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Budget 2008-2009 » Important Budget
Announcements
- Plan Expenditure has been approximated at Rs.243,386 crore.
- Non-Plan Expenditure figured out at Rs.507,499 crore.
- Revenue deficit for 2007-08 to be 1.4 per cent (against a BE of 1.5 per cent) and the fiscal deficit to be 3.1 per cent (against a BE of 3.3 per cent); Revenue receipts of Central Government for 2008-09 projected at Rs.602, 935 crore and revenue expenditure at Rs.658,119 crore; Revenue deficit for 2008-09 estimated at Rs.55,184 crore, which amounts to 1.0 per cent of GDP; Fiscal deficit for 2008-09 estimated at Rs.133,287 crore which is 2.5 per cent of GDP; elimination of Revenue Deficit may require one more year; due to the conscious shift in expenditure favoring health, education and the social sector.
- Thirteenth Finance Commission would be called for to visit again the roadmap for fiscal adjustment and be required to advice a suitably revised roadmap, once the obligations on account of the Sixth Central Pay Commission gets clear.
- he Gross Domestic Product has seen an hike by 7.5 per cent, 9.4 per cent and 9.6 percent in first three years of the UPA Government ensuing into an unprecedented average of 8.8 per cent rate of growth. The driving force for the growth remains to be 'services' and 'manufacturing' which are approximated to rise at 10.7 per cent and 9.4 per cent respectively.
- Agricultural rate of growth for 2007-08 is figured at 2.6 per cent.
- Food grain production in 2007-08, planned at 219.32 million tonnes-an all time record. Rice production at 94.08 million tonnes, maize at 16.78 million tonnes, soya bean at 9.45 million tonnes, cotton at 23.38 million bales each, constitutes an all time record.
- Rashtriya Krishi Vikas Yojana established with an outlay of Rs. 25,000 crore, National Food Security Mission with an outlay of Rs. 4,882 crore under National Policy for Farmers in the Eleventh Five Year Plan.
- Tax to GDP ratio which was 9.2 per cent in 2003-04, set to increase to 12.5 per cent at the end of 2007-08.
- Fixed to attain the Budget Estimates of indirect taxes and surpass the Budget Estimates of direct taxes.
Threshold level of exemption from personal income tax in the case of all assesses rose to Rs.150,000. The slabs and rates of tax are :
| Up to Rs.150,000 | NIL |
| Rs.150,001 to Rs.300,000 | 10 per cent |
| Rs.300,001 to Rs.500,000 | 20 per cent |
| Rs.500,001 and above | 30 per cent |
In case of a woman assessee, the threshold limit increased from Rs.145,000 to Rs.180,000; for a senior citizens, the threshold limit increased from Rs.195,000 to Rs.225,000.
Corporate income tax rates unchanged.
Rate of surcharge unchanged.
Senior Citizen Saving Scheme 2004 and the Post Office Time Deposit Account is an addition to the saving instruments under Section 80C of the Income Tax Act.
Surplus reduction of Rs.15,000 allowed under Section 80D to an individual paying medical insurance premium for his/her parent or parents.
Income Tax Act to be rectified to provide that reverse mortgage would not be subjected to "transfer"; and the stream of revenue drawn by the senior citizen would not be "income".
Tax income coming out of saplings or seedlings grown in a nursery would be released.
Business for the production of seeds and manufacture of agricultural implements added to the list of companies allowed amounted to deduction of 150 per cent on any expenditure on in-house scientific research.
Benefit of amortisation of certain preliminary expenses under Section 35D allowed to assessees in the services sector.
Corporate debt instruments issued in demat form and listed on recognised stock exchanges would be freed from TDS.
Crèche facilities, sponsorship of an employee-sportsperson, organising sports events for employees and guest houses would be kept out from the purview of FBT.
Indirect Taxes
Customs duties
Peak rate of customs duty remains unchanged.
Customs duty on Project Imports would be step down from 7.5 per cent to 5 per cent; 4 per cent special CVD would be applied on a few specified projects in the power sector.
Customs duty would be cut down on steel melting scrap and aluminium scrap from 5 per cent to nil.
Customs duty would dip from 10 per cent to 5 per cent on certain specified life saving drugs and on the bulk drugs used for the manufacture of such drugs. They would also be released from excise duty or countervailing duty.
Customs duty is cut on vitamin premixes and mineral mixtures from 30 per cent to 20 per cent and on phosphoric acid from 7.5 per cent to 5 per cent to reduce cost of manufacture of dairy and poultry feeds
Customs duty would be step down on bactofuges from 7.5 per cent to nil for the betterment of dairy industry and to enhance shelf life of milk
Specified parts of set top boxes and specified raw materials for use in the IT/ electronic hardware industry would be released from customs duty.
Customs duty on convergence products would be dipped from 10 per cent to 5 per cent in order to set up parity between devices used in the information/ communication sector and the entertainment sector
Customs duty would be cut down on specified machinery from 7.5 per cent to 5 per cent to offer fillip to the manufacture of sports goods; duty also being released on specified raw materials for sports goods.
Customs duty to be freed on rough cubic zirconia and being stepped down on polished cubic zirconia from 10 per cent to 5 per cent, to boost up value addition and exports by gem and jewellery industry; Customs duty on rough coral would be reduced from 10 per cent to 5 per cent.
Customs duty freed on helicopter simulators to facilitate training of helicopter pilots
Customs duty dipped down on crude and unrefined sulphur from 5 per cent to 2 per cent, in order to support domestic fertiliser production Customs duty exemption is proposed to be applied on naphtha for use in the manufacture of polymers to maintain correct price distortions and revenue losses. Naphtha for use in the manufacture of polymers will be amounted to normal rate of 5 per cent. Naphtha imported for the production of fertilisers will remain to be exempt from import duty.
Export duty on chrome is being increased from Rs.2,000 per metric tonne to Rs.3,000 per metric tonne to conserve and make it available for value added manufacture in India.
Excise duty
General CENVAT rate on all goods decreased from 16 per cent to 14 per cent to give action to the manufacturing sector.
Excise duty on all goods manufactured in the pharmaceutical sector would be dipped from 16 per cent to 8 per cent.
Excise duty on buses and their chassis has been reduced from 16 per cent to 12 per cent.
Excise duty has been reduced on small cars from 16 per cent to 12 per cent and on hybrid cars from 24 per cent to the general revised rate of 14 per cent.
Excise duty has been reduced on two wheelers and three wheelers from 16 per cent to 12 per cent.
Excise duty would be reduced on paper, paper board and articles made there from manufactured out of non-conventional raw materials by units not having an attached bamboo/wood pulp making plant from 12 per cent to 8 per cent with a further reduction on clearances up to 3,500 MT from 8 per cent to nil. Excise duty on certain varieties of writing, printing and packing paper will also be reduced from 12 per cent to 8 per cent.
Excise duty is to be stepped down from 16 per cent to nil on a few mass consumption items including composting machines, wireless data cards, packaged coconut water, tea and coffee mixes, and puffed rice.
Excise duty deduction from 16 per cent to 8 per cent on a few more items like water purification devices, veneers and flush doors, sterile dressing pads etc,. specified packaging material and breakfast cereals.
Anti AIDS drug, Atazanavir, as well as bulk drugs for its manufacture are to be released from excise duty.
Excise duty being released on end-use basis, on refrigeration equipment (consisting of compressor, condenser units, evaporator, etc) above 2 TR (tonne refrigeration) utilising power of 50 KW and above.
Excise duty would be applicable on bulk cement and packaged cement brought on par; bulk cement to pull excise duty of Rs.400 per Metric Tonne or 14 per cent ad valorem, whichever is higher; cement clinkers excise duty at Rs.450 per Metric Tonne.
Excise duty has been increased on packaged software from 8 per cent to 12 per cent, bringing at par with customised software attracting a service tax of 12 per cent.
Excise duty on both filter and non-filter cigarettes has been brought down on the same condition by applying higher rates on non-filter cigarettes.
Ad valorem part of the excise duty on unbranded petrol and unbranded diesel being removed and replaced by an equivalent specific duty of Rs.1.35 per litre; there will be only a specific duty of Rs.14.35 per litre on unbranded petrol and Rs.4.60 per litre on unbranded diesel; there will be no impact on retail prices.
Service Tax
- Four services that has been brought under service tax net namely, asset management service provided under ULIP, services provided by stock/commodity exchanges and clearing houses; has the right to use goods, in cases where VAT is not payable; and customised software, to bring it on equality with packaged software and other IT services.
- Threshold level of exemption for small service providers rose from Rs.8 lakhs per year to Rs.10 lakh per year; about 65,000 small service providers go out of the tax net.
Central Sales Tax rate would be reduced from 3 per cent to 2 per cent from April 1, 2008.
Roadmap for Goods and Service Tax would be prepared for introduction of GST from April 1, 2010.
BHARAT NIRMAN
Bharat Nirman has made a remarkable growth in 2007-08 with 290 habitations offered with drinking water each day, 17 habitations linked through all weather road, 52 villages provided telephones, 42 villages electrified & 4,113 rural houses completed each day.
INVESTMENT
Saving rate and investment rate approximated to be 35.6 per cent and 36.3 per cent, respectively, by the end of 2007-08; between April- December 2007-2008. FDI numbered to US$ 12.7 billion and FII to US$ 18 billion.
Support to Central Public Sector Enterprises (CPSEs): Government to offer Rs.16,436 crore as equity support and Rs.3,003 crore as loans to CPSEs in 2008-09; 44 CPSEs listed as on date; Government policy is to list more CPSEs in an effort to unlock their true value and improve corporate governance.
AGRICULTURE
Agricultural Credit:
Growth of agricultural credit would surpass the planned target for 2007-08. For 2008-09, target set at Rs.280,000 crore, with short-term crop loans remained to be disbursed at 7 per cent per annum; initial provision of Rs.1,600 crore made for interest subvention in 2008-09.
Investment in Agriculture:
Gross Capital Formation (GCF) in agriculture as a proportion of GDP in the agriculture sector enhances from a low of 10.2 per cent in 2003-04 to 12.5 per cent in 2006-07; Plans to increase it to 16 per cent during the Eleventh Plan to achieve the growth rate of 4 per cent.
Water Resources:
Accelerated Irrigation Benefit Programme (AIBP): 24 major and medium irrigation projects and 753 minor irrigation schemes to be accomplished in 2007-08, making additional irrigation potential of 500,000 hectare; Outlay for 2008-09 has been hiked to Rs. 20,000 crore, from Rs.11,000 crore in 2007-08.
Rainfed Area Development Programme decided and would be applied in 2008-09 with an allotment of Rs.348 crore. Priority would be given to those areas that have not been beneficiaries of watershed development schemes.
Centrally Sponsored Scheme on Micro Irrigation: Rs.500 crore given in 2008-09 with a plan of covering 400,000 hectare.
Water bodies: Agreements for a total sum of US$738 million signed with the World Bank by the Governments of Tamil Nadu, Andhra Pradesh and Karnataka to improve, renovate and restore water bodies. Similar agreements to be signed between the World Bank and the Governments of Orissa, West Bengal and some other States.
Irrigation and Water Resources Finance Corporation: 14 irrigation projects finalized as National Projects by Government; Irrigation and Water Resources Finance Corporation (IWRFC) aimed to be set up with initial capital of Rs.100 crore contributed by the Central Government, to fund long-gestation major and medium irrigation projects.
National Horticulture Mission (NHM): NHM that covers 340 districts in 18 States and two Union Territories, offered Rs.1,100 crore in 2008-09.
Soil testing: 500 soil testing laboratories would be established during the Eleventh Plan with Government assistance of Rs.30 lakh per laboratory; one-time allotment of Rs.75 crore to the Ministry of Agriculture in an effort to provide one fully-fitted mobile soil testing laboratory each to 250 districts of the country.
Plantation Crops: Special Purpose Tea Fund for re-plantation and rejuvenation to be offered at Rs.40 crore in 2008-09; similar support to cardamom, rubber and coffee; crop insurance scheme for tea, rubber, tobacco, chilli, ginger, turmeric, pepper and cardamom to be introduced.
National Plant Protection Training Institute at Hyderabad to be turned into an autonomous National Institute of Plant Health Management.
Crop Insurance: National Agriculture Insurance Scheme (NAIS) to be continued in its present form for Kharif and Rabi 2008-09. Rs.644 crore provided for the scheme.
Weather Based Crop Insurance Scheme would be applied as a pilot scheme in selected areas of five States to be continued; Rs.50 crore offered for this purpose in 2008-09.
Subsidy for Fertilizers: Government would continue to offer fertilisers to farmers at subsidized prices; Proposals to move to a nutrient based subsidy regime and alternative methods of delivery being scrutnized.
Cooperative Credit Structure: Prof. Vaidyanathan Committee's report on reviving the short-term cooperative credit structure under implementation in 17 states. Rs. 1185 crore has been released so far by the Central Government to four States. Central Government and State Government have sorted an agreement to implement the report on reviving the long term cooperative credit structure. Central Government's share will be Rs. 2,642 crore or 86 per cent of the total burden.
Scheme of Debt Waiver and Debt Relief for farmers:
Plans to cover all loans disbursed by scheduled commercial banks, regional rural banks and cooperative credit institutions up to March 31, 2007 and overdue as on December 31, 2007 would be covered under the scheme;
Complete waiver of all loans that were overdue on December 31, 2007 and which were unpaid until February 29, 2008 for marginal farmers and small farmers;
One time settlement (OTS) plan in respect of other farmers for all loans that were overdue on December 31, 2007 and which were unpaid until February 29, 2008; Rebate of 25 per cent against payment of the balance of 75 per cent under OTS;
Agricultural loans has been reconstructed and rescheduled by banks in 2004 and 2006 via special packages also eligible, either for a waiver or an OTS on the same pattern.
Application of the debt waiver and debt relief scheme to be carried out by June 30, 2008; Farmers availing the relief would be allowed to avail fresh agricultural loans from banks in accordance with normal rules.
About 3 crore small and marginal farmers and about one crore other farmers to gain from the scheme; Total value of overdue loans being waived estimated at Rs.50,000 crore and the OTS relief estimated at Rs.10,000 crore.
Manufacturing Sector
Growth in capital goods remains very high at 20.2 per cent. Aims to make manufacturing growth rate to double digit with the help of more reforms.
Power
Against Eleventh Plan aim for additional power generation capacity of 78,577 MW Commercial Operation Date (COD) on about 10,000 MW to be attained by the end of March 2008.
Ultra Mega Power Project (UMPP): Fourth UMPP at Tilaiya to be started up shortly; Chhattisgarh, Karnataka, Maharashtra, Orissa and Tamilnadu pressed up to bring five more UMPPs to the bidding stage by stretching the necessary support.
Rajiv Gandhi Grameen Vidyutikaran Yojana to be followed up during the Eleventh Plan period with a capital subsidy of Rs.28,000 crore; allotment of Rs.5,500 crore for 2008-09.
Accelerated Power Development and Reforms Project: Rs.800 crore to be offered in 2008-09, A National Fund for transmission and distribution reform to be established.
Roads
National Highway Development Programme (NHDP): Allotment amount for NHDP increased to Rs.12,966 crore in 2008-09 from Rs.10,867 crore in 2007-08; Completion rate in the Golden Quadrilateral is 96.48 per cent and in the North South, East West Corridor project is 23.36 per cent; Extra attention being paid to SARDP-NE; programme devised for the North Eastern region; 180 kms of roads completed in 2007-08 and 300 kms. of road targetted for completion in 2008-09.
Oil and Gas
Seventh round of bidding under the New Exploration Licensing Policy; bids invited for 57 exploration blocks; figured to pull investment of the order of US$3.5 billion to US$8 billion for exploration and discovery.
Coal
53 coal blocks with reserves of 13,842 million tonnes allocated during April-January 2007-08 to Government and private sector companies; new Coal Distribution Policy notified in October 2007; coal regulator to be implemented.
Information Technology
Allocation to the Department of Information Technology increased to Rs.1,680 crore in 2008-09 from Rs.1,500 crore in 2007-08; Two Schemes for setting up 100,000 broadband internet-enabled Common Service Centres in rural areas and State Wide Area Networks (SWAN) with Central assistance under operation; new scheme for State Data Centres also approved; Rs.75 crore provided for the common service centres; Rs.450 crore provided for SWAN and Rs.275 crore for the State Data Centres.
Textiles
Schemes for Integrated Textile Parks (SITP) and the Technology Upgradation Fund (TUF) to be followed in the Eleventh Plan period; Provision for SITP being kept at Rs.450 crore in 2008-09; Provision for TUF to be enhanced to Rs.1,090 crore in 2008-09 from Rs.911 crore in 2007-08.
Handloom sector: 250 clusters being set up and 443 yarn banks devel under the cluster approach to the rising sector of the handloom sector; Over 17 lakh families of weavers to be covered under the health insurance scheme by March 2008; Allocation being enhanced to Rs.340 crore in 2008-09; Infrastructure and production being increased up by taking up six centres for development as megaclusters; Varanasi and Sibsagar would be taken up for handlooms, Bhiwandi and Erode for powerlooms, and Narsapur and Moradabad for handicrafts; Each mega-cluster to require about Rs.70 crore; Initial provision of Rs.100 crore made in 2008-09.
Micro, Small and Medium Enterprises
A risk capital fund being established in the Small Industries and Development Bank of India (SIDBI); Credit Guarantee Trust with SIDBI had offered guarantees to 89,129 units for an amount of Rs.2,479 crore as on January 31, 2008; SIDBI to bring down the guarantee fee from 1.5 per cent to 1 per cent and the annual service fee from 0.75 per cent to 0.5 per cent for loans up to Rs.5 lakhs.
Foreign Trade
Relief given to exporters in three tranches would cost to over Rs.8,000 crore; Interest cost of sterilization through market stabilization bonds (MSS), which is in a sense, subsidy to the export sector, estimated at Rs.8,351 crore for the year 2007-08.
INVESTMENT, INFRASTRUCTURE, INDUSTRY AND TRADE
Saving rate and investment rate figured out to be 35.6 per cent and 36.3 per cent, respectively, by the end of 2007-08; between April- December 2007-2008. FDI amounted to US$ 12.7 billion and FII to US$ 18 billion.
Support to Central Public Sector Enterprises (CPSEs): Government to offer Rs.16,436 crore as equity support and Rs.3,003 crore as loans to CPSEs in 2008- 09; 44 CPSEs listed as on date; Government policy is to list more CPSEs in order to unlock their true value and improve corporate governance.
Rural Infrastructure Development Fund
Corpus of RIDF-XIV to be increased in 2008-09 to Rs.14,000 crore, with a different window for rural roads.
OTHER PROPOSALS
Skill Development Mission: A non-profit corporation would be set up with the entrusted mission to deal the challenge of delivering the skills required by a growing economy; Rs.15,000 crore decided to be garnered as capital from Governments, public and private sector, and bilateral/multilateral sources; Government's equity in the proposed non-profit corporation to be Rs.1,000 crore to begin with.
Industrial Training Institutes: 238 ITIs being upgraded under the World Bank assisted scheme; Under the PPP scheme, 309 ITIs have been identified in 29 States with corresponding industry partners and agreements signed in 244 cases; Rs.750 crore set apart in 2008-09 in anticipation of upgrading 300 more ITIs.
Sainik Schools: Rs.44 crore granted to the 22 Sainik Schools at the rate of Rs.2 crore each, for quick improvement of infrastructure including classrooms, laboratories, libraries and facilities for physical education.
Public Distribution System: Rs.32,667 crore being offered next year for food subsidy under PDS and other welfare programmes; State of Haryana and the Union Territory of Chandigarh to introduce, on a pilot basis, a smart card based delivery system to offer food grains under the PDS.
Unorganised Sector Workers: In anticipation of the Unorganised Sector Workers' Social Security Bill, 2007 being made into law, three plans have been designed to offer social security to workers in unorganised sector in a phased manner introduced; (i) Aam Admi Bima Yojana to offer insurance cover to poor households; in the first year of the Yojana, LIC to cover one crore landless households by September 30, 2008; Rs.1,500 crore placed with LIC; Additional sum of Rs.1,000 crore to be placed with LIC in 2008-09 to cover another one crore poor households in the second year;
(ii) Rashtriya Swasthya Bima Yojana to be applied with effect from April 1, 2008; Indira Gandhi National Old Age Pension Scheme enlarged with effect from November 19, 2007 to involve all persons over 65 years coming under the BPL category expanding beneficiary cover from 87 lakh to 157 lakh; Rs. 3,443 crore being allocated in 2008-09 as against Rs.2,392 crore in 2007-08.
Housing for the Poor: 41.13 lakh houses built up to December 2007 under Indira Awas Yojana (IAY) against an aim of 60 lakh houses; Cumulative number of houses constructed under IAY to be 51.77 lakh by end March 2008; Subsidy per unit in respect of new houses sanctioned after April 1, 2008 to be enhanced from Rs.25,000 to Rs.35,000 in plain areas and from Rs.27,500 to Rs.38,500 in hill/ difficult areas would amount to the higher cost of construction; Subsidy for upgradation of houses to be enhanced from Rs.12,500 per unit to Rs.15,000; Public sector banks to be advised to include IAY houses under the differential rate of interest (DRI) scheme and lend up to Rs.20,000 per unit at an interest rate of 4 per cent.
Defence: Allocation for Defence to be enhanced by 10 per cent from Rs.96,000 crore to Rs.105,600 crore.
Backward Regions Grant Fund: Allocation for 2008-09 kept at same level as current year at Rs.5,800 crore; 45 per cent of the amount likely to be allocated to the States of Bihar, Orissa and Uttar Pradesh.
Climate Change: Permanent institutional mechanism to be set up for development and coordination role in exploration and implementation of ideas.
Sixth Central Pay Commission: to submit its report by March 31, 2008.
Commonwealth Games: to be offered Rs.624 crore in 2008-09.
Institutions of Excellence: Special grant of Rs.100 crore granted to three institutions
of excellence for 2008-09
- Mahatma Phule Krishi Vidyapeeth, Rahuri, Maharashtra;
- University of Mysore, Mysore; and
- Delhi University, Delhi.
Tiger Protection: One time allocation of Rs.50 crore to the National Tiger Conservation Authority to redouble efforts to save the tiger; Bulk of grant to be used to increase, arm and deploy a special Tiger Protection Force.
Monitoring and Evaluation: Central Plan Schemes' Monitoring System (CPSMS) to be put in place and implemented as Plan scheme; a comprehensive Decision Support System and Management Information System also to be established to generate and monitor scheme-wise and State-wise releases for about 1,000 Central Plan and centrally sponsored schemes in 2008-09; Concurrent evaluation started by some ministries to be supplemented by independent evaluations conducted by research institutions.
