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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

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

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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

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Fiscal Management

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Showing Restraint

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Managing Cash Flow

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

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

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CPI for Agriculture

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Is NREG the Culprit?

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Keeping Above the Water

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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

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Focus on Health

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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

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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 11 th plan

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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)

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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

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Clinical Trials Exempted from service tax Advantages: Disadvantages:

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Expenditure on Education

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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

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School Education Problem dropout rate high Critical class 8 th to 9 th class Solution Scholarships from 9-12 100,000 means-cum-merit scholarship Rs. 6000/- a year Rs. 750 crores in 2007-08

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

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

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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 2 nd shift allowed

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Physically Challenged Subsidy for regular employment Employer contribution to PF reimbursed

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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 SMEs 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

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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

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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

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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%

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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%

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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

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

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

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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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