The investment blog

By far the largest China Huijin holding, the bank had almost 400,000 employees in 2009 and a domestic Corporate Credit of $480 bn or $3232 RMB. Its total assets of $1.6 Trillion or 11T RMB(Renminbi) Its Credit book is spread across 515 bn RMB (same as CNY or Chinese Yuan) in Personal Loans ( USD 77bn) and $42 billion to Real estate Developers (incl. $13bn in construction).

As the rest of the Big 4, ICBC spent time and resources in building partnerships with financial services majors to increase ‘green credit’ or access to SMEs and by extension local municipal bodies, that are facing the brunt of accelerated real estate bubble as their repayment ability is stretched. The green credit wave started in 2007 end after all the Big 4 went public in 2006 in Hong-Kong IPOs. With 190 million PB clients and 3 million Corp Customers ( 30000 SME customers) and 16000 branches, it may see to be undervalued at its current market value of RMB 1.1 T. However after reduction of NPLs from 20% a decade back, their current NPL ratio is still far high at nearly 5%

Since 2007 it has managed to diversify into global investment banking business lines with RMB 1.1 Trillion in Custody assets, and RMB 54bn in custody management annuities, increasing volumes in futures agency, bancassurance ( across 50+ insurance firms), precious metals and other trading businesses.

Its 2006 IPO amounted to $22 billion with $16 billion in H-Shares and $6 bn in S-Shares ( free float of 22%) and its 2009 savings balance was RMB 4 T or $586 bn. Annual Persona Banking sales now exceed RMB 1 T in “Elite” products and even 240 million credit cards as of 2008. Trading generated volumes of more than $1 T for ICBC alone (RMB 7.6T) with only $170 bn in FX trading

China’s Big $ have still not updated December 2009 results but prior 12 months results show ICBC sales at more than RMB 400 billion ($61 bn) and 130 bn in Net Income ( $20 billion )

Property funding shifts to PE

With ICBC and the Big 4 stopping credit for Real Estate, on CBRC’s express instructions, the PE firms are increasingly the source for Property and Local Municipal companies to close current projects.

ICBC and others could invest in the Real estate funds as Limited Partners to control their exposure. Citibank has raised one such RMB 3400 bn fund with China Resources group to invest in China’s Shopping Malls. Also sovereign investments in Gold have topped off at 1054 Tonnes and CIC/China claims to hold Euro and Yen for FX stabilization apart from its large holdings of US Treasuries

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The fund report at the AMFI India web site shows growing assets. India’s growing MF industry has grown to INR 7.83 T or almost $2 T led by rise in market indices in Equities ( Our 2010 Dollar price) . However with not much trading in Fixed Income and investors skipping the current rise in yields ( missed chance) as inflation watch was supposed to kick in, there was only Rs 2000 crores in new inflows into the industry.

The jumbo equity plans in Reliance Growth, Regular Savings, Reliance Diversified Power and others like Vision remain dominant while Money plans skipping the tax implications in Birla Sun Life Savings and Reliance money managers track Rs 1T among the three gross of all Dividend and Growth schemes.

BNP Paribas has been asked to consolidate between Sundaram BNP Paribas and Fortis MF while Sundaram want to be a managing entity in the Sundaram BNP JV. The HDFC MF funds by themselves have grown to INR 1 T in the mean time the $20-$25bn bringing in a sweet hegemony with the funds spread evenly between 25 different Equity, Balance, Fixed Income, Floater, and Money market funds

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US and China

China holds 23% of US Treasury debt and in the near future may also add from the 21% held by Japan, safe in its aspiration to be US’s banker (China) Thus China would not likely do anything to tipple the Dollar from its perch as it by policy likes the US whe it plans to expand in the West despite other political aspirations.

It was a slow crisis

Back in January when by tradition, the Big 4 in China opened the floodgates they quickly notched up more than the $550 m in new loans at the end of the month. Bank of China, covered earlier, led with $135bn or $800bn Renminbi(CNY) in loans. In the same period china Mobile suffered at the bourse for spending $3 bn to pick up 20% of the tiny Shanghai Pudong Bank, and it came three months after the Chinese added a large amount of Yuan in float at the Hong kong markets for preparing for the inevitable. The crisis is currently panning out in a slow expansion of derelict inventory and falling consumption in pockets of the economy. Do go back to all these stories at http://china.advantages.us

This year, we will have more half-drawn swords to show faith in the demands made by the Western World and as the natural sequence of credit dries up, China will look more and more like us. In that light we coevr the other three banks from the mainland held by the Huijin for the PRC. In just October 2008, even as the lemmings sold themselves upstream for the TBTF failures of July and September, ken Lewis paid $7bn for 6.8% of CCB at a substantial discount with the TARP cash. Eventually in 2009 BofA was rid of both Lewis and CCB, CCB sold to a local PE fun, Hopu Invest Management for $3 bn for the 3bn shares coming to 7% of CCB it held. BofA’s 17% netted $7.3 billion for 54 cents a share. Hopu is funded by Temasek of Singapore and the Golden Goldman Sachs. Temasek also pad USD 600MM for a direct stake in CCB.

The Bank

Like other Huijin banks, CCB started global push outs with 3 fund management JVs by 2005, with Credit Suisse, COSCO and Schroeders in the last one in 2005. It’s post IPO hare holders included China Life and Temasek (5.7%) when the government stake through Huijin came to below 50% It established resources in Hong Kong with the acquisition of BofA(Asia) the Bank of Canton successor in the territory in 2006

Currently the Central Huijin has reinvested in CCB with 78.4 moillion H-shares and the S-shares repurchased in six month long market operations and from China Jianyin(Jianyin=Bank) another of its own investment companies in 2009 to 57%

Current CCB Capital Adequacy at 11% is a might lower than 11.5% required by the China Bank Regulatory Commission but has denied rumors of further consolidation by Huijin or new shares issuance to boost the TCE

Huijin is also injecting $12 billion in China EXIM Bank and $4 billion in Sinosure as a CIC subsidiary. China’s banking system liquidity reserves are also lower than the internationally accepted 15% though the regulaors have raised such reserve requirements in 2009.

many of those smaller banks are believed to need new capital to boost their adequacy ratios.

China CITIC Bank (0998.HK)(601998.SS) is actively exploring raising capital [ID:nBJC002509], and China Merchants Bank (3968.HK)(600036.SS) is launching a $3.2 billion rights issue, but this week said it should require no further capital raising for at least the next three years. [ID:nBJB003703]

Bank of Communications (BoCom) (3328.HK) (601328.SS), China’s fifth-largest lender, said last month that it planned to raise as much as 42 billion yuan via a rights issue in Shanghai and Hong Kong to bolster capital.

Strictly Bank Business

CCB October 2009 reported more than $4.52 bn in profits ( 6.7 RMB= 1 USD) growing 18% y-o-y by bank’s IFRS interpretation, $12.86 bn for the 9 months of 2009. It has recently attempted a $730 million Healthcare Fund. At a total of 234 bn shares outstanding, CCB is worth $196 bn as of March 2010. In line with the crises of plenty, it has recently increased down payments on retail mortgages and second homes, designed to step with CBRC’s plans to protect the economy from a property bubble. he bank is opening 100 rural branches with Banco Santander as also a $100mn auo financing unit with them. The Banco Santander JV has a capital of RMB 3 bn. It has also recently bought a 50% stake in Antai Life from ING. It’s last capital raising was thru subordinated bonds worth $15 bn in December

CCB is expected to close 2010 with $40 billion in Sales and has its share of exposure to real estate groups ( $10 bn contract with leading developer) and local bodies though the new debt is mostly from smaller banks

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The verdict is out. most money this year will be spent in India, US, PIIGS, Europe and China on Infrastructure and Social Welfare. The first tranche on Infrastructure having already effected and initiated mega projects, financing needs to be closed in projects outside the U.S. and recovery.gov needs to catch up with where the money has already gone in the US and why it is not going to the identified Transportation and Security projects.

The Social Welfare bit is of course predominantly partaken through non profits in the west and where like in India and China this superstructure does not exist, the public exchequer sponsors the chalk-boarding and transmission of new and in pipe projects. We are in need of expertise to disciuss this non profit superstructure but that will also be ‘tabled’ very soon.

Of more importance is to catch the rising star in expense budgets as that is likely to be something that requires the preparation skills and the base delivered by a functioning private sector. And this the question – who will take the decade behind infrastructure? It can be Higher Education and indeed Education reforms at all levels. So, because No child Left Behind in the US was an answer to an almost criminal characterization of the state of Education in the US, because Europe while suffering from some under population and disfranchise in migration also noticed that it did not have the infrastructure required to produce aware citizens and because in India and China significant 50% and more of the population does not have the desired access to schools and Colleges.

Health and Wellness

It could indeed be Health – Healthcare, Big Pharma, Public Health ( Sanitation, Vaccination, Basic Access), Health Education & Health and Wellness or the OTC revolution bringing Retail and Health under one roof. In the case of Health somehow, there are only two subsets of aware populations that will produce leadership in the Industry. The India-China-US-Latam axis that is more or less homogenized by processes, medications and a common understanding of global challenges and the other a Big Pharma led European/Boston hegemony that has different expectations but receding faith in the constituencies’ ability to pay up for renegade experiments and the Health Insurance lobby that has established proceses requiring it to raise premiums when it faces losses.

Well, at the risk of probably jumping the gun, despite some of the attention Education has already received and most importantly without making any distinction between the degree of importance of both the sectors, economically, even as education sets the base for the next revolution, health will come first. Basic Access to Health has in fact to be a fundamental right in all those that believe in a democracy and most do.

Health is indeed a vast field, the current Health bill but a visible ramification of the same..However the subjects are too tough to be dealt in high summary without more work. We have been following Big Pharma and Health Insurance companies with interest over the last year and with Novartis bypassing the emerging markets refusing to deal vaccination contracts without economic consideration and paying top dolllar for eye lotion, they have an uphill task earning returns for their business. While Glaxo on the other hand has done big ticket vaccination contracts in India, China and Brazil, it does not have that many ‘moneyspinners’ in the stable ( throwing a key concern, that of ethical hazards in the ring just with these verbal nuances) Industry wide concerns include Patent expirations..On the healthcare insurance side, health insurers and public administration have a key common concern, that of making a viable money making product available to the vast population and in that making sure the burden is a fair and lasting one, so that everyone wants to be insured.

Of course, the developing world and the BRIC nations are at a different stage of development but the top level concerns are the same. Let’s follow this yellow brick road..and get to the land of magic in the next 10 years. Technology Access started it off in India, Education a little behind. Meanwhile in the US, Technology and Costs seem to have gone overboard.

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I can’t get the right image for this article, but dear Chris Dodd and the screaming Barney Frank are busy fighting their own Democrat and Republican Teams. The fight for Financial reforms still got sold out long back and international audiences are watching an empty ring with the two corners showing up the two different fights. Seemingly it’s Dodd who’s batting for the reforms in the Senate Bill, But Barney in the Democrats’ corner unwittingly, is trying to get his team’s attention too… anyone who can draw this for me if welcome to join the Board at ADVANTAGES.US

Chris Dodd’s statements in the press would never have given us the insight Barney has given on his diatribe  ( and not diatwibe, so much for social media’s reach) on Bloomberg TV. It’s relative. Anywhere else he would have been the voice of sanity but here, his bill has passed and Dodd is batting to get the Consumer Financial Protection Agency regulator off on the right foot in the Senate. As with healthcare the rest of the process is a big dud, filibustering because you have the 60th vote in a 100 person senate a real donkey kick to the process of governance. Finally this senate deterrence has already watered down the Jobs Bill to hardly $35 billion, ended the debate of healthcare prematurely and cornered the attention of those just hoping for a little less than the deluge of $10T that is about to hit the US this decade

The Consumer Financial Protection Regulatory Agency will of course, stand this test of time as it shapes up, but housing it under the Fed is definitely a disaster that can be avoided. The change of governments mid stream has not helped as Investment Banks also turn Republican when they should all have shaken hands with the new regulators by now.

It’s a shame. Let’s finish the fight…

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Kaushik Basu has actually gotten away with quite a lot and established a pretty useful charter for the next 4 years with this Budget for 2009-10, none of the limitations of the US Financial statements seem to be applying despite the pressures of pro poor politics and wasteful public expenditure as the excuses for the decade to be and the decade gone by still acting as appropriate nettle stalks in the grass…

While Democrat state governments pay with minor ruses turning into full-blown scandals, the bankrupt states are finally out of the media eye as the December 2009 GDP growth figures of 5.5% become a new benchmark for statistics to prove/bely in 2010. In the same light, India turns into a Swadeshi and pro woman’s battleground with a reform budget in place. And there I can see a few Kaushik Basu monos from his personal dirty tricks department. Being his first document as Pranab’s shadow, his own security is very short-lived and he better put money where the mouth is..

Firstly, while everyone knows that we had bad experiences with VDIS and Gold Bonds, The governments proposals to rejuvenate collections with improving the tax net have defaulted to activating the defunct Settlement Commission. Secondly, the nutrient based subsidy programs are a non starter and nothing has been attempted to even start the transformation required to make it useful. Despite 25K crores or $6bn in Oil bonds, the gross subsidy bill keeps on increasing. However, the totals for borrowing and the deficit show that except for the INR 1T made available from previous program’s one time expenses in salaries and farmers loans, not much has been changed on the expenses side. And where credit is due, we have all noted the great reinforcement for Infrastructure, Education and even Health compared to previous governments..So, if in the next 12 months Kaushik Basu cannot show anything for his shenanigans, Pranab da will surely get away much easier.

Lower Revenue Receipts will definitely not be helped in this year as the new Direct Tax Code is awaited..thas also GST implementation and sharing raising much doubts for the planned and penned down deficit targets. As long as such hawkish budget reviews continue it is obvious that not much more will be achieved by investing in this market either, and thus analysts stay away from belling this Dino-Kaw. However, our fiscal performance is likely to suffer and not much showing in the new inflation, IIP or GDP numbers for the India story to sell any better than the last 20 years..10% GDP growth..likely 14% but if inflation is above 15% we would have actually lost growth.

However, we believe this was a great opportunity to get to infrastructure and social implementations with as simple benchmarks as invented for Security and Justice Programs and even the subject matter of the Thirteenth Finance Commission..Apart from that we have also missed a chance to bell the RE cat substantially and even with RTI and established program history left public and investors in the dark about rural employment and economic welfare programs. Unfortunately our access to detailed situation on the country side also needs to be improved for us to even gallop like civilized horses, let alone saunter away the recession munching grass like Cattle.

Some Key Features the top line summary missed

To help analysts scything thru the long list of Customs exemptions and the Cashless attempts at Power, Financial Inclusion and Clean Energy, and even 10 lakh skilled manpower in 10 years for a grand sum of INR45 Crores($11MM), I can empathise, sympathise and verbalise just the fact that these have never stopped us from growing in the private sector and generating business before.

Especially with the tax code now cleared and the social infrastructure spending bill of INR 1.38 T with $10 bn in Infrastructure construction ( Bharat Nirman = “Building India”) nd the $12bn for Rural Employment Guarantees we have what we can get from a government. Credit support obviously runs much more than the $90bn+ promised.

I also significantly liked the idea of a District level Health Census. As alluded to above, that s where the government can help us access the rural world and get accurate data points Also great is the final affirmation on India Infrastructure Finance and IDFC.

Price rise by industry has been met optimistically by retail investors but the sales numbers will start coming in April 2010. That growth then will underline most market movements and targets for 2010

FDI limits in retail and bancassurance/ insurance sectors are also eagerly looked forward to as the government consolidates Para 4, SEA FIPB and other regulations for FDI and ECB into one handy-dandy notebook..

May I recommend personal attention for some captains of Industry like Anil Ambani, Sunil Mittal and a selected few, to see government in action than in whittled statements and insane public arguments with the politically disposed and pretty well displaced class of BJP and the chairists from CPM

Industry Impact

Inflation to keep growing till June, Petroleum situation tougher to manage, marginal increase in prices and addl service tax to bring in better realisation and measurement of healthcare and housing implementation

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While Banking seems to be equally interesting to all media, dominating most lifestyle, infrastructure and even Sunil Mittal’s dealmaking stories, the retail banks are never at the fore front of a lifestyle trend apart from being revered for the status symbol they are for their customers and partners. Banks, as always sceptical of all the talks of vision and policy as they hide the nations’ paper trail secrets from the next generations, are predisposed towards safeguarding their own house.

As recovery kicks in from Australia to even the USA, AIG has found only a single buyer for its Asia business from China to Australia; JPM and Goldman Sachs have agreed to grow in China, India and a dozen other Asian ‘hamlets of prosperity’ and done precious little, while India’s banks sit on its reserves of $1.2 T wary of corporate borrowers esp after Real Estate provisions are increased to 175%. While SBI and PNB curry favours with the government, the Private sector leaders have decided to step up their retail finance structure.

Auto loans and Home loans are now costlier by 50bps to 100 bps for HDFC and Kotak Bank, ICICI Bank and others to follow soon. SBI and PNB are leading the lower cost of deposits plan and will follow much later, esp as their mortgage markets are responding and those confined to Delhi , Mumbai and the big cities cannot look forward to any large ramp up in these markets where real estate is likely to be depressed the rest of 2010 and some 2011.

The lack of depth of the local securitisation market, the prevasiveness of low cost housing and the lack of imagination on each part has left the consumers without access to the advantages of a growing economy, while the seemingly unaffected by status symbols consumer of public sector banks is busy saving with whatever products are on offer. This stoy is getting so old and sonorous, there will soon be a break in the sky, with someone like ICICI and HDFC Bank Credit Cards caught in the act literally.

For one, someone can use the market segmentation to start discovering a differential price structure rather than dviding the poor customers between the SBI & BOB vis – a – vis Citi and HSBC. All significant product innovation by StanChart, HSBC and even Citi mostly limited to either the very Wealthy who can buy a Smart Home loan , or a very tech savvy yuppy crowd at the IT/BPO offices with contactless payments and Suvidha accounts.

On the Brokerage and Insurance fronts, Online trading and unit Insurance accounts have been almost fully exploited in the metro markets, each city offering annual additions in unit $ Billions, higher in Delhi and Mumbai. If you let me the operation, I could get the Treasury to talk to Marketing

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Blatant Borrowing of Global idea banks

A long-standing complaint of the Banking Industry in the last 2 years, that had indeed been a cornerstone for the next reform we unleashed on the local industry had been the blind and unseeing transplantation of global ideas in their new form into the Indian system, leaving only trails of paper and no further action reports on such. The last such reform is the Financial Stability and Development Council, probably enunciated just to let Obama and European Governments ‘eat from Indian hands’ as it were. In bad taste, this measure announced in the budget looks like a supplication from an expat that just lost all Indian currency in an overnight storm.

The FSDC will be the inter regulatory oversight coordinator, or defacto disallow all forms of governance from commenting on the next crisis if allowed to function with a pet civil services officer appointment making it a civil services junket and an expat appointment or retirement lozenges for the retiring bankers of cabals and political connections a heresy in practice for the next Satyam design

I would give this measure 2 red stars -2 on a scale of 0 to 5 (Golden stars recognise good value )

Banking Licences

In a realization that the current diaspora is a lifeless being without teeth just two steps from the erstwhile wasted public sector economy of the 80s, the government has decided to create new banks by giving away new licenses.

In an apparent bid to rationalize and set a new opening value for the Capital requirement for these new licensees, the MoF has posted its first clarifications requiring new banking licenses to show value in rural distribution and also non commitment to new capital values. I would recommend a value 2.5 times that of the first private banking licenses in the country, in fact probably 5 X but the regulators may not be able to get agreement on that. A value of $6m would still be peanuts and be ineffective of the scale required to be a bank, but it has to be recognized that such an enterprise has to prove itself n the ground and earn revenues in a limited time frame.

Rural Distribution should not be a limiting factor as a religare also is in 400 towns as an NBFC, and it would be a shame if such regions around the NCR and other cities cannot be tapped . Unfortunately, Barclays has already left a bad taste in the mouth by trying that for its loans nbfc and disappointing the regulators and the citizens of this country.

I would give this measure 3 Golden stars, 3.5 on a scale of 0 to 5 (Golden stars recognise good value )

Recapitalization of RRBs

Regional rural banks had a market share of 4% in India behind the MNC banks’ 7% share of business thus probably carry assets of INR 5T or $ 125bn The committed $4bn in capitalization coupled with a similar $3 T allocation for farm waivers in PSBs would probably mean enough has been done by the government.

Low yields and preceived higher defaults make new bank candidates possibly cagey according to the long established traditions in Indian Banking analysis. It seems unlikely that given the consumption patterns that show rural strengths in good light and the spread of DTH and aiutomobiles in mofussil towns as we build the next lifestylle economy.

The candidates would have good leeway in creating the rural franchise. The MNC model and the Kotak model, lasting only in metros and bigger cities is definitely not a happy occasion for them and the new candidates.

I would give this measure 3 Golden stars, 3.0 on a scale of 0 to 5 (Golden stars recognise good value )

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Some key FRBM impacting projects and macroeconomic nos. (Budget estimates) and security and justice proposals as highlighted in the Central budget for 2011

STRENGTHENING TRANSPARENCY & PUBLIC ACCOUNTABILTY

Financial Sector Legislative Reforms Commission to be set up to rewrite and clean
up the financial sector laws to bring them in line with the requirements of the
sector.

Rs 1,900 crore allocated to the Unique Identification Authority of India (UIDAI)
for 2010-11. UIDAI will be able to meet its commitments of issuing the first set of
UID numbers in the coming year

A Technology Advisory Group for Unique Projects (TAGUP) to be set up to look
into various technological and systemic issues for effective tax administration and
financial governance.

Independent Evaluation Office (IEO) chaired by the Deputy Chairman, Planning
Commission to be set up to evaluate the impact of flagship programmes.

Allocation for Defence increased to Rs. 1,47,344 crore including Rs 60,000 crore
for capital expenditure.

About 2,000 youth to be recruited as constables in five Central Para Military Forces
from Jammu and Kashmir in the year 2010.

Planning Commission to prepare an integrated action plan for the thirty-three left
wing extremism affected districts. Adequate funds will be made available to support
the action plan.
Government has approved the setting up of the National Mission for Delivery of
Justice and Legal Reforms to help reduce legal backlog in courts from an average
of 15 years at present to 3 years by 2012.

BUDGET ESTIMATES 2010-11

The Gross Tax Receipts are estimated at Rs. 7,46,651 crore ( INR 7.47T or $162 bn)

The Non Tax Revenue Receipts are estimated at Rs. 1,48,118 crore. ( INR 1.48T or $32.2 bn)

The net tax revenue to the Centre as well as the expenditure provisions in 2010-11
have been estimated with reference to the recommendations of the Thirteenth
Finance Commission.

The total expenditure proposed in the Budget Estimates is Rs. 11,08,749 crore, (INR 11 T or $241bn)
which is an increase of 8.6 per cent over last year.

The Plan and Non Plan expenditures in BE 2010-11 are estimated at Rs. 3,73,092
crore(INR 3.74T or $81bn) and Rs. 7,35,657 crore(INR 7.36T or $159.92 bn respectively. While there is 15 per cent increase in
Plan expenditure, the increase in Non Plan expenditure is only 6 per cent over the
BE of previous year.

Fiscal deficit for BE 2010-11 at 5.5 per cent of GDP, which works out to Rs.3,81,408
crore. ( INR 3.8T or $83bn)

Taking into account the various other financing items for fiscal deficit, the actual
net market borrowing of the Government in 2010-11 would be of the order of
Rs.3,45,010 crore. This would leave enough space to meet the credit needs of the
private sector. The Gross Borrowings are INR 4.59T or $100bn

The rolling targets for fiscal deficit are pegged at 4.8 per cent and 4.1 per cent for
2011-12 and 2012-13, respectively.

Against a fiscal deficit of 7.8 per cent in 2008-09, inclusive of oil and fertilizer
bonds, the comparable fiscal deficit is 6.9 per cent as per the Revised Estimates for
2009-10.

Conscious effort made to avoid issuing bonds to oil and fertilizer companies.
Government would like to continue with this practice of extending Government
subsidy in cash, thereby bringing all subsidy related liabilities into Government’s
fiscal accounting.

http://indiabudget.nic.in

PART B TAX PROPOSALS

The Centralized Processing Centre at Bengaluru is now fully functional and is
processing around 20,000 returns daily. This initiative will be taken forward by
setting up two more Centres during the year.

The Income Tax department has introduced “Sevottam”, a pilot project at Pune,
Kochi and Chandigarh through Aayakar Seva Kendras, which provide a single window
system for registration of all applications including those for redressal of grievances
as well as paper returns. The scheme will be extended to four more cities in the year.

Automation of Central Excise & Service Tax, has already been rolled out throughout
the country this year. Similarly, a Mission Mode Project for computerization of
Commercial Taxes in States has been approved recently.

With an outlay of Rs. 1133 crore of which the Centre’s share is Rs. 800 crore, the project will lay the
foundation for the launch of GST.

The income tax department to notify SARAL-II form for individual salaried
taxpayers for the coming assessment year.

Scope of cases which may be admitted by the Settlement Commission expanded to
include proceedings related to search and seizure cases pending for assessment.

Scope of Settlement Commission also expanded in respect of Central Excise and
Customs to include certain categories of cases that hitherto fell outside its
jurisdiction.

Bi-lateral discussions commenced to enhance the exchange of bank related and
other information to effectively track tax evasion and identify undisclosed assets
of resident Indians lying abroad.

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Budget Review and Summary – 1/5

Pranab’s  Speech and Explanatory Memorandum ( Full copy at Indiabudget web ) has been used as basis with in-line analysis and enhancements from the economic news leaks by the ministers in the pre release theater.  As already published, the key features of the budget and the overall direction are available here

• From the Economic Survey ’s  presentation on the 26th, Economy grew at 6.1% in Q1, and 7.9 % in Q2, GoI expects the Q3 and Q4 estimates at 6.8% and 7.2% >> we expect growth closer to 07% and 8.5%
• Negative growth in the agricultural sector is likely being thrown up as a recurrent phenomena for the markets to lower expectations.  The rest of the budget also focuses
• PMI modifications from April 2010 will come about in the Industry basis the new IIP composite including mobile phone production and laptops, computers and a large group of chemicals and pharmaceuticals not included in the NIC 1987 classification, reducing the weightage for food products as per the new NIC 2004 and with the move of the base year from 1993-94 to 2004-05
• IIP being reported for 20% + growth for the comparable reported 16.8% of December 2009 and muting of distortion from invalid items like alarm clocks and typewriters(courtesy ET)
• The Food Inflation thru 2009 along with Fuel Price Increases (Post budget 5% increase) A Food Security Act is planned in the next few months to further control this inflation apart from any promises in this budget
• The performance of the Economic and Fiscal Stimulus thru supply of disposable personal income in rural development  and infrastructure programs and the recommendation of the Thirteenth Finance Commission is cited for the withdrawal of stimulus and gradual exit over two years
• Tax Reforms including the Direct Tax Code and the introduction of GST have been committed to April 01, 2011
• Further Divestment will net INR 40,000 Crores in FY11 (2010-11)
• There was lip srvice to Expenditure management and targeting subsidies but not taken up in the 2nd budget of the Congress government because of state elections and discomfort with planning policy changes. that the same will entail.

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• Interest rate hike expected as inflation sores.
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