Food inflation, a big cause for concern for the ruling dispensation, is bound to exacerbate with the rise in motor fuels that came into effect immediately after the budget was presented to Parliament on Friday. The NRE and FCNR deposits have now become extremely unattractive, as the interest earned on them is less than three percent as against the food inflation touching a whopping 17 percent last month. NRIs, especially Gulf Indians who regularly send money to their dependents, will find the going tough because of this mismatch.

On the other hand, flying to and fro to India will also be costlier since a service tax of 10.36 percent will now be levied on domestic flights and the economy class of foreign flights. This is in addition to the proposed rise in aviation turbine fuel by Rs.1,500 per kiloliter. Air travelers will feel the pinch when they take to flights within and outside India.

The budget also proposes to tax interest, royalty and fees for technical services received by NRIs even if such payments do not relate to a place of business/business connection in India or if the services are rendered outside India.

As far as the Indian rupee is concerned, Mukherjee intends to formalize a symbol that reflects and captures the Indian ethos and culture. The idea is to ensure pride of place to the rupee alongside the select club of currencies such as the US dollar, the British sterling, the euro and the Japanese yen that have clear and distinguishing identities.

With the expectation of Indian growth going forward, the rupee is expected to be firm. Some foreign fund managers have described the budget as forward looking. Foreign institutional investors (FIIs) are likely to pump more money into India to cash in on strong growth prospects as Europe and America are yet to recover completely from the global financial crisis. Just on the day of the budget and as it was being presented, FIIs pumped in nearly Rs.9 billion, the highest single session intake recorded by the National Stock Exchange (NSE). If this FII trend continues in the future, it would result in the strengthening of the rupee, which might not be to the liking of NRIs.