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Budget 2007-08. Shubhashis Gangopadhyay India Development Foundation (March 7, 2007) Prepared for the joint discussion with ICRIER, NCAER and NIPFP; Jacaranda Hall, IHC. The Document. Annual book-keeping Policy statement Tax implications Sops, exemptions and largesse. The Basics.

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budget 2007 08
Budget 2007-08

Shubhashis Gangopadhyay

India Development Foundation

(March 7, 2007)

Prepared for the joint discussion with ICRIER, NCAER and NIPFP; Jacaranda Hall, IHC

the document
The Document
  • Annual book-keeping
  • Policy statement
  • Tax implications
  • Sops, exemptions and largesse
the basics
The Basics
  • Receipts and expenditure
  • Revenue deficit is down (2.0 to 1.5)
  • Fiscal deficit is down (3.7 to 3.3)
  • Capital versus revenue expenditure
macro versus micro
Macro versus Micro
  • Overall deficit targets are being met
  • Composition of expenditure a bit suspect
setting
Setting
  • Start of the plan period
  • Continuity towards long term goals
  • CMP
  • Inflation and elections
inference
Inference
  • NREG disbursement raises local food prices
  • But rural wages have been increasing

Real wage rise small but positive

  • Agriculture is highly fragmented

Differing prices in adjoining states

hiv aids
HIV/AIDS
  • NACP III to begin in 2007 -2008
  • Budget allotted for 2007-2008 is 969 crores
  • Steps by the government to destabilize HIV/AIDS by keeping the prevalence to < 1per cent in the population
  • Focus on high risk groups in all states
  • Access to condoms
  • Universal screening of blood and safe blood
  • Hospitals to prevent mother to child transmission of HIV/AIDS
  • To follow protocol for paediatric dosage developed by Indian doctors
slide15
ICDS
  • Budget increased from INR 4087 crore to INR 7061 crore for 2007-2008
  • 173 new ICDS projects

1,07274 anganwaadi centres

25,961 mini anganwaadi centres

  • Government committed to cover all habitations and settlements by ICDS during the 11th plan
national rural health mission 2005 12
National Rural Health Mission (2005-12)
  • Decentralisation of health planning and management – Village Health Plan/District health plan – all districts will be ready with District health plans by March 2007
  • Integration with programmes on health determinants (nutrition,sanitation etc.)
  • Recruitment of ASHAs (Accredited Social Health Activists) – 320,000 recruited and 200,000 undergone orientation training
  • Mainstreaming of AYUSH (Ayurveda,Yoga and Naturopathy, Unani, Siddha and Homeopathy) into the public health system – budget increased by 26 percent
  • Integration of vertical health and family welfare programmes and funds (e.g. Polio – allocated 1290 crores)
medical equipment and drugs
Medical Equipment and Drugs
  • General rate of import duty on medical equipment reduced to 7.5 per cent (equipment are taxed at 12.5 per cent at present with a concessional duty of 5 per cent on specified equipment)
  • Duty on 15 specified machinery in pharmaceutical and biotechnology sector reduced from 7.5 percent to 5 percent
  • Duty on most chemicals and plastics reduced from 12.5 percent to 7.5 percent
clinical trials
Clinical Trials
  • Exempted from service tax

Advantages:

Disadvantages:

primary education focus
Primary Education Focus
  • SSA allocation increased by 35%
  • Mid-day meal scheme to cover upper primary
  • Teacher training boost
    • allocation almost tripled to Rs. 450 crores
    • 200,000 teachers to be added
  • Classrooms to increase – by 500,000
school education
School Education

Problem – dropout rate high

  • Critical class – 8th to 9th class
  • Solution – Scholarships from 9-12
    • 100,000 means-cum-merit scholarship
    • Rs. 6000/- a year
    • Rs. 750 crores in 2007-08
secondary education
Secondary Education
  • Allocation increase
    • INR 1837 crore to INR 3794 crore
  • Scholarships
    • Through a fund with SBI
education and r d
Education and R&D
  • Promoting Ph.D.s – for some sections
  • Research institutions – customs duty exempt
  • Corporate in-house R&D – 150% deduction continued
vocational training
Vocational training
  • Vocational education mission
    • INR 50 crore
    • Based on PPP concept
  • ITIs – 1396 centres of excellence
    • 300 more ITIs to be covered
    • Academic and financial autonomy
    • 2nd shift allowed
physically challenged
Physically Challenged
  • Subsidy for regular employment
  • Employer contribution to PF reimbursed
slide26
SME
  • Increase in outstanding credit from INR 135,200 crore to INR 173,460 crore at end Dec 2006
  • Government to encourage banks to lend to SME’s
  • Proposal to allow credit rating of SMEs to fix interest rates by bank
  • Exemption limit for SSI raised from INR 1 crore to INR 1.5 crore
food processing
Food Processing
  • Customs duty on food processing machinery reduced from 7.5% to 5%
  • Exemption on crude and refined edible oil from additional CV duty of 4% and reduction on duty on crude and refined sunflower oil by 15 percentage points
  • Biscuit below INR 50 per Kg and all food mixes fully exempted
urban development
Urban Development
  • Increase in allocation for SJSRY from INR 250 crore to INR 344 crore
  • Promoting world class financial centre in Mumbai
  • Five year tax holiday for luxury hotels in NCT regions like Gurgaon, Faridabad and Ghaziabad
indirect taxes
Indirect taxes

Reform continued

  • Move toward general sales tax:
    • central sales tax reduced – 4% to 3%
    • states to be compensated – revenue loss
  • Peak customs duty to ASEAN levels: reduced - 12.5% to 10%
reducing customs duty
Reducing customs duty

Controlling inflation

  • Chemicals and plastics – 12.5% to 7.5%
  • Steel seconds – 20% to 10%
  • Coking coal – duty exempt
  • Polyester yarn and fibres – 10% to 7.5%
  • Diamonds – 5% to 3%
  • Dredgers – duty exempt
  • Food processing machinery – 7.5% to 5%
  • Medical equipment – 12.5% to 7.5%
  • R & D – 5% duty extended to all research institutions
  • Pharmaceuticals and biotechnology specified machinery – 7.5% to 5%
reducing excise duty
Reducing excise duty
  • Ad valorem duty on petrol and diesel – 8% to 6%
  • Other reductions
    • Job-creating sectors
    • Food processing
    • Cement
    • Umbrellas, footwear, plywood
  • Biodiesel, water carrying pipes - exempt
service tax
Service tax
  • Service tax extended to a no. of services
  • Exemptions
    • Technology business incubators
    • Clinical trials for new drugs
direct taxes
Direct taxes

Personal income tax (lower)

  • Standard exemption increased - all assessees, senior citizens, women
  • Deduction for medical insurance premia increased
direct taxes1
Direct taxes
  • Corporate income tax
    • Infrastructure companies exempt – gas pipeline and distribution; sea navigation channel
    • In-house R&D – 150% deduction continued until 2012
    • Hotels (2,3,4 star) in the NCR region – 5-year tax holiday
  • CESS on education – secondary and higher – 2% - what for? (could it be scholarships in private educational institutions?)
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