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Birmingham Chamber of Commerce and Industry

March 1st, 2010

A new era of strategic partnership

Prime Minister Dr. Mammohan Singh with King of Saudi Arabia

Prime Minister Dr. Manmohan Singh on March 1 concluded a historic three-day visit to Saudi Arabia during which the two countries signed ten bilateral agreements. The two sides also issued a Riyadh Declaration to strengthen ties between India and the influential Arabic Gulf nation.

In a rare honour accorded to a foreign dignitary, Dr. Singh was invited to address the Majlis-ash-Shura, the Saudi Parliament, where he not only sought investments from the Islamic kingdom but also pressed the need for Pakistan to "act decisively against terrorism".

The Prime Minister said that India would grow at the rate of 9 to 10 percent for the next 25 years. "We seek Saudi investments in a range of sectors from infrastructure and manufacturing to the services and hospitality sector."

Dr. Singh also met Saudi Foreign Minister Prince Saud Al-Faisal, Petroleum and Mineral Resources Minister Ali Al-Naimi and Commerce and Industry Minister Zainal Alireza.

Later, the Prime Minister visited the King Saud University where he was conferred an honorary doctorate.

Earlier on February 27, the Prime Minister arrived to an unprecedented welcome in the Saudi capital when, setting aside protocol, the Saudi Crown Prince and the entire cabinet were at hand at the airport to receive the Indian leader. The next day, Saudi King Abdullah Bin Abdul Aziz officially welcomed him at a grand ceremony where a guard of honour was presented and a state banquet thrown in his honour.

Dr. Singh and King Abdullah signed the 'Riyadh Declaration - A New Era of Strategic Partnership' on February 28 to put their seal on steadily growing ties. This is expected to cover security, economy, defence, technology and political areas as well as ways to combat terrorism.

"The two leaders reviewed the status of implementation of the historic Delhi Declaration signed in 2006, and expressed their satisfaction at the steady expansion of Saudi-India relations since the signing of the Delhi Declaration," a statement read.

Another agreement signed by the two countries was to facilitate transfer of sentenced prisoners to their own country.

"We hope this treaty will facilitate the transfer of Indian prisoners back to India where they could serve the remaining part of the sentence handed out by a Saudi court," said Latha Reddy of the External Affairs Ministry. The third agreement was on cultural cooperation between the two Ministries of Culture.

The fourth MoU was on cooperation on the peaceful use of outer space. It was signed between India's Department of Science and Technology (DST) and Saudi Arabia's King Abdulaziz City for Science and Technology (KACST).

Tata Motors has agreed to supply Saudi Arabia's Hotil school buses worth $80 million. A pact was also signed between the Gulf Bureau of Research and DFL, and another between India's Centre for Development of Advanced Computing (C-DAC) and Saudi Arabia's King Saud University.

Excerpts from Riyadh Declaration:

"Keeping in view the development of relations between the two countries, and the potential for their further growth, the two leaders decided to raise their cooperation to a strategic partnership covering security, economic, defence and political areas.

The two leaders reiterated their mutual desire to develop as knowledge-based economies based on advances in the areas of information technology...

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India Budget: Welfare, inclusive growth key targets

Finance Minister Pranab Mukherjee

India on February 26 proposed a sizeable tax relief for individuals but hiked excise rates and minimum alternate tax in the $221.75 billion budget for 2010-11 that steps up outlays for welfare schemes and assures high, inclusive growth.

Individuals stand to gain on account of a revision in tax slabs. But they will have to pay more for cars, cigarettes, petrol, diesel, cement, jewellery and a host of consumer goods, even as they will shoulder higher airfares owing to the new service tax on air travel.

Presenting the Budget in the Lok Sabha, the Lower House of the Indian Parliament, Finance Minister Pranab Mukherjee also estimated a lower fiscal deficit of 5.5 percent of gross domestic product (GDP), against the revised estimates of 6.7 percent for this fiscal.

He said 46 percent of the plan allocation will be set aside for infrastructure alone and 37 percent for social welfare, programmes, while substantially hiking outlays for rural and urban development schemes, as also for education and healthcare. "Today, as I stand before you, I can say with some confidence that we have weathered the crisis well," Mr. Mukherjee said in his 100-minute speech, recalling the hard days faced by the economy in the past two years, whilerolling back some purse-loosening measures.

"That is not to say the challenges today are any less than they were nine months ago, when the United Progressive Alliance was voted back to power under the leadership of Smt. Sonia Gandhi and Prime Minister Dr. Manmohan Singh."

Mr. Mukherjee proposed thefollow-ing tax slabs for individuals: No tax for an annual income of up to Rs. 160,000, a rate of 10 percent for up to Rs. 500,000, then 20 percent for up to Rs. 800,000 and finally 30 percent on anything higher.

At the peak rate this will entail a saving of up to Rs. 50,000, and an overall hit of $5.2 billion for the exchequer. "The proposal to reduce the tax slab will benefit 60 percent of all tax payers," said Mr. Mukherjee, bringing cheer to people.

But he also sought to hike the minimum alternate tax to 18 percent of book profits from the present 15 percent, though he lowered the surcharge from 10 percent to 7.5 percent, which will have a direct impact on the bottomlines of large companies.

The Finance Minister also sought to restore the 5 percent basic duty on oil and 7.5 percent each on petrol and diesel, and imposed a Re. 1 excise on these two fuels.

Continued on Page 3

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