Finance Minister Palaniappan Chidambaram presented the budget for 2007-08 to parliament on 28 February 2007. Experts say that the budget is a continuation of what was already there without any major changes as such. Highlights of the budget are as follows:
The Progress Report
1)The average inflation rate seen at between 5.2 and 5.4 % in 2006/07 and the government says it is confident it can tackle the present inflationary trend.“I wish to reiterate government’s concern over inflation. The government has already taken a number of measures on the fiscal, monetary and supply sides to maintain price stability and if required will not hesitate to take more measures,” he said.
2)Revenue deficit remained at 2% and fiscal deficit at 2% of GDP.Increase in gross tax revenue by 19.9%. “Revenues were buoyant for the third year in succession. I have put the revenues to good use to promote inclusive growth, equity and social justice,” Chidambaram said.“The economy is in a stronger position than ever before. It therefore behoves us to set higher goals.”
3)Chidambaram says all indicators point to an accelerating rate of investment.April 2006-January 2007 foreign direct investment seen at $12.5 billion.Overseas investment exceeds portfolio investments.
4)Government sets up panel to study the impact of forward trading in commodities
5) Exports seen crossing Rs5,53,260 crore ($125 billion) in 2006/07.
1)Total plan spending for 2007/08 set at Rs2.05 trillion.
2)Spending on education raised by 34.2 percent to 323.5 billion rupees for 2007/08.
3)Spending on healthcare and family welfare raised by 21.9 percent to 152.9 billion rupees for 2007/08
4)Spending on rural job guarantee scheme in 2007/08 set at 120 billion rupees; plan expanded to 330 districts.
5)Spending on irrigation to be increased to 110 billion rupees in 2007/08.
6)National Bank for Agriculture and Rural Development to issue farm bonds worth 50 billion rupees.
7)Agriculture must top the agenda of policymakers. “There is no dearth of schemes, there is no dearth of funds, what needs to be done is to deliver the intended outcomes,” he said.Farm credit for 2007/08 seen at 2.25 trillion rupees compared to 1.90 trillion in the previous year.
8)Equity support to state-run firms set at 164 billion rupees for 2007/08.
9)Debt support to state-run firms set at 29.7 billion rupees for 2007/08.
10)Spending on national highway programme increased to 106.67 billion rupees for next fiscal year from 99.45 billion in previous year.
11)Defence budget allocation increased to Rs96,000 crore.
12)North Eastern region will get Rs405 crore for highways. Work on Golden Quadrilateral road project nearly complete. North- South, East- West Corridor to be completed by 2009.
13)Technology upgradation fund to be continued in the 11th Plan. Allocation for handloom sector increased to Rs911 crore. Allocation to textile parks hiked to Rs412 crore. Central PSUs to invest Rs1 lakh crore.
1)The FM maintained the corporate tax rates to previous levels.
2)Surcharge was removed only for small and medium enterprises having an income of Rs1 crore or less.
3)Another benefit came to SMEs in the form of service tax relief. Small tax providers providing service up to Rs8 lakh have been exempted from tax.
4)The dividend distribution tax was raised from 12.5% to 15%, a move to which the market reacted sharply.
5)But the rate of securities transaction tax was kept unchanged.
6)The fringe benefit tax(FBT) regime was tweaked, bringing in ESOPs under it, while free distribution items and samples were exempt.
7)In move directed at individual sectors, 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.
8)Excise on cigarettes have increased by 5%, but duty on pan masala without tobacco as mouth freshners reduced from 66 % to 45 %
9)In what came as a surprise, MAT was extended to the IT sector.
10)The benefits of investment in venture capital funds was confined to IT, bio-technology, nano-technology, seed research, dairy among others.
11)Excise duty on petrol and diesel to be cut. Ad valorem duty on petrol and diesel cut to 6%.
12)No change CENVAT and service tax rate.
13)SSI expansion raised to Rs1.5 crore.
14)Excise duty on cigarettes increased by 5%.
15)Import duty on medical equipment cut by 17%.
16)Biodiesel fully exempt from excise.
17)A duty of Rs300 ($6.7) per metric tonne would be charged on iron ore exports.
1)The standard deduction for individual income-tax payers to be increased by Rs10,000.
2)All individuals,income up to Rs 1,10,000 will be exempt of income-tax.
3)For women tax payers, this amount has been raised from Rs1,35,000 to Rs1,45,000.
4)For senior citizens income up to Rs1,95,000 will be exempt from income-tax.
5)The education cess on income-tax has been raised from 2% to 3%.
6) The rate of corporate income-tax has been kept unchanged, but for companies which have an income of Rs1 crore or less, the surcharge has been removed.