BUDGET 2007 - Key Highlights

ECONOMY

• GDP growth seen 9.2% in FY07.
• Average GDP growth rate 8.6% in three years of UPA coalition govt.
• Economy in stronger position than ever before.
• Agriculture sector average growth 2.3% in 10th Plan, below targeted 4%.
• Agriculture supply imbalances can disrupt growth.
• Foreign trade growing at double of domestic growth.
• Govt to continue export friendly policies.
• Gross domestic capital formation up 23.7%.
• Savings rate estimated at 32.4% in FY07.
• All indicators point to accelerating rate of invesment.
• Apr-Jan FDI at $12.5 bln; outpaces portfolio investment.
• 1.65 trln rupees investment by central PSUs FY08.

GOVT FINANCES

• Govt targets FY08 revenue deficit 1.5% of GDP
• Govt targets FY08 fiscal deficit 1.5 trln rupees
• FY08 non-plan expenditure seen 4.35 trln rupees
• Govt targets FY08 fiscal deficit 3.3% of GDP
• FY08 total spend 2.05 trln rupees
• FY07 fiscal deficit aim revised to 3.7% of GDP
• Plan spend 32% ot total spend
• Fiscal deficit target achieved
• FY07 revenue deficit aim revised to 2% of GDP
• Gross budget support 2.05 trln rupees FY08 vs 1.73 trln.
• Central FY08 plan allocation 1.55 trln rupees vs 1.31 trln.
• Faster, more inclusive growth main 11th Plan objective.
• "States never had it so good", says Chidambaram
• VAT has been an unqualified success, says Chidambaram
• Centre to give 1.42 trln rupees to states in FY08
• 1.10 trln rupees state debt consolidated
• Consolidated 1.10 trln rupees of states' debt
• Centre, states regained lost fiscal ground due to FRBM

TAX PROPOSALS

• Senior citizen tax exemption threshold up at 195,000 rupee
• 5-yr income tax holiday for new 2-,3-, 4-star hotels
• Co-op banks to get same tax benefits as PSU banks on M&A
• Removes surcharge on corporate income up to 10 mln rupee
• Medical insurance premium I-T exemption up at 15,000 rupee
• No change in corporate income tax.
• Income tax threshold limit raised by 10,000 rupees.
• To give some relief to personal income tax payers
• Service tax exemption for tech business incubators
• Drug testing clinical trials exempt from service tax
• Service tax on rental of property for commercial use
• Service tax on works' contract services
• Ups cement excise with MRP +190 rupee/bag to 600 rupee/tn
• Cuts cement excise for MRP 190 rupee/bag to 350 rupee/tn
• Excise duty on pan masala without tobacco cut to 40%
• Excise duty on pan masals without tobacco cut to 40%
• Non-electric water filters fully exempt from excise
• To reward cement makers who hold prices of cement
• Umbrella, footwear excise duty cut to 8% vs 16%
• Bio diesel, food processing exempted from excise duty.
• SSI excise exemption raised to 15 mln rupees vs 10 mln.
• Excise on plywood cut to 8% from 16%.
• General customs duty on medical equipment 5%
• Petrol, diesel ad valorem excise duty cut to 6% vs 8%.
• Customs duty on animal feed cut to 20% vs 30%.
• CENVAT unchanged.
• Pvt players to pay 3% duty on import of aircraft.
• Customs duty on watch dials, umbrella 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% from 10%
• Crude, refined edible oils to be exempt from customs duty
• Customs duty on steel cut to 12% vs 20%
• General customs rate on medical equipent 5%
• Cut customs duty on DMT/PTA to 7.5%
• Customs duty on drip irrigation cut to 5% vs 7.5%
• Cut custom on cut and polished gems to 3% from 5%
• Customs duty on polyester fibre yarn cut to 7.5% vs 10%
• Fully exempts coking coal from customs duty
• To cut peak rate for non-farm pdts to 10% vs 12.5%
• Govt targets FY08 revenue deficit 714.78 bln rupees
• Tax to GDP ratio now 11.4% from 9.9%
• Tax-GDP ratio up 11.4% in 2006-07
• Intend to keep tax rates moderate, stable
• States agreed to National General Goods and Svcs tax 2010
• Cuts central sales tax to 3% from 4%
• 4.5 bn rupees allocated to Commonwealth Games

BANKING SECTOR

• Bank credit Apr 1-Feb 2 expanded 29.6% on year.
• Banks credit to small firms up at 1.7 trln rupees as of Dec.
• NHB to start policy for senior citizens.
• RRBs permitted to accept deposits from NRIs under NRE, FCNR schemes.
• 400 bln rupees for govt to acquire RBI stake in SBI.
• Banks asked to get credit rating for small, medium enterprises.

INFLATION

• Average inflation in this financial year estimated 5.2-5.4%.
• Govt confident inflation can be moderated.
• Govt will take more steps to combat inflation.
• Global commodity prices pushing local prices up.
• Notes supply constraints in wheat, pulses, edible oil.
• Monetary trends pressurised prices, govt committed to monetary stability.
• Notes PM said state govts' role important to tame inflation.
• Notes UPA govt curbed inflation in initial years.

INFRASTRUCTURE

• 12,198 km rural roads completed up to December.
• 15,054 villages provided phones up to December.
• Allocated 40 bln rupees for rural roads.
• Separate window for rural roads under RIDF to continue.
• Giving 120 bln rupees FY08 for Rural Infrastructure fund.
• Consider Parekh panel advise on infrastructure financing.
• Scheme to use forex reserve for infrastructure development.
• MFs to launch dedicated infrastructure funds.
• National highway plan to get 106.7 bln rupees FY08.
• Rajiv Gandhi Vidyutikaran Yojana allocation 39.8 bln rupee.
• Rural electrification allocation at 39.83 bln rupee FY08.
• Imperative to take new steps to up power generation.
• Govt to award 2 more ultra power projects by July.
• 75% growth rate in electricity generation in Apr-Dec.

AGRICULTURE SECTOR

• Farm sector top agenda for policy makers.
• Draft National Policy for farmers under consideration.
• "No dearth of funds, no dearth of schemes" for agriculture.
• Bank farm loans doubled in 2 years vs 3 year aim.
• FY07 farm credit seen 1.9 trln rupees vs 1.75 trln target.
• 5.3 mln farmers brought under credit system until Dec.
• 150 mln families into farming.
• Farm loan target 2.25 trln rupees in FY08.
• Farm credit growing at satisfactory rate.
• To create additional irrigation for 2.4 mln ha.
• Pilot project for weather based crop insurance scheme.
• 1 bln rupees given for weather based corp insurance plan.
• Weather based insurance to replace farm insurance scheme.
• Expert panel to study impact of climate change on India.
• Farm insurance scheme stays in FY08, gets 5 bln rupees.
• New insurance scheme for rural landless households.
• FY07 fertiliser subsidy seen 224.52 bln rupees.
• New training programme planned for water harvesting.
• To extend farm technology agency to 300 more districts.
• Allocated 18 bln rupees to NABARD for farmer subsidy.
• NABARD can issue tax-free rural bonds up to 50 bln rupee.
• NABARD bond raising to augment refinance capacity.
• 100% subsidy for small, marginal farmers.
• World Bank lent 21.8 bln rupee to renew 5,763 water bodies.
• Depletion of ground water is a concern.
• 1 bln rupee for development of rainfed programme in FY08.
• Irrigation FY08 outlay 110 bln rupees vs 71.21 bln.
• Special purpose fund for coffee, rubber, spices proposed.
• Panel on farm sector indebtedness to submit report soon.
• Special development programme for oilseeds, maize.
• Separate window for rural roads under RIDF to continue.
• Giving 120 bln rupees FY08 for Rural Infrastructure fund.
• To focus on improving productivity of pulses.

FUTURES TRADING

• No new forward contract in wheat, rice futures.
• Panel set up to probe futures trade in food items.
• Panel on food forward trading to submit report in 2 mos.

SOCIAL SECTOR

Education

• Allocated 323.52 bln rupees to education sector.
• Employment scheme extended to 337 districts from 200.
• FY08 school education allocation up 35% to 231.4 bln rupee.
• Secondary education allocation doubled to 37.94 bln rupee.
• SBI to get corpus to fund new scholarships.
• 3 scholarship programs for minority students.
• Allocated 7.5 bln rupees for upgradation of ITIs.
• To upgrade 300 more ITIs by Aug 2009.
• New plan for manpower development in software industry.

Health

• FY08 health allocation 99.47 bln rupee, up from 82.07 bln.
• To start National Aids Control Programme-III from FY08.
• 9.69 bln rupees allocated for AIDS control in FY08 .
• Polio immunisation allocation in FY08 up at 12.90 bln rupee.
• Polio eradication strategy revised.
• Health insurance extended to ancillary workers.

Unorganised sector

• Considering panel report on unorganised sector insurance.
• Social security scheme for unorganised sector soon.

Women and children

• Govt to expand Integrated Child Development Scheme.
• ICDS allocation up at 47.61 bln rupees from 40.87 bln.
• To expand Anganwadi scheme to cover all mothers.
• To expand Anganwadi scheme to cover children below 6 yrs.
• Spend 169.8 bln rupee under spl plan in 31 districts FY08.
• 50 ministries have gender budgeting cells.
• 87.95 bln rupees for women-specific programmes.

Physically challenged

• 18 bln rupees for employment of physically challenged.
• Govt to support 100,000 jobs for physically challenged.
• Steps to boost regularised jobs for physically challenged.

Other social sector steps

• Allocation for SC/STs raised to 32.71 bln rupees in FY08.
• Public distribution system will be computerised.

FINANCIAL SECTOR

• To set up an autonomous debt management office.
• Debt management distinct from monetary mgmt world over.
• To release panel report to make Mumbai financial hub.
• IT-PAN to be sole identification for capital mkt investor.
• Allow short selling, settlement by delivery.
• 2 new financial inclusion funds to get 5 bln rupee corpus.
• To establish financial inclusion fund with NABARD.
• Bill to amend insurance laws in Budget session.
• To change law to allow creation of mortgage guarantee cos.

EMPLOYMENT

• Allocated 18 bln rupees FY08 for self-employment plan.
• Allocated 120 bln rupees for Rural Employment plan FY08.

REGIONAL AND URBAN DEVELOPMENT

• New industrial policy for northeast before March.
• FY08 allocation for North-East region 143.65 bln rupees.
• National Urban Renewal FY08 allocation 49.87 bln rupees.
• FY08 backward region grant fund 58 bln rupees.

OTHER

• Gave 7.19 bln rupees for e-governance FY08 vs 3.95 bln.
• FY08 defence allocation 960 bln rupees.
• FY08 provision for tourist infrastructure 5.2 bln rupees.
• Announces scheme for coir industry.
• FY08 integrated apparel park allocation 4.25 bln rupees.
• Oil cos invested 970 bln rupees for oil exploration.
• Road-cum-bridge on Bramhaputra a national project.
• Energy security high on govt agenda.
• FY08 APDRP support raised to 8 bln rupees vs 6.5 bln.