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First-cut analysis: Favourable impact seen on equity markets

Overall, the Union Budget 2001 is expected to have a very favourable impact on the Equity markets.

Positive Direct Impact

• Removal of all surcharges except the 2% Earthquake Relief surcharge.
• Interest Rate Cuts on small savings schemes reduced by 1%- 1.5% as of March 1, 2001.
• FII investment limit increased from 40% to 49%.
• Dividend Tax reduced to 10% from 20%.
• No tax on Long Term Capital gains if re-invested in IPOs.

Positive Non-Fiscal Measures

• Acceleration on PSU Disinvestment Reforms
• Concrete Measures towards reduction in Govt. Wage Bill
• Levying of User Charges for Infra for Govt. Services
• Strong Commitment at reducing taxes and simplifying tax structures

1. Removal of all surcharge except that for Gujarat Earthquake
2. Rationalisation of excise duty to three rates: The three rates to be reduced to single rate of 16%.
3. Customs' Duty to be cut to 20% peak rate in 3 years

Rediff-CRISIL Budget Impact Analysis
Budget 2001

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