Highlights of the Union Budget for 2008-09

Following are the highlights of the Union Budget for 2008-09 (Apr-Mar) presented by Finance Minister P. Chidambaram today:
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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DIRECT TAXES
• Banking transaction tax to be withdrawn from April 1 2009
• Commodities transaction tax to be imposed in line with STT
• Short term capital gains tax raised from 10% to 15%
• Tax on income above Rs 5 lakh-30%
• Tax on income between Rs 3 lakh to Rs 5 lakh-20%
• Tax on income between Rs 1.5 lakh to Rs 3 lakh-10%
• Tax on income upto Rs 1.5 lakh-Nil
• Threshold limit for all IT assesses increased from 110,000 to 150,000
• Threshold level for small service providers to be increased
• Service tax on money changers, tour operators
• Excise duty reduced to nil on anti-AIDS drugs
• Excise duty reduced on automobiles (buses, small cars)
• General CENVAT rate reduced
• Customs duty on crude reduced from 5% to 2%
• Customs duty for convergence products (media, telecom) reduced to 5%
• Peak rate of customs duty for project imports reduced
• Peak rate of customs duty for non-agricultural products maintained at 10%
• 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
• 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
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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
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
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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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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