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UNION BUDGET 2007 - 08

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Union Budget 2007-2008: Speech

Plan Expenditure
Plan expenditure for 2007-08 at Rs.205,100 crore. As a proportion of total expenditure (net of the SBI share acquisition), Plan expenditure will be 32.0 per cent.

Non-Plan Expenditure
Non-Plan Expenditure in 2007-08 (net of the SBI share acquisition) is estimated at Rs.435,421. The increase over 2006-07 is only 6.5 per cent.

Revenue Deficit and Fiscal Deficit
The Budget Estimates for 2007-08, the total expenditure is estimated at Rs.680,521 crore (including Rs.40,000 crore for the SBI share acquisition). The total revenue receipts of the Central Government are projected to be Rs.486,422 crore and the revenue expenditure to be Rs.557,900 crore. Consequently, the revenue deficit is estimated at Rs.71,478 crore which is 1.5 per cent of the GDP. The fiscal deficit is estimated at Rs.150,948 crore, which is 3.3 per cent of the GDP.

OVERVIEW OF THE ECONOMY
  • Average growth for last three years is 8.6 per cent, farm sector down at 1.5%
  • 9.2 per cent GDP growth rate estimated during 2006-07.
  • Inflation during 2006-07 estimated at between 5.2 and 5.4 per cent against 4.4 per cent during the previous year.
  • Total expenditure during 2006-07 estimated at Rs.6,80,521 crore including Rs.40,000 crore for SBI shares.
  • The growth rate in manufacturing has accelerated from 8.7 per cent to 9.1 per cent and further to 11.3 per cent.
  • The services sector continues to maintain impressive growth and has recorded, in the three years, a growth rate of 9.6 per cent, 9.8 per cent and 11.2 per cent respectively.
  • Average growth in Agriculture Sector during the Tenth Plan period is estimated at 2.3 per cent, which is below the desired level of 4 per cent a year.
  • Per capita income in 2005-06, in real terms, increased by 7.4 per cent, and the savings rate has been estimated at 32.4 per cent and the investment rate at 33.8 per cent.
TAX PROPOSAL
  • Gross tax revenue has grown by 19.9 per cent, 20.0 per cent and 27.8 per cent in the first three years of this Government. The tax to GDP ratio has increased from 9.2 per cent in 2003-04 to 11.4 per cent in 2006-07. We intend to keep our tax rates moderate and stable and administer the tax laws in a tax payer-friendly manner.
Direct Tax
  • Income tax exemption hiked by Rs 10,000. Threshold limit raised by Rs 10,000 giving every assessee a relief of Rs 1,000.
  • Moderate tax regime: Personal income tax: Some relief to the taxpayers. Exemption limit increased to Rs 110,000, for women Rs 145,000 and for senior citizens up at Rs 195,000. Deduction: Medical insurance to be increased to Rs 15,000; and for senior citizens Rs 20,000. Corporate tax: No surcharge for firms with a taxable income of Rs 1 crore or less.
  • Surcharge on Corporate income tax on companies below Rs 1 crore removed.
  • Deduction in respect of medical insurance under Section 80 (D) increased to Rs 15,000 and Rs 20,000 for senior citizens.
  • Cash withdrawal tax limit raised to Rs 50,000 for individuals.
  • Five year tax holiday for two, three, four star hotels and convention centres with a seating capacity of 3,000 in NCT of Delhi, Gurgaon, Ghaziabad, Faridabad and Gautam Buddha Nagar for Commonwealth Games. Twenty thousand more rooms required.
  • Minimum Alternate Tax being extended.
  • Capital gains tax: Dividend distribution tax raised from 12.5 to 15 per cent.
  • Additional revenue from direct taxes to yield Rs.3000 crore and indirect taxes revenue neutral: FM
  • Tax exemption on aviation turbine fuel sold to turbo prop aircraft extended to all small aircraft less than 40,000 kg.
  • Withdrawals by central and state governments exempted from Banking Cash Transaction Tax. The limit for individuals and HUF raised from Rs 25,000 to Rs 50,000.
Indirect Tax
  • Wide ranging reductions in tariffs. Import duties on capital goods, project imports, metals and specified inorganic chemicals were reduced by 2.5 percentage points and, in some cases, by 5 percentage points. Duties on some edible oils were reduced by 10 to 12.5 percentage points.
  • To bring peak duty rate down for non-farm products from 12.5 percent to 10 percent, on chemicals and plastics cut to 7.5%, coking coal free of duty; customs duty on manmade fibre cut to 7.5% from 10%; gems and jewellery: cut and polished diamonds duty down to 5%; duty on drip irrigation systems cut to 5%; import duty on medical equipment cut to 7.5%; crude and refined edible oils duty to be cut by 15%.
  • Duty on pet foods reduced to 10%.
  • Duty on watch dials reduced and umbrella parts to 5%
  • Export duty on iron ore and concentrate at the rate of Rs.300 per tonne. Export duty on Chromium proposed at Rs.2000 tonne.
  • Ad valorem duty on petrol and diesel to be brought down from eight to six per cent.
    Customs
  • Import duties on capital goods, project imports, metals and specified inorganic chemicals were reduced by 2.5 percentage points and, in some cases, by 5 percentage points. Duties on some edible oils were reduced by 10 to 12.5 percentage points.
  • Peak customs duty rate cut to 10%
  • Customs duty on polyster to be reduced from ten per cent to 7.5 per cent.
  • Three per cent import duty to be levied on private importers of aircraft including helicopters.
  • Customs duty on Non-agricultural product reduced by 25%
Excise
  • Ad valorem duty cut to 6% on petrol and crude.
  • No excise duty on water purifcation devices.
  • Duties on seconds and defective reduced from 20 to ten per cent.
  • Excise duty on Pan Masala without tobacco as mouth freshners reduced from 66 per cent to 45 per cent.
  • Excise duty on cement reduced from Rs 400 per tonne to Rs 350 per tonne for cement bags sold at Rs 190 per bag at retail market. Those sold above Rs 190 will attract excise duty of Rs 600 per tonne.
  • 5% hike in excise duty on cigarettes
  • Fully exempt from excise duty biscuits whose retail sale price does not exceed Rs.50 per kilogram.
Service Tax
  • Two lakh people to benefit out of service tax exemption. Govt to lose Rs 800 crore as a result.
  • Service tax on Residents Welfare Associations whose members contribute more than Rs 3,000.
Fringe Benefit Tax
  • ESOPs to be brought under FBT.
Central Sales Tax/ VAT/ CENVAT
  • Central Sales Tax rate to be reduced to 3%
INFRASTRUCTURE
Telecom
  • 15,054 villages have been covered under rural telephony and efforts to be made to complete the target of covering 20,000 villages by 2006-07.
Roads
  • Allocation for National Highway Development programme to be stepped up from Rs 9955 crore to Rs 12600 crore.
  • Work on Golden Quadrilateral road project nearly complete. Considerable progress made on North-South, East-West corridor and is likely to be completed by 2009, says FM.
  • Northeastern region will get Rs 405 crore for highway development. Road-cum-rail project over Brahmaputra in Bogibil, Assam.
Power
  • Seven more UMPPs are under process and we are confident that at least two more will be awarded by July, 2007. Other initiatives taken by the Ministry of Power include facilitating setting up of merchant power plants by private developers and private participation in transmission projects.
  • Besides, the Accelerated Power Development and Reforms Project (APDRP) has reduced significantly Aggregate Technical and Commercial (ATC) losses in 213 towns. APDRP is being restructured to cover all district headquarters and towns with a population of more than 50,000. FM proposed to increase the budgetary support for APDRP from Rs.650 crore in 2006-07 to Rs.800 crore next year.
  • Under the Rajiv Gandhi Grameen Vidyutikaran Yojana and the annual target FM proposed to increase the allocation from Rs.3,000 crore in 2006-07 to Rs.3,983 crore in 2007-08.
FINANCIAL SECTOR
  • Bank credit rate grew by 29 per cent during first ten months of 2006-07
  • Saving rate of 32.4 per cent, investment rate of 33.8 per cent will continue.
Banking
  • The ceiling of loans for weaker sections under diferential rate of interest scheme will be raised from Rs 6500 to Rs 15,000 and in housing loan from Rs 5000 to Rs 20,000.
  • Regional Rural Banks, which are willing to take up greater responsibilities, to undertake aggressive branch expansion programme. One RRB branch for each of 80 districts so far uncovered. RRBs to accept NRE and FCNR deposits.
  • Insurance companies to launch a senior citizens scheme in 2007-08.
  • Regulations would be put in place for mortgage guarantee company for housing loans.
  • Insurance companies to launch a senior citizens scheme in 2007-08. Reverse mortgage scheme for senior citizens.
Capital Market
  • PAN to be made sole identity for participants in the security markets to strengthen capital market.
  • Govt allows delivery-based short selling by institutions.
AGRICULTURE
  • Rs 2,25,000 crore farm credit proposed in the new budget. A target of additional 50 lakh farmers to be brought under farm credit.
  • Special Purpose Tea Fund to rejuvenate tea production:
  • Rs. 100 crore allocated for National Rainfed Area Authority.
  • One hundred per cent subsidy for small farmers and 50 per cent for other farmers for water recharging scheme.
  • World Bank signed agreement for revival of 5,763 waterbodies in Tamil Nadu. Loan component Rs 2,182 crore. To have a command area of four lakh hectares.
  • Similar agreement with Andhra Pradesh in March for recharge of 2,000 bodies. Command area 2.5 lakh hectares.
  • National Agricultural Insurance Scheme to be continued for Kharif and Rabi this year.
  • Bonds worth Rs 5,000 crore to augment NABARD to be issued, says FM. These bonds will enjoy tax benefits.
FISCAL CONSOLIDATION
  • FM proposed to set up an autonomous Debt Management Office and, in the first phase, a Middle Office will be set up to facilitate the transition to a full-fledged DMO.
  • Fiscal deficit for 2007-08 pegged at 3.3 per cent of GDP at Rs.1,50,948 crore. Revenue deficit at Rs.72,478 crore which will be 1.5 per cent.
  • Economy grows 8.6 per cent in third quarter of this fiscal compared to 9.3 per cent in the year-ago period
MANUFACTURING


Information Technology
  • Increase in allocation for e-governance from Rs. 395 crore to Rs. 719 crore;
  • Increase in e-governance action plans at State levels from Rs. 300 crore to Rs. 500 crore;
  • Provision of Rs. 33 crore for a new scheme of manpower development for software export industry.
Textiles
  • Increase in allocation from Rs. 189 crore to Rs. 425 crore for the scheme for Integrated Textile Parks;
  • Continuation of the Rs. 911 crore Technology Upgradation Fund scheme.
Handlooms
  • Addition of 100-150 clusters for handloom in 2007-2008;
  • Extension of Health insurance scheme to more weavers and to ancillary workers;
  • Increase in the allocation of funds from Rs. 241 crore to Rs. 321 crore in the handloom sector.
Petroleum and Natural Gas
  • Rs. 97,000 crore invested in exploration activities;
  • 162 production sharing contracts awarded;
  • 23 coal bed methane blocks awarded for exploration.
Coir Industry
  • Rs. 22.50 crore allocated for modernizing and technologically upgrading Coir industry.
SERVICE SECTOR
Tourism
  • Tourism infrastructure to get an allocation of Rs.520 crore as against Rs.423 crore last year.
INVESTMENT
  • FDI inflows between April and January this fiscal year touched $12.5 billion, while portfolio investment reached $6.8 billion, says FM.
  • Indian investors to be allowed investment in overseas capital markets through mutual funds. Mutual funds to set up Infrastructure Fund schemes.
OTHER PROPOSALS
Women and Children
  • Allocation of Rs. 8,795 crore for 100% women specific programmes and Rs. 22,282 crore where 30% allocation is for women specific programmes;
  • Increase in allocation for Integrated Child Development Services from Rs. 4,087 crore to Rs. 4,761 crore.
Minorities
  • Increase in share capital of National Minorities Development and Finance Corporation to Rs. 63 crore;
  • Allocation of Rs. 108 crore for a multisector development programme in districts having a concentration of minorities;
  • Allocation of Rs. 72 crore for Pre-matric scholarships, Rs. 90 crore for Post-matric scholarships and Rs. 48.60 crore for Merit-cum-Means scholarships at graduate and postgraduate levels.
North Eastern Region
  • Total Budget for the Northeastern region raised to Rs 14,365 crore;
  • Introduction of a New Industrial Policy for the northeastern region before March 31, 2007.
Education
  • Education allocation hiked by 34.2 % to Rs. 32,352 crore;
  • Increase in allocation of funds for school education by 35% from Rs. 17,133 crore to Rs. 23,142 crore out of which Rs. 10,671 crore to be allocated for Sarva Shiksha Abhiyan;
  • Increase in allocation of funds from Rs. 162 crore to Rs. 450 crore for strengthening teachers training institutions by appointment of 200,000 more teachers and construction of 500,000 more classrooms;
  • Allocation of Rs. 7,324 crore for providing Mid-day Meal Scheme;
  • Mid-day Meal Scheme to cover children in upper primary classes in 3,427 educationally backward blocks;
  • Increase in the transfer to Prarambhik Shiksha Kosh from Rs. 8,746 crore to Rs. 10,393 crore;
  • Increase in the provision for secondary education from Rs. 1,837 to Rs. 3,794;
  • Introduction of National Means-cum-Merit Scholarship Scheme selection for which to be made from among students who have passed class VIII; each student to be given Rs. 6,000 per year; 100,000 scholarships to be awarded every year; creation of a corpus fund of Rs. 750 crore this year which must undergo annual increased over the next 3 years;
Social Security Schemes
  • Death and Disability to be covered under LIC for workers from unorganized sector.
Health
  • Hike in allocation to health by 21.9% to Rs. 15,291;
  • Completion of District Health Action Plans by all districts by March 2007;
  • Emphasis to be laid on mother and child care and prevention and treatment of communicable diseases;
  • Combining programmes such as immunization, ante natal care, nutrition and sanitation through Monthly Health Days organized at Anganwadi centres;
  • Recruitment of 320,000 Associated Social Health Activists out of which 200,000 to be given orientation training;
  • Selection of 90,000 link workers by the States;
  • Mainstreaming of AYUSH (Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy) systems into health delivery system at all levels;
  • Increase in allocation for National Rural Health Mission from Rs. 8,207 crore to Rs. 9,947 crore
  • Health insurance scheme for weavers to be extended to ancillary industries;
  • Allocation of Rs. 969 crore for AIDS control programme;
  • NACP-III to target high risk groups, expand access to condoms, ensure universal access to blood screening and safe blood, increase the number of hospitals providing treatment for preventing transmission of HIV / AIDS from mother to child;
  • Offering of exclusive health insurance scheme for senior citizens by National Insurance Company.
DEFENCE
  • Defence Budget increased to Rs 96,000 crore. This includes capital expenditure of Rs 41,922 crore. Any requirement for security of the nation to be provided, says FM.
BHARAT NIRMAN AND THE FLAGSHIP PROGRAMMES


Bharat Nirman remains the cornerstone of the Government's policy. I am glad to report that in the current financial year:
  • Additional irrigation potential of 2,400,000 hectares, including 900,000 hectares under AIBP, will be created;
  • Drinking water has been provided to 55,512 habitations until December 2006 against a target of 73,120 habitations;
  • Until December 2006, 12,198 kilometres of rural roads have been completed. The separate window under RIDF will augment funds for the programme by Rs.4,000 crore a year;
  • 783,000 rural houses have been constructed up to December 2006 and 914,000 houses are under construction, and the annual target of 1,500,000 houses is likely to be exceeded;
  • 19,758 villages have been covered so far under the Rajiv Gandhi Grameen Vidyutikaran Yojana;
  • 15,054 villages have been provided with a telephone against the target of 20,000 villages, and the balance will be covered by the end of the year;
  • The eight flagship programmes of the UPA Government will continue to receive high priority. Presently, I shall refer to these programmes in some detail.
Gross Budgetary Support
  • In 2006-07, the GBS was fixed at Rs.172,728 crore and, of this, support to the Central Plan was Rs.131,284 crore. GBS for 2007-08 will be increased to Rs.205,100 crore. Out of this, the Central Plan will receive Rs.154,939 crore.
Allocations for Major Sectors
  • For Bharat Nirman, as against Rs.18,696 crore (including the NER component) in 2006-07, FM proposed to provide Rs.24,603 crore in 2007-08, which marks an increase of 31.6 per cent.
  • The education and health sectors will also receive substantial funds. In 2007-08, FM proposed to enhanced the allocation for education by 34.2 per cent to Rs.32,352 crore and for health and family welfare by 21.9 per cent to Rs.15,291 crore.
Sarva Shiksha Abhiyan and Mid-day Meal Scheme
  • FM proposed to increase the allocation for school education by about 35 per cent from Rs.17,133 crore in 2006-07 to Rs.23,142 crore in 2007-08.
  • Out of this amount, Sarva Shiksha Abhiyan (SSA) will be provided Rs.10,671 crore. FM proposed to increase the provision for strengthening teachers training institutions from Rs.162 crore to Rs.450 crore. FM proposed to appoint 200,000 more teachers and construct 500,000 more class rooms.
  • The Mid-day Meal Scheme will be provided Rs.7,324 crore next year. In addition to covering children in primary classes, beginning 2007-08, FM proposed to cover children in upper primary classes in 3,427 educationally backward blocks.
  • The transfer to Prarambhik Shiksha Kosh will increase from Rs.8,746 crore to Rs.10,393 crore.
  • As more students complete upper primary classes, it is necessary to increase access to secondary education. Schemes for this purpose are under formulation, and FM proposed to double the provision for secondary education from Rs.1,837 crore in 2006-07 to Rs.3,794 crore in 2007-08.

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