Highlights of Union Budget 2006-07


ECONOMY

Savings up 21.9% of GDP
FY05 GDP growth was 7.5%
Having best of times and worst of times
GDP growth likely to be 8.1% in 2006-07
Govt has met first aim of high growth rate
Growth is best antidote to poverty
Govt determined to take country to 10% growth rate

FISC

Gross capital formation up 30% in 2004-05
Non-food credit growing over 25%
Investment rate up from 25.3% in FY03 to 30.1% in FY05
1.727 trln rupee budget support for plan, up 20.4% in FY07
1.312-trln-rupee budget support for central plan
FY07 budgetary support for North East 120.41 bln rupees
Outcome Budget to be presented on Mar 17
Provide 169.01 bln rupees equity support to central PSUs
1.227 trln rupees outlay in FY07 for public sector
100 bln rupees corpus for RIDF-XII in FY07
Separate window for rural roads under RIDF
To unwind special securities by converting to SLR papers
Defense allocation raised to 890 bln rupees FY07
To provide 30 bln rupees as VAT compensation to states
States' revenue share up at 944 billion rupees FY07
Tax-GDP ratio 10.5% in FY06 vs 9.8% yr ago
FY06 fiscal deficit revised to 4.1% of GDP vs 4.3%
FY06 revenue deficit revised to 2.6% of GDP vs 2.7%
FY07 non-plan expenditure seen at 3.91 trln rupees
FY07 fiscal deficit pegged at 3.8% of GDP
FY07 total expenditure pegged at 5.639 trln rupees

AGRICULTURE

Foodgrain output 209.3 mln tns, up 5 mln tns over last yr
Farm credit to be raised to 1.75 trillion rupees in FY07
Banks asked to add 5 mln more farmers to credit portfolio
Interest subsidy of 200 bps for farm loans taken 05-06
To provide 17 bln rupees for farmers' relief
Banks asked to add 5 mln more farmers to credit portfolio
Short-term credit to farmers at 7%
Special new NABARD credit line for self-help groups
Central institute of Horticulture to be set up in Nagaland
Food processing to be priority sector for bank credit
NABARD to set up 10 bln rupee centre for food processing

INDUSTRY

Manufacturing sector to grow at 9.4% in 2006-07
Barring mining, all sectors performing satisfactorily
Set up special purpose tea fund with 1-bln-rupee corpus
National Fisheries Board to be constituted soon
5.35 bln rupees in FY07 for textile upgradation scheme
Jute Technology Mission, National Jute Board to be set up
Govt proposes Handloom Mark
To develop 3 investment regions for oil sector in FY07
180 SSI items identified for de-reservation
To recognise small, medium enterprises in services sector
For cut in SSI credit guarantee fee to 1.5% vs 2.5%

INFRASTRUCTURE

Highway schemes progressing at 4.4 km/day
5,083 MW capacity to be added in 2005-06
96% of Golden Quadrilateral will be completed by Jun
870,000 rural houses built under Bharat Nirman
71,182 villages got telephones under Bharat Nirman
870,000 rural houses built in Apr-Jan
Budget support of 186.96 bln rupees for Bharat Nirman FY07
Education allocation up in FY07 to 241.54 bln rupees
Sarva Siksha Abhyan outlay for FY07 at 100.41 bln rupees
FY07 mid-day meal allocation 48.13 bln rupees
Rural employment to cost 117 bln rupees in FY07
FY07 drinking water outlay 46.8 bln rupees vs 36.45 bln
143 bln rupee outlay in FY07 for Rural Employment Scheme
45.95 bln rupee outlay for National Urban Mission in FY07
20,000 water bodies to covered under renewal plan
Indian Infrastructure Investment Co to be established
Tourism ministry to develop 15 tourist centres
Set up empowered ministers' group on cluster development
FY07 allocation for tourist sector 8.30 bln rupees
15 bln rupees in FY07 to boost telephone connectivity
To electrify 40,000 more villages in FY07
82 new power projects underway
To electrify 40,000 more villages in FY07
4.75% rise in power generation so far; govt not happy
5.97 bln rupee for non-conventional energy resources FY07
99.45 bln rupees budget support for NHDP in FY07
To build 1,000 Kms of access controlled expressways
7.35 bln rupees for development of sea ports in FY07
1,000 Kms of new expressways on BOT basis
Defense allocation includes 374.58 bln rupees for capex

SECTORS

Committed to strong, efficient public sector
Expert body to look into gems, jewellery sector taxation
20 bln tn coal to be deblocked for power sector by 2012
45 coal blocks allocated for power, coal, steel sectors
220 bln rupee investment expected in refinery sector
Introduce comprehensive bill on insurance in FY07

DEBT MARKETS

Cap on FII in gilts raised to $2 bln
Cap on FII investment in corp debt raised to $1.5 bln
To remove 10% cap on overseas investment by mutual funds
NDS-OM to be extended to some MFS, PFs, pension funds
To create unified exchange traded mkt for corporate bonds

SOCIAL SECTOR

To eliminate polio by December 2007
Leprosy to be eliminated by December 2006
45.95 bln rupee outlay for National Urban Mission in FY07
To raise old age pension to 200 rupees/mo vs 75 rupees
Allocation for SC/STs raised 14.5% to 29.02 bln rupees
20,000 merit scholarships for minority students
164 mln rupees for National Minorities Development Corp
To grant 1 bln rupees each to 3 universities
New grants to Calcutta, Madras, Mumbai universities
To allocate 970 mln rupees for upgrading ITIs in FY07
50 bln rupees for new fund under Panchayati Raj in FY07
13 bln rupees special aid to J&K for power reforms

EXTERNAL SECTOR

FDI estimated at $4 bln till Nov 2005
Confident of more FDI, especially in infrastructure
To double world export share to 1.5% by FY09

CUSTOMS DUTY

Non-farm imports customs peak rate cut to 12.5% from 15%
Duty on alloy steel cut to 7.5% from 10%
Customs on steel melting scrap raised to 5%
Import duty on ores, concentrates cut to 2% from 5%
BUDGET: Customs duty on inorganic chemicals cut to 10% from 15%
Customs on steel melting scrap raised to 5%
Import duty on ores, concentrates cut to 2% from 5%
Customs on mineral products cut to 5% vs 15%
Duty on catalysts cut to 7% from 7.5%
Customs duty on inorganic chemicals cut to 10% from 15%
Customs duty on anti-AIDS, anti-cancer drugs cut to 5%
Customs on packaging machines cut to 5% vs 15%
To impose countervailing duty of 4% on oil imports
Customs duty on vanaspati raised to 18%
Import duty on man-made fibre yarn cut to 8% vs 18%

EXCISE DUTY

All excise rates to converge at CENVAT rate at 16%
Excise duty on small cars cut to 16%
Condensed milk, ice-creams exempted from excise duty
8% excise on packaged software in FY07
Excise on idly, dose premixes cut to 16%
Excise duty on aerated drinks cut to 16%
Excise on glassware will be 16%
DVD, Flash, Combo drives exempted from excise duty
Duty on naphtha on plastics to be nil
Petroleum pdts duty measures to be retail price neutral
Excise duty on printing paper, ink cut to 12% from 16%
Excise on cigarettes hiked by 5%

SERVICE TAX

More services brought under service tax net
Registrars, share transfer agents under service tax net
Service tax to be extended to PR firms
ATM operation, maintenance to come under service tax
Services industry seen contributing 54% of GDP
Service tax raised to 12% from 10%
Apr 1, 2010 deadline for national level goods, svcs tax

DIRECT TAX


No change in personal, corporate income tax rates
Minimum Alternate Tax rate up to 10% from 7.5%
To abolish 1/6 income tax norm
MAT cos' credit period extended to 7 years
Rate for STT increased by 25%
Bank deposits of over 5 year under section 80C of IT Act
10,000 rupee ceiling on pension contribution removed
Open, close-end equity MFs on par for div distribution tax
PAN needed for more transactions
To continue with cash withdrawal tax
Hopes debate on FBT ends; FBT is justified
Announce changes in computation of fringe benefit tax
Lauds cash withdrawal tax role in curbing money laundering
Retirement contribution cap of 100,000 rupees for FBT
To issue statement of revenue foregone
Include LPG under declared goods for CST
States taxing LPG at high rates
BUDGET: Direct tax proposals to yield 40 bln rupees more FY07
Thanks to Mr.Anup Bhaiya , Indiainfoline.

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