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

• 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 • • • • • • • • • • • • • • •

Direct Taxes

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
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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
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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
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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
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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
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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