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Title: Shri P. Chidambaram presented a statement of the estimated receipts and expenditure of the Government of India for the
year 2013-2014.

MADAM SPEAKER: Now, the presentation of the General Budget − Shri P. Chidambaram

THE MINISTER OF FINANCE (SHRI P. CHIDAMBARAM): Madam, Speaker, I rise to present the Budget for the year 2013-14.

I recall my last tenure as Finance Minister and acknowledge with gratitude the splendid support that I received from all sections
of the House as well as the people of India. Today, more than ever, I seek the same support as we navigate the Indian
economy through a crisis that has enveloped the whole world and spared none.

I intend to keep my speech simple, straight forward and reasonably short.

I. THE ECONOMY AND THE CHALLENGES

I shall begin by setting the context. Global economic growth slowed from 3.9 percent in 2011 to 3.2 percent in 2012. India is
part of the global economy: our exports and imports amount to 43 percent of GDP and two-way external sector transactions
have risen to 108 percent of GDP. We are not unaffected by what happens in the rest of the world and our economy too has
slowed after 2010-11. In the current year, the CSO has estimated growth at 5 percent while the RBI has estimated growth at
5.5 percent. Whatever may be the final estimate, it will be below India's potential growth rate of 8 percent. Getting back to that
growth rate is the challenge that faces the country.

Let me say, however, there is no reason for gloom or pessimism. Even now, of the large countries of the world, only China
and Indonesia are growing faster than India in 2012-13. And in 2013-14, if we grow at the rate projected by many forecasters,
only China will grow faster than India. Between 2004 and 2008, and again in 2009-10 and 2010-11, the growth rate was over 8
percent and, in fact, crossed 9 percent in four of those six years. The average for the 11 th Plan period, entirely under the
UPA Government, was 8 percent, the highest ever in any Plan period. Achieving high growth, therefore, is not a novelty or
beyond our capacity. We have done it before and we can do it again.

I acknowledge that the Indian economy is challenged, but I am absolutely confident that, with your cooperation, we will get out
of the trough and get on to the high growth path. I shall now outline our plans and priorities.

Our goal is 'higher growth leading to inclusive and sustainable development'. That is the mool mantra.

Growth is a necessary condition and we must unhesitatingly embrace growth as the highest goal. It is growth that will lead to
inclusive development, without growth there will be neither development nor inclusiveness. However, I may sound a note of
caution. Owing to the plurality and diversity of India, and centuries of neglect, discrimination and deprivation, many sections of
the people will be left behind if we do not pay special attention to them. As Joseph Stiglitz, Nobel prize-winning economist,
said, "There is a compelling moral case for equity; but it is also necessary if there is to be sustained growth. A country's most
important resource is its people." We have examples of States growing at a fast rate, but leaving behind women, the scheduled
castes, the scheduled tribes, the minorities, and some backward classes. The UPA does not accept that model. The UPA
Government believes in inclusive development, with emphasis on improving human development indicators. I hope this Budget
will be yet another testimony to that commitment.

Fiscal Deficit, Current Account Deficit and Inflation

The purpose of a Budget − and the job of a Finance Minister − is to create the economic space and find the resources to
achieve the socio economic objectives. At present, the economic space is constrained because of a high fiscal deficit;
reliance on foreign inflows to finance the current account deficit; lower savings and lower investment; a tight monetary policy
to contain inflation; and strong external headwinds. During the course of my speech, I shall spell out measures that will
address each of these issues.

In September, 2012, Government accepted the main recommendations of the Dr. Vijay Kelkar Committee. A new fiscal
consolidation path was announced. Red lines were drawn for the fiscal deficit at 5.3 percent of GDP this year and 4.8 percent
of GDP in 2013-14. I know there is a lot of skepticism. In a little while, I shall tell you how we have fared.

My greater worry is the current account deficit (CAD). The CAD continues to be high mainly because of our excessive
dependence on oil imports, the high volume of coal imports, our passion for gold, and the slow down in exports. This year, and
perhaps next year too, we have to find over USD 75 billion to finance the CAD. There are only three ways before us: FDI, FII
or External Commercial Borrowing (ECB). That is why I have been at pains to state over and over again that India, at the
present juncture, does not have the choice between welcoming and spurning foreign investment. If I may be frank, foreign
investment is an imperative. What we can do is to encourage foreign investment that is consistent with our economic
objectives.

Finally, the development must be sustainable − economically and ecologically. The development model must have democratic
legitimacy and approval.

Looming large over our efforts to stimulate growth is inflation. Some inflation is imported. Supply demand mismatch, for
example in oilseeds and pulses, also pushes up inflation. Aggregate demand is another cause of inflation. The battle against
inflation must be fought on all fronts. Our efforts in the past few months have brought down headline WPI inflation to about 7.0
percent and core inflation to about 4.2 percent. It is food inflation that is worrying, and we shall take all possible steps to
augment the supply side to meet the growing demand for food items.

Government expenditure boosts aggregate demand and it has both good and bad consequences. Wisdom lies in finding the
correct level of government expenditure. In the budget for 2012-13, the estimate of Plan Expenditure was too ambitious and the
estimate of non-Plan Expenditure was too conservative. Faced with a huge fiscal deficit, I had no choice but to rationalize
expenditure. We took a dose of bitter medicine. It seems to be working. We also took some policy decisions that had been
deferred for too long, corrected some prices, and undertook a review of certain tax policies. We have retrieved some
economic space. As I outline our plans and priorities, hon. Members will find that I have used that economic space to
advantage − and to advance the UPA Government's socio-economic objectives.

II. THE PLAN AND BUDGETARY ALLOCATIONS

The 12th Five Year Plan began in 2012-13. Anticipating a global and domestic recovery, total expenditure had been fixed at
Rs. 14,90,925 crore. Due to the slowdown and the austerity measures, the revised estimate is Rs.14,30,825 crore or 96
percent of the budget estimate. The economic space that we have gained has given me the confidence to be more ambitious
in 2013-14. I have been able to set the BE of total expenditure at Rs. 16,65,297 crore and of plan expenditure at Rs.5,55,322
crore. Hon. Members will be happy to know that plan expenditure in 2013-14 will be 29.4 percent more than the revised
estimate of the current year. All flagship programmes have been fully and adequately funded. I dare say I have provided
sufficient funds to each Ministry or Department consistent with their capacity to spend the funds. Now, it is over to the
Ministries and Departments to deliver the outcomes through good governance, prudent cash management, close monitoring
and timely implementation.

Madam Speaker, on the one side is economic policy. On the other side is economic welfare. We are a developing country.
The link between policy and welfare can be expressed in a few words: opportunities, education, skills, jobs and incomes.
Every mother understands this. Every young man and woman understands this. My budget for 2013-14 has before it one
overarching goal: to create opportunities for our youth to acquire education and skills that will get them decent jobs or self-
employment that will bring them adequate incomes that will enable them to live with their families in a safe and secure
environment.

SC, ST, Women and Children

Let me assure Hon. Members that their concerns are my concerns too. I know their concern for the welfare and progress of
the scheduled castes and the scheduled tribes for whom the Budget has sub plans. I also know their concern that adequate
funds must be provided for programmes that benefit women, children and the minorities. I have tried to meet these concerns
as fully as possible. I propose to allocate Rs.41,561 crore to the scheduled caste sub plan and Rs. 24,598 crore to the tribal
sub plan. The total represents an increase of 12.5 percent over the BE and 31 percent over the RE of the current year. I
reiterate the rule that the funds allocated to the sub plans cannot be diverted and must be spent for the purposes of the sub
plans.

I have made sufficient allocations to programmes relating to women and children. Hon. Members will find from the budget
documents that the gender budget has Rs. 97,134 crore and the child budget has Rs.77,236 crore in 2013-14.
Women belonging to the most vulnerable groups, including single women and widows, must be able to live with self-esteem and
dignity. Young women face gender discrimination everywhere, especially at the work place. Ministry of Women and Child
Development has been asked to design schemes that will address these concerns. I propose to provide an additional sum of
Rs. 200 crore to that Ministry to begin work in this regard.

Minorities

I have allocated Rs.3,511 crore to the Ministry of Minority Affairs. This is an increase of 12 percent over the BE and 60
percent over the RE of 2012-13.

The Maulana Azad Education Foundation is the main vehicle to implement educational schemes and channelize funds to non-
government organisations for the minorities. Its corpus stands at Rs.750 crore. With the objective of raising it to Rs.1,500
crore during the 12th Plan period, I propose to allocate Rs.160 crore to the corpus fund. The Foundation wishes to add
medical aid to its objectives. I have accepted that a beginning can be made by providing medical facilities such as an
infirmary or a resident doctor in the educational institutions run or funded by the Foundation. I propose to allocate Rs.100
crore to launch this initiative.

Disabled Persons

Government is committed to provide support to persons with disabilities. I propose to allocate a sum of Rs.110 crore to the
Department of Disability Affairs for the ADIP Scheme in 2013-14, as against the RE of Rs.75 crore in the current year.

Health and Education

Health for all and education for all remain our priorities.

I propose to allocate Rs.37,330 crore to the Ministry of Health and Family Welfare. Of this, the new National Health Mission
that combines the rural mission and the proposed urban mission will get Rs.21,239 crore, an increase of 24.3 percent over the
RE.

I propose to provide Rs.4,727 crore for medical education, training and research.

The National Programme for the Health Care of Elderly is being implemented in 100 selected districts of 21 States. Eight
regional geriatric centres are being funded for the development of dedicated geriatric departments. I propose to provide
Rs.150 crore for this programme.

Ayurveda, Unani, Siddha and Homoeopathy are being mainstreamed through the National Health Mission. I propose to allocate
Rs.1,069 crore to the Department of AYUSH.

The six AIIMS-like institutions have admitted their first batch of students in the academic session that commenced in
September 2012. The hospitals attached to the colleges will be functional in 2013-14. I propose to provide a sum of Rs.1,650
crore for these institutions.

Education is the other high priority. I propose to allocate Rs.65,867 crore to the Ministry of Human Resource Development,
which is an increase of 17 percent over the RE of the current year. The Sarva Shiksha Abhiyan (SSA) and the Right to
Education Act are firmly in place. I propose to provide Rs.27,258 crore for SSA in 2013-14.

Investment in the Rashtriya Madhyamik Shiksha Abhiyan (RMSA) cannot be postponed any longer. Hence, I propose to
provide Rs.3,983 crore for RMSA, which is an increase of 25.6 percent over the RE of the current year.

Hon'ble Members will be happy to know that thousands of scholarships will be given to students belonging to Scheduled
Castes, Scheduled Tribes, Other Backward Classes and Minorities, and girl children, in 2013-14. I propose to allocate
Rs.5,284 crore to the various Ministries for the purpose, as compared Rs.4,575 crore in the RE of the current year, an
increase of nearly Rs.700 crore.

The Mid-Day Meal Scheme (MDM) will be provided Rs.13,215 crore.

The reconstruction of the Nalanda University has gathered momentum. The Government is committed to the creation of
Nalanda University as a centre of educational excellence.
ICDS

Madam Speaker, I commend the ICDS for being able to spend the entire amount of Rs.15,850 crore provided in 2012-13. In
recognition of the needs of children, I propose to allocate Rs.17,700 crore in 2013-14, representing an increase of 11.7
percent. The focus will continue to be on early childhood care and education.

Maternal and child malnutrition in a country with abundant foodgrains is a shame that we must overcome. A multi-sectoral
programme that was announced last year will be implemented in 100 districts during 2013-14 and it will be scaled up to cover
200 districts the year after. I propose to allocate a sum of Rs.300 crore for the programme in 2013-14.

Drinking Water

Clean drinking water and sanitation have a number of beneficial externalities. I propose to allocate Rs.15,260 crore to the
Ministry of Drinking Water and Sanitation, as against the RE of Rs.13,000 crore in the current year.

There are still 2,000 arsenic- and 12,000 fluoride-affected rural habitations in the country. I propose to provide Rs.1,400 crore
towards setting up water purification plants.

Rural Development

The Ministry of Rural Development steers a number of flagship programmes. We estimate that they will be able to spend
Rs.55,000 crore before the end of the current year, and I propose to allocate Rs.80,194 crore in 2013-14, marking an
increase of 46 percent. MGNREGS will get Rs.33,000 crore, PMGSY will get Rs.21,700 crore, and Indira Awas Yojana will
get Rs.15,184 crore.

The objectives of PMGSY have been substantially fulfilled in several States. Naturally, these States wish to do more. Hence, it
is proposed to carve out PMGSY-II and allocate a portion of the funds to the new programme that will benefit States such as
Andhra Pradesh, Haryana, Karnataka, Maharashtra, Punjab and Rajasthan. Details of PMGSY-II will be announced by the
Minister .… (Interruptions)

MADAM SPEAKER: Please sit down.

...(Interruptions)

MADAM SPEAKER: Nothing will go on record.

(Interruptions) … *

SHRI P. CHIDAMBARAM: Please listen carefully....(Interruptions)

MADAM SPEAKER: Please sit down.

...(Interruptions)

SHRI P. CHIDAMBARAM: Please sit down and listen carefully.

MADAM SPEAKER: Please continue.

SHRI P. CHIDAMBARAM: The States, which have completed PMGSY, will be eligible for PMGSY-II. Other States will continue
on the PMGSY....(Interruptions) Please sit down.

JNNURM

The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) is being continued in the 12th Plan. The 14,000 buses
sanctioned during 2009 to 2012 have made a big contribution to urban transport. I propose to provide Rs.14,873 crore for
JNNURM, as against the RE of Rs.7,383 crore in the current year. Out of this, a significant portion will be used to support the
purchase of upto 10,000 buses, especially by the hill States.

III. AGRICULTURE

Thanks to our hard working farmers, agriculture continues to perform very well. The average annual growth rate of agriculture
and allied sector during the 11 th Plan was 3.6 percent as against 2.5 percent and 2.4 percent, respectively, in the 9 th and 10th
Plans. In 2012-13, total foodgrain production will be over 250 million tonnes. Minimum support price of every agricultural
produce under the procurement programme has been increased significantly under the UPA Government. Farmers have
responded to the price signals and produced more. Agricultural exports from April to December, 2012 have crossed
Rs.138,403 crore.

I propose to allocate Rs.27,049 crore to the Ministry of Agriculture, an increase of 22 percent over the RE of the current year.
Of this, agricultural research will be provided Rs.3,415 crore.

Agricultural Credit

Agricultural credit is the driver of agricultural production. We will exceed the target of Rs.575,000 crore fixed for 2012-13. For
2013-14, I propose to increase the target to Rs.700,000 crore.

The interest subvention scheme for short-term crop loans will be continued and a farmer who repays the loan on time will be
able to get credit at 4 percent per annum. So far, the scheme has been applied to loans extended by public sector banks,
RRBs and cooperative banks. I propose to extend the scheme to crop loans borrowed from private sector scheduled
commercial banks in respect of loans given within the service area of the branch concerned.

Green Revolution

Bringing the green revolution to eastern India has been a remarkable success. Assam, Bihar, Chhattisgarh and West Bengal
have increased their contribution to rice production. I propose to continue to support the eastern Indian States with an
allocation of Rs.1000 crore in 2013-14.

The original Green Revolution States face the problem of stagnating yields and over-exploitation of water resources. The
answer lies in crop diversification. I propose to allocate Rs.500 crore to start a programme of crop diversification that would
promote technological innovation and encourage farmers to choose crop alternatives.

The Rashtriya Krishi Vikas Yojana is intended to mobilise higher investment in agriculture and the National Food Security
Mission is intended to bridge yield gaps. I propose to provide Rs.9,954 crore and Rs.2,250 crore, respectively, for these two
programmes.

Small and marginal farmers are vulnerable everywhere, and especially so in drought prone and ecologically-stressed regions.
Watershed management is crucial to improve productivity of land and water use. I propose to increase the allocation for the
integrated watershed programme from Rs.3,050 crore in 2012-13 (BE) to Rs.5,387 crore next year.

Eminent agricultural scientists have suggested that we start a pilot programme on Nutri-Farms for introducing new crop
varieties that are rich in micro-nutrients such as iron-rich bajra, protein-rich maize and zinc-rich wheat. I propose to provide a
sum of upto Rs.200 crore to start the pilots. Ministry of Agriculture will formulate a scheme and I hope that agri businesses and
farmers will come together to start a sufficient number of pilots in the districts most affected by malnutrition.

The National Institute of Biotic Stress Management for addressing plant protection issues will be established at Raipur,
Chhattisgarh. The Indian Institute of Agricultural Bio-technology will be established at Ranchi, Jharkhand and will serve as a
centre of excellence in agricultural bio-technology.

A pilot scheme to replant and rejuvenate coconut gardens that was implemented in some districts of Kerala and the Andaman
& Nicobar Islands will be extended to the entire State of Kerala, and I propose to provide an additional sum of Rs.75 crore in
2013-14.

Farmer Producer Organizations

Farmer Producer Organizations (FPO), including Farmer Producer Companies (FPC), have emerged as aggregators of farm
produce and link farmers directly to markets. To signal our support to them, I intend to provide matching equity grants to
registered FPOs upto a maximum of Rs.10 lakh per FPO to enable them to leverage working capital from financial institutions. I
propose to provide Rs.50 crore for this purpose. Besides, a Credit Guarantee Fund will also be created in the Small Farmers'
Agri Business Corporation with an initial corpus of Rs.100 crore. I urge State Governments to support such FPOs through
necessary amendments to the APMC Act and in other ways.

National Livestock Mission

The National Livestock Mission will be launched in 2013-14 to attract investment and to enhance productivity taking into
account local agro-climatic conditions. I propose to provide Rs.307 crore for the Mission. There will be a sub Mission for
increasing the availability of feed and fodder.

Food Security
Madam Speaker, food security is as much a basic human right as the right to education or the right to health care. The
National Food Security Bill is a promise of the UPA Government. I sincerely hope that Parliament will pass the Bill as early as
possible. Hon. Members will be happy to know that over and above the normal provision for food subsidy, I have set apart
Rs.10,000 crore, towards the incremental cost that is likely under the Act.

IV. INVESTMENT, INFRASTRUCTURE AND INDUSTRY

The growth rate of an economy is correlated with the investment rate. The key to restart the growth engine is to attract more
investment, both from domestic investors and foreign investors. Investment is an act of faith. We will improve communication of
our policies to remove any apprehension or distrust in the minds of investors, including fears about undue regulatory burden
or application of tax laws. 'Doing business in India' must be seen as easy, friendly and mutually beneficial.

While every sector can absorb new investment, it is the infrastructure sector that needs large volumes of investment. The 12th
Plan projects an investment of USD 1 trillion or Rs.55,00,000 crore in infrastructure. The Plan envisages that the private sector
will share 47 percent of the investment. Besides, we need new and innovative instruments to mobilise funds for this order of
investment. Government has taken or will take the following measures to increase investment in infrastructure:

• Infrastructure Debt Funds (IDF) will be encouraged. These funds will raise resources and, through take-out finance, credit
enhancement and other innovative means, provide long-term low-cost debt for infrastructure projects. I am happy to report that four
IDFs have been registered with SEBI so far and two of them were launched in the month of February, 2013.

• India Infrastructure Finance Corporation Ltd (IIFCL), in partnership with the Asian Development Bank, will offer credit
enhancement to infrastructure companies that wish to access the bond market to tap long term funds.

• In the last two years, a number of institutions were allowed to issue tax free bonds. They raised Rs.30,000 crore in 2011-
12 and are expected to raise about Rs.25,000 crore in 2012-13. I propose to allow some institutions to issue tax free
bonds in 2013-14, strictly based on need and capacity to raise money in the market, upto a total sum of Rs.50,000
crore.

• Multilateral Development Banks are keen to assist in efforts to promote regional connectivity. Combining the 'Look East'
policy and the interests of the North Eastern States, I propose to seek the assistance of the World Bank and the Asian
Development Bank to build roads in the North Eastern States and connect them to Myanmar.

• NABARD operates the Rural Infrastructure Development Fund (RIDF). RIDF has successfully utilised 18 tranches so far.
I propose to raise the corpus of RIDF-XIX in 2013-14 to Rs.20,000 crore.

• Pursuant to the announcement made last year, a sum of Rs.5000 crore will be made available to NABARD to finance
construction of warehouses, godowns, silos and cold storage units designed to store agricultural produce, both in the
public and the private sectors. This window will also finance, through the State Governments, construction of godowns
by panchayats to enable farmers to store their produce.

Road Construction

The road construction sector has reached a certain level of maturity. But it faces challenges not envisaged earlier, including
financial stress, enhanced construction risk and contract management issues, that are best addressed by an independent
authority. Hence, Government has decided to constitute a regulatory authority for the road sector. Bottlenecks stalling road
projects have been addressed and 3,000 kms of road projects in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan and Uttar
Pradesh will be awarded in the first six months of 2013-14.

Cabinet Committee Investment

Revival of investment in the industrial sector, especially manufacturing, is a key challenge. Many projects are stalled because
they are unable to clear regulatory hurdles. The Cabinet Committee on Investment (CCI) has been set up to monitor investment
proposals as well as projects under implementation, including stalled projects, and guide decision-making in order to remove
bottlenecks and quicken the pace of implementation. Two meetings of the CCI have been held already and decisions were
taken in respect of a number of oil and gas, power, and coal projects. CCI will take up some more projects shortly.

New Investment

To attract new investment and to quicken the implementation of projects, I propose to introduce an investment allowance for
new high value investments. A company investing Rs.100 crore or more in plant and machinery during the period 1.4.2013 to
31.3.2015 will be entitled to deduct an investment allowance of 15 percent of the investment. This will be in addition to the
current rates of depreciation. There will be enormous spill-over benefits to small and medium enterprises.

The National Electronics Policy 2012 is intended to promote manufacture of electronic goods in India. We recognise the
pivotal role of semiconductor wafer fabs in the eco-system of manufacture of electronics. I propose to provide appropriate
incentives to semiconductor wafer fab manufacturing facilities, including zero customs duty for plant and machinery.

Savings

Increasing savings and their optimal allocation for productive uses lead to higher economic growth. After touching a high of
36.8 percent in 2007-08, gross domestic saving fell by 6 percentage points in 2011-12. The private sector, comprising
households and corporates, remains the main contributor to saving. The household sector must be incentivised to save in
financial instruments rather than buy gold. Hence, I propose the following measures:
• Firstly, the Rajiv Gandhi Equity Savings Scheme will be liberalised to enable the first time investor to invest in
mutual funds as well as listed shares and she can do so, not in one year alone, but in three successive years.
The income limit will be raised from Rs.10,00,000 to Rs.12,00,000;
• Secondly, a person taking a loan for his first home from a bank or a housing finance corporation upto
Rs.25,00,000 during the period 1.4.2013 to 31.3.2014 will be entitled to an additional deduction of interest of upto
Rs.100,000. This will promote home ownership and give a fillip to a number of industries like steel, cement, brick,
wood, glass etc. besides jobs to thousands of construction workers.

• Thirdly, in consultation with RBI, I propose to introduce instruments that will protect savings from inflation,
especially the savings of the poor and middle classes. These could be Inflation Indexed Bonds or Inflation
Indexed National Security Certificates. The structure and tenor of the instruments will be announced in due
course.

Industrial Corridors

The Delhi Mumbai Industrial Corridor (DMIC) project has made rapid progress. Plans for seven new cities have been finalised
and work on two new smart industrial cities at Dholera, Gujarat and Shendra Bidkin, Maharashtra will start during 2013-14. We
acknowledge the support of the Government of Japan. In order to dispel any doubt about funding, I wish to make it clear that
we shall provide, if required, additional funds during 2013-14 within the share of the Government of India in the overall outlay
for the project.

The Department of Industrial Policy and Promotion (DIPP) and the Japan International Cooperation Agency (JICA) are
currently preparing a comprehensive plan for the Chennai Bengaluru Industrial Corridor. The corridor will be developed in
collaboration with the Governments of Tamil Nadu, Andhra Pradesh and Karnataka.

The next corridor will be the Bengaluru Mumbai Industrial Corridor on which preparatory work has started.

Leh-Kargil Transmission Line

To improve power supply in the Leh-Kargil region and connect the Ladakh region to the northern grid, the Government will
construct a transmission system from Srinagar to Leh at a cost of Rs.1,840 crore. I propose to provide Rs.226 crore in 2013-
14 for the project.

Ports

Two new major ports will be established in Sagar, West Bengal and in Andhra Pradesh to add 100 million tonnes of capacity.
In addition, a new outer harbour will be developed in the VOC port at Thoothukkudi, Tamil Nadu through PPP at an estimated
cost of Rs.7,500 crore. When completed, this will add 42 million tonnes of capacity.

National Waterways

Five inland waterways have been declared as national waterways. I am happy to announce that the Minister of Water
Resources will move a Bill in Parliament to declare the Lakhipur − Bhanga stretch of river Barak in Assam as the sixth national
waterway. Preparatory work is underway to build a grid connecting waterways, roads and ports. The 12th Plan has an
adequate outlay for capital works, including dredging, on the national waterways. The objective is to choose barge operators,
through competitive bidding, to transport bulk cargo on the national waterways. The first transport contract has been awarded
in West Bengal from Haldia to Farakka.

Oil and Gas

The oil and gas exploration policy will be reviewed to move from profit sharing to revenue sharing contracts. A policy to
encourage exploration and production of shale gas will be announced. The natural gas pricing policy will be reviewed and
uncertainties regarding pricing will be removed. NELP blocks that were awarded but are stalled will be cleared. The 5 MMTPA
LNG terminal in Dabhol, Maharashtra will be fully operational in 2013-14.

Coal

Despite abundant coal reserves, we continue to import large volumes of coal. Coal imports during the period April-December,
2012 have crossed 100 million tonnes. It is estimated that imports will rise to 185 million tonnes in 2016-17. If the coal
requirements of the existing power plants and the power plants that will come into operation by 31.3.2015 are taken into
account, there is no alternative except to import coal and adopt a policy of blending and pooled pricing. In the medium to long
term, we must reduce our dependence on imported coal. One of the ways forward is to devise a PPP policy framework, with
Coal India Limited as one of the partners, in order to increase the production of coal for supply to power producers and other
consumers. These matters are under active consideration and the Minister of Coal will announce Government's policies in this
behalf in due course.

Power

Hon. Members are aware that the Government has approved a scheme for the financial restructuring of DISCOMS to restore
the health of the power sector. I would urge State Governments to prepare the financial restructuring plans quickly, sign the
MOU, and take advantage of the scheme.

Micro, small and medium enterprises (MSME) have a large share of jobs, production and exports. Too many of them do
not grow because of the fear of losing the benefits associated with staying small or medium. To encourage them to grow, I
propose that the benefits or preferences enjoyed by them will stay with them for upto three years after they grow out of the
category in which they obtained the benefit. To begin with, I propose that the non-tax benefits may be made available to a
MSME unit for three years after it graduates to a higher category.

To provide greater support to MSMEs, I propose to enhance the refinancing capability of SIDBI from the current level of
Rs.5,000 crore to Rs.10,000 crore per year.

SIDBI set up the India Microfinance Equity Fund in 2011-12 with budgetary support of Rs.100 crore to provide equity and
quasi-equity to Micro Finance Institutions (MFI). An amount of Rs.104 crore has been committed to 37 MFIs. I have allocated
Rs.100 crore to the IME Fund in the budget and I now propose to provide another sum of Rs.100 crore to the Fund.

The Factoring Act 2011 has been passed by Parliament. I propose to provide a corpus of Rs.500 crore to SIDBI to set up a
Credit Guarantee Fund for factoring.

Tool Rooms and Technology Development Centres set up by the Ministry of Micro, Small and Medium Enterprises have done
well in extending technology and design support to small businesses. I propose to provide, with World Bank assistance, a sum
of Rs.2,200 crore during the 12th Plan period to set up 15 additional Centres.

Incubators play an important role in mentoring new businesses which start as a small or medium business. The new
Companies Bill obliges companies to spend 2 percent of average net profits under Corporate Social Responsibility (CSR). I
am glad to announce that the Ministry of Corporate Affairs will notify that funds provided to technology incubators located
within academic institutions and approved by the Ministry of Science and Technology or Ministry of MSME will qualify as CSR
expenditure.

Textiles

I propose to continue the Technology Upgradation Fund Scheme (TUFS) for the textile sector in the 12th Plan with an
investment target of Rs.151,000 crore. The major focus would be on modernisation of the powerloom sector. I propose to
provide Rs.2,400 crore in 2013-14 for the purpose.

Textile parks have been set up under Scheme for Integrated Textile Parks (SITP). It is proposed to set up Apparel Parks within
the SITPs to house apparel manufacturing units. To incentivise such Apparel Parks, I propose to allocate Rs.50 crore to the
Ministry of Textiles to provide an additional grant of upto Rs.10 crore to each Park.

A new scheme with an outlay of Rs.500 crore called the Integrated Processing Development Scheme will be implemented in
the 12th Plan to address the environmental concerns of the textile industry, including improving the effluent treatment
infrastructure. I propose to provide Rs.50 crore in 2013-14 for the scheme.

Madam Speaker, the handloom sector is in distress. A very large proportion of handloom weavers are women and belong
mainly to the backward classes. I propose to accept their demand for working capital and term loans at a concessional interest
of 6 percent. 150,000 individual weavers and 1,800 primary cooperative societies will benefit in 2013-14. I propose to allocate
an additional sum of Rs.96 crore in 2013-14 to the Ministry of Textiles for interest subvention.

India has a rich heritage of traditional industries. Khadi, village industries and coir were taken up for development during the
11th Plan under the Scheme of Fund for Regeneration of Traditional Industries (SFURTI). The 12th Plan has provided an
outlay of Rs.850 crore. I propose to leverage assistance from Multilateral Development Banks to extend SFURTI to 800 clusters
during the 12th Plan. 400,000 artisans are expected to be benefited.

Foreign Trade
I look forward to the changes that will be made by my colleague, the Minister of Commerce, to the Foreign Trade Policy next
month and I assure my support to measures that will be taken to boost exports of goods and services.

V. FINANCIAL SECTOR

The financial sector is at the heart of the economy.

Hon'ble Members are aware that Government constituted the Financial Sector Legislative Reforms Commission (FSLRC) in
2011. I am informed that the report will be presented next month. It is our intention to examine the recommendations and act
quickly and decisively so that our financial sector stands on sound legal foundations and remains well-regulated, efficient and
internationally competitive. I propose to constitute a Standing Council of Experts in the Ministry of Finance to analyse the
international competitiveness of the Indian financial sector, periodically examine the transaction costs of doing business in the
Indian market, and provide inputs to Government for necessary action.

Banking

Our public sector banks are well regulated, they must also be adequately capitalised. Before the end of March, 2013, we shall
provide Rs.12,517 crore to infuse additional capital into 13 public sector banks. In 2013-14, I propose to provide a further
amount of Rs.14,000 crore for capital infusion. We shall ensure that public sector banks always meet the Basel III regulations
as they come into force in a phased manner.
Financial inclusion has made rapid strides. All scheduled commercial banks and all RRBs are on core banking solution (CBS)
and on the electronic payment systems (NEFT and RTGS). We are working with RBI and NABARD to bring all other banks,
including some cooperative banks, on CBS and e-payment systems by 31.12.2013. I am also happy to say, Madam, public
sector banks have assured me that all their branches will have an ATM in place by 31.3.2014.

Madam Speaker, women are at the head of many banks today, including two public sector banks, but there is no bank that
exclusively serves women. Can we have a bank that lends mostly to women and women-run businesses, that supports women
SHGs and women's livelihood, that employs predominantly women, and that addresses gender related aspects of
empowerment and financial inclusion? I think we can. I therefore propose to set up India's first Women's Bank as a public
sector bank and I shall provide Rs.1,000 crore as initial capital. I hope to obtain the necessary approvals and the banking
licence by October, 2013, and I invite all Hon'ble Members to the inauguration of the bank shortly thereafter.

The Rural Housing Fund set up through the National Housing Bank is used to refinance lending institutions, including RRBs,
that extend loans for rural housing. So far, 400,000 rural families have taken loans. In the last Budget, we provided Rs.4,000
crore to the Fund. In consultation with RBI, I propose to provide Rs.6,000 crore to the Rural Housing Fund in 2013-14.

Similarly, it is proposed to start a fund for urban housing to mitigate the huge shortage of houses in urban areas. I propose to
ask National Housing Bank to set up the Urban Housing Fund and, in consultation with RBI, I propose to provide Rs.2,000
crore to the Fund in 2013-14.

Insurance

A multi-pronged approach will be followed to increase the penetration of insurance, both life and general, in the country. I have
a number of proposals that have been finalised in consultation with the regulator, IRDA.

Insurance companies will be empowered to open branches in Tier II cities and below without prior approval of IRDA.
All towns of India with a population of 10,000 or more will have an office of LIC and an office of at least one public
sector general insurance company. I propose to achieve this goal by 31.3.2014.
KYC of banks will be sufficient to acquire insurance policies.
Banks will be permitted to act as insurance brokers so that the entire network of bank branches will be utilised to
increase penetration.
Banking correspondents will be allowed to sell micro-insurance products.
Group insurance products will now be offered to homogenous groups such as Self Help Groups (SHGs), domestic
workers associations, anganwadi workers, teachers in schools, nurses in hospitals etc.
There are about 10,00,000 motor third party claims that are pending before Tribunals/Courts. Public sector general
insurance companies will organise adalats to settle the claims and give relief to the affected persons/families.
The Insurance Laws (Amendment) Bill and the PFRDA Bill are before this House. I sincerely hope that Government and the
Opposition can arrive at a consensus and pass the two Bills in this session.

The Rashtriya Swasthiya Bima Yojana covers 34 million i.e. 3.4 crore families below the poverty line. It will now be extended to
other categories such as rickshaw, auto-rickshaw and taxi drivers, sanitation workers, rag pickers and mine workers.

A comprehensive and integrated social security package for the unorganised sector is a measure that will benefit the poorest
and most vulnerable sections of society. The package should include life-cum-disability cover, health cover, maternity
assistance and pension benefits. The present schemes such as AABY, JSBY, RSBY, JSY and IGMSY are run by different
ministries and departments. I propose to facilitate convergence among the various stakeholder ministries/departments so that
we can evolve a comprehensive social security package. I shall come back to the House as early as possible.

Capital Market

I believe that India's capital market is among the best regulated markets. This year is SEBI's silver jubilee year and I offer the
regulator our congratulations. A proposal to amend the SEBI Act to strengthen the regulator is under consideration.

I have a number of proposals relating to the capital market that have been finalised in consultation with SEBI:
 There are many categories of foreign portfolio investors such as FIIs, sub-accounts, QFIs etc. and there are also
different avenues and procedures for them. Designated depository participants, authorised by SEBI, will now be
free to register different classes of portfolio investors, subject to compliance with KYC guidelines.
SEBI will simplify the procedures and prescribe uniform registration and other norms for entry of foreign portfolio
investors. SEBI will converge the different KYC norms and adopt a risk-based approach to KYC to make it easier
for foreign investors such as central banks, sovereign wealth funds, university funds, pension funds etc. to invest in
India.
In order to remove the ambiguity that prevails on what is Foreign Direct Investment (FDI) and what is Foreign
Institutional Investment (FII), I propose to follow the international practice and lay down a broad principle that,
where an investor has a stake of 10 percent or less in a company, it will be treated as FII and, where an investor
has a stake of more than 10 percent, it will be treated as FDI. A committee will be constituted to examine the
application of the principle and to work out the details expeditiously.
FIIs will be allowed to participate in the exchange traded currency derivative segment to the extent of their Indian
rupee exposure in India.
FIIs will also be permitted to use their investment in corporate bonds and Government securities as collateral to meet
their margin requirements.
Angel investors bring both experience and capital to new ventures. SEBI will prescribe requirements for angel investor
pools by which they can be recognised as Category I AIF venture capital funds.

Small and medium enterprises, including start-up companies, will be permitted to list on the SME exchange without being
required to make an initial public offer (IPO), but the issue will be restricted to informed investors. This will be in addition
to the existing SME platform in which listing can be done through an IPO and with wider investor participation.
With the object of developing the debt market, stock exchanges will be allowed to introduce a dedicated debt segment on the
exchange. Banks and primary dealers will be the proprietary trading members. In order to create a complete market,
insurance companies, provident funds and pension funds will be permitted to trade directly in the debt segment with the
approval of the sectoral regulator.
Mutual fund distributors will be allowed to become members in the Mutual Fund segment of stock exchanges so that they can
leverage the stock exchange network to improve their reach and distribution.
The list of eligible securities in which Pension Funds and Provident Funds may invest will be enlarged to include exchange
traded funds, debt mutual funds and asset backed securities.

VI. ENVIRONMENT

India tosses out several thousand tonnes of garbage each day. We will evolve a scheme to encourage cities and municipalities
to take up waste-to-energy projects in PPP mode which would be neutral to different technologies. I propose to support
municipalities that will implement waste-to-energy projects through different instruments such as viability gap funding,
repayable grant and low cost capital.

Clean and Green energy is a priority of the Government. However, despite cost advantages in labour, land and construction,
the consumer pays a high price for renewable energy. One of the reasons is high cost of finance. In order to provide low cost
finance, Government will provide low interest bearing funds from the National Clean Energy Fund (NCEF) to IREDA to on-lend
to viable renewable energy projects. The scheme will have a life span of five years.

The non-conventional wind energy sector deserves incentives. Hence, I propose to reintroduce 'generation-based incentive'
for wind energy projects and provide Rs. 800 crore to the Ministry of Non Renewable Energy for the purpose.

VII. OTHER PROPOSALS

Backward Regions Grant Fund

The Backward Regions Grant Fund (BRGF) is a vital source of gap funding. I propose to allocate Rs. 11,500 crore in 2013-14
as well as another sum of Rs. 1,000 crore for LWE affected districts. BRGF will include a State component for Bihar, the
Bundelkand region, West Bengal, the KBK districts of Odisha and the 82 districts under the Integrated Action Plan. The
present criteria for determining backwardness are based on terrain, density of population and length of international borders.
It may be more relevant to use a measure like the distance of the State from the national average under criteria such as per
capita income, literacy and other human development indicators. I propose to evolve new criteria and reflect them in future
planning and devolution of funds.

Skill Development

Hon'ble Members will recall that in 2008-09 I had proposed the establishment of the National Skill Development Corporation.
The Corporation has since been set up and has done good work, but there is a long way to go. We have set an ambitious
target of skilling 50 million people in the 12th Plan period, including 9 million in 2013-14. We have to pull out all stops to
achieve this objective. Funds will be released by the National Rural Livelihood Mission and the National Urban Livelihood
Mission to be spent on skill development activities. 5 percent of the Border Area Development Programme Fund, 10 percent of
the Special Central Assistance to the Scheduled Caste sub plan and the Tribal sub plan, and some other funds will also be
used for skill development.

Defence

I propose to increase the allocation for Defence to Rs. 203,672 crore. This will include Rs. 86,741 crore for capital
expenditure. The Minister of Defence has been most understanding, and I assure him and the House that constraints will not
come in the way of providing any additional requirement for the security of the nation.

Science & Technology

Despite our constraints, we must find resources for science and technology and for Space, Atomic Energy etc. I propose to
allocate Rs. 6,275 crore to the Ministry of Science & Technology; Rs. 5,615 crore to the Department of Space; and Rs. 5,880
crore to the Department of Atomic Energy. Hon'ble Members will be happy to know that these amounts are substantial
enhancements.

While we extol the virtues of science and technology (S&T), I think we do not pay enough attention to science and technology
for the common man. With the help of the Ministry of Science and Technology and the Principal Scientific Adviser to the
Government, I have identified a few amazing S&T innovations. I propose to set apart Rs. 200 crore to fund organisations that
will scale up and make these products available to the people. I propose to ask the National Innovation Council to formulate a
scheme for the management and application of the fund.

Institutions of Excellence

Continuing the tradition of supporting institutions of excellence, I propose to make a grant of Rs.100 crore each to:

Aligarh Muslim University, Aligarh campus

Banaras Hindu University, Varanasi

Tata Institute of Social Sciences, Guwahati campus

Indian National Trust for Art and Cultural Heritage (INTACH)

Sports

Sports of all kind deserve our support. We have many sportsmen and sportswomen but few coaches. Hence, I propose to set
up the National Institute of Sports Coaching at Patiala at a cost of Rs. 250 crore over a period of three years.

Broadcasting

Government proposes to expand private FM radio services to 294 more cities. About 839 new FM radio channels will be auctioned in
2013-14 and, after the auction, all cities having a population of more than 100,000 will be covered by private FM radio services.

Panchayati Raj

The Rajiv Gandhi Panchayat Sashaktikaran Abhiyan (RGPSA) was started in the current year with a modest allocation of
Rs.50 crore. Keeping in view the importance of building capacity in panchayati raj institutions, I had allocated Rs.455 crore to
the Ministry of Panchayati Raj in 2013-14. I now propose to provide an additional Rs. 200 crore, making it Rs. 655 crore.
Post Offices
Government has an ambitious IT driven project to modernise the postal network at a cost of Rs. 4,909 crore. Post offices will
become part of the core banking solution and offer real time banking services. I propose to provide Rs. 532 crore for the
project in 2013-14.

Ghadar Memorial

To mark the centenary of the Ghadar movement, the Government will fund the conversion of the Ghadar Memorial in San
Francisco into a museum and library.

Central Schemes

Government is concerned about the proliferation of Centrally Sponsored Schemes (CSS) and Additional Central Assistance
(ACA) schemes. They were 173 in number at the end of the 11 th Plan. I am glad to announce that the schemes will be
restructured into only 70 schemes. Each scheme will be reviewed once in two years. Central funds for the schemes will be
given to the States as part of central plan assistance. Hon'ble Members will be glad to know that, in 2013-14, I expect to
transfer resources to the tune of Rs. 5,87,082 crore to the States and UTs under share of taxes, non-plan grants and loans,
and central assistance.

I make three promises

Madam Speaker, before I close this part of my speech, I wish to draw a picture of three faces that represent the vast majority
of the people of India. The first is the face of the woman. She is the girl child, the young student, the sportswoman, the
homemaker, the working woman, and the mother. The second is the face of the youth. He is impatient, she is ambitious, and
both represent the aspirations of a new generation. The third is the face of the poor who look to the government for a little help,
a scholarship or an allowance or a subsidy or a pension. To each of them, on behalf of the Government, the Prime Minister
and the Chairperson of the UPA, I make a promise.

To the women of India: We have a collective responsibility to ensure the dignity and safety of women. Recent incidents have
cast a long, dark shadow on our liberal and progressive credentials. As more women enter public spaces − for education or
work or access to services or leisure − there are more reports of violence against them. We stand in solidarity with our girl
children and women. And we pledge to do everything possible to empower them and to keep them safe and secure. A number
of initiatives are under way and many more will be taken by Government as well as non-government organisations. These
deserve our support. As an earnest of our commitment to these objectives, I propose to set up a fund − let us call it the
Nirbhaya Fund − and Government will contribute Rs.1,000 crore. Ministry of Women and Child Development and other
ministries concerned will be requested to work out the details of the structure, scope and application of the fund.

To the youth of India: A large number of youth must be motivated to voluntarily join skill development programmes. I propose to
ask the National Skill Development Corporation to set the curriculum and standards for training in different skills. Any institution
or body may offer training courses. At the end of the training, the candidate will be required to take a test conducted by
authorised certification bodies. Upon passing the test, the candidate will be given a certificate as well as a monetary reward of
an average of Rs. 10,000 per candidate. Skill-trained youth will give an enormous boost to employability and productivity. On
the assumption that 10,00,000 youth can be motivated in one year, I propose to set apart Rs.1,000 crore for this ambitious
scheme. I hope that this will be the trigger to extend skill development to all the youth of the country.

Finally, to the poor of India: The Direct Benefit Transfer scheme has captured the imagination of the people, especially the
poor. The Government is the government of the people. The money is the money belonging to the people. When we say
"Aapka paisa aapke haath", why should anyone oppose it? We have made a modest and cautious beginning on the 1st of
January, 2013. Nearly 11 lakh beneficiaries have received the benefit directly into their bank accounts. All around us, we see
the smiles on the faces of the dalit girls and the tribal boys who have received their scholarships. We see the happiness on the
faces of the pregnant women who are assured that the Government cares for the mother and the child before and after child
birth. We are redoubling our efforts to ensure that the digitized beneficiary lists are available; that a bank account is opened
for each beneficiary; and that the bank account is seeded with Aadhaar in due course. I assure the House and the people of
India that the DBT scheme will be rolled out throughout the country during the term of the UPA Government.

Budget Estimates
I shall now turn to the Budget Estimates for 2013-14.

The estimate of Plan Expenditure is placed at Rs. 5,55,322 crore. As a proportion of total expenditure, it will be 33.3 percent.

Non Plan Expenditure is estimated at Rs.11,09,975 crore.

When we accepted the main recommendations of the Kelkar report, I had drawn some red lines and promised that I would not
cross those lines. I am glad to report that I have kept my promise. The fiscal deficit for the current year has been contained at
5.2 percent and the fiscal deficit for the year
2013-14 is estimated at 4.8 percent. The revenue deficit for the current year will be 3.9 percent and the revenue deficit for the
year 2013-14 is estimated at 3.3 percent. We must redeem our promise by 2016-17 and bring down the fiscal deficit to 3
percent, the revenue deficit to 1.5 percent and the effective revenue deficit to zero.

PART B

VIII. TAX PROPOSALS

Madam Speaker, I shall now present my tax proposals.

When I took over in August, 2012, I made a statement that "clarity in tax laws, a stable tax regime, a non-adversarial tax
administration, a fair mechanism for dispute resolution, and an independent judiciary will provide great assurance". That
statement is the underlying theme of my tax proposals, both on the direct taxes side and on the indirect taxes side.

An emerging economy must have a tax system that reflects best global practices. I propose to set up a Tax Administration
Reform Commission to review the application of tax policies and tax laws and submit periodic reports that can be implemented
to strengthen the capacity of our tax system.

In 2011-12, the tax GDP ratio was 5.5 percent for direct taxes and 4.4 percent for indirect taxes. These ratios are one of the lowest for
any large developing country and will not garner adequate resources for inclusive and sustainable development. I may recall that in
2007-08, the tax GDP ratio touched a peak of 11.9 percent. In the short term, we must reclaim that peak.

Direct Taxes

Let me begin with direct taxes.

In a constrained economy, there is little room to raise tax rates or large amounts of additional tax revenues. Equally, there is
little room to give away tax revenues or the tax base. It is a time for prudence, restraint and patience.

The rates of personal income tax -- 10, 20 & 30 -- have survived four Finance Ministers and four Governments. The current
slabs were introduced only last year. Hence, I am afraid, there is no case to revise either the slabs or the rates. Besides, even
a moderate increase in the level of threshold exemption will mean that hundreds of thousands of tax payers will go out of the tax
net and the tax base will be severely eroded. Nevertheless, I am inclined to give some relief to the tax payers in the first
bracket of Rs. 2 lakh to Rs. 5 lakh. Assuming an inflation rate of 10 percent and a notional rise in the threshold exemption from
Rs. 2,00,000 to Rs. 2,20,000, I propose to provide a tax credit of Rs. 2,000 to every person who has a total income upto Rs. 5
lakh. 1.8 crore tax payers are expected to benefit to the value of Rs. 3,600 crore.

Fiscal consolidation cannot be effected only by cutting expenditure. Wherever possible, revenues must also be augmented.
When I need to raise resources, who can I go to except those who are relatively well placed in society? There are 42,800
persons − let me repeat, only 42,800 persons in the whole country − who admitted to a taxable income exceeding Rs. 1 crore
per year. I propose to impose a surcharge of 10 percent on persons whose taxable income exceeds Rs. 1 crore per year.
This will apply to individuals, HUFs, firms and entities with similar tax status.

I also propose to increase the surcharge from 5 percent to 10 percent on domestic companies whose taxable income exceeds
Rs. 10 crore per year. In the case of foreign companies, who pay the higher rate of corporate tax of 40 per cent, the
surcharge will increase from 2 percent to 5 percent.

In all other cases, such as dividend distribution tax or tax on distributed income, I propose to increase the current surcharge of
5 percent to 10 percent.

tBut I may add that the additional surcharges will be in force for only one year, that is Financial Year 2013-14.
I believe there is a little bit of the spirit of Mr. Azim Premji in every affluent tax payer. I am confident that when I ask the
relatively prosperous to bear a small burden for one year, just one year, they will do so cheerfully.

The education cess for all tax payers shall continue at 3 percent.

In part A of my speech, I had referred to the tax benefit to the first-home buyer who takes a loan for an amount not exceeding
Rs. 25,00,000. I propose to allow such home buyers an additional deduction of interest of Rs. 100,000 to be claimed in AY
2014-15. If the limit is not exhausted, the balance may be claimed in AY 2015-16. This deduction will be over and above the
deduction of Rs. 150,000 allowed for self-occupied properties under section 24 of the Income-tax Act.

I propose to relax the eligibility conditions of life insurance policies for persons suffering from disability or certain ailments by
increasing the permissible premium rate from 10 percent to 15 percent of the sum assured. This relaxation shall be available in
respect of policies issued on or after 1.4.2013.

Contributions made to the Central Government Health Scheme are eligible for deduction under section 80D of the Income-tax
Act. I propose to extend the same benefit to similar schemes of the Central Government and State Governments.

Donations made to the National Children's Fund will now be eligible for 100 percent deduction.

No large economy can become truly developed without a robust manufacturing sector. Hence, as stated in part A of my
speech, I propose to provide an investment allowance at the rate of 15 percent to a manufacturing company that invests more
than Rs. 100 crore in plant and machinery during the period 1.4.2013 to 31.3.2015.

I propose to extend the 'eligible date' for projects in the power sector to avail of the benefit under section 80-IA of the Income-
tax Act, from 31.3.2013 to 31.3.2014.

In order to encourage repatriation of funds from overseas companies, I propose to continue for one more year the
concessional rate of tax of 15 percent on dividend received by an Indian company from its foreign subsidiary. Further, the
Indian company shall not be liable to pay dividend distribution tax on the distribution to its shareholders of that portion of the
income received from its foreign subsidiary.

With a view to attract investment in long term infrastructure bonds in foreign currency, the rate of tax on interest paid to non-
resident investors was reduced last year from 20 percent to 5 percent. I propose to extend the same benefit to investment
made through a designated bank account in rupee-denominated long term infrastructure bonds.

In order to facilitate financial institutions to securitise their assets through a special purpose vehicle, I propose to exempt the
Securitisation Trust from income tax. Tax shall be levied only at the time of distribution of income by the Securitisation Trust at
the rate of 30 percent in the case of companies and at the rate of 25 percent in the case of an individual or HUF. No further
tax will be levied on the income received by the investors from the Securitisation Trust.

Investor Protection Fund set up by a depository for the protection of interest of beneficial owners will be exempt from income
tax.

I propose to provide parity in taxation between an IDF-Mutual Fund that distributes income and an IDF-NBFC that pays
interest, when the payment is made to a non-resident. The rate of tax on such distributed income or interest will be 5 percent.

Venture Capital Funds have been allowed pass through status under the Income-tax Act. The relevant regulations of SEBI have
been replaced by Alternative Investment Fund Regulations. Hence, I propose to extend, subject to certain conditions, pass
through status to category I Alternative Investment Funds registered with SEBI as venture capital funds. Angel Investors who
are recognised as category I AIF venture capital funds will also get pass through status.

I propose to modify the Rajiv Gandhi Equity Saving Scheme, details of which I had mentioned in part A of my speech.

Transactions in immovable properties are usually undervalued and underreported. One-half of the transactions do not carry
the PAN of the parties concerned. With a view to improve the reporting of such transactions and the taxation of capital gains, I
propose to apply TDS at the rate of one percent on the value of the transfer of immovable property where the consideration
exceeds Rs. 50 lakhs. However, agricultural land will be exempt.

Some tax avoidance arrangements have come to notice, and I propose to plug the loopholes. Some unlisted companies have
avoided dividend distribution tax by arrangements involving buyback of shares. I propose to levy a final withholding tax at the
rate of 20 percent on profits distributed by unlisted companies to shareholders through buyback of shares.

Another case is the distribution of profits by a subsidiary to a foreign parent company in the form of royalty. Besides, the rate
of tax on royalty in the Income-tax Act is lower than the rates provided in a number of Double Tax Avoidance Agreements. This
is an anomaly that must be corrected. Hence, I propose to increase the rate of tax on payments by way of royalty and fees for
technical services to non-residents from 10 percent to 25 percent. However, the applicable rate will be the rate of tax stipulated
in the DTAA.

Securities Transaction Tax (STT) has a stabilizing effect on transactions, although it adds to the transaction cost. Taking note
of the changes and shifts in the market, I propose to make the following reductions in the rates of tax:

Equity futures:from 0.017 to 0.01 percent

MF/ETF redemptions at fund counters: from 0.25 to 0.001 percent

MF/ETF purchase/sale on exchanges: from 0.1 to 0.001 percent, but only on

the seller

There is no distinction between derivative trading in the securities market and derivative trading in the commodities market,
only the underlying asset is different. It is time to introduce Commodities Transaction Tax (CTT) in a limited way. Hence, I
propose to levy CTT on non-agricultural commodities futures contracts at the same rate as on equity futures, that is at 0.01
percent of the price of the trade. Trading in commodity derivatives will not be considered as a 'speculative transaction' and
CTT shall be allowed as deduction if the income from such transaction forms part of the business income. As I said,
agricultural commodities will be exempt.

Hon'ble Members are aware that the Finance Act, 2012 introduced the General Anti Avoidance Rules, for short, GAAR. A
number of representations were received against the new provisions. An expert committee was constituted to consult
stakeholders and finalise the GAAR guidelines. After careful consideration of the report, Government announced certain
decisions on 14.1.2013 which were widely welcomed. I propose to incorporate those decisions in the Income-tax Act. The
modified provisions preserve the basic thrust and purpose of GAAR. Impermissible tax avoidance arrangements will be
subjected to tax after a determination is made through a well laid out procedure involving an assessing officer and an
Approving Panel headed by a Judge. I propose to bring the modified provisions into effect from 1.4.2016.

The Rangachary Committee was appointed to look into tax matters relating to Development Centres & IT sector and Safe
Harbour rules for a number of sectors. We have issued a circular covering IT sector exports and will shortly issue a circular
covering Development Centres. Rules on Safe Harbour will be issued after examining the reports of the Committee, the last of
which is expected by 31.3.2013.

The fifth Large Tax payer Unit will be opened at Kolkata shortly.

I have also taken a number of administrative measures in the last few months. I propose to expand the scope of annual
information returns, extend e-payment facility through more banks, extend the refund banker system to refunds of more than
Rs.50,000, and make e-filing mandatory for more categories of assessees. The Income-tax department is rapidly moving
towards technology-based processing as would be evident from the Central Processing Cell set up at Bengaluru and the
Central Processing Cell-TDS inaugurated a few days ago at Vaishali, Ghaziabad.

The Direct Taxes Code (DTC) is work in progress. The DTC is not intended to be an amended version of the Income-tax Act,
1961 but a new Code based on the best international practices that will be compatible with the needs of a fast developing
economy. The Standing Committee on Finance has submitted its report and we attach great weight to its recommendations.
My team in the Ministry of Finance is examining the recommendations and I intend to work with the Standing Committee and
its Chairman in order to finalise the official amendments. I shall endeavour to bring the Bill back to this House before the end
of the Budget Session.

Indirect Taxes

I shall now deal with indirect taxes.

There will be no change in the peak rate of basic customs duty of 10 percent for non-agricultural products. There will also be
no change in the normal rate of excise duty of 12 percent and the normal rate of service tax of 12 percent.
I have a few proposals on customs duties.

To encourage manufacture of environment-friendly vehicles, I propose to extend the period of concession now available for
specified parts of electric and hybrid vehicles up to 31.3.2015.

Leather and leather goods is a thrust sector for exports. I propose to reduce the duty on specified machinery for manufacture
of leather and leather goods, including footwear, from 7.5 percent to 5 percent.

To encourage exports, I propose to reduce the duty on pre-forms of precious and semi-precious stones from 10 percent to 2
percent.

Export duty on de-oiled rice bran oil cake has made our exports uncompetitive. Hence, I propose to withdraw the said duty.

Prices of unprocessed ilmenite have gone up several fold in the export market. Considering the need to conserve our natural
resources, I propose to impose a duty of 10 percent on export of unprocessed ilmenite and 5 percent on export of upgraded
ilmenite.

The aircraft manufacture, repair and overhaul (MRO) industry is at a nascent stage. Encouraging the MRO sector will generate
employment besides other benefits. Hence, I propose to provide certain concessions to the MRO industry, details of which are
in the budget documents.

To encourage domestic production of set top boxes as well as value addition, I propose to increase the import duty from 5
percent to 10 percent.

In order to give a measure of protection to domestic sericulture, I propose to increase the import duty on raw silk from 5
percent to 15 percent.

Steam coal is exempt from customs duty but attracts a concessional CVD of one percent. Bituminous coal attracts a duty of 5
percent and CVD of 6 percent. Since both kinds of coal are used in thermal power stations, there is rampant misclassification.
I propose to equalise the duties on both kinds of coal and levy 2 percent customs duty and 2 percent CVD.

There is an affluent class in India that consumes imported luxury goods such as high end motor vehicles, motorcycles, yachts
and similar vessels. I am sure they will not mind paying a little more. Hence, I propose to increase the duty on such motor
vehicles from 75 percent to 100 percent; on motorcycles with engine capacity of 800cc or more from 60 percent to 75
percent; and on yachts and similar vessels from 10 percent to 25 percent.

The baggage rules permitting eligible passengers to bring jewellery was last amended in 1991. Gold prices have risen since,
and passengers have complained of harassment. Hence, I propose to raise the duty-free limit to Rs.50,000 in the case of a
male passenger and Rs.100,000 in the case of a female passenger, subject to the usual conditions.

Next, I shall deal with excise duties.

The readymade garment industry is in the throes of a crisis. The industry needs a lifeline. There is a demand to restore the
'zero excise duty route' for cotton and manmade sector (spun yarn) at the yarn, fabric and garment stages. I propose to
accept the demand. In the case of cotton, there will be zero duty at the fibre stage also and, in the case of spun yarn, there
will be a duty of 12 percent at the fibre stage. The 'zero excise duty route' will be in addition to the CENVAT route now
available.

I propose to totally exempt handmade carpets and textile floor coverings of coir or jute from excise duty.

As a measure of relief to the ship building industry, I propose to exempt ships and vessels from excise duty. Consequently,
there will be no CVD on imported ships and vessels.

What does a Finance Minister turn to when he requires resources? The answer is cigarettes. I propose to increase the
specific excise duty on cigarettes by about 18 percent. Similar increases are proposed on cigars, cheroots and cigarillos.

SUVs occupy greater road and parking space and ought to bear a higher tax. I propose to increase the excise duty on SUVs
from 27 percent to 30 percent. However, the increase will not apply to SUVs registered as taxis.

The excise duty rate on marble was fixed in 1996. Keeping in view the increase in prices of marble, I propose to increase the
duty from Rs.30 per sq. mtr to Rs. 60 per sq mtr.

I propose to levy 4 percent excise duty on silver manufactured from smelting zinc or lead, to bring the rate on par with the
excise duty applicable to silver obtained from copper ores and concentrates.

About 70 percent of imported mobile phones and about 60 percent of domestically manufactured mobile phones are priced at
Rs.2000 or below. Mobile phones enjoy a concessional excise duty of one percent and I do not propose to change that in the
case of low priced mobile phones, that is, below Rs. 2,000. However, on mobile phones priced at more than Rs.2000, I
propose to raise the duty to 6 percent.

To reduce valuation disputes, I propose to provide for MRP based assessment in respect of branded medicaments of
Ayurveda, Unani, Siddha, Homeopathy and bio-chemic systems of medicine. There will be an abatement of 35 percent.

As regards service tax, I have only a few proposals. The negative list became effective after the last Budget. Stability in the tax
regime is important. Hence, I propose to include only two services which deserve to be included in the negative list. They are
vocational courses offered by institutes affiliated to the State Council of Vocational Training and testing activities in relation to
agriculture and agricultural produce. They will be exempt from service tax.

Last year, at the request of the film industry, full exemption of service tax was granted on copyright on cinematography. The
industry has now requested to limit the benefit of exemption to films exhibited in cinema halls. I propose to accept that request.

At present, service tax does not apply to air conditioned restaurants that do not serve liquor. The distinction is artificial, and I
propose to levy service tax on all air conditioned restaurants.

Homes and flats with a carpet area of 2,000 sq. ft. or more or of a value of Rs.1 crore or more are high-end constructions where the
component of 'service' is greater. Hence, I propose to reduce the rate of abatement for this class of buildings from 75 percent to 70
percent. Existing exemptions from service tax for low cost housing and single residential units will continue.

While there are nearly 17,00,000 registered assessees under service tax, only about 7,00,000 file returns. The remaining ten
lakhs, many of them have simply stopped filing returns. We cannot go after each of them. I have to motivate them to file
returns and pay the tax dues. Hence, I propose to introduce a one-time scheme called 'Voluntary Compliance Encouragement
Scheme'. A defaulter may avail of the scheme on condition that he files a truthful declaration of service tax dues since
1.10.2007, that is, for five years, and makes the payment in one or two installments before the prescribed dates. In such a
case, we will collect the taxes but interest, penalty and other consequences will be waived. I hope to entice a large number of
assessees to return to the tax fold. I also hope to collect a reasonable sum of money.

There are a few more decisions which entail small gains or losses of revenue. They are reflected in the budget documents.

My tax proposals on the direct taxes side are estimated to yield Rs.13,300 crore mainly from the surcharges and on the
indirect taxes side Rs.4,700 crore.

Goods and Services Tax

Hon'ble Members will recall that I had first mentioned the Goods and Services Tax (GST) in the Budget speech for 2007-08. At
that time, it was thought that GST could be brought into effect from 1.4.2010. Alas, that was not to be, although the States
swear by the benefit of GST. However, my recent meetings with the Empowered Committee of State Finance Ministers has led
me to believe that the State Governments − or, at least, the overwhelming majority − are agreed that there is a need for a
Constitutional amendment; that there is a need for State Governments and the Central Government to pass a GST law that will
be drafted by the State Finance Ministers and the GST Council; and there is a need for the Centre to compensate the States
for loss due to the reduction in the CST rate. I hope we can take this consensus forward in the next few months and bring to
this House a draft Bill on the Constitutional amendment and a draft Bill on GST. Hope inspires courage. I propose to take the
first decisive step by setting apart, in the Budget, a sum of Rs.9,000 crore towards the first installment of the balance of CST
compensation. I appeal to the State Finance Ministers to realise the serious intent of the Government to introduce GST and
come forward to work with the Government and bring about a transformational change in the tax structure of the country.

Conclusion

Madam Speaker, the last day of February is another day in the life of a nation. We pause today, to reflect on the past and the
future, and we shall resume our work tomorrow. Our work will be seen in our actions. How shall we act? I turn to my favourite
poet, Saint Tiruvalluvar, who said:
"Kalangathu Kanda Vinaikkan Thulangkathu

Thookkang Kadinthu Seyal"

(What clearly the eye discerns as right, with steadfast will

And mind unslumbering, that should man fulfill)

Any economist will tell us what India can become. We are the tenth largest economy in the world. We can become the eighth,
or perhaps the seventh, largest by 2017. By 2025, we could become a $ 5 trillion economy, and among the top five in the
world. What we will become depends on us and on the choices that we make. Swami Vivekananda, whose 150th birth
anniversary we celebrate this year, told the people: "All the strength and succour you want is within yourself. Therefore, make
your own future."

As a resolute step towards that future, Madam Speaker, I commend the Budget to the House.