years and above, who will
be eligible for a higher exemption limit of `5,00,000. 

143.     In the case of corporates, my initiative of phasing out the surcharge continues. I propose
to reduce the current surcharge of 7.5 per cent on domestic companies to 5 per cent.
Simultaneously, I propose to increase the rate of Minimum Alternate Tax (MAT) from the
current rate of 18 per cent to 18.5 per cent of book profits to keep the effective rate of the MAT
at the same level. As a measure to ensure equal sharing of the corporate tax liability, I propose to
levy MAT on developers of Special Economic Zones as well as units operating in SEZs.
144.     To attract foreign funds for financing of infrastructure, I propose to:
•        create special vehicles in the form of notified infrastructure debt funds;
•        subject interest payment on the borrowings of these funds to a reduced withholding
tax rate of 5 per cent instead of the current rate of 20 per cent;
•        exempt the income of the fund from tax.
145.     In order to promote savings and raise funds for infrastructure, an additional deduction
of `20,000 for investment in long-term infrastructure bonds was notified by the Central
Government in 2010-11. I propose to extend this window for one more year.
146.     It has been represented that the taxation of foreign dividends in the hands of resident
taxpayers at full rate is a disincentive for their repatriation to India and they continue to remain
invested abroad. For the year 2011-12, I propose a lower rate of 15 per cent tax on dividends
received by an Indian company from its foreign subsidiary.  I do hope these funds will now flow
to India.   
147.     In order to give a boost to production in the agriculture sector, I propose to extend the
benefit of investment linked deduction to businesses engaged in the production of fertilisers.
148.     Considering the importance of housing, I also propose investment linked deduction to
businesses which develop affordable housing under a notified scheme.
149.     In this Decade of Innovation, I enhanced the weighted deduction on payments made to
National Laboratories, universities and Institutes of technology, for scientific research, to 175 per
cent in the last budget. I propose to further enhance this to 200 per cent.
150.     In order to strengthen our system of collection of information from foreign tax
jurisdictions, I propose to provide a toolbox of counter measures to discourage transactions with
entities located in non-cooperative jurisdictions as may be notified by the Government.
151.     My proposals on direct taxes are estimated to result in a net revenue loss of `11,500 crore
for the year.
VII. Indirect Taxes
            I shall now turn to my indirect tax proposals.
152.     In view of the healthy growth in indirect taxes in 2010-11, I had the option to roll back
the Central excise duty to levels prevailing in November 2008. I have chosen not to do so for two
reasons. I would like to see improved business margins translated into higher investment rates. I
would also like to stay my course towards GST. I have therefore decided to maintain the
standard rate of Central excise duty at 10 per cent.
153.     I propose certain changes in the Central Excise rate structure to prepare the ground for
the transition to GST, beginning with a reduction in the number of exemptions. At present, there
are about 100 items that are exempt from Central Excise as well as State VAT. In addition, there
are as many as 370 items that enjoy exemption from Central Excise duty but are chargeable to
VAT. I propose to withdraw the exemption on 130 of these items that are mainly in the nature of
consumer goods. The remaining 240 items would be brought into the tax net when GST is
introduced.
154.     A nominal Central Excise duty of 1 per cent is being imposed on the 130 items that are
entering the tax net. No Cenvat credit would be available for the manufacture of these items.
Basic food and fuel would continue to be exempt. This levy would also not apply to precious
metals and stones. In case of jewellery and articles of gold, silver and precious metals, the levy
would apply only to goods sold under a brand name.
155.     Most of the States have increased their merit rate of VAT from 4 per cent to 5 per cent. In
line with this, I also propose to enhance the lower rate of Central Excise duty from 4 per cent to
5 per cent.
156.     Ready-made garments and made-ups of textiles are currently under an optional excise
duty regime.  A manufacturer is required to pay duty only if he wishes to avail of Cenvat credit.
Our garment and made-ups industry has come of age and has shown handsome growth in recent
years.  As part of base expansion, I propose to convert the optional levy into a mandatory levy at
a unified rate of 10 per cent. The levy would however, apply only to branded garments or made-
ups and not to those tailored or made to order for a retail customer. Credit of tax paid on inputs,
capital goods and input services would be available to manufacturers of these products.  Keeping
in mind the fragmented nature of this industry, full SSI exemption is also being extended to these
products.  Export of these items would continue to be zero-rated.
157.     We have a long term commitment to align our customs duty rates to those prevailing in
ASEAN countries.  The peak rate of customs duty has been reduced over the years and has
settled at 10 per cent.  In view of continued uncertainties in the global economy, I propose to
hold the peak rate at its current level.  However, some rationalization is being done to unify three
rates namely, 2 per cent, 2.5 per cent and 3 per cent at the middle level of 2.5 per cent.
158.     I now turn to proposals that are aimed at encouraging some of the thrust sectors that are
in need of attention.
Agriculture & Related Sectors
159.     Hon'ble Members would recall that, in the last Budget, I had announced a package of
measures to improve the availability of storage and warehouse facilities for agricultural produce
as well as to incentivize food processing.  
I have received encouraging feedback on the impact of these measures. I propose to enlarge the
scope of these exemptions by:
•        extending full exemption from excise duty to air-conditioning equipment and
refrigeration panels for cold chain infrastructure;
•        including conveyor belts in the full exemption from excise duty to equipment used
in cold storages, mandis and warehouses.

160.     A concessional rate of basic customs duty of 5 per cent was provided to specified
agricultural machinery in the last budget. This duty is being reduced further to 2.5 per cent and
the concession is also being extended to parts of such machinery to encourage their domestic
production. 
161.     Micro-irrigation is an environment-friendly and efficient means of irrigation especially
for dry land farming.  I propose to reduce the basic customs duty on micro-irrigation equipment
from 7.5 per cent to 5 per cent. 
162.     De-oiled rice bran cake constitutes an important ingredient of cattle feed and its improved
availability would have a positive impact on milk production.  I propose to provide full
exemption from basic customs duty to this item.  Simultaneously, an export duty of 10 per cent
would be levied to discourage its export.
Manufacturing Sector
163.     For the manufacturing sector, my proposals seek to encourage domestic value addition
vis-a-vis imports, to remove duty inversions and anomalies and to provide a level playing field to
the domestic industry.   The major proposals are to:
•        reduce basic customs duty on raw silk (not thrown) from 30 to 5 per cent;
•        reduce basic customs duty from 5 per cent to 2.5 per cent on certain textile
intermediates and inputs for chemicals, ferro-alloys and paper;
•        reduce basic customs duty on certain specified inputs for manufacture of certain
technical fibre and yarn from 7.5 per cent to 5 per cent;
•        fully exempt stainless steel scrap from basic customs duty;
•        reduce import duties on specified raw material for the manufacture of syringes and
needles to 5 per cent basic and 4 per cent CVD;
•        extend the concession available to parts, components and accessories for
manufacture of mobile handsets till 31st March, 2012 and to include few more
items in its ambit;
•        expand the raw material list for manufacture of specified electronic components
that are fully exempt from basic customs duty;
•        reduce excise duty (and hence CVD) on parts of ink-jet and laser-jet printers from
10 per cent to 5 per cent.

164.     Iron ore attracts an export duty of 15 per cent in the case of lumps and 5 per cent in the
case of fines. This is a natural resource which needs to be conserved.  I propose to enhance the
rate of export duty for all types of iron ore and unify it at 20 per cent ad valorem. Iron ore is also
exported in a value-added, pelletized form. Full exemption from export duty is being provided to
iron ore pellets to encourage the value addition process for fines.
165.     As a measure of relief to cement industry, I propose to replace the existing excise duty
rates with composite rates having an ad valorem and specific component with some
rationalization. The basic customs duty on two critical raw materials of this industry viz. petcoke
and gypsum is proposed to be reduced to 2.5 per cent.
166.     To drive the financial inclusion agenda of the Government, I propose to fully exempt
cash dispensers from basic customs duty. Full exemption is also being extended to parts of such
machines to encourage their domestic production.     
Environment
167.     Full exemption from basic customs duty and a concessional rate of Central Excise duty of
4 per cent was provided to specified parts of electrical vehicles in the last Budget on actual-user
basis. I propose to extend the concession to batteries imported by such manufacturers for the
replacement market.
168.     Fuel cell or Hydrogen cell technology is a promising green technology for the automobile
sector.  I propose to extend the concessional excise duty of 10 per cent to vehicles based on this
technology.
169.     Hybrid vehicles enjoy a concessional excise duty rate of 10 per cent. However, import
dependence for their critical parts/ sub-assemblies is still quite high. It is proposed to grant
specified parts of such vehicles full exemption from basic customs duty and special CVD. In
addition, a concessional rate of excise duty of 5 per cent is being prescribed to incentivise their
domestic production.
170.     In response to the growing demand for green products, a technology has been developed
indigenously for the conversion of fossil fuel vehicles into Hybrid vehicles through the fitment of
a kit. I propose to reduce the excise duty on such kits and their parts from 10 per cent to 5 per
cent.
171.     In the last Budget, Central Excise duty on LED lights was reduced from 8 per cent to 4
per cent to promote their use. The basic component of these lights viz. the LED attracts an excise
duty (hence, CVD) of 10 per cent and a special CVD of 4 per cent. The excise duty on LEDs is
being reduced to 5 per cent and special CVD is being fully exempted.
172.     The solar lantern enables our countrymen in far-flung villages to partake of developments
in green technology. The basic customs duty on such lanterns is being reduced from 10 per cent
to 5 per cent. Basic customs duty on a few more inputs used in the manufacture of solar modules/
cells is being reduced to Nil.
173.     Environmental considerations demand promotion of laundry soaps which conserve water
and are gentle on the soil. To this end, full exemption from basic customs duty is being provided
to Crude Palm Stearin for use in the manufacture of laundry soap.
174.     Pre-tanning or tanning processes in the leather industry use chemicals which are
pollutants. To encourage use of green processes, full exemption from basic excise duty is being
granted to enzyme based preparations for pre-tanning.
Infrastructure
175.     Capital goods imported for the expansion of existing mega or ultra mega power projects
enjoy a concessional basic customs duty of 2.5 per cent and full exemption from CVD. This
creates a disability for the domestic suppliers who are required to pay Central Excise duty on
supplies to such projects. I propose to correct this anomaly by providing a parallel excise duty
exemption.   
176.     Bio-based asphalt is an emerging, green technology for the surfacing of roads. Full
exemption from basic customs duty is being extended to bio-asphalt and specified machinery for
its application in the construction of national highways. Tunnel-boring machines required for the
construction of highways are also being included in this exemption.
Other Proposals
177.     Works of art and antiquities are exempt from customs duties when imported for
exhibition in a public museum or national institution. In recent years, many organisations have
joined the cause of promoting and popularising both traditional and contemporary art. Some of
them have been active in locating heritage works of Indian art and antiquities in foreign countries
and bringing them back home. To encourage such initiatives, I propose to expand the scope of
this exemption for works of art and antiquities to also apply to imports for exhibition or display,
in private art galleries or similar premises that are open to the general public. Department of
Culture will notify details of the scheme separately.   
178.     Full exemption from import duty is available to spares and capital goods required for
ship-repair units. This exemption is being extended to imports by ship owners too.
179.     The concessional basic customs duty of 5 per cent and CVD of 5 per cent, presently
applicable to high-speed printing presses imported by newspaper establishments is being
extended to mailroom equipment.
180.     The Indian film industry has represented that colour, unexposed jumbo rolls of
cinematographic film are not manufactured domestically and have to be imported. I propose to
exempt jumbo rolls of 400 feet and 1000 feet from CVD by providing full exemption from
excise duty.
181.     I propose to provide outright concession to factory-built ambulances in place of the
existing refund-based concession from excise duty. A refund-based concession is available to
taxis having a seating capacity not exceeding 7 persons including the driver. I propose to extend
this to vehicles upto a seating capacity not exceeding 13 persons including the driver.
182.     Some of the other relief measures that I propose are:
•        Reduction in basic customs duty on raw pistachio from 30 per cent to 10 per cent;
•        Reduction in basic customs duty on bamboo for agarbatti from 30 per cent to 10 per
cent;
•        Reduction in basic customs duty on lactose for the manufacture of homeopathic
medicines from 25 per cent to 10 per cent; and
•        Reduction in central excise duty on sanitary napkins, baby and adult diapers from
10 per cent to 1 per cent.

183.     My proposals relating to customs and Central excise are estimated to result in a net
revenue gain of `7,300 crore for the year.
VIII. Service Tax
184.     The actual collections of Service Tax do not reflect the full potential of this sector. While
retaining the standard rate of service tax at 10 per cent, I seek to achieve a closer fit between the
present service tax regime and its GST successor by:
•        Bringing in a few new services into the tax net to expand the tax base while
ensuring that the impact is predominantly on sections of society that have the
ability to pay;
•        Suitably expanding or rationalizing the scope of existing service categories;
•        Rationalizing certain provisions relating to import of services and valuation;
 •        Modifying provisions of the Cenvat Credit scheme to achieve a more realistic
balance between input credits and output tax and harmonising the provisions of the
scheme across goods and services;
•        Rationalizing penal provisions to reinforce the message that honest taxpayers
would be facilitated and deviants would be dealt with severely; and
•        Adoption of Point of Taxation rules for services which would shift the basis for tax
collection from “cash” towards “accrual” basis as with Central Excise duty.

185.     I propose to levy service tax on the following new services:

•        Hotel accommodation, in excess of declared tariff of `1,000 per day with an
abatement of 50 per cent so that the effective burden is only 5 per cent of the
amount charged;
•        Service provided by air-conditioned restaurants that have license to serve liquor, by
giving an abatement of 70 per cent.  Thus, the effective burden will be 3 per cent of
the bill.

186.     I imposed service tax in 2010-11 on health check up or treatment. This levy has resulted
in differential treatment between persons who make payments themselves and others where
payments are made by an insurance company or a business entity.  Thus, I propose to replace it
with a tax on all services provided by hospitals with 25 or more beds that have the facility of
central air-conditioning. Though the tax is on high- end treatment, I propose to sweeten the pill
by an abatement of 50 per cent so that the actual burden is kept at 5 per cent of the value of
service.  I also propose to extend the levy to diagnostic tests of all kinds with the same rate of
abatement. However, all Government hospitals shall be outside this levy. 
187.     I propose to raise the service tax on air travel by `50 in the case of domestic air travel
and `250 on international journeys by economy class.  I also propose to tax travel by higher
classes on domestic sector at the standard rate of 10 per cent to bring it on par with journeys by
higher classes on international air travel.
188.     Services provided by life insurance companies in the area of investment are also
proposed to be brought into tax net on the same lines as ULIPs. I propose to expand the scope of
legal services to include services provided by business entities to individuals as well as
representational and arbitration services by individuals to business entities. There shall, however,
be no tax on services provided by individuals to other individuals.
189.     There are certain other changes mainly by way of rationalisation or expansion in the
scope of certain services or by plugging existing loopholes. I do not wish to take the valuable
time of the House in further elaboration here.
190.     The strength of a good value-added-tax lies in the free flow of the credit of the tax paid at
the previous stage.  Due to complexities, there have been many legal disputes on the availability
of credit on a number of inputs or input services.  These provisions are being rationalized by
laying down clear definitions so that the scope of inputs and input services that are eligible and
those that are not, is clear. Allocation of CENVAT credit to exempt and taxable goods and
services is also being streamlined.
191.     The number of assessees in service tax has grown manifold.  I find that a large number of
them comprise individuals or sole proprietors with small turnovers.  Any audit at their premises
tends to dislocate their activities for the duration of the audit. I therefore, propose to free all
individual and sole proprietor taxpayers with a turnover upto `60 lakh from the formalities of
audit.  This will give relief to a large number of  taxpayers. I also intend to give all assessees
with turnover upto `60 lakh, the benefit of 3 percentage points in interest on delayed payment.
192.     In keeping with our thrust to encourage voluntary compliance, the penal provisions for
Service Tax are being rationalised. A key component of this strategy would be to treat less
harshly those who have maintained truthful records but have fallen short of discharging their tax
liability. Simultaneously, deliberate evaders with unrecorded business transactions will be dealt
with more severely. Similar changes are being carried out in Central Excise and Customs laws.
The details of the provisions are in the Finance Bill.
193.     My proposals relating to service tax are estimated to result in net revenue gain of `4,000
crore for the year. 
194.     Many experts have argued that it will be desirable to tax services based on a small
negative list, so that many untapped sectors are brought into the tax net. Such an approach will
be very conducive for a nationwide GST. I propose to initiate an informed public debate on the
subject to help us finalise the approach to GST.
195.     Copies of notifications giving effect to the changes in Customs, Central Excise and
Service Tax will be laid on the Table of the House in due course.
196.     My proposals on direct taxes are estimated to result in a revenue loss of `11,500 crore for
the year. Proposals relating to indirect taxes are estimated to result in a net revenue gain
of `11,300 crore, leaving a net loss of `200 crore in the Budget.
197.     As an emerging economy, with a voice on the global stage, India stands at the threshold
of a decade which presents immense possibilities. We must not let the recent strains and tensions
hold us back from converting these possibilities into realities. With oneness of heart, let us all
build an India, which in not too distant a future, will enter the comity of developed nations.
            Madam Speaker, with these words, I commend the Budget to the House.