India's Rs.12.58 lakh crore (Rs.12.58 trillion or $280 billion) federal budget for 2011-12 Monday sought to address the want of every constituency with tax relief to cheer households and corporates alike while also promising fair doses of reform on subsidies and foreign investment along with measures to curb inflation, check corruption and push growth.

Seemingly aware of polls due soon in five states and the overall downbeat sentiment on issues such as graft, Finance Minister Pranab Mukherjee also proposed more money toward health, infrastructure, education, farming and even defence, and outlined a strategy to bring back black money stashed abroad -- all this with a check on fiscal deficit.

In a 110-minute budget speech in the Lok Sabha, the lower house of parliament, Mukherjee said he proposed to enhance the income tax exemption limit to Rs.1.8 lakh (Rs.180,000 or $4,000) for the next financial year, from Rs.1.6 lakh, and said corporate tax surcharge will be lowered to 5 percent from 7.5 percent

He also proposed a "very senior" category of income tax payers, above the age of 80, for whom the tax exemption will be up to Rs.5 lakh. In addition, he lowered the qualifying age limit for senior citizens to avail of tax cuts to 60 years from 65 years.

While announcing these give-aways, Mukherjee also promised to bring down fiscal deficit to 4.6 percent of India's gross domestic product (GDP) from 5.1 percent of GDP in the revised estimates, while hiking allocation for education by 24 percent, health by 20 percent, infrastructure by 23 percent and defence by 11 percent.

Nobel Laureate Amartya Sen and other economists have been calling for an increase in social structure spending to bridge India's huge inequities. 

His proposals for a new subsidy regime on farm nutrients and direct cash transfers to the users of fertilisers and kerosene addressed a long-pending reform, aimed to ensure these doles reach the needy and are not diverted illegally -- an issue that caught the national attention when an oil official was killed by kerosene mafia in Maharashtra.

At the same time, the finance minister's proposals could push up the costs of domestic and overseas air travel, dining at air-conditioned restaurants that serve liquor, stay in hotels that charge over Rs.1,000 per day and health check-ups in hospitals with air-conditioning and more than 25 beds.

"As en emerging economy, with voice on the global stage, India stands at the threshold of a decade which presents immense possibilities. We must not let the recent strains and tensions hold us back from converting these possibilities into realities," the finance minister said in his largely uninterrupted speech.

He set the tone for what was his sixth budget by stating that India had bounced back after the global financial crisis with broad-based growth even as inflation remained a matter of concern, especially food prices - even though it had dipped from over 20 percent - to around 7 percent now.

This apart, he said the foreign direct investment policy was being revamped, which may result in the entry of multinational firms in the country's $300 billion retail trade industry, apart from promising to liberalise norms for pension, insurance and banking sectors.

"We are reaching the end of a remarkable fiscal year. In a globalised world, with its share of uncertainties and rapid changes, this year brought us some opportunities and many challenges as we moved ahead with steady steps on the chosen path of fiscal consolidation and high economic growth," he said.

"Our growth in 2010-11 has been swift and broad-based. The economy is back to its pre-crisis growth trajectory. While agriculture has shown a rebound, industry is regaining its earlier momentum. Services sector continues its near double-digit run. Fiscal consolidation has been impressive," he said.

The proposals drew immediate praise from Prime Minister Manmohan Singh, who was particularly pleased with the decision to hike tax income tax limit. "The finance minister deserves congratulations for maintaining a high growth rate despite the adverse international economic climate."

Mukherjee also laid significant emphasis on the institutional framework in rural and semi-urban areas by hiking outlays for rural banks and micro-finance units, while promising 11 food parks and major initiative for cold chains.

This time around, the finance minister also, perhaps, had an eye on the stock markets as well, as he allowed all registered mutual funds to accept money from foreign investors and hiked the cap on investments in infrastructure bonds and intra-fund trading during lock-in period.

The markets, cheered the proposals, lifting the sensitive index (Sensex) of the Bombay Stock Exchange (BSE) by over 500 points, before it settled an hour before closing bell at 17,832.12 points, with a gain of 131.21 percent, or 0.74 percent.

On the tax front, the finance minister proposed to keep the excise duty rates virtually unchanged, even as 130 items were included in for a nominal duty of 1 percent. The customs duty rates, however, were retained at existing levels.

The finance minister said concerned remained over inflation, public delivery of goods and services and inclusive growth. "To address these concerns, I do not foresee resources being a major constraint, at least not in the medium-term."