Industry chambers and investment bankers have given thumbs-up to the union budget that proposes a whopping Rs5,900 crore tax relief in indirect taxes as also a hike in income tax exemption limit to raise consumption.

Finance minister P Chidambaram proposed Rs60,000 crore write-off of farm loans, raised income tax exemption limits and brought down excise duties to stimulate economy.

Presenting the last full budget of the UPA government, Chidambaram announced a reduction in excise duties on drugs, small and hybrid cars, two- and three-wheelers, water purification devices, breakfast cereals, paper and paper-board.

The finance minister also proposed a reduction in the general Central Value-Added Tax (Cenvat) across the board from 16 to 14 per cent, in a bid to boost demand and stimulus to manufacturing sector. However, he kept the peak rate of customs duty unchanged.

Chidambaram's direct tax proposals are revenue neutral while those on the indirect taxes side are estimated to result in a loss of Rs5,900 crore to the exchequer.

The finance minister has presented a comprehensive, balanced and growth-oriented budget, said Sunil Mittal, president, CII in a press release. 

The Budget aims to address the triple challenge of growth inclusiveness and sustainability very astutely, said Mittal, adding that the proposals would go along way in building people and building India. 

The budget benefits all - from farmers to industry to the average salary earner - without making the budget fiscally irresponsible, said the CII release.

The CII, however, noted the absence of any reference to the implications of the implementation of the Sixth Pay Commission report.

The budget proposals aimed at giving a fillip to consumption in the country and thereby the growth cycle, would supplement the RBI's neutral stance indicated in the last monetary policy review, the CII release said.

CII said it is particularly happy that necessary attention has been given to the social sector, including health and education supplemented by rural focus that would indirectly aid the growth cycle.

The chamber also welcomed the budget's emphasis on development of human resources, especially those related to minorities, skill development programmes and increased provision for research and development.

The 5-year tax holiday proposed for hospitals under section 80 IA of the Income Tax Act set up anywhere in India except specified urban agglomerations and especially in Tier II & Tier III cities would help more private sector hospitals to come up in rural areas, said Mittal.

The CII president also welcomed the move to accord five year tax holiday for two, three- or four-star hotels that would be established in specified districts which have UNESCO-declared 'World Heritage Sites.'

The Tirupur Exporters' Association (TEA) also welcomed the budget, saying it was more beneficial to farmers and also to basic income tax payers. TEA president, A Shaktivel in a statement hailed the reduction of CENVAT from 16 to 14 per cent as also the allocation of more funds for infrastructure and power projects.

He also welcomed the setting up of textile parks in the country, especially Erode. However, Shaktivel expressed disappointment the budget not considering issues like reduction of interest rates, exemption of service tax and fringe benefit tax, refund of state levies and taxes and also refund of hedging cost, sought by the exporters.