India increases spending to support economic recovery

Dubai: India ramped up spending for this fiscal year to support a fragile economic recovery, spooking stock and bond markets with plans for record borrowing and the biggest budget deficit in 16 years.

The UAE's Indian community had a mixed reaction to the budget. While they were pleased with the cuts in personal tax and increased total budget expenditure, some said there was a lack of focus on the community outside the country.

They also expressed concerns on rising fiscal deficit - 6.8 per cent of gross domestic product (GDP) for the year ending March 2010.

"The budget lacked innovation and bold initiatives," said Paras Shahdadpuri, president and member of administrative board of Indian Business and Professional Council.

Investors had hoped the new government would use a strong re-election mandate to push through reforms, but the budget lacked major policy changes.

Stocks tumbled nearly six per cent, bond yields spiked and the rupee fell 1.4 per cent.

Mukherjee kept the corporate tax rate unchanged. For individuals, the budget sought to raise the income tax exemption limits for senior citizens by Rs15,000 and for women and other taxpayers by Rs10,000, while scrapping the 10 per cent surcharge on personal taxes.

Customs duty on gold was raised. Gold bars are currently subject to customs duty of Rs100 per 10 grams while other forms of gold (excluding jewellery) are subject to a duty of Rs250 per 10 grams.

The budget raised the rates to Rs200 and Rs500 in each category respectively.

The customs duty on silver (excluding jewellery) was increased from Rs500 per kg to Rs1,000.

These revised rates will also apply to gold and silver, including ornaments that are not studded, when imported by a bona fide passenger as baggage.