Finance Minister Jaswant Singh's 2003-04 Budget has unveiled a slew of initiatives that mixes populism with pragmatism.

The Budget, which seeks to offer a counter-cyclical fiscal stimulus to get growth rates up, has proposed action to catalyse investment worth Rs 60,000 crore in infrastructure like roads, airports, ports and railways, pep up the capital markets by abolishing dividend and capital gains taxes in the hands of shareholders, and put more money in the hands of the salaried classes and pensioners by making concessions in standard deduction, and sections 80L and 88 of the Income Tax Act.

This suggests that the bulk of the Kelkar committee's recommendations have been left out of the Budget proposals.

The following are the main proposals in various areas:

Personal taxes: The basic tax slabs remain the same. The IT surcharge of five per cent has been abolished for those with salaries up to Rs 8.5 lakh.

For those above Rs 8.5 lakh, the surcharge goes up to 10 per cent. Standard deduction has been raised to 40 per cent, or Rs 30,000, whichever is lower, for those with incomes up to Rs 5 lakh.

For those above it, the deduction is Rs 20,000.

While the basic exemption limit has not been raised, the tax-free income limit for pensioners has been raised to Rs 1.53 lakh - or Rs 1.83 lakh, if one includes standard deduction and tax rebate.

Exemptions and deductions: The exemption of Rs 1.5 lakh for interest paid on housing loans has been retained. The Rs 15,000 limit for section 80L has been retained despite dividends being made tax-free.

Section 88 has not been withdrawn, despite Kelkar's recommendations.

Dividends are totally tax-free in the hands of shareholders and mutual fund investors, but companies have to pay a distribution tax of 12.5 per cent on dividends paid out.

Shares and equity-oriented mutual funds bought and sold after March 1, 2003, will not have to pay long-term capital gains tax.

Expenditure on children's education, at Rs 12,000 per annum per child for up to two children, will be entitled to a tax rebate under section 88.

Royalty income up to Rs 3 lakh per annum, received by authors of literary, artistic and scientific books, shall also be fully exempt from income tax.

Interest rates: Interest rates on all small savings schemes, including PPF, NSCs and RBI tax-free bonds, have been cut by one per cent. For pensioners, as long as they are above 55 years of age, the LIC will float a monthly pension scheme that will guarantee them annual returns of nine per cent on their lumpsum investments (The ceiling is Rs 2,000 per month on pension incomes).

The gap between market returns and the promised nine per cent return to pensioners will be bridged by government support.

Interest rates on loans to the agricultural and rural section will not be more than two per cent above banks' prime lending rates, with SBI asked to take the lead in this area.

Social security: The public sector general insurance companies are to work out a universal medical insurance scheme that will cost no more than Rs 1 a day.

For families, with up to five or seven members, the rates will go up to Rs 1.5 to Rs 2 a day, depending on the size of the family.

This premium will entitle them to reimbursement of medical expenses up to Rs 30,000 towards hospitalisation and life cover due to accident for Rs 25,000.

A new individual-based pension fund scheme has been announced for government and non-government employees.

A Pension Fund Regulatory Authority will be set up under the finance ministry to oversee the performance of these pension funds.

New imposts: The infrastructure investment will be partly financed by an additional 50 paise additional cess on petrol and diesel prices.

This is over and above the existing Re 1 a litre already being levied to finance the Golden Quadrilateral road project.

Corporate taxes and concessions: The surcharge on income-tax has been halved from five per cent to 2.5 per cent. But the basic corporate tax rate of 35 per cent remains the same.

The income-tax reliefs under sections 10A& B for IT companies will remain.

Stock exchanges that corporatise and demutualise will be given a one-time exemption on capital gains. Tax holiday has been extended for drug R&D companies.

Financial institutions that lend money for the creation of new or enhanced medical facilities (hospitals with 100 or more beds) will get the benefit of Section 10 (23 G) of IT Act.

Service tax: The service tax is being raised to eight per cent from five per cent currently to align with VAT requirements. This will push up the cost of telephone bills, brokerage services and credit card expenses, among other things.

Moreover, 10 more services have been brought under the service tax net in 2003-04.

Major customs changes: The peak customers tariff rate has been reduced to 25 per cent from 30 per cent. Import duty on gold (numbered) coins has been slashed to Rs 100 per 10 gm, from Rs 250 earlier.

Specified power and water supply equipment will face import duties of five per cent and nil, respectively.

Telecom and IT infrastructure equipment imports will face lower import duties of 15 per cent (vs 25 per cent earlier).

Textile machinery import duties have been reduced from 25 per cent to five per cent.

Customs duty on some life-saving equipment is being cut from 25 per cent to 5 per cent, while also being exempt from CVD (countervailing duty or additional duty of customs).

Major excise changes: The core rates for excise have been reduced to just three - eight, 16 and 24 per cent.

This will bring down excise rates on products like cars, tyres, ACs and soft-drinks to 24 per cent against 32 per cent earlier.

In respect of life-saving equipment already exempt from customs CVD, it is proposed to exempt them from excise duty as well so as to encourage indigenous manufacturers.

Other reforms: The foreign investment limit in private banks has been increased to 74 per cent from the current 49 per cent.

The cap on voting rights - currently 10 per cent - will go shortly.

States will shift to value added tax from April 1, and the centre will compensate States for any revenue shortfall fully in 2003-04.

Price changes: The prices of fertiliser are being raised. Urea goes up by Rs 12 a bag, and diammonium phosphate and muriate of potash by Rs 10 a bag.

Infrastructure: Two companies are to be set up to modernise and upgrade Mumbai and Delhi airports, while Hyderabad and Bangalore will get private airports.

Private investors may be roped in for the Mumbai and Delhi airports.

Overall, the changes in direct taxes will cost the government Rs 2,955 crore in terms of lost revenue, which will be recouped from indirect tax changes (plus Rs 3,294). With total expenditure at Rs 4,38,795 crore, and revenues of Rs 2,53,935 crore, the fiscal deficit balloons to Rs 1,53,637 crore in 2003-04. That would work out to 5.6 per cent of the GDP.