India Union Budget 2008-09

India Union Budget 2008-09

Highlights of the Union Budget for 2008-09

GLOBAL IMPACT
* Capital inflows in excess of economic deficit
* Capital inflows need to be managed more actively
* To take steps on foreign inflows to ensure stable markets
* Downside risks have increased worldwide
* Global markets weak since August, impact on local market not clear
* Govt will monitor foreign fund inflows
* Chidambaram says need to be vigilant on global risks
* Impact of US slowdown on emerging mkts not clear yet
* Outlook for global econ benign early FY08

GROWTH, INFLATION
* India growth story interesting, inspiring
* Manufacturing, services to grow 10.7%, 9.4% respectively
* Confident of 8.8% GDP growth in FY08
* FY08 H1 GDP growth was 9.1%
* FY08 most challenging of last 4 years
* 12 successive quarters of over 8% GDP growth until December
* 8.7% GDP growth seen FY08 as per CSO estimates
* Second year of plan extremely critical
* Farm growth seen 2.6% FY08
* FY09 year of consolidation, implementation, monitoring
* Must be vigilant, swift for growth with price stability
* Keeping inflation in check remains cornerstone of policy
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INDIRECT TAXES
* Indirect tax proposals revenue loss 59 bln rupees
* Not surprised with buoyancy in tax revenues
* Excise duty on 2 wheelers, 3-wheelers cut to 12% vs 16%
* Excise on small cars cut to 12% vs 16%
* Customs duty on vitamin food, mineral food cut to 20%
* Customs duty on phosphoric acid 5% vs 7.5%
* Some cuts in customs to protect industry
* On course to exceed budget estimate of indirect taxes
* Customs duty on some bulk drugs cut to 5% vs 10%
* Customs duty on project imports cut to 5% vs 7.5%
* Customs duty steel scrap cut to 0% vs 5%
* No change in peak rate of customs duty
* Customs duty on crude sulphur 2% vs 5%
* Fully exempt rough cut stones from import duty
* Raw material for sports goods exempt from customs duty
* Customs duty on unrefined sulphur cut to 2% vs 5%
* Customs duty exemption for set top boxes in IT hardware
* Customs duty on sports goods cut to 5% vs 7.5%
* To give 34.43 bln rupees to social security scheme FY09
* Customs duty on specialised machinery cut to 5% vs 7.5%
* Customs on steel melting, aluminium melting scrap 0% vs 5%
* Some IT, hardware components exempted from Customs duty
* Excise on hybrid cars cut to 14% vs 25%
* Excise duty on paper cut to 8% vs 12%
* Customs duty on edible oils left unchanged
* General CENVAT rate on all goods cut to 14% from 16%
* Excise duty on pharma goods cut to 8% vs 16%
* FY08 tax to GDP ratio 12.5% vs 9.2% inherited by UPA govt
* Customs duty on rough coral 5% vs 10%
* Customs duty on crude/unrefined sulphur cut to 2% vs 5%
* Customs exempt to continue only for naptha for fertiliser
* Excise duty on water purifiers cut to 8% vs 16%
* Excise cut on all pharmaceutical goods to 8% from 16%
* Excise duty on bus chassis 12% vs 16%
* No excise duty on anti-AIDS drugs
* Excise duty on some paper types cut to 10% vs 12%
* Wireless data card exempt from excise duty
* Excise duty on some writing, printing paper 8% vs 12%
* Excise duty of 1% on polyester filament yarn removed
* Cement Excise: Higher of 14% advolorem or 400 rupees/tn
* Filter, non-filter cigarettes to be taxed at par
* Abolish ad valorem component on unbranded petrol, diesel
* Excise on refrigeration units above 2 tn cut
* Filter, non-filter cigarettes to be taxed at higher rate
* Excise duty on packaged software 12% vs 8%
* Excise duty on bulk cement 400 rupees/tonne
* Excise on packaged software hiked to 12% from 8%
* Excise duty on packaging software upped to 12%
* Money changers, tour operators to come under svc tax net
* Excise duty also exempted on packaged coconut water
* Excise duty exemption for coffee mixes, puffed rice
* Svc tax net to include svc by shr, commodity exchanges
* Excise duty exempted on wireless data cards
* Svc tax net to include asset management svc of ULIPs
* Excise duty on unbranded diesel to be 4.6 rupees/litre
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SPENDING
* Additional 100 bln rupees plan capital expenditure this yr
* FY09 defence allocation 1.056 trln rupees vs 960 bln
* Defence allocation up by 10%
* Sets aside 5 bln rupee for Arunachal, border develop plan
* 73 bln rupee for Rajiv drinking water plan FY09 vs 65 bln
* 3 bln rupees for desalination plant in Chennai in FY09
* 2 bln rupee initial outlay for drinking water in schools
* Allocation for northeast 164.47 bln rupees vs 143.65 bln
* FY09 ministry of minority allocation at 10 bln rupees
* Nehru Urban Renewal Mission outlay up at 68.66 bln rupee
* 68.66 bln rupees for Jawaharlal Urban plan vs 54.82 bln
* FY09 Integrated Child Development Plan sum 63 bln rupees
* Scheduled Tribe Fin Corp gets 500 mln rupees allocation
* National Agri Insurance Plan to get 6.4 bln rupees FY09
* Food security scheme allocation 48.82 bln rupees
* IT department allocation 16.80 bln rupees vs 15 bln
* 44% of backward regions' grant to UP, Bihar, Orissa
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LOAN WAIVER
* Farmers' debt worth 500 bln rupees to be waived off
* 40 mln farmers to benefit from loan waiver scheme
* Complete waiver of all loans for marginal, small farmers
* Loan waiver for marginal farmers holding up to 1 ha
* 11 bln rupees for National Horticulture Mission FY09
* Farm loans by bank, RRBs, co-op bks until Mar 07 covered
* Farm loan waiver scheme to be completed Jun 30
* Farmers can get fresh loans after debt reschedule
* Farm loan waiver to cover 600 bln rupees of loans
* Debt waiver scheme implementation to be completed by Jun
* Loan waiver scheme to be completed by June
* Waiver also for farm loans recast by banks since 2005, 2006
* Rescheduled farm loans will also be eligible for waiver
* One-time settlement scheme for "other farmers"
* Farm loan waiver scheme liability 600 bln rupees
* Loans worth 500 bln rupees to be waived under scheme
* 10 mln other farmers to also gain from loan waiver
* 30 mln small, marginal farmers to benefit from waiver
* 30 mln small, medium farmer to gain from loan waiver
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SOCIAL SECTOR
* India midday meal scheme is world's largest
* 182,000 girls in residential schools under Kasturba plan
* 114 mln children covered by midday meal scheme
* FY09 2nd year of plan should be year of consolidation
* 52 villages per day get phone connections under Bharat Nirman
* 4,113 rural villages computerised everyday.
* 42 villages/day get power connections under Bharat Nirman
* "Can do better" on ensuring more inclusive growth
* Noon meal scheme to be extended to upper primary schools
* Mid-day meal plan to be extended to all blocks in country
* Midday meal scheme extended to all govt schools
* Mid-day meal plan extension to help 25 mln children
* Cleanliness drive allocation upped to 12 bln rupees FY09
* More equity to Commissions for minorities, SC/ST
* SC, ST, minorities to continue getting special attention
* Northeast, especially Arunachal, face "special problem"
* Plan to give potable water to schools in scarcity areas
* FY09 plan for districts with minorities 37.8 bln rupees
* 288 more bank branches by Mar in mainly minority districts
* 2 bln rupees for new potable water plan for schools FY09
* Paramilitary forces to have more SC, ST candidates
* Initial grant for potable water in schools 2 bln rupee
* Potable water in schools cost 15,000-30,000 rupee/system
* Non-profit cooperation fund for national skill development
* Need to set up world class skill development programme
* Smart card based PDS food delivery in Haryana, Chandigarh
* 3 social security schemes for unorganised workers FY09
* National Handicapped Corporation to get 90 mln rupees
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FARM, RURAL SECTOR
* Food grain adequacy will be a challenge in FY09.
* Farm credit seen 2.4 trln rupees by March end.
* Promises new initiatives for agriculture.
* Cotton output seen at 23.38 mln bales FY08.
* Cotton output estimated 24.38 mln bales.
* Maize output seen at 65.78 mln tn FY08.
* 88% rise in wheat prices, 15% rise in rice prices.
* Soybean output estimated 9.45 mln tn.
* Rice output seen at 94.08 mln tn FY08.
* Maize output estimated 16.7 mln tn.
* FY08 food grains output at record high of 219.32 mln tn.
* Rice output estimated 94 mln tn.
* FY09 farm credit aim 2.8 trln rupees
* Farm credit growth impressive
* Gross capital formation in farm 12.5% of GDP FY07
* Aims to up farm contribution to GDP to 1.6% in 11th plan
* Crucial to manage inflow of food supply
* FY09 agri credit target 2.8 trln rupees
* 16 bln rupee interest subvention for short-term crop loan
* 900,000 ha to be developed under World Bank aid
* Irrigation Resources Finance to have 1 bln rupee capital
* More pacts with World Bank likely for Orissa, W Bengal
* To set up Irrigation, Water Resources Finance Corp
* 548,000 ha brought under irrigation in last 2 years
* To give 2.8 trln rupees of loans to farm sector FY09
* Funds for rain-fed area 3.48 bln rupees FY09
* 24 major, 750 minor irrigation projects in FY09
* Education plan to up retention, upgrade learning quality
* To cover 400,000 ha more in micro, dip irrigation
* Irrigation outlay 200 bln rupees FY09 vs 110 bln yr ago
* IWRFC to be incorporated as company before Mar
* Rubber Fund to get 190 mln rupees FY09
* Coconut, cashew, pepper to get priority for crop revival
* Special purpose Tea Fund to get 400 mln rupees FY09
* 56,000 old plantations revived under horticulture mission
* To stress on revival of coconut, cashew, pepper crops
* To set up 500 soil testing labs as PPP in 11th plan
* 276,000 ha brought under horticulture
* To incorporate new water commission before Mar 31
* Have planned crop insurance scheme for spices next yr
* 180 mln rupees allocation for coffee in FY09
* 50-mln-rupee one-time fund to Trivandrum plantation unit
* 400 bln rupees allocation for special purpose tea fund
* 200 mln rupee grant for Tea Research Association
* 750 mln rupees for farm ministry for mobile soil testing
* Perpetual fund for Rubber, Cardamom, few others FY09
* Have planned crop insurance scheme for spices next year
* Determined to be self-sufficient in foodgrain output
* 200 mln rupees for tea research
* To set up mobile soil testing labs in 230 districts
* 40 bln rupees for rural roads in FY09
* RIDF corpus up 140 bln rupees in FY09
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NON-FARM COMMODITIES
* Global crude oil prices sharply up.
* Crude oil, iron ore, copper, lead, tin prices elevated.
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SUBSIDY
* To give 326.67 bln rupees for food subsidy under PDS FY09
* Fertiliser subsidy to continue
* Mulling new structure for fertiliser subsidy scheme
* To continue providing fertilisers at subsidised rate
* National Agri Insurance Plan to get 6.4 bln rupees FY09
* Looking at moving to nutrient-based fertiliser subsidies
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INDUSTRY
* Policy is to list PSUs to unlock their true value
* Aiming to take manufacturing growth rate to double digits
* Manufacturing industries, apparel, paper growing slower
* Manufacturing sector growing more slowly
* 20% growth in capital goods
* IIP for consumer goods, durables down in FY08
* Govt to list more arms to unlock value
* Some fiscal steps to be taken to boost industrial growth
* 55 bln rupees for Rajiv electrification plan in FY09
* National fund for power transmission, distribution
* Double-digit manufacturing growth in coal, power, steel
* 8 bln rupees for accelerated power reform plan FY09
* Power generation capacity target in 11th plan 78,577MW
* Tilaiya ultra mega power project to be awarded shortly
* Sharp fall in consumer goods growth in Apr-Dec
* Micro, small enterprises to continue to get govt aid
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FINANCIAL SECTOR
* To extend sr citizens pension plan to all above 65 yrs
* To give 10 bln rupees to LIC for Aam Admi Bima Yojana
* Govt to ask bks to meet credit needs of self-help groups
* Home loans for poor brought under banks' DRI scheme
* LIC to cover 10mln landless farmer in social security plan
* Aam Aadmi Bima Yojna to cover 10 mln households by Sep 30
* 20-bln-rupee SIDBI fund for risk financing
* 50-bln-rupee fund in NABARD to up short-term loans
* To launch exchange traded FX, rate derivative mkt
* To expand market for corporate bonds
* 50 bln rupee NABARD fund for short-term co-ops' lending
* Banks to embrace total financial inclusion concept
* 288 PSU bank branches to be opened in backward areas by Mar
* Will work with RBI for temporary steps to moderate inflow
* 256 new bank branches opened in minority districts
* 75-79% of farm lending has come from rural, small banks
* 75% of farm credit by scheduled commercial banks
* 256 PSU bank branches opened in 2007
* 288 more PSU bank branches to be set up by Mar
* To create risk capital fund in SIDBI
* Micro, small, medium cos continue to be priority
* Fund for TUFS up to 10.9 bln rupees vs 9 bln rupees
* Banks, RRBs to add 250 accounts/yr per rural branch
* "Measured steps" to continue in financial sector reforms
* SIDBI cuts SSIs annual services fees to 0.5% from 0.75%
* Risk capital fund for micro, small, medium cos under SIDBI
* To ask states to help develop national securities mkt
* PAN requirement extended to all financial mkts
* PAN sole identification number in securities market
* There is no seamless national market for securities
* Differences in duties, levies hampering securities mkt
* PSU bks to give DRI scheme home loans at 4% interest rate
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TRADE
* Rupee up 9.8% from Apr 2007
* Relief to exporters in FY09 to continue as required
* To develop handloom cluster at Varanasi, Shivsagar
* Apr-Dec merchandise export growth 21.8%
* Merchandise exports to fall short of target
* 3.40 bln rupees for weavers insurance scheme in FY09
* Interest spend on MSS is subsidy to export sector
* Govt sensitive to needs of merchandise export sector
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CORE SECTOR
* To give 129.66 bln rupee to National highway plan FY09
* NHDP outlay upped to 129.66 bln rupees from 108.67 bln
* 96.4% roads completed in Golden Quadrilateral
* NELP-7 to attract $3.5 bln-$8.0 bln investments
* $3.5 bln-$8.0 bln needed for oil exploration blocks
* To introduce more reform in coal, electricity sectors
* Coal regulator to be established
* 300 km roads to be completed FY09 under national plan
* Plans national fund for power transmission, distribution
* 4.5 bln rupees allocated for textile parks FY09
* All 30 integrated textile parks approved
* Integrated textile park scheme to continue in 11th Plan
* 750 mln rupees for common service centres
* 180-km roads completed in FY08, 300 km target FY09
* 250 clusters for handloom being developed
* Provision for integrated textile parks 4.5 bln rupees
* 1.57 mln houses to be built by March
* 4.1 mln houses built until Dec under rural housing plan
* Sop for housing for poor 35,000 rupees/head from Apr
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INVESTMENT, SAVINGS
* FDI inflow seen at $12.7 bln in FY08
* FII inflow seen at $18 bln in FY08
* Policy is to encourage all investment - local, foreign
* FY08 investment rate estimated 36.3% of GDP
* "Unmistakeable boom of investment" since FY06
* FY08 savings rate estimated 35.8% of GDP
* FY08 savings estimated 35.8% of GDP
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EDUCATION
* Education allocation up 20%
* India has opportunity to become "knowledge society"
* To set up 2 architecture schools at Bhopal, Vijaywada FY09
* New IIT in Andhra, Bihar, Rajasthan
* New central universities in each of uncovered states
* 16 central universities to be set up in FY09
* 16 new central universities in FY09
* 800 mln rupees for Balika Vidyalaya hostels upgrade
* FY09 allocation for secondary education 45.54 bln rupees
* 1 bln rupees to IT ministry to link knowledge institutes
* Deccan college in Pune to get 50 mln rupees grant
* 850 mln rupees to new scholarship for scientific research
* 454.5 mln rupees for Madrasa education FY09
* 600 mln rupees to up corpus of Maulana Azad Foundation
* 1 bln rupees for IT ministry to set up knowledge bank
* Student reservation to continue for SC, ST, minorities
* Spend on children's schemes FY09 over 330 bln rupees
* 72 bln rupees for ministry for woman, child development
* 162.02 bln rupees allotted for 30% women-specific plans
* 114.60 bln rupees for 100% women specific programme
* To allot 72 bln rupee for ministry of women, children FY09
* 7.5 bln rupees for upgrade of ITIs in FY09
* 440 mln rupees for Sainik School infrastructure
* 1 bln rupees each for DU, University of Mysore
* 1 bln rupees for Mahatma Phule Vidyapeth
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HEALTH
* Health allocation up 20%
* FY09 allocation for AIDS programme 9.9 bln rupees
* FY09 polio eradication drive allocation 10.42 bln rupees
* Rural health plan budget aid upped to 120.50 bln rupees
* 323 district hospitals taken up for upgrade in FY09
* Trained 462,000 personnel in National Rural Health plan
* 165.34 bln rupees allocation for health sector in FY09
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MISCELLANEOUS
* 6th pay commission to submit report by Mar 31
* Concerned about rate of attrition in defence services
* Permanent institutional mechanism to study climate change
* Fund worth 6.24 bln rupees in FY09 for Commonwealth Games
* 750 mln rupees to Indian Council of Cultural Relations
* Allocates funds for special tiger protection force
* 500 mln rupees for national tiger conservation project
FISCAL
* Govt targets FY09 fiscal deficit at 2.5% of GDP
* Govt targets FY09 fiscal deficit 1.33 trln rupees
* FY09 non-plan expenditure seen 5.70 trln rupees
* FY09 plan expenditure seen 2.43 trln rupees
* One more year needed to remove revenue deficit
* Fiscal deficit not only achieved but also some headroom
* FY09 revenue deficit 551.84 bln rupees, 1% of GDP
* FY09 revenue expenditure projected at 6.58 trln rupees
* Govt targets FY09 fiscal deficit at 3.1% of GDP vs 3.3%
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DIRECT TAXES
* Income Tax slabs changed
* Income tax threshold up to 150,000 rupees for all assesses
* On course to achieve budget estimate of direct taxes
* Agriculture income exempt from income tax
* Demat corp debt instruments exempt from TDS
* Reverse mortgage income won't be considered income for tax
* 10% income tax for 150,000-300,000 rupees income
* Stock, commodity bourses under service tax net
* All income tax payers get minimum relief of 4,000 rupee/yr
* 30% income tax for income above 500,000 rupees
* I-T threshold for women 180,000 rupees vs 145,000 rupees
* No change in corporate income tax, surcharge
* Direct tax proposals revenue neutral
* Withdraws banking cash transaction tax
* No change in securities transaction tax
* Short-term capital gains tax 15% vs 10%
* Introduces STT for commodity futures trades
* Dividend distribution tax to be 15%
* Deduction of STT paid allowed
* Can setoff dividend income from arms vs dividend tax
* Exemption limit for small service providers 1 mln rupee/yr
* Services contribute 55% of GDP
* Svc sector to get amortisation benefit
* 5 yr tax holiday for hospitals set up to serve rural areas
* To up short-term capital gains tax to 15% in some cases
* High growth rates helped boost tax revenue collection
* Senior citizen I-T threshold 225,000 rupees vs 195,000
* Production of seeds added to VAT list
* 30% income tax on over 500,000 rupees per year
* FBT exemption to creche facility, guest houses
* 125% weighted deduction for research co on R&D outsourcing
* 5-yr IT holiday for 2, 3, 4-star hotels in some districts
* Chrome ore export duty up at 3,000 rupee/tn vs 2,000 rupee
* To withdraw bank cash transaction tax by Apr 1, 2009
* Goods & services tax to come into effect from Apr 1, 2010
* Central sales tax to be 2% from April vs 3% now
* 15,000 rupees more 80D cut on parents' insurance premium