BUDGET 2007-2008

Taxes
Direct Taxes
Indirect Taxes
Economy
Govt Finance
Banking Sector
Financial Sector
Inflation
Futures trading
Infrastructure
Agriculture
Education
Health
Unorganized Sector
Women and Children
Physically Challenged
Other Social Sector Steps
Employment
Others
 TAXES

• Tax to GDP ratio up 11.4% in 2007-08 from 9.9%

• Govt targets FY 08 revenue deficit at Rs 714.78 bn
• Intends to keep tax rates moderate and stable
• States agreed to National General Goods and Services Tax 2010
• Exemption on Banking Cash Transactions Tax for individuals and HUFs raised
from Rs 25,000 to Rs 50,000
• Education cess increased from 2% to 3%
• ESOPs to be brought under FBT
• Dividend Distribution Tax raised by 25% on all dividends distributed by money
market mutual funds and liquid mutual funds
 Direct Taxes
• Better tax compliance
• No change in personal, corporate, service tax
• Threshold limit of exemption to be increased by Rs 10,000 taking it up from 1,00,000 to
1,10,000
• Threshold limit of exemption for women increased to Rs 1,45,000
• Threshold limit of exemption for senior citizens increased to Rs 1,95,000
• Deduction for medical insurance under Section 80D is going to 15000 for common man
and 20000 for senior citizens
• Surcharge on tax removed for companies with income of 1 cr or less. This will benefit 12
lakh companies.
• Minimum Alternate Tax extended to income for which deduction is claimed under
Section 10A and 10B
• Service tax exemption for technical business incubators
• Five year tax holiday for 2,3, 4 star hotels and convention halls with seating capacity not
less than 300 in Gurgaon, Noida, Ghaziabad and Delhi owing to Commonwealth Games
• Rs 350 crore to Delhi for Commonwealth Games
• Rs 150 cr to Ministry of Sports and Youth Affairs for Commonwealth Games
• Rs 50 cr for Commonwealth Youth Games in Pune
• Co-op banks to get same tax benefits as PSUs on MA
• No change in CENVAT rate and Service Tax rate
• Clinical drug trials exempt from service tax
• Service tax on works’ contract services
• Service tax on rental of property for commercial use
 Indirect Taxes
• Cuts cement excise for MRP 190 rupee/bag to 350 rupee/tonne
• Ups cement excise with MRP + 190 rupee/bag to 600 rupee/tonne
• Excise duty on pan masala without tobacco cut to 40%
• Non-electric water filters full exempt from excise
• To reward cement makers who hold prices of cement
• Umbrellas, foot wear excise duty cut to 8% vs 16%
• Bio-diesel, food processing exempted from excise
• SSI excise exemption raised to Rs 15 mn vs 10 mn
• Excise duty on plywood cut to 8% vs 16%
• General custom duty on medical equipment at 5%
• Petrol, diesel ad valorem excise cut to 6% vs 8%
• Customs duty on pet food cut to 20% vs 30%
• Private players to pay 3% duty on aircraft import
• Customs duty on watch dials, umbrellas cut to 5% vs 12.5 %
• Coking coal exempt from customs duty
• Customs duty on cut, polished gems cut to 3% from 5%
• Customs duty on PFY cut to 7.5% vs 10%
• Crude, refined edible oils to be exempt from customs duty
• Customs duty on steel cut to 12% vs 20%
• Import duty on medical equipment down by 7.5%
• Cut customs duty on DMT/PTA to 7.5%
 Economy
• GDP growth rate at 9.2% for FY 2006-07
• India has registered average 8.6% growth rate in last 3 years
• Agriculture growth down to 2.3% in 10th Plan period below targeted 4%
• Manufacturing sector growing at 11.3 % as compared to 8.7% in FY 05
• Services sector growing at 11.2% as compared to 9.6% three FY 05
• Farm supply imbalances can disrupt growth
• Foreign trade growing at double of domestic growth
• Apr-Jan FDI at USD 12.5 bn, outpaces portfolio investment
• Equity support of Rs 163.61 bn and loans of Rs 29.70 bn to be provided to Central
Public Sector Enterprises
• Eight CPSEs restructured
• All indicators point to accelerating rate of investment
• To continue with export friendly policies
• 150 mn families into farming
• Economy is in stronger position than ever before
• Savings rate estimated at 32.4% in FY-07
• Faster more inclusive growth main 11th Plan objective
• Gross domestic capital formation up 23.7%
• 1.65 tn investment by central PSUs in FY 08
 Govt Finance
• Govt targets FY 08 revenue deficit at 1.5% of GDP
• Govt targets FY 08 fiscal deficit at Rs 1.5 tn at 3.3% of GDP
• FY 08 non-plan expenditure seen at 4.3 tn rupees
• FY 07 fiscal deficit aim revised to 3.7% of GDP
• Gross Budget Support of Rs 2.05 trillion compared to Rs 1.73 trillion earlier
• Plan spend 32% of total spend
• Fiscal deficit target achieved
• FY07 revenue deficit aim revised to 2% of GDP
• Central FY 08 plan allocation Rs 1.55 tn versus Rs 1.31 tn
• VAT has been an unqualified success
• Central Sales Tax reduced from 4% to 3% with aim of eventual phase out
• Roadmap for introducing Goods and Services Tax w.e.f 2010
• Centre to allocate to give Rs 1.42 tn to states in FY 08
• Rs 1.10 tn state debt consolidated
• Centre, states regained lost fiscal ground due to FRBM
 Banking Sector

• Bank credit Apr 1-Feb 2 expanded 29.6% on year

• Bank credit to small firms up at Rs 1.7 tn as of Dec
• NHB to start policy for senior citizens
• RRBs committed to accept deposit from NRIs under NRE, FCNR schemes
• Target of opening at least one RRB in 80 uncovered districts
• Rs 400 bn for government to acquire RBI stake in SBI
• Banks asked to get credit ratings for small, medium enterprises
•
 Financial Sector
• To set up autonomous debt management office
• Debt management distinct from monetary management world over
• To release panel report to make Mumbai financial hub
• To allow delivery based short selling by institutions
• PAN will be sole identification for all capital market transactions
• Two new financial inclusion funds to get Rs 5 bn corpus
• To establish financial inclusion fund with NABARD
• Bill to amend insurance laws in Budget Session
• To change law to allow creation of mortgage companies
•
 Inflation

• Emphasis on inflation control

• Average inflation seen at 5.2% -- 5.4% in FY07 vs 4.4%
• M3 has expanded by 21.3%
• Global commodity prices pushing local prices
• Govt confident it can moderate inflation; committed to monetary stability
• Emphasizes state govt’s role in taming inflation
• Monetary trends had put pressure on prices
• Notes supply constraints in wheat, pulses, edible oils
•
 Futures trading

• No new forward contracts in wheat and rice

• Expert committee headed by Prof Abhijit Sen to look into forward trading
in commodities. Report in 2 months
 Infrastructure
• 12,198 km of rural road has been built till December
• 15,054 villages to be connected by phones till December
• Allocated Rs 40 bn for rural roads
• 75% growth rate in electricity generation in April – December
• Govt to award two more ultra power projects by July
• Imperative to take new steps to up power generation
• Rural electrification allocation at 39.83 billion rupee FY 08
• Rajiv Gandhi Vidyutikran Yojana allocation Rs 39.8 billion
• National highway plan to get 106.7 billion FY 08
• FY 08 APDRP support raised to 8 billion rupees versus 6.5 billion
• Energy security high on government agenda
• Rs 120 bn more earmarked for RIDF for FY 07-08
• Separate window for rural roads under RIDF to continue
• 4000 cr more earmarked for RIDF for FY 07-08
• Considers Parekh panel advise on infrastructure financing
• Scheme to use forex reserves for infrastructure development
• Mutual Funds to launch dedicated infrastructure funds
• Rs 1 bn corpus for revolving fund for project preparation of PPP schemes
 Agriculture
• Agriculture to top the agenda of policy makers
• Draft National Policy for farmers under consideration
• Bank farm loans doubled in 2 years vs 3 year aim
• FY 07 farm credit seen Rs 1.9 tn vs 1.75 tn target
• 5.3 mn farmers brought under credit till December
• Farm credit growing at satisfactory rate
• Farm loan target at Rs 2.25 tn in FY 08
• To create additional irrigation for 2.4 mn ha
• Pilot project for weather based crop insurance scheme at Rs 1 bn
• Weather based insurance to replace farm insurance scheme
• Farm insurance scheme stays in FY 08, gets Rs 5 bn
• New insurance scheme for rural landless households
• FY 07 fertilizer subsidy seen at Rs 224.52 bn
• World Bank lent 21.8 billion rupees to renew 5763 water bodies
• Depletion of ground water is a concern
• New training programme planned for water harvesting
• To extend farm tech agency to 300 more districts
• 100% subsidy for small, marginal farmers, 50% subsidy for small farmers for water
management
• Outlay for Rainfed Irrigation Programme at Rs 1 bn in FY 08
• Irrigation FY 08 outlay at Rs 110 bn vs 71.21 bn
• Special purpose fund for coffee, rubber, spices proposed
 Education
• Education spending up 34.2% to INR 323.5 billion for FY 07-08
• Secondary education allocation doubled to Rs 37.94 bn
• FY 08 school education allocation up 35% to Rs 231.4 bn
• Sarva Siksha Abhiyaan allocation increased to Rs 106 bn
• 2 lakh more teachers to be appointed
• Midday meal scheme allocated Rs 73.24 bn
• Prarambhik Shiksha Kosh to be increased from Rs 87.46 bn to Rs 103.93 bn
• 5 lakh more classrooms to be built. Children in upper primary classes to be covered
• Scholarship scheme for class 8 students.
• 1 lakh scholarships to be awarded every year.
• Rs 7.5 bn to be given to SBI for this purpose
• Free scholarship programmes for minority students
• Fellowships for SC/STs studying M Phil., PhD increased to Rs 0.8 bn vs Rs 0.35
• Post-matric scholarship for Sc/STs increased to Rs 6.1 bn vs Rs 4.4 bn
• Allocation of Rs 0.91 bn for post-matric scholarships for socially backward
• Allocation Rs 7.5 bn for upgradation of ITIs
• To upgrade 300 more ITIs by Aug 2009
• New plan for manpower development in software industry
 Health

• Allocation for health and family welfare hiked by 21.9% at Rs 152.91 bn

• FY 08 National Rural Health Mission allocation 99.47 bn up from 82.07 bn
• To start National Aids Control Programmme-III from FY 08, allocation at Rs 9.69
bn
• Rs 12.9 bn to be provided for elimination of polio
• Polio eradication strategy revised
• Health insurance extended to ancillary workers
• 3,20,000 Associated Social Health Activists recruited; 2 lakh trained
•
 Unorganised Sector

• Considering panel report on unorganized sector insurance

• Social security scheme for unorganized sector soon
• Head of rural landless family or one earning member to be insured for death and
disability. Corpus of Rs 10 bn to be maintained by LIC
 Women and Children

• Govt to expand Integrated Child Development Shceme

• Allocation for Integrated Child Development Services(ICDS) at Rs 47.61 bn vs Rs
40.87 bn to
• To expand Anganwadi scheme to cover all mothers
• To expand Anganwadi scheme to cover children below six years
• To spend Rs 169.8 bn under special plan in 31 districts in FY 08
• 50 ministries have gender budgeting cells
• Rs 87.95 bn for women specific programmes
•
 Physically Challenged

• Rs 18 bn for employment of Physically challenged

• Govt to support 1 lakh jobs for physically challenged
• Steps to boost regularized jobs for physically challenged
 Other Social Sector Steps

• Allocation for SC/ST raised to Rs 32.71 bn in FY 08

• Schemes with at least 20% benefit earmarked of SC/ST allocation at Rs
176.91 bn
• PDS to be computerized
• Drinking water provided to 55,512 habitations till Dec 2006
• 7,83,000 rural houses constructed till Dec 2006
• Construction of 9,14,000 rural houses underway
• Allocation for sanitation increased to Rs 9.54 bn vs Rs 7.2 bn
• Provision of 1.08 bn for multi-sectoral development of minority
concentration districts
• Reverse mortgage scheme for senior citizens owning a house to receive
monthly income
 Employment

• Allocation of Rs 18 bn in FY 08 for self-employment plan

• Allocation of Rs 120 bn for National Rural Employment Plan in FY 08
• Allocation towards eradication of urban unemployment at Rs 3.4 bn vs Rs 2.5 bn

•
 Others

• New industrial policy for Northeast before March

• FY 08 allocation for Northeast at Rs 143.65 bn
• National Urban Renewal FY 08 allocation at Rs 49.87 bn
• FY 08 backward region grant fund at Rs 58 bn
• Gave Rs 7.19 bn for e-governance in FY 08 vs Rs 3.95 bn
• FY 08 defence allocation hiked to Rs 960 bn
• FY 08 provision for tourist infrastructure at Rs 5.2 bn
• New scheme for coir industry at Rs 0.22 bn
• FY 08 integrated apparel park allocation at Rs 4.25 bn
• Oil companies invested Rs 970 bn for oil exploration
• Road come bridge on Brahamputra at Bogibeel(Assam) declared national project
• Road-cum-bridge over Ganges at Munger(Bihar) declared national project
• Expert committee to study impact of climate change on India
• Rs 0.30 bn for Sabarmati Ashram, Sevagram Ashram, Bhandarkar Oriental Research Institute and Rajendra
Smriti Snaghrahalaya
• Rs 0.20 bn for Nehru Memorial Museum and Library
•