Budget 2008- Full Speech Text

Budget  2008-2009

Speech  of

P. Chidambaram

Minister of Finance

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.

I. THE ECONOMY: AN OVERVIEW

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.

The Growth Story: Faster and more inclusive

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.

Bharat Nirman

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.

II. THE ELEVENTH FIVE YEAR PLAN:

THE CRUCIAL SECOND YEAR

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.

Education: Sarva Shiksha Abhiyan

17. Education and health are the twin pillars on which rests the edifice of social sector reforms. The total allocation for the education sector (including NER) will be increased by 20 per cent from Rs.28,674 crore in 2007-08 to Rs.34,400 crore in 2008-09.

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.

Jawahar Navodaya Vidyalaya

21. Jawahar Navodaya Vidyalayas are quality schools. In order to make such schools more accessible to SC and ST students, Government plans to establish Navodaya Vidyalayas in 20 districts that have a large concentration of Scheduled Castes and Scheduled Tribes. I propose to set apart Rs.130 crore in 2008-09 for this purpose.

 

Kasturba Gandhi Balika Vidyalaya

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.

National Means-cum-Merit Scholarship

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.

Nehru Yuva Kendra

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.

Mid-day Meal Scheme

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.

Institutes of Higher Education

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.

Science and Technology

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.

Health

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.

National Rural Health Mission

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/AIDS

32. The National Aids Control Programme will be provided Rs.993 crore. Studies have shown that the prevalence rate of HIV/AIDS has come down from 0.9 per cent to 0.36 per cent, which is a matter of some satisfaction.

Polio

33. 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 Elderly

35. 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 Services

36. 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.

 

 

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India Budget 2008 - Highlights

Budget 2008 Highlights

 

NEW DELHI - Finance Minister Palaniappan Chidambaram presented the union budget for 2008/09 on Friday, the fifth and final full one of the administration before elections due by May 2009.

 

• Banking cash transaction tax withdrawn from April 1, 2009
• Indirect tax proposals to result in loss of Rs 5,000 cr
• Direct tax proposals to be revenue neutral
• Dividend of subsidiary company exempt from DDT
• Reduce central sales tax to 2%
• Increase in short term capital gains tax to 15%
• 5-yr tax holiday for setting up hospitals in tier-II, tier III regions
• Excise duty of Rs 1.35/litre on unbranded petrol
• Excise duty of Rs 4.6/litre on unbranded diesel
• Commodities Transactions Tax to be introduced
• Securities Transaction Tax to be treated like deductible expenditure
• 5-yr tax holiday to 2,3,4-star hotels in UNESCO's heritage sites
• NO FBT on creche, employee sports, guest houses facilities
• No change in corporate income tax rate
• No change in corporate surcharge tax
• Duty on two wheelers reduced from 16 to 12 pc
• Tax slab for Rs 3-5 lakh is 20%, above 5 lakhs 30%
• Senior citizens' exemption hiked from Rs 1,95,000 to 2,25,000
• Women exemption threshold hiked from Rs 1,45,000 to 1,80,000
• Tax exemption hiked from Rs 1,10,000 to Rs 1,50,000
• Duty on non filter cigarettes to be raised
• Excise duty slashed to 8% on water purification items
• Duty withdrawn on naptha for production of polymers
• Reduce excise duties on anti-AIDS drugs
• Tax-GDP ratio up at 12.5%
• Excise on paper and paper products reduced
• Excise duties on buses, chassis slashed
• Excise on small cars to 14%
• Excise on pharma goods slashed to 14%
• General CENVAT rate on all goods from 16% to 14%
• Customs duty on few bulk drugs cut to 5%
• Customs duties on crude sulphur reduced to 2%
• Exempt on duties on coral
• Duties on convergence products slashed to 5%
• Fully exempt duties on Set top boxes
• Reduce duties on steel melting scrap, aluminum scrap
• No change in peak rate of customs duties
• Revenue Deficit will be 1.4 % agt Budget Estimate of 1.5%
• Planning Commission to evaluate major schemes
• Sixth central pay commission to submit report by March 31, 2008
• Grant of Rs 50 cr to Natl Tiger Conservation Authority
• Rs 75 cr to ICCR for cultural development
• Defence allocation hiked by 10% to Rs 1,05,600 cr
• Rs 32,676 crore as subsidy to PDS
• Smart-card based PDS system in Haryana, Chandigarh
• Allocation of Rs 44 cr to 22 Sainik schools each
• Rs 75 cr to Agri Ministry for soil testing labs in 250 districts
• Rs 15,000 cr for non-profit body for skilled dev programme
• Launch a world-class skilled development programme
• PAN requirement for all securities transactions
• To start a forex derivative market
• More transparency in the derivative market
• Risk Capital Fund to be set up in SIDBI
• National Highway Dev programme gets Rs 12,966 cr
• Accelerated power development programmes to get Rs 8,000 cr
• Ultra mega power project at Tilana shortly
• Rs 12,956 Cr for NHDP
• Banks to be encouraged to embrace total financial inclusion
• Foreign invt up to $8 bn expected for oil block exploration
• Coal regulator to be set up
• 17 lakh families of weavers under Health Insurance
• State data centres scheme approved and get Rs 275 cr
• 1 lakh broadband-enabled common service centres in villages
• Enhance allocation of NHDP programme
• Rs 800 cr for power reforms
• Manufacturing growth rate to be taken to double digit
• RIDF corpus to be hiked to Rs 14,000 cr
• Total estimate of loans being waived is Rs 50,000 cr
• Implementation of debt waiver scheme to end by June 30
• Waiver amounts to 4% of total bank loans
• Rescheduled farm loans eligible for waiver
• Sensex down 210 points
• Speaker calls for silence
• Din in House over PC's relief plans to farmers
• Marginal, small farmers to get full waiver on all loans
• 500 soil testing labs to be set up in the country
• Scheme of debt waiver and debt relief for farmers
• Allocation for NRHM increased to Rs 12,050 cr
• National Horticulture Mission gets Rs 1,100 cr
• Weather-based crop insurance scheme to get Rs 50 cr
• Rs 20,000 cr for irrigation projects under AIPB
• Special grant of Rs 20 cr to Tea Research Association
• Rs 500 cr to be allocated for micro irrigation schemes
• More funds for cardamom, coffee growing
• Rashtriya Krishi Vikas Yojana to get Rs 2,80,000 cr
• 53 minor irrigation programmes to be implemented
• Target of Rs 2.80 lakh cr for agri-credit in 2008-09
• Ministry of Woman and Child Dev gets Rs 7,200 cr
• 24% increase in allocation for child development
• Rs 500 cr for development of border areas
• Rs 1,042 cr for anti-Polio drive
• Jawaharlal Nehru Urban Renewal Mission to get Rs 6,865cr
• Growth of agri-credit impressive
• Allocation for ICDS increased to Rs 6,300 cr
• Minority Affairs Ministry fund doubled to Rs 1,000 cr
• 288 PSU bank branches in minority districts
• LIC to cover all women Self-help Groups linked to banks
• Rs 200 crore for potable water in schools
• Rs 12,050 cr for strengthening rural health services
• Sanitation programmes to get Rs 1200 cr
• More minority recruitments in central para-military forces
• ICDS allocation hiked to Rs 6,300 cr
• Rs 300 cr for desalination plant near Chennai
• Rs 75 cr for Rajiv Gandhi Natl Fellowship Prog
• Natl Handicap Development Corp to get Rs 9 cr
• Natl Minorities Development Corp to get Rs 75 cr
• Allocation for NE schemes up from 14,365 cr to 16,400 cr
• Rajiv Gandhi Drinking Water mission allocation hiked
• NREG scheme to be rolled out in 596 districts
• National Rural Health Mission allocation hiked by 15%
• Remuneration of Anganwadi helpers hiked to Rs 750
• Remuneration of Anganwadi workers hiked to Rs 1,500
• 3 IIScs in Bhopal and Trivandrum
• National Programme for the Elderly to be set up
• Rs 30,000 health cover for every worker in unorganised sector
• 2 schools of Planning and Architecture
• Secondary education Scheme Rs 4,554 crore
• Rs 100 cr to Ministry of Science and tech for Natl Knowledge Network
• All knowledge bodies to be connected via broadband
• Rs 85 crore to building a knowledge society
• Scholarships for science and research
• Education and Health allocation up 20%
• Service Sector to grow at 10.7%
• 3 IITs in AP, Bihar and Rajasthan
• 16 central universities to be set up
• Mid-day meal scheme extended to upper primary classes
• Budgetary allocation for mid-day meal scheme Rs 8,000
• Rs 10 cr for Nehru Kendras in 110 districts
• Rs 34,400 cr budgetary allocation for education
• Sarva Shiksha Abhiyaan gets Rs 13,100 cr
• Bharat Nirman Programme gets allocation of Rs 31,280 cr
• 410 Vidyalayas in villages
• Navodiya Vidyalayas in 6,0-00 districts
• 6,000 model high schools to be set up
• Agricultural growth rate at 2.6%
• Education, health pillars of social sector reforms
• 2008-09 will be a year of consolidation
• Budget 08-09 about raising our sights, doing better
• Capital inflows in excess of economic deficit
• Confident of maintaining 8% growth
• Impact of global mkts on local mkts unclear
• Govt, RBI to jointly work to check capital inflow
• Govt will monitor foreign fund inflow
• Check foreign inflow to stabilise Indian mkts
• Capital Inflow needs to be managed more actively
• Agri credit doubled in first 2 years of UPA rule
• Global markets are weak
• Inflation will be checked
• Sustained progress thanks to economic reforms
• Launched Rashtriya Krishi Vikas Yojna
• All time record for food grain output in 2007
• Total output of food grains 219.32 mn tonnes
• We must be vigilant for downside risk
• Crude oil down significantly
• Agriculture was disappointing
• Capital inflow poses a challenge to monetary management
• Growth rate is 8.8%
• Service sector is the driver of Budget
• Since Aug 2007 financial economies witnessed turmoil
• 2007-08 has been a challenging year
• Finance Minister P Chidambaram begins addressing Parliament
• Pandemonium in the House as Oppn holds up speech
• This is PC's seventh Budget, UPA government's last before it goes to poll next year
• The next Union Budget will be a vote-on-account because of general elections

Source- IBNLive- TV 18

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Sensex down nearly 400 pts on heavy selling @ 12:59 hrs 29th Feb 2008

Sensex down nearly 400 pts on heavy selling @ 12:59 hrs

 

The market has plunged deeper into the red with stocks from information technology, banking, capital goods, realty, power, oil and metal sectors declining sharply on severe selling pressure. Auto and FMCG stocks have managed to buck the trend.

 

Several midcap and smallcap stocks too have plunged into the red now.

The Sensex, which crashed to 17,337.46, has recovered to 17,428.45, but still remains deep down in the red with a whopping loss of 396.03 points or 1.92%. The Nifty is down with a huge loss of 1.88% or 99.60 points despite having recovered to 5185.50 from a low of 5130.60.

 

Maruti Suzuki, Mahindra & Mahindra and Bajaj Auto have posted strong gains. Tata Power, GlaxoSmithKline Pharma, Hindustan Unilever, ITC and Reliance Petroleum have also moved up.

 

Suzlon Energy, ABB, Nalco, BPCL, Siemens, Tata Chemicals, HCL Technologies, Reliance Industries, Ambuja Cements, GAIL India, Wipro, Tata Steel, Bharti Airtel, Hindalco, Sterlite Industries, Infosys Technologies, ONGC, ICICI Bank, HDFC Bank, Larsen & Toubro, Reliance Communications, Zee Entertainment, Idea Cellular, Sun Pharmaceuticals, ACC, Grasim Industries, BHEL, SAIL and State Bank of India are down in the red with sharp losses.

 

The proposal to allocate Rs 12,966 cr to National Highway Plan in financial year 2008 - 2009 is expected to keep the infrastructure sector buoyant.

The peak rate of customs duty has been left unchanged. Reduction in customs duty on project imports and specified projects in power sectors. Duty on steel scrap cut down to nil from 5%.

 

Duty on bulk drugs and speicified life saving drugs reduced. Duty on vitamin mixtures reduced. Duty on milk reduced. Custom duty on crude reduced. Few IT, hardware components have been exempted from customs duty. Customs on steel melting, aluminium melting cut to 0% vs 5%

 

Excise duty on 2-wheeler, small cars cut from 16% to 12%. Shares of leading automobile manufacturers have come off their lower levels and a few of them have even made it to the positive territory now.

 

Excise duty on buses & chassis cut from 16% to 12%. Customs duty on crude/unrefined sulphur cut to 2% vs 5%. Excise duty on some paper types cut to 10% from 12%.

Corporate tax and surcharge on corporate tax have been left unchanged. Personal income tax slab has been hiked to Rs 1.5 lakh. For women, it shall be Rs 1.8 lakh.

 

Five year holiday of income tax for hotels constructed during April 2008 to March 2013 in Unesco specified heritage centres. The move is likely to aid the hospitality sector.

 

Commodities transaction tax levied on the lines of STT on securties and options trade. Short term capital gains tax hiked to 15%.

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News Across the Web 29th Feb 2008

News Across the Web

Nasdaq to enter Indian market

MUMBAI: The BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) could soon face international competition in their backyard.

Nasdaq, one of the leading exchanges in the US, is planning to enter the Indian equity exchange space by integrating the networks of regional stock exchanges in the country.

According to sources, Nasdaq has recently made presentations to five regional stock exchanges (RSEs) - Ahmedabad, Bangalore, Kochi, Chennai and Vadodara - for setting up a national level equity exchange.

Nasdaq, which operates through a 'quote driven trading system', is planning to introduce the same trading system in the country by integrating RSEs.

Under this system, market makers are obliged to give two-way quotes to the system. (Full Story)

 

 

Dollars & rupees to keep flocking the markets

Corporate earnings are expected to remain encouraging, and strong projected economic growth coupled with supportive policy initiatives is likely to attract more money flow into the capital markets, according to the Economic Survey 2007-08. At the same time, the government has also stressed on the need for caution and better understanding on the part of individual investors when it came to stock market investments.

"Investor awareness is equally important from the market stability angle as investment in equities could be based on incomplete analysis and guided by short term speculative gains," the Survey notes. "Individual investors need to take informed decisions and remain cautious. They would do well to resist from commonly observed "herd mentality" and "panic" in their buying and selling operations," it added. (Full Story)

 

 

India Needs $500 Billion Spending on Infrastructure

Feb. 28 (Bloomberg) -- India needs to nearly double spending on roads, ports, power and other infrastructure over the next five years to end blackouts, ease congestion for the movement of goods and people and sustain record economic growth.

Infrastructure spending may increase to 9 percent of gross domestic product in the five years ending March 31, 2012, from about 5 percent now, the Economic Survey, a finance ministry report, said before tomorrow's budget announcement, reiterating a target that India set last year.

The South Asian nation needs to raise spending to sustain a targeted 9 percent annual growth rate for the next five years. Congested ports and roads and power shortages add to the cost of operations for companies and shave off 2 percentage points from growth in Asia's third-largest economy. (Full Story)

 

 

Chinese co plans big-bang India investment

BANGALORE: China's largest investment in India is slated to come up in Karnataka with the setting up of Xindia Steels, a joint venture between the $11-billion Xinxing Group (Shanghai Exchange-listed), China National Metal Products (part of China Minmetals), Manasara Investments and the Kelachandra Group, along with Sigma Minmet. The total investment is expected to be over Rs 8,000 crore over 5-10 years.

Xindia Steels intends to put up, at a cost of Rs 400 crore in the first phase, a 2-million tonne iron pelletisation project at Koppal in Karnataka. According to Gopi Ramanathan, director, Xindia Steels, the company has acquired Hampi Steel, whose iron ore project had been approved by the Karnataka government high-level committee three years ago, but the project had not taken off. (Full Story)

 

 

Never mind shocks, FIIs still like India

The government has expressed confidence in sustaining the cross-border portfolio investment in the Indian capital market.

It has also asked banks to cut interest rates to maintain growth momentum of the economy.

In the Economic Survey 2007-08, government said since India's growth performance is relatively better among the emerging economies, it would continue to attract significant investments in the equity market from abroad.

In the last one-and-a-half months, Indian stock markets took a severe beating because of the huge fund outflow, driven by foreign institutional investors (FIIs). Since January 14, 2008, FIIs have sold $3.30 billion of equity. (Full Story)

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Budget 2008- What you can Expect

Budget 2008 – Expectations

 

--Life may be less taxing after Budget –

--FM may hike STT, says NSDL's Tilak

--Brokerage expectations from 2008/09 budget

--BPO industry seeks separate identity

--Drug cos seek cure for R&D in the forthcoming budget

--Animation & gaming companies want STPI-like tax break for exports

--Textile machinery sector needs a booster dose

--Dismantle tax on house construction: Urban Housing Ministry

--Consumer durable makers for lower indirect taxes

--Plantation cos look for rejuvenation package

--Budget 2008: Govt should allow 100% FDI in retail

--Lotus Mutual CEO expects, at best, mildly positive Budget

--Excise, interest rate cuts to improve manufacturing: FICCI

--Brainstorming with ET: Great minds on Budget

 
 

Life may be less taxing after Budget –

NEW DELHI: Finance Minister P Chidambaram might spread cheer all around with Budget 2008-09, the last full-fledged Budget of the UPA government. A hike in the income-tax exemption limit, a higher ceiling for tax-saving investments along with a wider range of products under this category, and a rejig in tax slabs are some of the key proposals being considered by the UPA government. Corporate tax payers can expect some relief in the form of removal of surcharge.

The finance ministry, which is giving final touches to the tax proposals, is likely to raise the income-tax exemption limit from Rs 1,10,000 to Rs 1,25,000. Though there is a strong pitch from all corners to raise the limit to Rs 1,50,000, the fear of a big erosion in the tax base may prompt the government to follow a conservative approach.

A final call on direct taxes will be taken at "the highest political level", since this will be the UPA government's last full Budget, sources said. Budget 2009-10 will be a vote on account, as a new government has to be put in office by May 2009.  (Full Story)

 

 

FM may hike STT, says NSDL's Tilak

MUMBAI: "The budget will focus more on sustaining a high GDP growth rate of around 9 per cent, while continuing the measures to tame the inflation rate," said Chandrashekhar Tilak, senior vice president, NSDL, giving his expectations from the Union Budget 2008-09.

The Indian economy is growing at about 8.7 per cent, IIP index has risen from 128.4 in 1994-95 to 298.9 in 2006-07, foreign exchange reserves as on Feb 15, 2008 stood at $292,856 million, up from $25,186 million in 1994-95 while exports have shown robust growth to $11,012 million in April 2007 from $3,309 million in April 2001. "We need to concentrate more on the basic developmental sectors such as power and infrastructure, to propel the economy," he said.

This being the last budget of the current UPA government, people look forward to a more populist budget which will focus more on social initiatives like education, employment and public health. Setting up of industry related special economic zones and general SEZs is also likely to get more focus. The construction industry wants lifting the cap on SEZ size which is at present 5,000 hectares. According to Tilak, more SEZs should be constructed as it generates employment opportunity, boosts exports and will generate more foreign exchange reserves. (Full Story)

 

 

Brokerage expectations from 2008/09 budget

MUMBAI: Following is a snapshot of analysts' expectations from the Central budget compiled from brokerage reports.

AUTOMOBILES

Uniform excise duty rates of 16 percent for all cars, large and small.

Reduction in excise duty on two wheelers to 12 or 8 per cent from 16 per cent.

Reduction in the excise duty on buses to 16 per cent from 24 per cent.

BANKING

Raising FII/FDI limit in state-run banks to 49 per cent from 20 per cent.

Relaxation in the lock-in period to three years from five years for bank deposits to qualify for tax benefits.

Interest earned on long-term lending to infrastructure industries to be exempted from income tax.

CAPITAL GOODS

Exemption from customs duty.

Reduction in excise duty on air conditioners meeting energy efficiency guidelines to 8 per cent from 16 per cent.

Reduction in excise duty on power equipment to 8 per cent from 16 per cent.

Rationalisation of tax structures with respect to dividend paid by subsidiaries and special purpose vehicles.

CEMENT

Abolish the 5 per cent import duty on coal and pet coke.

Value Added Tax on cement and clinker be reduced and brought in line with similar construction materials, like steel, to 4 per cent from 12.5 per cent.

CONSUMER GOODS

Reduction in excise duty on packaging material to 8 per cent from 16 per cent.

Reduction in effective duties on vegetable oil, palm oil and crude derivatives to soften prices.

Excise exemption on biscuits similar to other food mixes granted exemption in the last budget.

Reduction in excise duty on processed foods to 8 percent from 16 percent.

FERTILISER

Removal or reduction of customs duties on inputs like liquefied natural gas.

Reduction in customs duty on sulphuric acid to 5 per cent from 7.5 per cent.

General sales tax exemption for basic raw materials like natural gas, naphtha, etc.

Reduction in excise duty on pesticides to 8 per cent from 16 per cent.

HEALTHCARE

Infrastructure status for hospitals with certain eligibility norms.

Relaxation of income tax for mergers and acquisitions with conditions.

HOTELS

Raising depreciation on hotel buildings to 20 per cent from 10 per cent.

INFORMATION TECHNOLOGY

Reduction in dividend distribution tax to 12.5 per cent from 15 per cent to encourage Indian IT companies pay higher dividend.

Extension of Software Technology Park scheme, which is set to end by 2008/09.

Reduction in excise duty on personal computers to 8 per cent from 12 per cent.

Abolish excise duty of 8 per cent on packaged software sold over the counter.

LOGISTICS

Infrastructure status for warehousing and shipping industry.

MEDIA

Abolish custom duty on digital exhibition equipment.

Abolish 16 per cent excice duty on set-top boxes.

METALS

Reduce excise duty on long steel products to 8 per cent from 16 per cent.

Abolish 5 per cent customs duty on import of scrap.

Increase in export tax to Rs 2,500 per tonne from Rs 1,500 on key raw materials for steel.

OIL & GAS

Cut in excise duty on petrol and diesel.

Removal of service tax on exploration activities. (Full Story)

 

 

BPO industry seeks separate identity

NEW DELHI: Extension of software technology parks of India (STPI) scheme for 20 years, withdrawal of minimum alternate tax (MAT), introduction of advance pricing arrangements for transfer pricing and abolition of FBT on ESOPs are some of the key pre-Budget recommendations made by the Business Process Industry Association of India (BPIAI).

The association said the STPIextension will help offset the losses incurred due to rupee appreciation that have drastically hit the bottom line of BPOs. With STPI scheme coming to an end in March 2009, investors could avoid India as an offshore destination , opting instead for places like China, Sri Lanka and Philippines, BPIAI president Samir Chopra said. "The government stands to lose more in terms of indirect taxes than it will gain from taking away the tax breaks," he said.

The association has also asked for recognition of BPO industry as a separate industry. Mr Chopra said the BPO industry must be decoupled from the IT/ITeS industry . BPIAI said business process outsourcing must be recognised as a separate industry from the IT industry and a special business process outsourcing department or ministry should be set up.

Other recommendations of the association include a proper method of determination of export turnover and optional employees' state insurance (ESI) scheme.

 

 

Drug cos seek cure for R&D in the forthcoming budget

MUMBAI: India's pharmaceutical industry, which is troubled by the appreciating rupee and market challenges abroad, is hoping that the finance minister would extend export-related tax benefits and strengthen incentives for research and development in his forthcoming annual Budget.

Revenues and profits of drug makers have shrunk as a result of increasing pricing pressure and competition in key Western markets. A firmer rupee hasn't helped either. Typically, Indian companies earn 50% to 80% revenue from exports, which is not the case anymore. "With the dollar playing havoc, we wish the export incentives to pharma companies are extended for another five years," said Cipla's chief executive officer Amar Lulla. "This should be announced this Budget to allow companies to plan ahead." (Full Story)

 

 

Animation & gaming companies want STPI-like tax break for exports

HYDERABAD: The animation and gaming industry in India wants income-tax breaks on a par with software companies to produce cheaper films and compete in the Asian market.

Software companies housed in software technology parks enjoy tax breaks on their export profits. Though the benefit ends in March 2009, it might be extended for 10 years, considering that the surge in the rupee has impacted their bottom lines.

The animation and gaming industry is lobbying for similar tax benefits. "We have given a formal proposal to the information and broadcasting ministry seeking a tax holiday on export profits under Section 10 A of the Income-Tax Act. The finance ministry has also been kept in the loop," said Ficci animation and gaming forum chairman and DQ Entertainment CEO Tapas Chakravarti. (Full Story)

 

 

Textile machinery sector needs a booster dose

NEW DELHI: The coming Budget could give support to the capital goods industry with a view to stimulating investments in the economy.

Particularly needed is an incentive package for the domestic textile engineering industry, considering that government's own estimate says the textile sector would place fresh demands for machinery worth Rs 1 lakh crore in the next five years. (Whether this estimate holds true even after the decline in textile exports due to the rupee's rise is another question). Anyway, the government has an obligation to salvage the textile industry from its current morbidity and spur its growth, given that it is highly employment-intensive and potentially, a smashing forex earner). (Full Story)

 

 

Dismantle tax on house construction: Urban Housing Ministry

NEW DELHI: The Urban Housing Ministry has proposed that the 12.5% service tax on construction of residential units be scrapped. This would bring down the cost of owning a house by 3-4%. The ministry is of the view that the tax was negating all government initiatives aimed at keeping property prices in check.

Budget 2005 had brought construction of residential complexes having more than 12 residential houses or apartments within the service tax net. This tax covers independent satellite townships that have more than 12 houses spread horizontally, as well as apartment complexes of more than 12 flats. Service tax is not charged on the entire amount charged for the residential unit. Instead, the tax is levied on value addition by the developer based on the cost of land and construction materials.

"It goes without saying that developers pass on any increase in input cost to the consumer," a Nirman Bhawan official told ET. (Full Story)

 

 

Consumer durable makers for lower indirect taxes

NEW DELHI: The consumer durables industry has wished for lower indirect taxes and cut in customs duty on inputs in the forthcoming budget, as it seeks to safeguard its profitability against any increase in cheaper imports of finished goods.

The industry has called for reduction in value-added tax (VAT), abolition of central sales tax and cut in excise duty.

"In 2007, all categories recorded a double digit growth. This year, we expect reduction in VAT and incentives to bring the sector at par with the IT industry. Even reduction in import and excise duty will help in fetching better margins and provide products to the consumers at a cheaper rate," Haier India Director Pranay Dhabai said. (Full Story)

 

 

Plantation cos look for rejuvenation package

KOLKATA/KOCHI: Life isn't easy for the plantation sector despite soaring prices of some crops such as rubber, pepper and cardamom. The biggest of them all, India's tea industry, is grappling with rising cost of production. A fall in exports due to production shortfall took the energy out of tea.

Alongside spiralling production costs, the tea industry faces the other challenge of scaling up of orthodox tea output in order to make deeper inroads into the rapidly-growing Russian market. Russia has traditionally been a large importer of Indian tea and the current boom in that country has seen demand drift towards orthodox tea from CTC tea. India's orthodox tea production is 80 million kg out of its total production of 940 million kg.

 

 

Budget 2008: Govt should allow 100% FDI in retail

This is seventh in a series of articles in association with Ernst and Young in the run up to the Budget.

Indian economy is booming and so is the retail sector. The growth which the Indian retail segment has witnessed during last one year is stupendous. This is besides the fact that foreign investment in multi-brand retailing is still prohibited.

Initially, many foreign players for example Guess, Esprit, Marks & Spencer etc had come to India through the franchise route. Opening up of 51% FDI ('Foreign Direct Investment') in single brand retail trading has attracted many international players to invest and do business in India.

These guidelines permit 51% foreign investment in retail operations with prior approval from FIPB ('Foreign Investment Promotion Board') provided the products are under a single brand and are sold under the same brand internationally. The guidelines laid down for single brand retail trading aims to attract investment in production and sourcing of goods from India. (Full Story)

 

 

Lotus Mutual CEO expects, at best, mildly positive Budget

MUMBAI: Lotus Mutual CEO Ajay Bagga doesn't expect much from the Budget for 2008-09, which will be presented by Finance Minister P Chidambaram on February 29.

"Over the years, the Union Budget has become a non-event, with most policy actions taken outside of it. The coalition nature of the last two central governments has also translated into big-bang structural reforms being put on the backburner. As such we don't expect much more than a mildly positive budget," says Bagga.

Overall the macro economic picture is buoyant, with 8.6 per cent economic growth for the last three years, this year's GDP growth forecast at 8.7 per cent and a forecast of 10 per cent economic growth in the 11th Plan. The tax collections have hit a lifetime high with nearly 40 per cent plus growth. This has given the finance minister the leeway to look at giving individuals and corporate some tax relief. However, populist politics will probably lead to an increase in the cess on taxes to fund some of the measures, Bagga said. (Full Story)

 

 

Excise, interest rate cuts to improve manufacturing: FICCI

NEW DELHI: Industry body FICCI has sought a cut in excise duties on consumer products in the coming Budget and a reduction in interest rates, besides implementation of appropriate raw material policies to reverse the current slowdown in the manufacturing sector.

"While the slowdown is not pervasive and has affected only some sectors, it is a cause for concern. The trend may continue for some time, given the current economic scenario," the chamber said in a survey on the Manufacturing Sector.

In its recommendations, FICCI has suggested stimulating consumption and demand, reducing interest rates and corporate tax rate, appropriate raw material policies and improved regulatory environment to arrest the slowdown in the sector. (Full Story)

 

 

Brainstorming with ET: Great minds on Budget

Five separate brainstorming sessions in three cities. Twentyseven experts, apart from ET's own resident wise men and women. Over 50,000 words of transcribed text. All this to distil the real concerns of this year's Budget.

On February 29, finance minister P Chidambaram will present the last full Budget of the UPA government. It is only natural to expect measures designed to please the voter — in rupee-hit textile towns, loan-financed new homes, suicide-prone farmlands, small towns bursting at the seams with growth, corner offices looking down on Nariman Point, villages thirsting for education, skills and healthcare as much as for water, IT and BPO campuses that track, eagle-eyed, the health of the US economy, small and medium enterprises and sarkari offices abuzz with Pay Commission speculation.

Pleasing the voter, however, cannot be at the expense of the economy's long-term. Over the past years of fiscal austerity, government dissaving has been brought down from over 6% of GDP to less than 1.5%, releasing resources for soaring corporate investment. The FM must maintain fiscal discipline, and meet deficit targets.

Indirect tax reform must lay the ground for, rather than hamper, the planned transition to a goods and services tax in April 2010. A combined central plus state GST rate of 20% should be the target. Bring all excise duties to 14% plus two additional rates for merit and demerit goods. Inverted import duties — higher rates on inputs as compared to rates on the final goods — are a bane. The best solution is a uniform rate of import duty: someone's finished goods are somebody else's inputs. A rate of 7.5% would be ideal this year, with two additional rates for merit and demerit goods.

Tax collections are booming. The FM can deliver on his promise to ease the tax burden. Scrap the surcharge. Give companies a choice between FBT and a flat 10% surcharge on book profits. Phase out all exemptions as scheduled. Let SEZs pay a minimum alternate tax after five years. (Full Story)

 

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