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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. Annual book-keeping Policy statement Tax implications Sops, exemptions and largesse. The Basics.

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Budget 2007-08

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  1. Budget 2007-08 Shubhashis Gangopadhyay India Development Foundation (March 7, 2007) Prepared for the joint discussion with ICRIER, NCAER and NIPFP; Jacaranda Hall, IHC

  2. The Document • Annual book-keeping • Policy statement • Tax implications • Sops, exemptions and largesse

  3. 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

  4. Fiscal Management

  5. Showing Restraint

  6. Managing Cash Flow

  7. Macro versus Micro • Overall deficit targets are being met • Composition of expenditure a bit suspect

  8. Setting • Start of the plan period • Continuity towards long term goals • CMP • Inflation and elections

  9. CPI for Agriculture

  10. Is NREG the Culprit?

  11. Keeping Above the Water

  12. 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

  13. Focus on Health

  14. 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

  15. 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

  16. 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)

  17. 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

  18. Clinical Trials • Exempted from service tax Advantages: Disadvantages:

  19. Expenditure on Education

  20. 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

  21. 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

  22. Secondary Education • Allocation increase • INR 1837 crore to INR 3794 crore • Scholarships • Through a fund with SBI

  23. Education and R&D • Promoting Ph.D.s – for some sections • Research institutions – customs duty exempt • Corporate in-house R&D – 150% deduction continued

  24. 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

  25. Physically Challenged • Subsidy for regular employment • Employer contribution to PF reimbursed

  26. 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

  27. 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

  28. 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

  29. 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%

  30. 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%

  31. 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

  32. Service tax • Service tax extended to a no. of services • Exemptions • Technology business incubators • Clinical trials for new drugs

  33. Direct taxes Personal income tax (lower) • Standard exemption increased - all assessees, senior citizens, women • Deduction for medical insurance premia increased

  34. 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?)

  35. www.idfresearch.org THANK YOU

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