Union Budget 2012-13

7 Strengthening Investment Environment 31.

The domestic investment environment has suffered on multiple counts in the past year. It is time to fast track policy decisions and ensure on-time implementation of major projects.

Foreign Direct Investment 32.

Organised retail helps in reducing cost of intermediation due to economies of scale, benefiting both consumers and producers. At present, FDI in single brand and in cash and carry wholesale trade is permitted to the extent of 100 per cent. The decision in respect of allowing FDI in multi-brand retail trade up to 51 per cent, subject to compliance with specified conditions, has been held in abeyance. Efforts are on to arrive at a broad based consensus in consultation with the State Governments.

Advance Pricing Agreement 33.

In a globalised economy with expanding cross-border production chains and growing trade within entities of the same group, Advance Pricing Agreement (APA) can significantly bring down tax litigation and provide tax certainty to foreign investors. Though, the provision for APA has been included in the DTC Bill, 2010, I propose to bring forward its implementation by introducing it in the Finance Bill, 2012.

Financial Sector 34.

Reforms in the financial sector have been pursued with the objective of more efficient market intermediation between savers and investors.

35.

To encourage flow of savings in financial instruments and improve the depth of domestic capital market, it is proposed to introduce a new scheme called Rajiv Gandhi Equity Savings Scheme. The scheme would allow for income tax deduction of 50 per cent to new retail investors, who invest up to ` 50,000 directly in equities and whose annual income is below ` 10 lakh. The scheme will have a lock-in period of 3 years. The details will be announced in due course.

Capital Markets 36.

During the year 2011-12, we took a series of steps to deepen the capital market and encourage investment in infrastructure sector. These steps included raising of FII investment limit in long-term infrastructure bonds, corporate bonds and government securities. The limit on External Commercial Borrowings (ECB) was also raised and qualified foreign investors were allowed to invest in specified Indian mutual funds and directly in equities. http://indiabudget.nic.in