Here is the text of the Union Budget address of Finance Minister P. Chidambaram. Follow the Union Finance Minister with Surfindia. Go through his speech word by word, point by point. Judge which of the speculations have turned real from abstract and which of them have fallen flat.
Mr. Speaker, Sir
I rise to present the Budget for 2008-09. This House and the United
Progressive Alliance Government have bestowed upon me the honour of
presenting all five Budgets on behalf of a Government - a rare honour
that I have the privilege to share with only one of my distinguished
predecessors, Dr. Manmohan Singh.
2. Honourable Members! The India growth story, so far, has been an absorbing and inspiring tale. Beginning January 1, 2005, the economy has recorded a growth rate of over 8 per cent in 12 successive quarters up to December 31, 2007. In the first three years of the UPA Government, the Gross Domestic Product (GDP) increased by 7.5 per cent, 9.4 per cent and 9.6 per cent, resulting in an unprecedented average growth rate of 8.8 per cent. In the current year too, according to the Advance Estimates by the Central Statistical Organisation (CSO), the growth rate will be 8.7 per cent - although I am confident that we will maintain the average 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, respectively.
3. Nevertheless, 2007-08 has been the most challenging of the last four years. At the beginning of the year, the outlook for the global economy was benign. Our economy, thanks to our own policies as well as globalisation, was poised to record another year of high growth: in fact, the first half of 2007-08 returned a growth of 9.1 per cent. However, since August 2007, the financial markets in the developed countries have witnessed considerable turbulence that has not yet abated. The consequences for developing countries are also not yet clear.
4. Moreover, agriculture has struck a disappointing note. Despite a fine start in the first half of 2007-08, the growth rate for the whole year in agriculture is estimated at only 2.6 per cent.
5. There are other downside risks too. World prices of crude oil, commodities and food grains have risen sharply in the period April 2007 to January 2008. The position of crude oil is well known to this House. Among commodities, the prices of iron ore, copper, lead, tin, urea etc are elevated. The prices of wheat and rice have increased in the world market by 88 per cent and 15 per cent, respectively. All these trends are inflationary, and there is pressure on domestic prices, especially on the prices of food articles. Consequently, the management of the supply side of food articles will be the most crucial task in the ensuing year.
6. We have also witnessed capital inflows that are far in excess of the current account deficit. This poses a challenge to monetary management. The solution lies in increasing the absorptive capacity of the economy in the medium term. In the short term, it is our responsibility to manage the flows more actively. Government will, in consultation with the RBI, continue to monitor the situation closely and take such temporary measures as may be necessary to moderate the capital flows consistent with the objective of monetary and financial stability.
7. Keeping inflation under check is one of the cornerstones of our policy. Recently, the Prime Minister declared, "I think no Government in our country can be oblivious to the objective of ensuring reasonable price stability without hurting the growth process." There can be no clearer enunciation of policy. However, since the downside risks have increased worldwide, we must be vigilant and prepared to make swift adjustments in our policies to achieve the goal of growth with price stability.
8. Let me first deal with agriculture, briefly for the present, and at some length later. The Ministry of Agriculture has estimated that the total output of food grains in 2007-08 will be 219.32 million tonnes and that will be an all time record. In particular, production of rice is estimated at 94.08 million tonnes; maize at 16.78 million tonnes; soya bean at 9.45 million tonnes; and cotton at 23.38 million bales (of 170 kg each) - and each of these will be an all time record. Government is conscious that while a lot has been done, a lot more needs to be done. Since the last Budget, Government has formulated and announced the National Policy for Farmers. Besides, Government has launched the Rashtriya Krishi Vikas Yojana with an outlay of Rs.25,000 crore and the National Food Security Mission with an outlay of Rs.4,882 crore. Both schemes will be implemented during the Eleventh Five Year Plan period. We are determined to become self-sufficient in food grains. Presently, I shall place before this House a number of new initiatives in the agriculture sector.
9. To return to the India growth story, I am of the firm belief that we owe our sustained progress to the policy of economic reforms first ushered in by a Congress Government and now carried forward by the UPA Government.
10. If 1984 and 1991 were turning points in the history of India's economy, 2004 was another turning point. Confident that high growth was sustainable, the UPA Government had declared in the National Common Minimum Programme its intention to make growth more inclusive. Sir, I ask this House, respectfully, to judge our record on inclusive growth from the following sample of facts:
agricultural credit doubled in the first two years of this
Government and is poised to reach a level of Rs.240,000 crore by March
2008.
the National Rural Employment Guarantee Scheme has proved to be
a historic measure of empowerment of Scheduled Castes and Scheduled
Tribes and, especially, of women.
the Mid Day Meal Scheme is the largest school lunch programme in
the world covering 11.4 crore children.
the National Rural Health Mission has taken improved health care
to rural India by strengthening the primary health centres of which
8,756 have been made 24 x 7.
the Kasturba Gandhi Balika Vidyalaya Scheme has enrolled 182,000
girls in residential schools, thus helping to bridge the gender gap in
education.
11. Bharat Nirman has made impressive progress in 2007-08. This ambitious programme is now over 1,000 days old. At the current pace, on each day of the year 290 habitations are provided with drinking water and 17 habitations are connected through an all weather road. On each day of the year 52 villages are provided with telephones and 42 villages are electrified. On each day of the year 4,113 rural houses are completed.
12. Mr. Speaker, just as I sat down to write this speech, I received a slim volume titled "Indira Gandhi - Selected Sayings". Within minutes, I found this gem and I quote, "The more one does, the more one attempts, the more one is capable of doing". What I have narrated so far is indeed proof of more inclusive growth, but if you ask me "can we do better?", my answer would be "we can and we should." Budget 2008-09 is about raising our sights and doing more and doing better.
13. The Eleventh Plan has started on a note of robust growth. Never before did we start a Plan with a first year growth rate of 8.7 per cent. Government regards the second year of the Plan as extremely critical to the success of the Plan. 2008-09 should be a year of consolidation; of securing the ongoing programmes on firm financial foundations; of close monitoring of implementation and enforcing accountability; and of measuring the outcomes in terms of the targets achieved as well as their quality. The Plan documents assumed that the Gross Budgetary Support (GBS) in the second year would be Rs.228,725 crore. In our view, that will not be enough. Hence, I propose to increase the GBS to Rs.243,386 crore, which will represent an increase of Rs.38,286 crore over the allocation in 2007-08.
14. Out of the GBS, the allocation for the Central Plan will be Rs.179,954 crore, marking an increase of 16 per cent over 2007-08.
15. Let me assure the House that all ongoing programmes will receive ample funds.
16. For Bharat Nirman, I propose to provide Rs.31,280 crore [including the North Eastern Region (NER) component] as against Rs.24,603 crore in 2007-08.
18. Of this, Sarva Shiksha Abhiyan (SSA) will be provided Rs.13,100 crore; the Mid-day Meal Scheme will be provided Rs.8,000 crore; and secondary education will be provided Rs.4,554 crore.
19. The focus of SSA will shift from access and infrastructure at the primary level to enhancing retention; improving quality of learning; and ensuring access to upper primary classes.
20. A Model School programme, with the aim of establishing 6,000 high quality model schools, will be started in 2008-09. I propose to provide Rs.650 crore for the new scheme.
22. Kasturba Gandhi Balika Vidyalayas were set up to address the issue of equity in the education of girls belonging to SC, ST, OBC and minority communities. So far, 1,754 vidyalayas have been started, and I propose to allocate funds (as part of SSA) to set up an additional 410 vidyalayas in educationally backward blocks. I also propose to provide a sum of Rs.80 crore to set up new or upgrade existing hostels attached to the Balika Vidyalayas.
23. Last year, I had announced the National Means-cum-Merit Scholarship Scheme to enable students to continue their education beyond class VIII and up to class XII. I had provided Rs.750 crore with the promise to add a like amount every year for three more years. The Scheme will be implemented by award of 100,000 scholarships beginning 2008-09. I intend to keep my promise and earmark another sum of Rs.750 crore so that a corpus of Rs.3,000 crore will be built up in four years.
24. 123 districts do not have a Nehru Yuva Kendra. I propose to allocate Rs.10 crore in 2008-09 to set up a Kendra in each of these districts and to cover the recurring expenditure in the first year.
25. The Mid-day Meal Scheme has been extended to upper primary classes in 3,479 educationally backward blocks. The scheme will now be extended to upper primary classes in Government and Government-aided schools in all blocks in the country. This will benefit an additional 2.5 crore children, taking the total number of children covered under the Scheme to 13.9 crore.
26. Knowledge is power. It is knowledge that will drive success in the 21st century. India has the opportunity to become a knowledge society. Following the Prime Minister's announcement, an IIM at Shillong; three IISERs at Mohali, Pune and Kolkata; and an IIIT at Kanchipuram have started functioning. Government will establish one Central University in each of the hitherto uncovered States. We propose to make a beginning in 2008-09 by establishing 16 Central Universities. Besides, we propose to set up 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. More institutes of higher education, as promised by the Prime Minister, will be established during the Eleventh Plan period.
27. I also propose to make a grant of Rs.5 crore to the Deccan College Post-Graduate and Research Institute, Pune which is one of the oldest institutions of modern learning in India.
28. We must encourage our children to take to careers in science and research and development. Ministry of Science and Technology will introduce a scheme called Innovation in Science Pursuit for Inspired Research (INSPIRE) that 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). I propose to provide Rs.85 crore in 2008-09 for this inspired contribution to building a knowledge society.
29. The recommendations of the National Knowledge Commission, submitted from time to time, are under active consideration. Some of them have been incorporated in the Eleventh Plan. Government has accepted an important recommendation to inter-connect all knowledge institutions through an electronic digital broadband network. This will encourage sharing of resources and collaborative research. I propose to provide Rs. 100 crore to the Ministry of Information and Technology for establishing the National Knowledge Network.
30. Turning to the health sector, I propose to allocate Rs.16,534 crore for the sector (including NER). This will mark an increase of 15 per cent over the allocation in 2007-08.
31. The National Rural Health Mission (NRHM) is the key instrument of intervention by the Central Government. The goal is to establish a fully functional, community owned, decentralised health delivery system. 462,000 Associated Social Health Activists (ASHAs) and link workers have been trained and are in place. 177,924 Village Health and Sanitation Committees are functional. 323 district hospitals have been taken up for upgradation. Ambitious goals have been set for 2008-09, and I propose to increase the allocation for NRHM to Rs.12,050 crore .
HIV/AIDS33. The drive to eradicate polio continues with a revised strategy and a focus on the high risk districts in Uttar Pradesh and Bihar. I propose to provide Rs.1,042 crore in 2008-09 for this purpose.
Rashtriya Swasthya Bima Yojana
34. Two major interventions are planned to be started in 2008-09. The first is the Rashtriya Swasthya Bima Yojana that will provide a health cover of Rs.30,000 for every worker in the unorganised sector falling under the BPL category and his/her family. I am happy to report that most of the States have agreed to join the Yojana and it will be launched in Delhi and in the States of Haryana and Rajasthan on April 1, 2008. I propose to provide Rs.205 crore as the Centre's share of the premia in 2008-09
National Programme for the Elderly35. The other major intervention will be for the elderly. A National Programme for the Elderly with a Plan outlay of Rs.400 crore will be started in 2008-09. Among other measures, we will establish, during the Eleventh Plan period, 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.
Integrated Child Development Services36. The universalization of the Integrated Child Development Services (ICDS) Scheme is underway. At the end of December 2007, 5,959 ICDS projects and 932,000 Anganwadi and mini-Anganwadi centres were functional. The beneficiary count had increased to 629 lakh children and 132 lakh pregnant and lactating mothers. I propose to enhance the allocation for ICDS from Rs.5,293 crore in 2007-08 to Rs.6,300 crore in 2008-09.
37. I am also happy to announce that the remuneration of Anganwadi
workers will be increased from Rs.1,000 per month to Rs.1,500 per month.
Likewise, the remuneration of Anganwadi Helpers will be increased from
Rs.500 per month to Rs.750 per month. Over 18 lakh Anganwadi workers and
helpers will benefit from the increase.
Flagship Programmes
38. As Honourable Members are aware, there are eight flagship
programmes of the UPA Government. I have dealt with two in the education
sector (SSA & MMS) and two in the health sector (NRHM & ICDS).
Let me now refer to the allocations that I propose to make for the other
four flagship programmes:
The National Rural Employment Guarantee Scheme (NREGS) will be
rolled out to all 596 rural districts in India. Initially, we will
provide Rs.16,000 crore. Let there be no apprehension in anyone's mind:
as demand rises, more money will be provided to meet the legal guarantee
of employment.
The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) is
the main vehicle for improving urban infrastructure. It has also
succeeded in driving reforms in urban governance and urban-related laws.
I propose to increase the allocation from Rs.5,482 crore in 2007-08 to
Rs.6,866 crore in 2008-09.
The goal of the Rajiv Gandhi Drinking Water Mission is to supply
safe drinking water to uncovered habitations and slipped back
habitations as well as to address issues of quality. I propose to
enhance the allocation to Rs.7,300 crore in 2008-09 as against Rs.6,500
crore in 2007-08.
The Mission does not yet have a separate component for school children
in water-deficient habitations. Our children should have good, clean
drinking water. Hence, I propose to allocate funds to the Mission under
a separate sub-head in order to install a standalone system to provide
potable water to each school in water-deficient habitations. The cost of
each system, depending on the technology and design, is estimated to be
between Rs.15,000 to Rs.30,000. While a detailed plan for four years
will be drawn up, I propose to make an initial allocation of Rs.200
crore in 2008-09.
The Total Sanitation Campaign is all about changing habits and
mindsets, and it is a continuous process. I propose to provide Rs.1,200
crore in 2008-09.
Desalination Plant
39. Honourable Members will recall that I had in July 2004 announced
support for a desalination plant to be installed near Chennai. A
proposal has now been received from the Government of Tamil Nadu to
establish a plant under public private partnership. While the proposal
will be examined for approval, I propose to signal the Government's
support to the project by setting apart Rs.300 crore in 2008-09.
40. The North Eastern Region (NER) will continue to receive special
attention and enhanced allocations. I propose to provide Rs.1,455 crore
to the Ministry of Development of North Eastern Region (DONER).
Including that amount, the total Budget allocation for NER, spread over
different ministries/departments, will increase from Rs.14,365 crore in
2007-08 to Rs.16,447 crore in 2008-09.
41. The North Eastern Region and, especially, Arunachal Pradesh and the
border areas face special problems that cannot be tackled in the usual
course or through normal schemes. Hence, Government proposes to identify
the urgent needs of these areas and address them through a special
mechanism. In order to jumpstart the process, I propose to set apart a
sum of Rs.500 crore in a fund dedicated for the purpose.
42. Scheduled Castes, Scheduled Tribes, socially and educationally backward classes, and minorities will continue to receive special attention.
Development and Finance Corporations
43. Development and Finance Corporations have been set up for certain
disadvantaged groups. I propose to contribute additional equity to these
corporations in the following manner:
1 National Minorities Development and Finance Corporation
2 Three National Finance and Development Corporations for Weaker Sections comprising
(i) Safai Karamcharis
(ii) Scheduled Castes
(iii) Backward Classes
3 National/State Scheduled Tribes Finance and Development Corporations
50.00
4 National Handicapped Development Corporation 9.00
Scholarships
44. In previous Budgets, we had announced a slew of pre- and
post-matric scholarship programmes for SC, ST, OBC and minorities. All
of them will be continued in 2008-09 with adequate funds as summarised
below:
Scheduled Castes Rs.804 crore
Scheduled Tribes Rs.195 crore
Other Backward Classes Rs.164 crore
Minorities (post-matric) Rs.100 crore
45. I propose to allocate a sum of Rs.75 crore in 2008-09 to the Rajiv
Gandhi National Fellowship Programme. As Honourable Members are aware,
this programme supports SC and ST students pursuing M.Phil and PhD
courses.
Scheduled Castes and Scheduled Tribes
46. Following the practice initiated in 2005-06, I have included in the
Budget documents a statement on the schemes for the welfare of SCs and
STs. I have provided Rs.3,966 crore for schemes benefiting SCs and STs
exclusively and Rs.18,983 crore for schemes where at least 20 per cent
of the benefits are earmarked for SCs and STs.
Minorities
47. The allocation to the Ministry of Minority Affairs will be
increased from Rs.500 crore in 2007-08 to Rs.1,000 crore in 2008-09.
Government has taken up the report of the Justice Rajindar Sachar
Committee for speedy implementation. Apart from the schemes commenced in
2007-08, it is proposed to implement the following schemes/measures in
2008-09:
a multi-sectoral development plan for each of the 90 minority
concentration districts will be drawn up at a cost of Rs.3,780 crore.
The allocation in 2008-09 will be Rs.540 crore;
a pre-matric scholarship scheme with an allocation of Rs.80
crore next year;
a scheme for modernising Madrassa education for which a
provision of Rs.45.45 crore has been made in 2008-09;
256 branches of public sector banks have been opened this year
until December 2007 in districts with substantial minority population.
288 more will be opened by March 2008 and many more in 2008-09; and
continuing the exercise started this year, more candidates
belonging to the minority communities will be recruited to the Central
Para-Military Forces.
48. I also propose to provide Rs.60 crore to enhance the corpus fund of
the Maulana Azad Education Foundation.
Women and Children
49. I confess that policy makers often tend to forget that one-half of
the population is constituted by women and they are entitled to an equal
share - and an equal say - in all programmes and schemes. Gender
Budgeting has gained wider acceptance and credibility. Four more
ministries/departments have set up gender budgeting cells taking the
total number to 54. Honourable Members will find in the Budget documents
a statement embracing 33 demands for grants contributed by 27
ministries/departments and 5 Union Territories. According to the
statement, Rs.11,460 crore has been provided for 100 per cent
women-specific schemes and Rs.16,202 crore for schemes where at least 30
per cent is for women-specific programmes.
50. We will score another 'first' this year. A statement on child
related schemes is included in the budget documents and Honourable
Members will be happy to note that the total expenditure on these
schemes is of the order of Rs.33,434 crore.
51. I propose to allocate Rs.7,200 crore in 2008-09 to the Ministry of
Women and Child Development. This represents an increase of 24 per cent
over the allocation in 2007-08.
Self Help Groups
52. The Life Insurance Corporation of India (LIC) runs the Janashree
Bima Yojana and offers life and permanent disability cover to people in
44 categories. One of the categories is Self Help Groups, but only
35,000 SHGs have been covered so far. Considering the fact that there
are over 30 lakh SHGs credit-linked to banks, I propose to single out
this category for special attention. I propose to ask LIC to rapidly
scale up the scheme and cover all women SHGs that are credit-linked to
banks. Since one-half of the premium is subsidized through the Social
Security Fund, I propose to contribute Rs.500 crore to the corpus of the
fund with the assurance that annual contributions will be made as the
scheme is scaled up. This scheme, together with the Rashtriya Swasthya
Bima Yojana, will mark the beginning of a new deal for women by
providing them life and health cover.
Supplement to GBS
53. Honourable Members will note that the allocations to various
sectors and schemes are generous. I hasten to add that more can be done
and more will be done subject, however, to one condition: the condition
of performance. In the last Budget, I had announced a Plan 'B' and I was
able to provide additional Plan funds of Rs.8,365 crore in cash through
two supplementaries - and a third one will follow shortly. The nub of
the problem lies in implementation - and implementation mostly is in the
hands of State Governments. This year too, I intend to mobilise
additional resources to the tune of Rs.10,000 crore to be used for Plan
capital expenditure. This money - under Plan 'B' - will be available to
ministries/departments of the Central Government and to State
Governments that achieve the physical and quality targets set under
different Plan schemes.
54. I shall now return to the subject of agriculture.
55. I have already referred to the Rashtriya Krishi Vikas Yojana and
the National Food Security Mission.
Agricultural Credit
56. Notwithstanding some shortcomings, the growth of agricultural
credit has been impressive and for this I have to thank our scheduled
commercial banks and Regional Rural Banks. Between them, they account
for about 75-79 per cent of agricultural credit disbursed during any
year. We will exceed the target set for 2007-08. For 2008-09, I propose
to set a target of Rs.280,000 crore.
57. Short-term crop loans will continue to be disbursed at 7 per cent
per annum and I am making an initial provision of Rs.1,600 crore for
interest subvention in 2008-09.
Investment in Agriculture
58. What ails agriculture, among other things, is the fall in
investment. However, there seems to be a turnaround. Gross Capital
Formation (GCF) in agriculture as a proportion of GDP in the agriculture
sector has improved from a low of 10.2 per cent in 2003-04 to 12.5 per
cent in 2006-07. This, however, needs to be raised to 16 per cent during
the Eleventh Plan to achieve the target growth rate of 4 per cent.
Water Resources
59. Government is investing heavily in the Accelerated Irrigation
Benefit Programme (AIBP) and the Rainfed Area Development Programme and
in the management and augmentation of water resources. Under AIBP, 24
major and medium irrigation projects and 753 minor irrigation schemes
will be completed in this financial year, creating additional irrigation
potential of 500,000 hectare. The outlay for 2007-08 was Rs.11,000 crore
with a grant component of Rs.3,580 crore. These are being increased in
2008-09, and the estimated outlay is Rs.20,000 crore with a grant
component of Rs.5,550 crore.
60. The Rainfed Area Development Programme has been finalised and will
be implemented in 2008-09 with an allocation of Rs.348 crore. Priority
will be given to those areas that have not been the beneficiaries of
watershed development schemes.
61. The centrally sponsored scheme on micro irrigation launched in
January 2006 has brought an area of 548,000 hectare under drip and
sprinkler irrigation within two years. I propose to allocate Rs.500
crore for the scheme in 2008-09 with a target of covering another
400,000 hectare.
62. Agreements have been signed with the World Bank by the Governments
of Tamil Nadu, Andhra Pradesh and Karnataka under the project to repair,
renovate and restore water bodies. The three agreements are for a total
sum of US$738 million that will benefit a command area of 900,000
hectare. I am confident that similar agreements will be signed soon
between the World Bank and the Governments of Orissa, West Bengal and
some other States.
Irrigation and Water Resources Finance Corporation
63. While these ongoing programmes will raise the level of investment
in agriculture, I think that we need an ambitious scheme of a much
larger proportion. Government is of the view that massive investments
are required to be made in irrigation projects. Recently, Government has
approved 14 projects that satisfy certain criteria as national projects
and three of them alone would require Rs.7,000 crore during the Eleventh
Plan period. Having regard to the magnitude of the challenge, I propose
to establish the Irrigation and Water Resources Finance Corporation
(IWRFC) with an initial capital of Rs.100 crore contributed by the
Central Government. State Governments and other financial institutions
will be invited to contribute to the equity. It is our intention to
mobilise the very large resources that will be required to fund major
and medium irrigation projects. I hope to be able to incorporate IWRFC
as a company before March 31, 2008.
National Horticulture Mission
64. The National Horticulture Mission (NHM) now covers 340 districts in
18 States and two Union Territories. An area of 276,000 hectare has been
brought under horticulture crops and an area of 56,000 hectare of old
plantations has been rejuvenated. Special thrust is being given to the
revival of crops such as coconut, cashew and pepper. NHM will be
provided Rs.1,100 crore in 2008-09.
65. 500 soil testing laboratories will be set up in the public and
private sectors during the Eleventh Plan period with Government
assistance of Rs.30 lakh per laboratory. In addition, I propose to make
a 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 before March 2009.
Plantation Crops
66. The Special Purpose Tea Fund set up last year for re-plantation and
rejuvenation will be provided Rs.40 crore in 2008-09. I propose to
provide funds for similar support to other plantation crops such as
cardamom (Rs.10.68 crore), rubber (Rs.19.41 crore) and coffee (Rs.18
crore). A crop insurance scheme for tea, rubber, tobacco, chilli,
ginger, turmeric, pepper and cardamom will be introduced next year.
67. In order to promote research on matters concerning the plantation
sector, I propose to make a one-time grant of Rs.5 crore to the Centre
for Development Studies, Tiruvananthapuram. The Tocklai Experimental
Station at Jorhat of the Tea Research Association will celebrate its
centenary in 2010. It is in the process of upgrading its facilities and
expanding its activities to cover other North Eastern States, North
Bengal and Darjeeling. I propose to make a special centenary grant of
Rs.20 crore to the Tea Research Association.
68. The National Plant Protection Training Institute at Hyderabad will
be converted and upgraded into an autonomous National Institute of Plant
Health Management with budgetary support of Rs.29.4 crore.
Crop Insurance
69. Pending a decision on an alternative crop insurance scheme that is
acceptable to the farmers as well as viable to the insurer, the National
Agriculture Insurance Scheme (NAIS) will be continued in its present
form for Kharif and Rabi 2008-09. I propose to provide Rs.644 crore for
the scheme.
70. In addition, the Weather Based Crop Insurance Scheme that is being
implemented as a pilot scheme in selected areas of five States will be
continued. I intend to provide Rs.50 crore for this purpose in 2008-09.
71. Government will continue to provide fertilisers to farmers at
subsidized prices. Government is examining proposals to move to a
nutrient based subsidy regime and alternative methods of delivering the
subsidy.
Cooperative Credit Structure
72. The Prof. Vaidyanathan Committee's report on reviving the
short-term cooperative credit structure is under implementation in 17
States. So far, a sum of Rs.1,185 crore has been released by the Central
Government to four States. I am happy to report that the Central
Government and the State Governments have reached an agreement on the
content of the package to implement the Prof. Vaidyanathan Committee's
report on reviving the long-term cooperative credit structure. The cost
of the package is estimated at Rs.3,074 crore, of which the Central
Government's share will be Rs.2,642 crore or 86 per cent of the total
burden.
Debt Waiver and Debt Relief
73. Sir, while I am confident that the schemes and measures that I have
listed above will give a boost to the agriculture sector, the question
that still looms large is what we should do about the indebtedness of
farmers. Honourable members will recall that Government had appointed a
Committee under Dr. R. Radhakrishna to examine all aspects of
agricultural indebtedness. The Committee has since submitted its report
and it is in the public domain. The Committee had made a number of
recommendations but stopped short of recommending waiver of agricultural
loans. However, Government is conscious of the dimensions of the problem
and is sensitive to the difficulties of the farming community,
especially the small and marginal farmers. Having carefully weighed the
pros and cons of debt waiver and having taken into account the resource
position, I place before this House a scheme of debt waiver and debt
relief for farmers:
(i) All agricultural 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 will be covered under the
scheme.
(ii) For marginal farmers (i.e., holding upto 1 hectare) and small
farmers (1-2 hectare), there will be a complete waiver of all loans that
were overdue on December 31, 2007 and which remained unpaid until
February 29, 2008. In respect of other farmers, there will be a one time
settlement (OTS) scheme for all loans that were overdue on December 31,
2007 and which remained unpaid until February 29, 2008. Under the OTS, a
rebate of 25 per cent will be given against payment of the balance of 75
per cent.
(iii) Agricultural loans were restructured and rescheduled by banks in
2004 and 2006 through special packages. These rescheduled loans, and
other loans rescheduled in the normal course as per RBI guidelines, will
also be eligible either for a waiver or an OTS on the same pattern.
(iv) The implementation of the debt waiver and debt relief scheme will
be completed by June 30, 2008. Upon being granted debt waiver or signing
an agreement for debt relief under the OTS, the farmer would be entitled
to fresh agricultural loans from the banks in accordance with normal
rules.
(v) Government estimates that about three crore small and marginal
farmers and about one crore other farmers will benefit from the scheme.
The total value of overdue loans being waived is estimated at Rs.50,000
crore and the OTS relief on the overdue loans is estimated at Rs.10,000
crore.
I appeal to Honourable Members - as well as to the people of India - to
give their unqualified support to the scheme and help Government
implement this momentous decision.
74. Since 2005-06, there has been an unmistakable boom in investment.
Two indicators tell the story. The saving rate and the investment rate
in 2003-04 were 29.8 per cent and 28.2 per cent, respectively. According
to estimates made by the Economic Advisory Council to the Prime
Minister, they will be 35.6 per cent and 36.3 per cent, respectively, by
the end of 2007-08. The trend is reflected on the foreign investment
side too. During the period April-December 2007-08, foreign direct
investment amounted to US$12.7 billion and foreign institutional
investment to US$18 billion. Our policy is to encourage all sources of
investment, domestic and foreign, private and public.
75. In 2008-09, Government will provide Rs.16,436 crore as equity
support and Rs.3,003 crore as loans to Central Public Sector Enterprises
(CPSEs). 44 CPSEs are listed today. It is the policy of the Government
to list more CPSEs in order to unlock their true value and improve
corporate governance.
Rural Infrastructure Development Fund
76. The Rural Infrastructure Development Fund (RIDF) is the main
instrument to channelize bank funds for financing rural infrastructure,
and it is quite popular among State Governments. Therefore, I propose to
raise the corpus of RIDF-XIV in 2008-09 to Rs.14,000 crore. I also
propose to operate a separate window under RIDF-XIV for rural roads with
a corpus of Rs.4,000 crore.
Manufacturing Sector
77. There has been some moderation in the index of production of the
six core infrastructure industries as well as in the overall index of
industrial production for the period April-December 2007-08. The decline
has been somewhat sharp in the case of consumer goods, especially
consumer durables. The silver lining is that the growth in capital goods
is still very high at 20.2 per cent, indicating that industry continues
to make huge capital investments and has a positive outlook about the
future. Manufacturing industries that have grown more slowly than the
average include food products, cotton textiles, textile products
including apparel, paper and transport equipment. Among the reasons for
the moderation are a rise in interest rates and the appreciation of the
Rupee. There are limits to monetary policy accommodation, especially
when the need is to maintain price stability. However, some steps can be
taken on the fiscal side and I shall, presently, place before the House
some proposals in order to stimulate industrial growth. Our goal is to
take the manufacturing growth rate to a double digit. This will also
call for more reforms in the coal and electricity sectors as well as
confronting oligopolistic tendencies in the cement and steel sectors.
Power
78. The Eleventh Plan target for additional power generation capacity
is 78,577 MW which is more than the total capacity added in the previous
three Plans. By end March 2008, we will achieve Commercial Operation
Date (COD) on about 10,000 MW, marking the best first year in any Plan
period. Government will redouble its efforts to ensure that the
ambitious target for the Eleventh Plan is achieved.
79. The fourth Ultra Mega Power Project (UMPP) at Tilaiya will be
awarded shortly. It is possible to bring five more UMPPs in
Chhattisgarh, Karnataka, Maharashtra, Orissa and Tamilnadu to the
bidding stage provided the States extend the required support. I urge
them to do so.
80. Government has approved the continuation of the Rajiv Gandhi
Grameen Vidyutikaran Yojana during the Eleventh Plan period with a
capital subsidy of Rs.28,000 crore. I propose to allocate Rs.5,500 crore
in 2008-09 for the Yojana (including NER).
81. I propose to provide Rs.800 crore in 2008-09 for the Accelerated
Power Development and Reforms Project. However, it is the poor state of
transmission and distribution (T&D) that is a drag on the sector.
Huge investments are required to be made in T&D, but linked to
fundamental reforms. Hence, I propose to create a national fund for
transmission and distribution reform. The details of the scheme will be
worked out and announced very soon.
Roads
82. All phases of the National Highway Development Programme continue
to make progress. The completion ratio 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 is being paid to SARDP-NE, a programme
devised for the North Eastern region. 180 kms of roads were completed in
2007-08 and the target for 2008-09 is 300 kms. I propose to enhance the
allocation for the NHDP from Rs.10,867 crore in 2007-08 to Rs.12,966
crore next year.
Oil and Gas
83. The 7th round of bidding under the New Exploration Licensing Policy
(NELP) was launched in December 2007 and bids have been invited for 57
exploration blocks. It is estimated that the round will attract
investment of the order of US$3.5 billion to US$8 billion for
exploration and discovery.
Coal
84. 53 coal blocks with reserves of 13,842 million tonnes have been
allotted during April-January 2007-08 to Government and private sector
companies. A new Coal Distribution Policy was notified in October 2007.
A coal regulator will be appointed.
Information Technology
85. Government's forward looking policy is driving the growth of
Information Technology and Information Technology Enabled Services. I
propose to enhance the allocation to the Department of Information
Technology from Rs.1,500 crore in 2007-08 to Rs.1,680 crore in 2008-09.
A scheme for establishing 100,000 broadband internet-enabled Common
Service Centres in rural areas and a scheme for establishing State Wide
Area Networks (SWAN) with Central assistance are under implementation. A
new scheme for State Data Centres has also been approved. I propose to
provide Rs.75 crore for the common service centres, Rs.450 crore for
SWAN and Rs.275 crore for the State Data Centres.
Textiles
86. The two principal schemes of the Ministry of Textiles - the Scheme
for Integrated Textile Parks (SITP) and the Technology Upgradation Fund
(TUF) - will be continued in the Eleventh Plan period. All 30 integrated
textile parks have been approved and 20 units in four parks have
commenced production. I propose to maintain the provision for SITP at
Rs.450 crore in 2008-09. The provision for TUF will be increased from
Rs.911 crore in the current year to Rs.1,090 crore in 2008-09.
87. The cluster approach to the development of the handloom sector has
made rapid progress. 250 clusters are being developed. 443 yarn banks
have been established. By March 2008, over 17 lakh families of weavers
will be covered under the health insurance scheme. I propose to increase
the allocation to Rs.340 crore in 2008-09.
88. In order to scale up both infrastructure and production, it is
proposed to take up six centres for development as mega-clusters.
Varanasi and Sibsagar will be taken up for handlooms, Bhiwandi and Erode
for powerlooms, and Narsapur and Moradabad for handicrafts. Each
mega-cluster will require about Rs.70 crore. I propose to start the
process with an initial provision of Rs.100 crore in 2008-09.
Micro, Small and Medium Enterprises
89. Micro, small and medium enterprises will continue to receive
support from the Government. I wish to remove certain wrong perceptions
about the sector. In the four years ending 2006-07, for which figures
are available, there has been a secular rise in the number of registered
units, the number of unregistered units, production, employment and
exports. In order to give a fillip to the sector, I propose to create a
risk capital fund in the Small Industries and Development Bank of India
(SIDBI). As on January 31, 2008, the Credit Guarantee Trust with SIDBI
had extended guarantees to 89,129 units for an amount of Rs.2,479 crore.
SIDBI will 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 lakh.
Foreign Trade
90. Merchandise exports have come under some pressure due to the
appreciation of the Rupee and may fall just short of the target of US$
160 billion, although the growth rate was strong at 21.8 per cent during
April-December 2007-08. Relief was given to exporters in three tranches
amounting to over Rs.8,000 crore. I may note that the interest cost of
sterilization through market stabilization bonds (MSS), estimated at
Rs.8,351 crore for the whole year is, in a sense, subsidy to the export
sector. Government is sensitive to the needs of the export sector and
will continue to respond sympathetically as the situation demands.
91. Government's policy of a careful and calibrated opening of the
financial sector has proved successful. We shall continue to take
measured steps.
92. The final report of the Committee on Financial Inclusion has been
received. To begin with, I propose to accept two recommendations:
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
to allow individuals such as retired bank officers,
ex-servicemen etc to be appointed as business facilitator or business
correspondent or credit counsellor.
93. Banks will be encouraged to embrace the concept of Total Financial
Inclusion. Government will 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, (a) income generation
activities, (b) social needs like housing, education, marriage etc and
(c) debt swapping.
NABARD, SIDBI and NHB
94. Financial inclusion can be taken forward by expanding the reach of
NABARD, SIDBI and NHB. Hence, in order to increase the resource base of
these three banks, I propose to tap into the resources of scheduled
commercial banks to the extent that they fall short of their obligation
to lend to the priority sector. Accordingly, it is proposed to create
the following funds:
(i) a fund of Rs.5,000 crore in NABARD to enhance its refinance
operations to short term cooperative credit institutions;
(ii) two funds of Rs.2,000 crore each in SIDBI - one for risk capital
financing and the other for enhancing refinance capability to the MSME
sector; and
(iii) a fund of Rs.1,200 crore in NHB to enhance its refinance
operations in the rural housing sector.
Each of these funds will be governed by the general guidelines that are
now applicable to RIDF with some modifications.
95. Last year, I enhanced the limit of the loan that could be extended
under the Differential Rate of Interest (DRI) scheme to the weaker
sections of the community engaged in gainful occupations. However, I did
not enhance the eligibility criteria which still stand at levels fixed
in 1986. This needs to be corrected. Hence, I propose to fix the
borrower's eligibility criteria as annual family income of Rs.18,000 in
rural areas and Rs.24,000 in urban areas.
Capital Markets
96. In my Budget Speech of 2006, I had informed the House that, on the
basis of the R.H. Patil Committee Report, we shall take steps to create
an exchange-traded market for corporate bonds. Both Bombay Stock
Exchange and National Stock Exchange have created platforms for trading
in corporate bonds.
97. I intend to move forward by taking some more measures to expand the
market for corporate bonds. Hence, I propose to:
take measures to develop the bond, currency and derivatives
markets that will include launching exchange-traded currency and
interest rate futures and developing a transparent credit derivatives
market with appropriate safeguards;
enhance the tradability of domestic convertible bonds by putting
in place a mechanism that will enable investors to separate the embedded
equity option from the convertible bond and trade it separately; and
encourage the development of a market-based system for
classifying financial instruments based on their complexity and implicit
risks.
98. The fear of the Permanent Account Number (PAN) has virtually
disappeared. PAN is now the sole identification number for all
participants in the securities market. I propose to extend the
requirement of PAN to all transactions in the financial market subject,
however, to suitable threshold exemption limits.
99. Our stock exchanges provide national electronic trading platforms
for securities transactions. Yet, we do not have a seamless national
market for securities because of differences among States on the scope
and applicability of rates of stamp duty. Hence, I propose to request
the Empowered Committee of State Finance Ministers to work with the
Central Government to create a truly pan Indian market for securities
that will expand the market base and enhance the revenues of the State
Governments.
100. India is poised to reap a 'demographic dividend' because the size
of its working age population will increase from about 77.5 crore in
2008 to a likely peak of 95 crore in 2026. The 'dividend' can prove
illusory if the workforce does not acquire the skills to support a
knowledge and technology driven economy.
Skill Development Mission
101. Today, skill development programmes are diffused and administered
by a number of ministries/departments. I have no intention of
interfering with these sector-specific programmes. However, there is a
compelling need to launch a world-class skill development programme, in
mission mode, that will address the challenge of imparting the skills
required by a growing economy. Both the structure and the leadership of
the mission must be such that the programme can be scaled up quickly to
cover the whole country. Hence, I propose to establish a non-profit
corporation and entrust the mission to that corporation. It is my
intention to garner about Rs.15,000 crore as capital from Governments,
the public and private sector, and bilateral and multilateral sources. I
shall begin by putting Rs.1,000 crore as Government's equity in the
proposed non-profit corporation.
Industrial Training Institutes
102. The upgradation of ITIs is proceeding apace. Under the World Bank
assisted scheme, 238 ITIs are undergoing upgradation. Under the PPP
scheme, 309 ITIs in 29 States have been identified with corresponding
industry partners and agreements have been signed in 244 cases. In
anticipation of upgrading 300 more ITIs in 2008-09, I have set apart
Rs.750 crore.
Sainik Schools
103. I am concerned by the rate of attrition in the defence forces,
especially at the officer level. Sainik Schools have played a unique
role as recruiting and training ground of future leaders of the defence
forces. I propose to make an allocation of Rs.44 crore at the rate of
Rs.2 crore each to the 22 Sainik Schools for immediate improvement of
infrastructure including classrooms, laboratories, libraries and
facilities for physical education.
Public Distribution System
104. A sum of Rs.32,667 crore is being provided next year for food
subsidy under the Public Distribution System (PDS) and other welfare
programmes. Strengthening the PDS would mean adequate supplies,
reasonable subsidies and efficient delivery of the subsidized food. An
idea that has been growing is to deliver subsidies to the target group
through smart cards. Finally, I have found two willing partners - the
State of Haryana and the Union Territory of Chandigarh. They will
introduce, on a pilot basis, a smart card based delivery system to
deliver food grains under the PDS in Haryana and Chandigarh,
respectively. I thank the Chief Minister of Haryana and the
Administrator of Chandigarh and promise them full support and
cooperation in making a success of the pilot scheme.
Unorganised Sector Workers
105. The Unorganised Sector Workers' Social Security Bill, 2007 is
before Parliament. In anticipation of the Bill being made into law,
Government has introduced three schemes that are designed to provide
social security to workers in the unorganised sector in a phased manner.
These are:
the Aam Admi Bima Yojana that will provide insurance cover to
poor households. I am happy to announce that, in the first year of the
Yojana, LIC will cover one crore landless households by September 30,
2008. I have already placed Rs.1,500 crore with LIC. In order to cover
another one crore poor households in the second year, I propose to place
an additional sum of Rs.1,000 crore with LIC in 2008-09;
the Rashtriya Swasthya Bima Yojana that will be implemented with
effect from April 1, 2008; and
the Indira Gandhi National Old Age Pension Scheme that was
enlarged with effect from November 19, 2007 to include all persons over
65 years falling under the BPL category. Consequently, the coverage has
expanded from 87 lakh to 157 lakh beneficiaries. I propose to allocate
Rs.3,443 crore in 2008-09 as against Rs.2,392 crore in 2007-08.
Housing for the Poor
106. Housing for the poor is one of the six elements of Bharat Nirman
and is implemented through the Indira Awas Yojana (IAY). Against a
target of 60 lakh houses, 41.13 lakh houses have been constructed up to
December 2007 and the cumulative number will be 51.77 lakh houses by end
March 2008. Reflecting the higher cost of construction, I propose to
enhance the subsidy per unit in respect of new houses sanctioned after
April 1, 2008 from Rs.25,000 to Rs.35,000 in plain areas and from
Rs.27,500 to Rs.38,500 in hill/difficult areas. The subsidy for
upgradation of houses will be increased from Rs.12,500 per unit to
Rs.15,000. A beneficiary will still need own funds to complete the
house. Public sector banks will 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
107. I propose to increase the allocation for Defence by 10 per cent
from Rs.96,000 crore to Rs.105,600 crore. I have assured the Raksha
Mantri that any further amount needed for the Defence Forces, especially
for capital expenditure, will be provided.
Backward Regions Grant Fund
108. The Backward Regions Grant Fund was given Rs.5,800 crore in the
current year. Having regard to the pace of expenditure, I propose to
keep the allocation for the next year at the same level. I may add that
nearly 45 per cent of the amount is likely to be allocated to the States
of Bihar, Orissa and Uttar Pradesh.
Climate Change
109. In the Budget Speech last year I had announced the decision of the
Government to appoint an expert committee to study the impact of climate
change on India and identify the measures that we may have to take in
the future. Work is in progress. Even while adhering to the principle of
"common but differentiated responsibility" we can - and we
must - do a number of things in our self-interest. We can promote clean
technology products; we can review fuel emission and efficiency
regulations; we can replace wood by solar as the fuel of common use; we
can encourage the use of gas which is the most benign hydrocarbon; we
can set up a trading platform for carbon emissions; we can build
sustainable greenfield cities; and we can do more. In order to explore
and implement these and other ideas, Government proposes to establish a
permanent institutional mechanism that will play a development and
coordination role. Details of the institutional mechanism will be
announced shortly.
Sixth Central Pay Commission
110. I have been informed that the Sixth Central Pay Commission will
submit its report by March 31, 2008. I am confident that the report will
meet the legitimate expectations of Government employees.
Commonwealth Games
111. The Commonwealth Games are only 947 days away. As promised, we
shall provide Rs.624 crore in 2008-09. I would urge the authorities
concerned to adhere to the strict timelines and the quality standards.
Institutions of Excellence
112. For the fourth year in succession, I propose to make a special
grant of Rs.100 crore each to three institutions of excellence. The
awards for 2008-09 go to: (i) Mahatma Phule Krishi Vidyapeeth, Rahuri,
Maharashtra; (ii) University of Mysore, Mysore; and (iii) Delhi
University, Delhi.
India's Soft Power
113. India's music, literature, dance, art, cuisine and especially
films are attracting huge interest around the world. This is the 'soft
power' of India, and it must be projected in a sophisticated and subtle
manner. I propose to provide Rs.75 crore to the Indian Council of
Cultural Relations to design and implement a programme to achieve this
objective.
Tiger Protection
114. The number 1,411 should ring the alarm bells. That is the number
of tigers in India. The tiger is under grave threat. In order to
redouble our effort to protect the tiger, I propose to make a one time
grant of Rs.50 crore to the National Tiger Conservation Authority. The
bulk of the grant will be used to raise, arm and deploy a special Tiger
Protection Force.
Monitoring and Evaluation
115. Robust economic growth has thrown up many new challenges, among
them the need to put in place effective monitoring, evaluation and
accounting systems for the large sums of money that are disbursed by the
Central Government to State Governments, district level agencies and
other implementing agencies. I think we do not pay enough attention to
outcomes as we do to outlays; or to physical targets as we do to
financial targets; or to quality as we do to quantity. Government
therefore proposes to put in place a Central Plan Schemes Monitoring
System (CPSMS) that will be implemented as a Plan scheme of the Planning
Commission. A comprehensive Decision Support System and Management
Information System will also be established. The intended outcome is to
generate and monitor scheme-wise and State-wise releases for about 1,000
Central Plan and centrally sponsored schemes in 2008-09.
116. Government also intends to strengthen evaluation. Some ministries
have started concurrent evaluation. This needs to be supplemented by
independent evaluations conducted by research institutions. The Planning
Commission will authorise such evaluations of the major schemes and
complete the task by the time of the mid-term review of the Eleventh
Plan.
117. I shall now turn to the Budget Estimates for 2008-09.
118. The estimate of Plan Expenditure is placed at Rs.243,386 crore. As
a proportion of total expenditure, it will be 32.4 per cent.
119. Non-Plan Expenditure is estimated at Rs.507,498 crore.
Revenue Deficit and Fiscal Deficit
120. It is widely acknowledged that the fiscal position of the country
has improved tremendously. I am happy to report that the revenue deficit
for the current year will be 1.4 per cent (against a BE of 1.5 per cent)
and the fiscal deficit will be 3.1 per cent (against a BE of 3.3 per
cent).
121. Further progress will be made in 2008-09. The revenue receipts of
the Central Government for 2008-09 are projected at Rs.602,935 crore and
the revenue expenditure at Rs.658,119 crore. Consequently, the revenue
deficit is estimated at Rs.55,184 crore, which amounts to 1.0 per cent
of GDP. The fiscal deficit is estimated at Rs.133,287 crore which is 2.5
per cent of GDP. Honourable Members will note that not only will I
achieve the target for fiscal deficit under the FRBM Act, I have also
left for myself some headroom. In the case of revenue deficit, I will
meet the target of annual reduction of 0.5 per cent. However, because of
the conscious shift in expenditure in favour of health, education and
the social sector, we may need one more year to eliminate the revenue
deficit. In my view, this is an entirely acceptable deferment.
Revisiting the Roadmap for Fiscal Adjustment
122. I acknowledge that significant liabilities of the Government on
account of oil, food and fertilizer bonds are currently below the line.
This accounting arrangement is consistent with past practice.
Nevertheless, our fiscal and revenue deficits are understated to that
extent. There is a need to bring these liabilities into our fiscal
accounting. As a first step, I have shown these liabilities clearly in
'Budget at a Glance'. After the obligations on account of the Sixth
Central Pay Commission become clear, I intend to request the Thirteenth
Finance Commission to revisit the roadmap for fiscal adjustment and
suggest a suitably revised roadmap.
123. Mr. Speaker, I shall now present my tax proposals.
124. Many people are surprised by the buoyancy in tax revenues,
especially in direct taxes. I am not. I have always maintained that
moderate and stable tax rates coupled with a tax administration that
shows no fear or favour will bring high revenues to the exchequer.
125. The UPA Government inherited a tax to GDP ratio of 9.2 per cent in
2003-04. At the end of 2007-08, that ratio would have risen to 12.5 per
cent.
126. High growth rates have helped. Changes in attitude have also
helped. Above all, information systems and technology have helped most.
And, if I may add in a lighter vein, having a lucky Finance Minister may
have also helped! We are on course to achieve the Budget Estimates of
indirect taxes and exceed the Budget Estimates of direct taxes. I take
this opportunity to thank all tax payers and I promise them an efficient
and tax payer-friendly administration.
Indirect Taxes
127. I shall begin with customs duties.
128. The peak rate for non-agricultural products was 20 per cent in
January 2004 and now stands at 10 per cent. The collection rate is the
closest approximation to the level of protection to domestic industry,
and that rate for all imports stood at 10 per cent in 2006-07. Since
April 2007, the Rupee has appreciated against the Dollar by 9.8 per
cent. Consequently, the case for reducing the peak rate at this stage is
very weak. Hence, I propose to make no change in the peak rate of
customs duty.
129. However, I find that in some cases it is necessary to reduce the
customs duty in order to provide a fillip to that industry or to promote
value addition or to remove inversion or any other anomaly. I shall
refer to a few such cases.
130. I propose to reduce the customs duty on Project Imports from 7.5
per cent to 5 per cent. However, I also propose to impose the 4 per cent
special CVD on a few specified projects in the power sector.
131. In order to improve the supply of raw material, I propose to
reduce the duty on steel melting scrap and aluminium scrap from 5 per
cent to nil.
132. On certain specified life saving drugs and on the bulk drugs used
for the manufacture of such drugs, I propose to reduce the customs duty
from 10 per cent to 5 per cent as well as to totally exempt them from
excise duty or countervailing duty.
133. In order to reduce the cost of manufacture of cattle and poultry
feeds, I propose to reduce the duty 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.
134. The duty on bactofuges will be reduced from 7.5 per cent to nil.
This will increase the shelf life of milk and benefit the dairy
industry.
135. I propose to fully exempt from duty specified parts of set top
boxes and specified raw materials for use in the IT/electronic hardware
industry.
136. To establish parity between devices used in the information/
communication sector and the entertainment sector, I propose to reduce
the duty on convergence products from 10 per cent to 5 per cent.
137. To provide a fillip to the manufacture of sports goods, I propose
to reduce the duty on specified machinery from 7.5 per cent to 5 per
cent. I also propose to exempt from duty specified raw materials for
sports goods.
138. The gem and jewellery industry has responded well to the duty
reductions made last year. In order to encourage value addition and
exports, I propose to exempt from duty rough cubic zirconia and to
reduce the duty on polished cubic zirconia from 10 per cent to 5 per
cent. Similarly, the duty on rough coral will be reduced from 10 per
cent to 5 per cent.
139. To facilitate training of helicopter pilots, I propose to remove
the duty on helicopter simulators.
140. In order to support domestic fertiliser production, I propose to
reduce the customs duty on crude and unrefined sulphur from 5 per cent
to 2 per cent.
141. Thanks to a complex regime of export benefits and duty exemptions,
naphtha is exported from refineries and naphtha is imported by
manufacturers of polymers, leading to price distortions and revenue
losses. I propose to correct the situation by withdrawing the duty
exemption on naphtha for use in the manufacture of polymers and subject
it to the normal rate of 5 per cent. However, naphtha imported for the
production of fertilisers will continue to be exempt from import duty.
142. Finally, in order to conserve chrome ore and make it available for
value added manufacture in India, I propose to increase the export duty
from Rs.2,000 per metric tonne to Rs.3,000 per metric tonne.
143. I shall now deal with excise duties.
144. The manufacturing sector is the backbone of any economy. It is
consumption that drives production and it is production that drives
investment. Having carefully studied current trends of production and
consumption, I believe there is a need to give a stimulus to the
manufacturing sector. Hence, I propose to reduce the general CENVAT rate
on all goods from 16 per cent to 14 per cent.
145. I have looked at specific sectors where growth is flagging. These
sectors are important because they are growth and employment drivers.
Some of them also have large externalities. Therefore, I propose to:
reduce the excise duty on all goods produced in the
pharmaceutical sector from 16 per cent to 8 per cent;
reduce the excise duty on buses and their chassis from 16 per
cent to 12 per cent;
reduce the excise duty 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;
reduce the excise duty on two wheelers and three wheelers from
16 per cent to 12 per cent; and
reduce the excise duty 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. Furthermore, excise duty on certain varieties of
writing, printing and packing paper will be reduced from 12 per cent to
8 per cent.
146. There are a number of products which are goods of mass
consumption. There is also the need to have tax parity on similar goods.
Taking into account requests from a number of industries, I propose to
reduce the excise duty from 16 per cent to nil on a few items including
composting machines, wireless data cards, packaged coconut water, tea
and coffee mixes, and puffed rice.
147. Further, I propose to reduce the excise duty from 16 per cent to 8
per cent on a few items including water purification devices, veneers
and flush doors, sterile dressing pads, specified packaging material,
and breakfast cereals.
148. I propose to totally exempt from excise duty the anti AIDS drug,
Atazanavir, as well as bulk drugs for its manufacture.
149. To further encourage cold chain facilities, I propose to exempt
from excise duty, on end-use basis, refrigeration equipment (consisting
of compressor, condenser units, evaporator etc) above 2 TR (tonne
refrigeration) utilising power of 50 KW and above.
150. I propose to bring parity in the excise duty rates on bulk cement
and packaged cement. Accordingly, bulk cement will now attract excise
duty of Rs.400 per Metric Tonne or 14 per cent ad valorem, whichever is
higher. Cement clinkers will be liable to excise duty of Rs.450 per
Metric Tonne.
151. Similarly, I propose to increase the excise duty on packaged
software from 8 per cent to 12 per cent to bring it on par with
customised software which will attract a service tax of 12 per cent.
152. Non-filter cigarettes are more toxic than filter cigarettes, yet
they enjoy a favourable tax regime, which is iniquitous. I propose to
tax both filter and non-filter cigarettes on par by applying - as
Honourable Members may have guessed - the higher rates.
153. In order to remove a source of misinformation, I propose to
abolish the ad valorem part of the excise duty on unbranded petrol and
unbranded diesel and replace the same by an equivalent specific duty of
Rs.1.35 per litre. Henceforth, 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.
154. An excise duty of 1 per cent called NCCD is now imposed on
polyester filament yarn, which is the only yarn suffering this excise
duty. I propose to remove that duty and shift the levy to cellular
mobile phones.
155. Finally, I turn to my proposals on service tax.
156. 55 per cent of the GDP is contributed by the services sector,
which is a growing sector that must contribute its legitimate share to
the exchequer. I propose to bring under the service tax net four
services. They are:-
(i) asset management service provided under ULIP, to bring it on par
with asset management service provided under mutual funds;
(ii) services provided by stock/commodity exchanges and clearing
houses;
(iii) right to use goods, in cases where VAT is not payable; and
(iv) customised software, to bring it on par with packaged software and
other IT services
157. I also propose to remove unwarranted doubts raised in respect of
certain services and clarify that they are liable to service tax. These
include money changers, persons running games of chance, and tour
operators using contract carriage vehicles.
158. There are some miscellaneous changes but I do not wish to burden
the House with the same.
159. Finally, I am happy to announce that the threshold limit of
exemption for small service providers will be increased from Rs.8 lakhs
per year to Rs.10 lakh per year. As a result, about 65,000 small service
providers will go out of the tax net.
Direct Taxes
160. I shall now deal with direct taxes.
161. I recall the Budget Speech of 1997. I believe that boldness pays.
I also believe that trust will beget trust, moderation will beget
revenues and fairness will beget compliance. Income tax payers have made
out a persuasive case for some relief. Accordingly, I propose to make
some changes in the slabs for personal income tax. I propose to increase
the threshold limit of exemption:
in the case of all assesses, from Rs.110,000 to Rs.150,000, thus
giving every assessee a relief at a minimum of Rs.4,000. Consequently,
the four slabs and rates will be as follows:
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 the case of a woman assessee, from Rs.145,000 to Rs.180,000;
in the case of a senior citizen, from Rs.195,000 to Rs.225,000.
162. I do not propose to make any change in the corporate income tax
rates.
163. No change is proposed in the rate of surcharge.
164. I propose to add the Senior Citizens Savings Scheme 2004 and the
Post Office Time Deposit Account to the basket of saving instruments
under Section 80C of the Income Tax Act.
165. I propose to allow an additional deduction of Rs.15,000 under
Section 80D to an individual who pays medical insurance premium for
his/her parent or parents.
166. The Reverse Mortgage Scheme was notified by the National Housing
Bank in the current financial year. In order to clarify the tax issues
arising out of the scheme, I propose to amend the Income Tax Act to
provide that:
(i) reverse mortgage would not amount to "transfer"; and
(ii) the stream of revenue received by the senior citizen would not be "income";
167. Agricultural income is exempt from income tax. However, courts
have ruled that growing saplings or seedlings on land is agriculture but
growing them in pots is not agriculture. This does not seem fair. Hence,
I propose to exempt from tax income arising from saplings or seedlings
grown in a nursery.
168. Companies engaged in certain businesses are allowed a weighted
deduction of 150 per cent on any expenditure on in-house scientific
research. I propose to add the business of production of seeds and
manufacture of agricultural implements to this list.
169. In order to promote outsourcing of research, I propose to allow a
weighted deduction of 125 per cent on any payment made to companies
engaged in research and development.
170. I propose to extend the benefit of amortisation of certain
preliminary expenses under Section 35D to assesses in the services
sector.
171. To supplement measures that I announced earlier in respect of the
corporate debt market, I propose to exempt from TDS corporate debt
instruments issued in demat form and listed on recognised stock
exchanges.
172. I propose to make some changes in the provisions of law pertaining
to Fringe Benefit Tax (FBT) that will give some relief to corporates and
firms. Crèche facilities, sponsorship of an
employee-sportsperson, organising sports events for employees, and guest
houses will be excluded from the purview of FBT.
173. At present, a domestic company is liable to pay Dividend
Distribution Tax (DDT). As a result, the distributed dividend is
sometimes taxed twice in the hands of a subsidiary company and its
parent company, causing hardship. In order to remove the hardship, I
propose to allow a parent company 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 another company.
174. I propose to insert a new sub-section (11C) in Section 80-IB to
grant a five year tax holiday to encourage hospitals to be set up
anywhere in India, except certain specified urban agglomerations, and
especially in tier-2 and tier-3 towns in order to serve the rural
hinterland. This window will be open for the period April 1, 2008 to
March 31, 2013, during which the hospital must commence operations.
175. Having regard to the significant rise in tourist arrivals,
especially for cultural tourism, I propose to grant a five year holiday
from income tax to two, three or four star hotels that are established
in specified districts which have UNESCO-declared 'World Heritage
Sites'. The hotel should be constructed and start functioning during the
period April 1, 2008 to March 31, 2013.
176. I am happy to announce that the Coir Board will be included in
Section 10(29A) and exempt from income tax.
177. Dividends that are distributed attract a tax of 15 per cent. Short
term capital gains attract a tax of 10 per cent under Section 111A.
There is merit in equating the rates and hence I propose to increase the
rate of tax on short term capital gains under Section 111A and Section
115AD to 15 per cent. This will also encourage investors to stay
invested for a longer term.
178. At present, Securities Transaction Tax (STT) paid is allowed as a
rebate against tax liability. Further, STT on options is levied on the
aggregate of the strike price and the option premium and is borne by the
seller. I propose to make some changes. Henceforth, STT paid will be
treated like any other deductible expenditure against business income.
Further, the levy of STT, in the case of options, will be only on the
option premium where the option is not exercised, and the liability will
be on the seller. In a case where the option is exercised, the levy will
be on the settlement price and the liability will be on the buyer. There
will be no change in the present rates.
179. Transactions in commodity futures have come of age. Hence, I
propose to introduce the Commodities Transaction Tax (CTT) on the same
lines as STT on options and futures.
180. "Charitable purpose" includes relief of the poor,
education, medical relief and any other object of general public
utility. These activities are tax exempt, as they should be. However,
some entities carrying on regular trade, commerce or business or
providing services in relation to any trade, commerce or business and
earning incomes have sought to claim that their purposes would also fall
under "charitable purpose". Obviously, this was not the
intention of Parliament and, hence, I propose to amend the law to
exclude the aforesaid cases. Genuine charitable organisations will not
in any way be affected.
181. The Banking Cash Transaction Tax (BCTT) has served a very useful
purpose in enlarging the information system of the Income Tax
Department. Since the information is also being gathered through other
instruments introduced in the last few years, I propose to withdraw this
tax with effect from April 1, 2009.
182. My tax proposals on direct taxes are revenue neutral. On the
indirect taxes side, the proposals are estimated to result in a loss of
Rs.5,900 crore.
CST and a Roadmap towards GST
183. Following an agreement between the Central Government and the
State Governments, the rate of Central Sales Tax was reduced from 4 per
cent to 3 per cent in this financial year. It is now proposed to reduce
the rate to 2 per cent from April 1, 2008. Consultations are underway on
the compensation for losses, if any, and once agreement is reached the
new rate will be notified. I am also happy to report that there is
considerable progress in preparing a roadmap for introducing the Goods
and Services Tax with effect from April 1, 2010.
184. Mr. Speaker, Sir, once upon a time India, together with China,
accounted for 50 per cent of the world's output. We must regain our
position and it is within our capacity to do so.
185. Our work in Government is, every day and every hour, a discovery
of the path to reach our goals: full employment, abolition of poverty
and elimination of inequality. "These goals can only be achieved by
a considerable increase in national income and our economic policy must,
therefore, aim at plenty and equitable distribution. We must produce
wealth, and then divide it equitably. How can we have a welfare state
without wealth?" Those are not my words; they were uttered in 1955
by Pandit Jawaharlal Nehru. Although Jawaharlal Nehru did not use the
phrase inclusive growth, he actually spelt out the conditions for
inclusive growth.
186. Those words will guide the UPA Government. As always, I turned to
my muse, Saint Tiruvalluvar, for guidance and reassurance. 2,000 years
ago he set the benchmark for good governance in the following immortal
words:
"Kodai Ali Sengol Kudi Ombal Nangum
Udaiyanam Vendharkku Oli"
[Generous grants, compassion, righteous rule
and succour to the downtrodden
Are the hallmarks of good governance]
We have tried to remain true to this philosophy. The four years to
2007-08 have been the best years so far but, may I say with humility,
that the best is yet to come.
187. Sir, with these words I commend the Budget to the House.