Budget Analysis <— Download file for detailed analysis
Key Features of Budget 2008-2009
THE ECONOMY : AN OVERVIEW
> The Gross Domestic Product increased by 7.5 per cent, 9.4 per cent and 9.6 percent
in first three years, of the UPA Government resulting in an unprecedented average
growth rate of 8.8 per cent. The drivers of growth continue to be ‘services’ and
‘manufacturing’ which are estimated to grow at 10.7 per cent and 9.4 per cent
> Growth rate in agriculture for 2007-08 is estimated at 2.6 per cent.
> Food grain production in 2007-08, estimated 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, an all time
> Rashtriya Krishi Vikas Yojana launched 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.
THE GROWTH STORY : FASTER AND MORE INCLUSIVE
> Agricultural credit poised to reach Rs. 2,40,000 crore by March, 2008.
> 11.4 crore children covered under Mid Day Meal Scheme, the largest school lunch
programme in the world.
> Under National Rural Health Mission 8,756 primary health centres have been made
> 1,82,000 girls enrolled in residential schools under Kasturba Gandhi Balika
> Bharat Nirman has made impressive progress in 2007-08 with 290 habitations
provided with drinking water each day, 17 habitations connected through all weather
road, 52 villages provided telephones, 42 villages electrified & 4,113 rural houses
completed each day.
ELEVENTH FIVE YEAR PLAN: THE CRUCIAL SECOND YEAR
> GBS 2008-09 at Rs.2,43,386 crore higher by Rs. 38,286 crore over 2007-08. Central
Plan allocation at Rs.1,79,954 crore, an increase of 16 percent over 2007-08; Bharat
Nirman to get Rs. 31,280 crore.
! Sarva Shiksha Abhiyan (SSA): Sarva Shiksha Abhiyan provided Rs.13,100 crore
with the focus to shift from access and infrastructure at the primary level to enhancing
retention and improving quality of learning. Mid-day Meal to get Rs. 8,000 crore;
secondary education to get Rs. 4,554 crore.
! Jawahar Navodaya Vidyalaya : Rs. 130 crore provided in 2008-09, to establish
Navodaya Vidyalaya in 20 districts having large concentration of Scheduled Castes
& Scheduled Tribes.
! Kasturba Gandhi Balika Vidyalaya: Funds (as part of SSA) provided for additional
410 Vidyalayas in educationally backward areas. Rs. 80 crore allocated to set up
new or upgrade existing hostels attached to Balika Vidyalaya.
! National Means-cum-Merit Scholarship: Rs. 750 crore allocated to build up a corpus
of Rs.3,000 crore in four years. 1,00,000 Scholarship to be awarded beginning
! Nehru Yuva Kendra: Rs. 10 crore allocated in 2008-09 to set up a Kendra in 123
districts, and to cover recurring expenditure in the first year.
! Mid Day Meal Scheme: Extended to upper primary classes in Government and
Government aided schools in all blocks which will benefit 2.5 crore children taking
the total number of children covered under the scheme to 13.9 crore.
! Institutes of Higher Education: India to become a knowledge society, three IISERs
at Mohali, Pune and Kolkata; and an IIIT at Kanchipuram have started
functioning.Government to set up 16 Central Universities in each of the hitherto
uncovered states; three IITs in Andhra Pradesh, Bihar and Rajasthan; two IISERs
at Bhopal and Tiruvananthapuram; and two Schools of Planning and Architecture
at Bhopal and Vijayawada: Rs. 5 crore grant provided to Deccan College, Postgraduate
and Research Institute, Pune.
! Science and Technology: Rs.85 crore allocated for Innovation in Science Pursuit
for Inspired Research (INSPIRE); which will include scholarships for young learners
(10-17 years), scholarships for continuing science education (17-22 years) and
opportunities for research careers (22-32 years); Rs. 100 crore provided for
establishing the National Knowledge Network.
! Health Sector: Rs.16,534 crore allocated, for the sector marking an increase of
15% over 2007-08.
National Rural Health Mission (NRHM): 462,000 Associated Social Health
Activitists have been trained, 177,924 villages have sanitation committees functional
and 323 district Hospitals have been taken up for upgradation. Allocation to NRHM
has been increased to Rs. 12,050 crore.
! HIV/AIDS: The National Aids Control Programme provided Rs.993 crore.
! Polio: Drive to eradicate polio continues with revised strategy and focus on the
high risk districts in Uttar Pradesh and Bihar. Rs. 1,042 crore allocated in 2008-09.
Rashtriya Swasthya Bima Yojana : Rashtriya Swasthya Bima Yojana to provide
health cover of Rs.30,000 for every worker in the unorganised sector falling under
the BPL category and his/her family. The Yojana will be launched in Delhi and in
the States of Haryana and Rajasthan on April 1, 2008. Rs.205 crore provided as the
Centre’s share of the premia in 2008-09.
! National Programme for the Elderly: National Programme for the Elderly to be
started in 2008-09 with a Plan outlay of Rs.400 crore. Two National Institutes of
Ageing, eight regional centres, and a department for geriatric medical care in one
medical college/tertiary level hospital in each State to be established during the
Eleventh Plan period.
! Integrated Child Development Services (ICDS): Allocation for ICDS enhanced
from Rs.5,293 crore in 2007-08 to Rs.6,300 crore in 2008-09; Remuneration of
Anganwadi workers being increased from Rs.1,000 per month to Rs.1,500 per
month; remuneration of Anganwadi Helpers increased from Rs.500 per month to
Rs.750 per month; over 18 lakh Anganwadi workers and helpers to benefit; 5,959
ICDS projects and 932,000 Anganwadi and mini-Anganwadi centres functional
under ICDS at the end of December 2007.
! National Rural Employment Guarantee Scheme (NREGS): NREGS to be rolled
out to all 596 rural districts in India with provision of Rs.16,000 crore; More money
will be provided to meet the legal guarantee of employment as demand rises.
! Jawaharlal Nehru National Urban Renewal Mission (JNNURM): Allocation for
JNNURM increased to Rs.6,866 crore in 2008-09 from Rs.5,482 crore in 2007-08.
! Rajiv Gandhi Drinking Water Mission: Allocation for Rajiv Gandhi Drinking Water
Mission enhanced to Rs.7,300 crore in 2008-09 as against Rs.6,500 crore in
! Total Sanitation Campaign to be provided Rs.1,200 crore in 2008-09.
! Desalination Plant near Chennai: Rs.300 crore in 2008-09 for a desalination plant
near Chennai to be set up under public private partnership.
! North Eastern Region (NER): Ministry of Development of North Eastern Region
to be provided Rs. 1,455 crore. Including this amount, total Budget allocation for
NER, to increase to Rs.16,447 crore in 2008-09 from Rs.14,365 crore in 2007-08.
! Development and Finance Corporations: Additional equity contributions proposed
for National Minorities Development and Finance Corporation Rs. 75.00 crore,
National Finance and Development Corporations for weaker sections
comprising Safai Karamcharis, Scheduled Castes and Backward Classes. Rs. 106.50
crore, National/State Scheduled Tribes Finance and Development Corporations
Rs. 50.00 crore, National Handicapped Development Corporation Rs. 9.00 crore.
! Scholarships: Pre- and post-matric scholarship programmes announced in previous
Budgets for SC, ST, OBC and minorities to get further funds in 2008-09: Scheduled
Castes (Rs.804 crore), Scheduled Tribes (Rs.195 crore), Other Backward Classes
(Rs.164 crore) and Minorities (post-matric) (Rs.100 crore).
! Rajiv Gandhi National Fellowship Programme supporting SC and ST students
pursuing M.Phil and PhD courses allocated Rs.75 crore in 2008-09.
! Minorities: Allocation to the Ministry of Minority Affairs increased from Rs.500
crore in 2007-08 to Rs.1,000 crore in 2008-09; Report of the Justice Rajindar
Sachar Committee taken up for speedy implementation.
Women and Children
! Rs, 11,460 crore has been provided for 100% women specific programmes and
Rs. 16,202 crore for schemes where at least 30 per cent allocation is for women
! Allocation for Ministry of Women and Child Development enhanced by 24% to
Rs. 7,200 crore in 2008-09.
Self Help Groups
! Life Insurance Corporation of India being asked to scale up Janashree Bima Yojana
scheme to cover all women self help groups that are credit-linked to the banks; of
Rs. 500 crore proposed to be contributed to the corpus of the Social Security Fund
with annual contributions to be made as the scheme is scaled up.
Supplement to GBS:
! Rs.8,365 crore provided as additional funds for Plan ‘B’ through two supplementaries
in 2007-08; additional resources to the tune of Rs.10,000 crore to be mobilized
under Plan ‘B’ for Plan Capital expenditure in 2008-09 also.
! Growth of agricultural credit set to exceed target set for 2007-08. For 2008-09,
target set at Rs.280,000 crore, with short-term crop loans continued 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 improves from a low of 10.2 per cent in 2003-04 to 12.5 per cent
in 2006-07; Target to raise it to 16 per cent during the Eleventh Plan to achieve the
growth rate of 4 per cent.
! Accelerated Irrigation Benefit Programme (AIBP): 24 major and medium irrigation
projects and 753 minor irrigation schemes to be completed in 2007-08, creating
additional irrigation potential of 500,000 hectare; Outlay for 2008-09 increased to
Rs. 20,000 crore, from Rs.11,000 crore in 2007-08.
! Rainfed Area Development Programme finalised and to be implemented in
2008-09 with an allocation of Rs.348 crore. Priority to those areas that have not
been beneficiaries of watershed development schemes.
! Centrally Sponsored Scheme on Micro Irrigation: Rs.500 crore being allocated in
2008-09 with a target 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 repair,
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
approved as National Projects by Government; Irrigation and Water Resources
Finance Corporation (IWRFC) proposed 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 covering 340 districts in 18 States
and two Union Territories, provided Rs.1,100 crore in 2008-09.
! Soil testing: 500 soil testing laboratories to be set up during the Eleventh Plan with
Government assistance of Rs.30 lakh per laboratory; one-time allocation of Rs.75
crore to the Ministry of Agriculture in order 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 provided 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 converted and
upgraded 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
! Weather Based Crop Insurance Scheme implemented as a pilot scheme in selected
areas of five States to be continued; Rs.50 crore provided for this purpose in 2008-09.
! Subsidy for Fertilizers: Government to continue to provide fertilisers to farmers at
subsidized prices; Proposals to move to a nutrient based subsidy regime and
alternative methods of delivery being examined.
! 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 reached 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:
” Scheme 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 are covered under the scheme;
” Complete waiver of all loans that were overdue on December 31, 2007 and
which remained unpaid until February 29, 2008 for marginal farmers and
” one time settlement (OTS) scheme in respect of other farmers for all loans that were overdue on December 31, 2007 and which remained unpaid until
February 29, 2008; Rebate of 25 per cent against payment of the balance of
75 per cent under OTS;
” Agricultural loans restructured and rescheduled by banks in 2004 and 2006
through special packages also eligible, either for a waiver or an OTS on the
” Implementation of the debt waiver and debt relief scheme to be completed
by June 30, 2008; Farmers availing the relief would be entitled to fresh
agricultural loans from banks in accordance with normal rules.
” About 3 crore small and marginal farmers and about one crore other farmers
to benefit 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.
INVESTMENT, INFRASTRUCTURE, INDUSTRY AND TRADE
! Saving rate and investment rate estimated 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 provide
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 raised in 2008-09 to Rs.14,000 crore, with a separate
window for rural roads.
! Growth in capital goods still very high at 20.2 per cent. Goal to take manufacturing
growth rate to double digit through more reforms.
! Against Eleventh Plan target for additional power generation capacity of 78,577
MW Commercial Operation Date (COD) on about 10,000 MW to be achieved by
end March 2008.
! Ultra Mega Power Project (UMPP): Fourth UMPP at Tilaiya to be awarded shortly;
Chhattisgarh, Karnataka, Maharashtra, Orissa and Tamilnadu urged to bring five
more UMPPs to the bidding stage by extending the required support.
! Rajiv Gandhi Grameen Vidyutikaran Yojana to be continued during the Eleventh Plan
period with a capital subsidy of Rs.28,000 crore; allocation of Rs.5,500 crore for
! Accelerated Power Development and Reforms Project: Rs.800 crore to be provided
in 2008-09, A National Fund for transmission and distribution reform to be created.
! National Highway Development Programme (NHDP): Allocation for NHDP
enhanced 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; Special 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; estimated to attract investment of the order of US$3.5
billion to US$8 billion for exploration and discovery.
! 53 coal blocks with reserves of 13,842 million tonnes allotted during April-January
2007-08 to Government and private sector companies; new Coal Distribution Policy
notified in October 2007; coal regulator to be appointed.
! Allocation to the Department of Information Technology enhanced to Rs.1,680
crore in 2008-09 from Rs.1,500 crore in 2007-08; Two Schemes for establishing
100,000 broadband internet-enabled Common Service Centres in rural areas and
State Wide Area Networks (SWAN) with Central assistance under implementation;
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.
! Schemes for Integrated Textile Parks (SITP) and the Technology Upgradation Fund
(TUF) to be continued in the Eleventh Plan period; Provision for SITP being
maintained at Rs.450 crore in 2008-09; Provision for TUF to be increased to
Rs.1,090 crore in 2008-09 from Rs.911 crore in 2007-08.
! Handloom sector: 250 clusters being developed and 443 yarn banks established
under the cluster approach to the development of the handloom sector; Over 17
lakh families of weavers to be covered under the health insurance scheme by March
2008; Allocation being increased to Rs.340 crore in 2008-09; Infrastructure and
production being scaled up by taking up six centres for development as megaclusters;
Varanasi and Sibsagar to 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 created in the Small Industries and Development Bank of
India (SIDBI); Credit Guarantee Trust with SIDBI had extended guarantees to
89,129 units for an amount of Rs.2,479 crore as on January 31, 2008; SIDBI to
reduce 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.
! Relief given to exporters in three tranches amounting 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.
! Financial Inclusion: Two recommendations of the Committee on Financial Inclusion
proposed to be accepted viz (i) to advise commercial banks, including RRBs, to
add at least 250 rural household accounts every year at each of their rural and
semi-urban branches; and (ii) to allow individuals such as retired bank officers,
ex-servicemen etc to be appointed as business facilitator or business correspondent
or credit counselor; banks to be encouraged to embrace concept of Total Financial
Inclusion; Government to request all scheduled commercial banks to follow the
example set by some public sector banks and meet the entire credit requirements
of SHG members, namely, income generation activities, social needs like housing,
education, marriage etc., and debt swapping.
! (i) Fund of Rs.5,000 crore to be created in NABARD to enhance its refinance
operations to short term cooperative credit institutions;
(ii) Two funds of Rs.2,000 crore each to be created in SIDBI – one for risk capital
financing and other for enhancing refinance capability to the MSME sector.
(iii) Fund of Rs.1,200 crore to be created in NHB to enhance its refinance operations
in the rural housing sector.
These funds are to be governed by the general guidelines that are now applicable
to RIDF with some modifications.
! Differential Rate of Interest (DRI) scheme: Borrower’s eligibility criteria for loan
under the DRI scheme to the weaker sections of the community engaged in gainful
! Measures to expand the market for corporate bonds: Exchange-traded currency
and interest rate futures to be launched and transparent credit derivatives market to
be developed with appropriate safeguards; Tradability of domestic convertible bonds
to be enhanced through the mechanism of enabling investors to separate the
embedded equity option from the convertible bond, and trade it separately;
Development of a market-based system for classifying financial instruments based
on their complexity and implicit risks to be encouraged.
! Permanent Account Number (PAN): Requirement of PAN extended to all
transactions in the financial market subject to suitable threshold exemption limits.
! National market for securities: Empowered Committee of State Finance Ministers
to be requested to work with the Central Government to create pan Indian market
for securities that will expand the market base and enhance the revenues of the
! Skill Development Mission: A non-profit corporation to be established with the
entrusted mission to address the challenge of imparting the skills required by a
growing economy; Rs.15,000 crore proposed 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 allocated to the 22 Sainik Schools at the rate of Rs.2
crore each, for immediate improvement of infrastructure including classrooms,
laboratories, libraries and facilities for physical education.
! Public Distribution System: Rs.32,667 crore being provided 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 deliver food grains under the PDS.
! Unorganised Sector Workers: In anticipation of the Unorganised Sector Workers’
Social Security Bill, 2007 being made into law, three schemes designed to provide
social security to workers in unorganised sector in a phased manner introduced;
(i) Aam Admi Bima Yojana to provide 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
(ii) Rashtriya Swasthya Bima Yojana to be implemented with effect from April 1,
2008; Indira Gandhi National Old Age Pension Scheme enlarged with effect from
November 19, 2007 to include all persons over 65 years falling 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 constructed up to December 2007 under
Indira Awas Yojana (IAY) against a target 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 to reflect the higher cost of construction; Subsidy for upgradation of
houses to be increased 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 increased 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 established 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 provided Rs.624 crore in 2008-09.
! Institutions of Excellence: Special grant of Rs.100 crore awarded to three institutions
of excellence for 2008-09
(i) Mahatma Phule Krishi Vidyapeeth, Rahuri, Maharashtra;
(ii) University of Mysore, Mysore; and
(iii) Delhi University, Delhi.
! India’s Soft Power: Rs.75 crore grant to Indian Council of Cultural Relations to
design and implement a programme to achieve the objective of projecting the ‘soft
power’ of India in music, literature, dance, art, cuisine and especially films.
! Tiger Protection: One time grant of Rs.50 crore to the National Tiger Conservation
Authority to redouble efforts to protect the tiger; Bulk of grant to be used to raise,
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
! Plan Expenditure estimated at Rs.243,386 crore.
! Non-Plan Expenditure estimated 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 need one more year; because of the conscious shift in expenditure in favour of
health, education and the social sector.
! Thirteenth Finance Commission to be requested to revisit the roadmap for fiscal
adjustment and suggest a suitably revised roadmap, after the obligations on
account of the Sixth Central Pay Commission become clear.
! Tax to GDP ratio that was 9.2 per cent in 2003-04, set to rise to 12.5 per cent at the
end of 2007-08.
! Set to achieve the Budget Estimates of indirect taxes and exceed the Budget
Estimates of direct taxes.
! No change in the peak rate of customs duty.
! Customs duty on Project Imports to reduce from 7.5 per cent to 5 per cent; 4 per
cent special CVD to be imposed on a few specified projects in the power sector.
! Customs duty being reduced on steel melting scrap and aluminium scrap from 5
per cent to nil.
! Customs duty to be reduced 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
are also being exempted from excise duty or countervailing duty.
! Customs duty is being reduced 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 being reduced on bactofuges from 7.5 per cent to nil for the benefit
of dairy industry and to increase shelf life of milk
! Specified parts of set top boxes and specified raw materials for use in the IT/
electronic hardware industry to be exempted from customs duty.
! Customs duty on convergence products to be reduced from 10 per cent to 5 per
cent to establish parity between devices used in the information/ communication
sector and the entertainment sector
! Customs duty being reduced on specified machinery from 7.5 per cent to 5 per cent
to provide fillip to the manufacture of sports goods; duty also being exempted on
specified raw materials for sports goods.
! Customs duty to be exempted on rough cubic zirconia and being reduced on polished
cubic zirconia from 10 per cent to 5 per cent, in order to encourage value addition
and exports by gem and jewellery industry; Customs duty on rough coral being
reduced from 10 per cent to 5 per cent.
! Customs duty removed on helicopter simulators to facilitate training of helicopter
! Customs duty reduced 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 withdrawn on naphtha for use in the
manufacture of polymers in order to correct price distortions and revenue losses.
Naphtha for use in the manufacture of polymers will be subjected to normal rate of
5 per cent. Naphtha imported for the production of fertilisers will continue to be
exempt from import duty.
! Export duty on chrome being increased from Rs.2,000 per metric tonne to Rs.3,000
per metric tonne in order to conserve and make it available for value added
manufacture in India.
! General CENVAT rate on all goods reduced from 16 per cent to 14 per cent to give
a stimulus to the manufacturing sector.
! Excise duty on all goods produced in the pharmaceutical sector reduced from 16
per cent to 8 per cent.
! Excise duty reduced on buses and their chassis from 16 per cent to 12 per cent.
! Excise duty 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 reduced on two wheelers and three wheelers from 16 per cent to
12 per cent.
! Excise duty to be reduced on paper, paper board and articles made therefrom
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 is to be reduced from 12
per cent to 8 per cent.
! Excise duty is to be reduced 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 reduction from 16 per cent to 8 per cent on a few more items including
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
exempted from excise duty.
! Excise duty being exempted 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 rates on bulk cement and packaged cement brought on par; bulk cement
to attract 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 being 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 brought on par by applying
higher rates on non-filter cigarettes.
! Ad valorem part of the excise duty on unbranded petrol and unbranded diesel being
abolished 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.
! NCCD of 1 per cent removed on polyester filament yarn and the levy shifted to
cellular mobile phones.
! Four services brought under service tax net namely, asset management service
provided under ULIP, services provided by stock/commodity exchanges and clearing
houses; right to use goods, in cases where VAT is not payable; and customised
software, to bring it on par with packaged software and other IT services.
! Threshold limit of exemption for small service providers increased from Rs.8 lakhs
per year to Rs.10 lakh per year; about 65,000 small service providers go out of the
! Threshold limit of exemption from personal income tax in the case of all assesses
increased 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
! No change in the corporate income tax rates.
! No change in the rate of surcharge.
! Senior Citizen Saving Scheme 2004 and the Post Office Time Deposit Account
added to the basket of saving instruments under Section 80C of the Income Tax
! Additional deduction 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 amended to provide that reverse mortgage would not amount
to “transfer”; and the stream of revenue received by the senior citizen would not be
! Tax income arising from saplings or seedlings grown in a nursery exempted.
! Business of production of seeds and manufacture of agricultural implements added
to the list of companies allowed weighted 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 exempted from TDS.
! Crèche facilities, sponsorship of an employee-sportsperson, organising sports events
for employees and guest houses excluded from the purview of FBT.
! Parent company allowed to set off the dividend received from its subsidiary company
against dividend distributed by the parent company; provided that the dividend
received has suffered DDT and the parent company is not a subsidiary of
! Insert a new sub-section (11C) in Section 80-IB to grant a five year tax holiday to
hospitals located in any place outside the urban agglomerations especially in tier-
2 and tier-3 towns; this window will be open for the period April 1, 2008 to March
! Five year holiday from income tax being granted to two, three or four star hotels
established in specified districts having UNESCO-declared ‘World Heritage Sites’;
the hotel should be constructed and start functioning during the period
April 1, 2008 to March 31, 2013.
! Coir Board included in Section 10(29A) and exempted from income tax.
! Rate of tax on short term capital gains under Section 111A & Section 115AD
increased to 15 per cent.
! STT paid to be treated like any other deductible expenditure against business income;
Levy of STT, in the case of options to be only on premium, where the option is not
exercised; liability to be on the seller; where the option is exercised, levy to be on
the settlement price and the liability on the buyer; no change in the present rates.
! Commodities Transaction Tax (CTT) to be introduced on the same lines as STT on
options and futures.
! Law being amended to exclude entities carrying on regular trade, commerce or
business or providing services in relation to any trade, commerce or business and
earning incomes from claiming that their purposes also fall under “charitable
purpose”; Genuine charitable organisations not to be affected in any way.
! Banking Cash Transaction Tax (BCTT) being withdrawn with effect from
April 1, 2009.
CST and a Roadmap towards GST
! Central Sales Tax rate being reduced from 3 per cent to 2 per cent from
April 1, 2008.
! Roadmap for Goods and Service Tax being prepared for introduction of GST from
April 1, 2010.