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Wednesday, February 28, 2007

Market finds Budget too disappointing

The market was hammered post the Budget, as it turned out to be a big disappointment for India Inc., which did not have second thoughts in giving it a thumbs down. Let us not forget that today's steep fall was amid extremely high volatility.

The 30-shares BSE Sensex tumbled 540.74 points, to settle at 12,938.09, on heavy selling across the board. The barometer Sensex moved in a range of approximately 500 points; 13,298.52 on the higher side and 12,800.91 on the lower. Indian stocks suffered their biggest fall in eight months after 13 June 2006.

In the F&O segment, the Sensex Futures settled at 12,920, down 574.35 points, and at a discount to the spot closing of 12,938.09.

The S&P CNX Nifty was down 148.60 points (3.97%), to 3,745.30.

The total turnover on BSE amounted to Rs 5809.65 crore. On Tuesday, the turnover was Rs 4019 crore.

The market-breadth was weak. There were close to four losers for every single gainer. On the BSE, 1,968 shares declined compared to 594 that advanced. Just 37 scrips remained unchanged.

All except one of the 30-members Sensex pack ended in red.

Satyam Computers was the top loser, down 8.38% to Rs 412.70, on a volume of 15.66 lakh shares.

Gujarat Ambuja Cements (down 7.48% to Rs 116.30), Wipro (down 7.15% to Rs 562) and ACC (down 6.25% to Rs 901) were the other losers.

Maruti Udyog flopped 5.59% to Rs 838, after the dream about the finance minister cutting excise duty on cars turned sour. The Maruti Udyog (MUL) stock had come off the lower level over the past two days on Budget eve on expectations that excise duty on all cars will be brought down from 24% to 16%. In the previous Budget, excise duty was cut to 16% from 24% only on small cars.

Index heavyweight Reliance Industries (RIL) was down 3.65% to Rs 1353.80 on a volume of 23.76 lakh shares.

ITC was the star of the day's trading session, and was the top gainer among the BSE Sensex pack. The scrip rose 3.21% to Rs 170.50, on huge volumes of 48.89 lakh shares, under the reckoning that makers will be able to pass on the 5% hike in excise duty announced on cigarettes to customers.

The worst fears of the market were that cigarettes will be brought under value added tax with 12.5% VAT, spawning concerns that higher tax may lead to a shift in tobacco consumption, to low-end products such as bidis and chewing tobacco. The stock had also surged to a high of Rs 179.90, in intra-day trade.

Finance Minister P Chidambaram today proposed a complete exemption of excise duty on all instant food mixes and biscuits, whose retail price does not exceed Rs 50 a kilo. Besides being the top cigarette maker, ITC also makes biscuits and ready-to-eat food. Relief from excise duty for biscuits and ready-to-eat foods augurs well for the company. The Budget also proposed a cut in duty on food processing machinery to 5%.

SMS Pharmaceuticals, which debuted on BSE at Rs 349.90, settled at Rs 357.85 compared to its IPO price of Rs 380 per share. The counter clocked 34.57 lakh shares on BSE. It also struck a high of Rs 390, and fell to a low of Rs 285.30. The face value per share is Rs 10. The paid-up equity capital of the company is Rs 10 crore.

All the BSE sectoral indices ended with losses, on selling pressure.

IT pivotals, which were down after the government brought employee stock option plans under fringe benefit tax, had recovered. The BSE IT Index slipped 5.85%, and was the biggest loser among BSE's sectoral indices.

Infosys was down 5.25% to Rs 2073, off a session’s low of Rs 2053. Satyam Computer was down 8.38% to Rs 412.70, off a session’s low of Rs 404. Wipro was down 7.15% to Rs 562, off a session’s low of Rs 536.55, while TCS lost 5.94% to Rs 1190. TCS had slipped to a low of Rs 1170.

Among small-mid size IT firms, NIIT Tech plunged 16.26% to Rs 404, Polaris down 13.15% to Rs 172, Geodesic Information lost 5.5% to Rs 255, Aftek Infosys shed 9.89% to Rs 63.35 and KPIT Cummins Infosystems shed 5.85% to Rs 139.90.

The scope of minimum alternate tax has been widened, which will raise tax burden for IT firms. Currently, tax exemption under section 10A is available for units set up in software technology parks (STP). The market was expecting an extension of section 10 A benefit for another 5 - 10 years, which did not materialise. The benefit under this sector expires in 2009.

The outlook for the IT sectors remains strong with strong demand for offshore outsourcing. Indian IT firms are increasingly getting large outsourcing deals. The IT services industry is expected to achieve 31% growth in FY 2007. Of these, exports are expected to grow by more than 33% to $31 billion.

Cement makers were hammered after excise duty was hiked to Rs 350 per MT on cement sold for less than Rs 190. Higher duty will be levied for more expensive varieties of cement.

Gujarat Ambuja Cements (down 7.48%), ACC (down 6.25%), Grasim (down 5.87%), UltraTech Cement Company (down 5.43%) and Shree Cements (down 6.50%) were the major losers in this sector.

Bank shares were under pressure as no there was no budgetary provision to make term deposits attractive. The BSE Bankex lost 4.28%.

Punjab National Bank (down 5.98%), Oriental Bank of Commerce (down 4.54%), Bank of India (down 4.51%), Canara Bank (down 4.21%), UTI Bank (down 6.06%), ICICI Bank (down 5.67%) and HDFC Bank (down 4.02%) declined.

The government announcing measures like restoration of tax deduction on interest income up to Rs 15000 under section 80L and reduction in the lock-in period for savings under section 80C, from the stipulated five years, to lure more term deposits for banks was expected. A hike in FII-ceiling for state-run banks from 20% to 24% was also anticipated. These, however, did not come true.

A sell-off gripped construction shares after the budget for 2007/08 proposed withdrawing tax breaks on construction contracts.

Nagarjuna Construction slumped 20.8% to Rs 153.10, Gammon India plunged 20% to Rs 317.45, IVRCL Infrastructures dropped 15.8% to Rs 289.90 and Hindustan Construction dropped 15.8% to Rs 102.70.

The budget proposed withdrawing the ten-year income tax breaks on infrastructure construction contracts available under section 80 IA, with retrospective effect from April 2000.

The withdrawal of the benefit will raise the tax liability of construction firms which in turn will impact their profit margins, analysts say. Further, their short-term cash-flow may also be affected due to tax payment for previous years as the tax benefit has been withdrawn from April 2000.

State-run Gail (India) managed to buck the weak trend. The scrip was up 2.53% to Rs 283, after reports that it is in talks for a stake in Algerian exploration assets of China's Sinopec.

A deal for a 30% stake in two blocks that Sinopec acquired in 2004 would be the latest sign of cooperation between state-run companies from Asia's fastest-growing oil consumers, both intent on limiting their dependence on imports. A deal will depend on the price asked by Sinopec. However, the deal value is not known.

The blocks 416a and 417 are 75% owned by Sinopec's international upstream subsidiary, while Algeria's state oil firm Sonatrach owns the rest. If the Algerian deal materialises, it will be Gail's first overseas tie-up with Sinopec.

IFCI saw huge volumes of 3.48 crore shares on BSE. The stock was down 10.41% to Rs 27.10.

Hindustan Motors climbed 4.30% to Rs 40.15, as the company expects to earn Rs 295 crore in five tranches, spread over the next 10 quarters, as well as a non-compete fee equal to 4% of sale proceeds from an integrated IT township and auto park it is developing on 314 acres in West Bengal, specifically identified for this purpose.

Drug maker Abbott India gained 2.10% to Rs 553, in an overall weak market, after the company decided to proceed with its plan to buy back shares after getting regulatory approval. The current market price of Rs 558.50, discounts the buy-back price of Rs 650 per share by Rs 91.50 per share.

Credit ratings firm Crisil declined 5% to Rs 2780.75. It announced a surge in net profit for FY-2006 to Rs 13.4 crore (Rs 4.8 crore). Total income for FY-2006 increased to Rs 85 crore (Rs 52 crore).

Iron ore exporter Sesa Goa plunged 8.10% to Rs 1790, after the government imposed export duty of Rs 300 per tonne on iron ore.

Oil refiner Chennai Petroleum Corporation (CPCL) rose 2.4% to Rs 194.90. The stock rose after the government today cut the ad valorem component of excise duty on petrol and diesel from 8% to 6%.

Reactions from a section of the market raise concerns on lack of measures to increase productivity, and a lost opportunity to provide relief to the corporate sector.

"This Budget is disappointing. There are no steps taken to increase productivity in agriculture, electricity and other sectors, which are not performing as is their potential," R Sesashayee, CII President said.

He feels since revenues from peak customs and excise were increasing, this could have been a time to reduce excise duty to 20%, if not 15% overall, in line with the Kelkar Committee Report.

FICCI President Habil Khorakiwala said a wrong signal has gone out to the corporate world, as the government has increased cess and dividend distribution tax.

Increase in dividend distribution tax impacted trading on the bourses, and the market tumbled soon after the announcement. The dividend distribution tax for corporates has been raised to 15% from 12.5%. There has been no change in corporate tax. The 10% surcharge for firms with a taxable income of Rs 1 crore, or less has been removed. The market was expecting abolition of 10% surcharge for all corporates.

On the flip side, there is no increase in the securities transaction tax (STT), on short-term capital gain tax and on long-term capital gains tax on sale of shares. Long-term capital gains tax remains zero. The market also expected an increase in STT. Marketmen also had apprehension of an increase in short-term capital gains tax to 12.5- 15% from 10%.

The finance minister also said that measures would be taken to allow short-selling by institutional investors, which will have to be backed by delivery.

With regard to personal income tax, there is some relief to the taxpayers as exemption limit has gone up to Rs 1,10,000 from Rs 1,00,000.

Markets across the globe were reeling under selling pressure. However, the Chinese market has bounced back smartly, plunging 8.84%, erasing about $140 billion of value in their biggest fall for a decade, amid fears that authorities would crack down on the speculation that had driven shares to record highs on Tuesday (27 December).

The tumble came a day after the main index jumped to an all-time high, cutting its gains for 2007 to 14%. Marketmen attributed the plunge in China to speculation. Chinese Shanghai today composite was up 109.28 (3.94%), to 2881.07. In the morning, markets were extremely weak.

Hong Kong’s Hang Seng Index was down 2.26%, while Japan's Nikkei 225 Index slipped 2.85%.

The market had a bumpy ride to the day of the Budget. Lack of inflows at higher levels, high valuations, inflation and rising interest rates, fears of an earnings slowdown in coming quarters, and profit taking at higher levels returned to haunt the market. From an all-time high of 14,723.88 struck on 9 February 2007, the BSE Sensex had already tumbled 1,245 points, to 13,478.83 by 27 February 2007, a day before the Budget. The defeat of the Congress in Uttarakhand and Punjab also did not help.

US stocks tumbled on Tuesday (27 February 2007), driving the Dow Jones industrial average down; its worst slide since the aftermath of the 9/11 attacks on the World Trade Centre, New York, as a sell-off in China's stock market raised concerns that equity valuations may be too high.

A US Government report showing a bigger-than-expected drop in January's new orders for US-made durable goods, added to investors' concerns about the outlook for economic growth and corporate profits. Those worries added more fuel to the sell-off, and helped contribute to a loss of about $600 billion in market value for the day.

The Dow Jones industrial average slid 416.02 points, or 3.29%, to end at 12,216.24. The Standard & Poor's 500 Index dropped 50.33 points, or 3.47%, to finish at 1,399.04. The Nasdaq Composite Index sank 96.65 points, or 3.86%, to close at 2,407.87.

As per provisional data, FIIs were net sellers to the tune of Rs 503 crore on Tuesday (27 February 2007), the day when the Sensex lost 171 points. FIIs were net sellers to the tune of Rs 688 crore in index-based futures on that day. They were net sellers to the tune of Rs 40 crore in individual stock futures. Nifty March futures settled at 3886.65 on Tuesday, a discount of 7.25 points over the spot Nifty closing of 3,893.90.

Wayward trading hallmark of today's session

A roller coaster ride was the order of the day on the bourses today as investors tried to strike a balance between unchanged corporate tax and unfounded fears of a rise in short term capital gains tax.

The Sensex today ended the day with a fall of 541 points, at 12,938.09.

The market had initially recovered after a weak opening. The benchmark Sensex fell 677.92 points at the onset of trade, to a low of 12,800.91. The initial drop was due to setback in equities across the globe.

The recovery started shortly after and lasted till the early-afternoon, when the finance minister dwelt on various spending plans and on indicate tax. The BSE Sensex reached 13,298.52 at 12:19 IST, the highest point of the day (though even at that level it was down 180 points over the previous day’s closing).

At that juncture, a sudden sell-off gripped the market which took Sensex to 12,948 at 12:40 IST, after the finance minister raised dividend distribution tax from 12.5% to 15%. The sharp fall was also due to no reduction in 10% surcharge on corporate tax, which was widely expected to be lifted in the next fiscal. At 12,948, the Sensex had lost 530 points for the day. The finance minister, however, restricted this benefit (of cut in 10% surcharge) only to firms with a taxable income of Rs 1 crore, or less.

A recovery began again from this low, taking the Sensex to 13,226 by 13:09 IST. At that level, the Sensex was down 253 points for the day. A sell-off again gripped the bourses, and the Sensex eased to 12,898 by 15:25 IST.

Between some of the vital tops and bottoms of the day, the Sensex swung a massive 1,274 points. It swung 497.61 points between the day’s low of 12,800.91 and the day’s high of 13,298.52.

The turnover on BSE surged to Rs 5683 crore from Tuesday’s Rs 4018 crore. Turnover on NSE’s derivatives segment surged to Rs 49408 crore from Tuesday’s Rs 31766.48 crore.

Nifty March 2007 futures were at 3,715, compared to the spot Nifty closing of 3,745.30.

Though there was no cut in corporate surcharge, there was also no increase in the securities transaction tax (STT), no hike on short-term capital gains tax and no hike on long-term capital gains tax on selling of shares. Long-term capital gains tax remains zero. The market had feared an increase in STT. Marketmen had also feared an increase in short-term capital gains tax from 12.5 - 15% from 10%.

The finance minister also said that measures will be taken to allow short-selling by institutional investors, which has to be backed by delivery.

The market’s favourite sectors IT, cement and construction tumbled. The cement sector, which has huge positions built up, tumbled after the finance minister announced price-based levy of excise duty on cement. IT stocks declined after the government brought stock option plans under fringe benefit tax.

Indian bourses had already seen a correction over the past few days on apprehensions that the Union Budget may spring some nasty surprises. The fall was also because of concerns that rising interest rates may impact equity valuations and a big IPO pipeline, which may suck out liquidity from the secondary market. At current 12,938.09, the Sensex is off 11.6% from the lifetime high of 14,652.09 attained on 8 February 2007.

Construction scrips tumble

A sell-off gripped construction shares after the budget for 2007/08 proposed withdrawing tax breaks on construction contracts.

Nagarjuna Construction plunged 20.8% to Rs 153.10, Gammon India plunged 20% to Rs 317.45, IVRCL Infrastructures dropped 15.8% to Rs 289.90 and Hindustan Construction dropped 15.8% to Rs 102.70.

The budget has proposed withdrawing the ten-year income tax breaks on infrastructure construction contracts available under section 80 IA, with retrospective effect from April 2000.

The withdrawal of the benefit will raise the tax liability of construction firms which in turn will impact their profit margins, analysts say. Further, their short-term cash-flow may also be affected due to tax payment for previous years as the tax benefit has been withdrawn from April 2000.

Among key positives for the infrastructure sector, the finance minister committed higher allocations to power generation capacity, rural electrification, irrigation projects and also to the National Highways Development Programme. He also allowed mutual funds to set up dedicated infrastructure funds.

India Income Tax Slabs - Budget 2007

BUDGET 2007 - Key Highlights


  • GDP growth seen 9.2% in FY07.
  • Average GDP growth rate 8.6% in three years of UPA coalition govt.
  • Economy in stronger position than ever before.
  • Agriculture sector average growth 2.3% in 10th Plan, below targeted 4%.
  • Agriculture supply imbalances can disrupt growth.
  • Foreign trade growing at double of domestic growth.
  • Govt to continue export friendly policies.
  • Gross domestic capital formation up 23.7%.
  • Savings rate estimated at 32.4% in FY07.
  • All indicators point to accelerating rate of invesment.
  • Apr-Jan FDI at $12.5 bln; outpaces portfolio investment.
  • 1.65 trln rupees investment by central PSUs FY08.


  • Govt targets FY08 revenue deficit 1.5% of GDP
  • Govt targets FY08 fiscal deficit 1.5 trln rupees
  • FY08 non-plan expenditure seen 4.35 trln rupees
  • Govt targets FY08 fiscal deficit 3.3% of GDP
  • FY08 total spend 2.05 trln rupees
  • FY07 fiscal deficit aim revised to 3.7% of GDP
  • Plan spend 32% ot total spend
  • Fiscal deficit target achieved
  • FY07 revenue deficit aim revised to 2% of GDP
  • Gross budget support 2.05 trln rupees FY08 vs 1.73 trln.
  • Central FY08 plan allocation 1.55 trln rupees vs 1.31 trln.
  • Faster, more inclusive growth main 11th Plan objective.
  • "States never had it so good", says Chidambaram
  • VAT has been an unqualified success, says Chidambaram
  • Centre to give 1.42 trln rupees to states in FY08
  • 1.10 trln rupees state debt consolidated
  • Consolidated 1.10 trln rupees of states' debt
  • Centre, states regained lost fiscal ground due to FRBM


  • Senior citizen tax exemption threshold up at 195,000 rupee
  • 5-yr income tax holiday for new 2-,3-, 4-star hotels
  • Co-op banks to get same tax benefits as PSU banks on M&A
  • Removes surcharge on corporate income up to 10 mln rupee
  • Medical insurance premium I-T exemption up at 15,000 rupee
  • No change in corporate income tax.
  • Income tax threshold limit raised by 10,000 rupees.
  • To give some relief to personal income tax payers
  • Service tax exemption for tech business incubators
  • Drug testing clinical trials exempt from service tax
  • Service tax on rental of property for commercial use
  • Service tax on works' contract services
  • Ups cement excise with MRP +190 rupee/bag to 600 rupee/tn
  • Cuts cement excise for MRP 190 rupee/bag to 350 rupee/tn
  • Excise duty on pan masala without tobacco cut to 40%
  • Excise duty on pan masals without tobacco cut to 40%
  • Non-electric water filters fully exempt from excise
  • To reward cement makers who hold prices of cement
  • Umbrella, footwear excise duty cut to 8% vs 16%
  • Bio diesel, food processing exempted from excise duty.
  • SSI excise exemption raised to 15 mln rupees vs 10 mln.
  • Excise on plywood cut to 8% from 16%.
  • General customs duty on medical equipment 5%
  • Petrol, diesel ad valorem excise duty cut to 6% vs 8%.
  • Customs duty on animal feed cut to 20% vs 30%.
  • CENVAT unchanged.
  • Pvt players to pay 3% duty on import of aircraft.
  • Customs duty on watch dials, umbrella cut to 5% vs 12.5%
  • Coking coal exempt from customs duty.
  • Customs duty on cut, polished gems cut to 3% from 5%
  • Customs duty on PFY cut to 7.5% from 10%
  • Crude, refined edible oils to be exempt from customs duty
  • Customs duty on steel cut to 12% vs 20%
  • General customs rate on medical equipent 5%
  • Cut customs duty on DMT/PTA to 7.5%
  • Customs duty on drip irrigation cut to 5% vs 7.5%
  • Cut custom on cut and polished gems to 3% from 5%
  • Customs duty on polyester fibre yarn cut to 7.5% vs 10%
  • Fully exempts coking coal from customs duty
  • To cut peak rate for non-farm pdts to 10% vs 12.5%
  • Govt targets FY08 revenue deficit 714.78 bln rupees
  • Tax to GDP ratio now 11.4% from 9.9%
  • Tax-GDP ratio up 11.4% in 2006-07
  • Intend to keep tax rates moderate, stable
  • States agreed to National General Goods and Svcs tax 2010
  • Cuts central sales tax to 3% from 4%
  • 4.5 bn rupees allocated to Commonwealth Games


  • Bank credit Apr 1-Feb 2 expanded 29.6% on year.
  • Banks credit to small firms up at 1.7 trln rupees as of Dec.
  • NHB to start policy for senior citizens.
  • RRBs permitted to accept deposits from NRIs under NRE, FCNR schemes.
  • 400 bln rupees for govt to acquire RBI stake in SBI.
  • Banks asked to get credit rating for small, medium enterprises.


  • Average inflation in this financial year estimated 5.2-5.4%.
  • Govt confident inflation can be moderated.
  • Govt will take more steps to combat inflation.
  • Global commodity prices pushing local prices up.
  • Notes supply constraints in wheat, pulses, edible oil.
  • Monetary trends pressurised prices, govt committed to monetary stability.
  • Notes PM said state govts' role important to tame inflation.
  • Notes UPA govt curbed inflation in initial years.


  • 12,198 km rural roads completed up to December.
  • 15,054 villages provided phones up to December.
  • Allocated 40 bln rupees for rural roads.
  • Separate window for rural roads under RIDF to continue.
  • Giving 120 bln rupees FY08 for Rural Infrastructure fund.
  • Consider Parekh panel advise on infrastructure financing.
  • Scheme to use forex reserve for infrastructure development.
  • MFs to launch dedicated infrastructure funds.
  • National highway plan to get 106.7 bln rupees FY08.
  • Rajiv Gandhi Vidyutikaran Yojana allocation 39.8 bln rupee.
  • Rural electrification allocation at 39.83 bln rupee FY08.
  • Imperative to take new steps to up power generation.
  • Govt to award 2 more ultra power projects by July.
  • 75% growth rate in electricity generation in Apr-Dec.


  • Farm sector top agenda for policy makers.
  • Draft National Policy for farmers under consideration.
  • "No dearth of funds, no dearth of schemes" for agriculture.
  • Bank farm loans doubled in 2 years vs 3 year aim.
  • FY07 farm credit seen 1.9 trln rupees vs 1.75 trln target.
  • 5.3 mln farmers brought under credit system until Dec.
  • 150 mln families into farming.
  • Farm loan target 2.25 trln rupees in FY08.
  • Farm credit growing at satisfactory rate.
  • To create additional irrigation for 2.4 mln ha.
  • Pilot project for weather based crop insurance scheme.
  • 1 bln rupees given for weather based corp insurance plan.
  • Weather based insurance to replace farm insurance scheme.
  • Expert panel to study impact of climate change on India.
  • Farm insurance scheme stays in FY08, gets 5 bln rupees.
  • New insurance scheme for rural landless households.
  • FY07 fertiliser subsidy seen 224.52 bln rupees.
  • New training programme planned for water harvesting.
  • To extend farm technology agency to 300 more districts.
  • Allocated 18 bln rupees to NABARD for farmer subsidy.
  • NABARD can issue tax-free rural bonds up to 50 bln rupee.
  • NABARD bond raising to augment refinance capacity.
  • 100% subsidy for small, marginal farmers.
  • World Bank lent 21.8 bln rupee to renew 5,763 water bodies.
  • Depletion of ground water is a concern.
  • 1 bln rupee for development of rainfed programme in FY08.
  • Irrigation FY08 outlay 110 bln rupees vs 71.21 bln.
  • Special purpose fund for coffee, rubber, spices proposed.
  • Panel on farm sector indebtedness to submit report soon.
  • Special development programme for oilseeds, maize.
  • Separate window for rural roads under RIDF to continue.
  • Giving 120 bln rupees FY08 for Rural Infrastructure fund.
  • To focus on improving productivity of pulses.


  • No new forward contract in wheat, rice futures.
  • Panel set up to probe futures trade in food items.
  • Panel on food forward trading to submit report in 2 mos.


  • Allocated 323.52 bln rupees to education sector.
  • Employment scheme extended to 337 districts from 200.
  • FY08 school education allocation up 35% to 231.4 bln rupee.
  • Secondary education allocation doubled to 37.94 bln rupee.
  • SBI to get corpus to fund new scholarships.
  • 3 scholarship programs for minority students.
  • Allocated 7.5 bln rupees for upgradation of ITIs.
  • To upgrade 300 more ITIs by Aug 2009.
  • New plan for manpower development in software industry.


  • FY08 health allocation 99.47 bln rupee, up from 82.07 bln.
  • To start National Aids Control Programme-III from FY08.
  • 9.69 bln rupees allocated for AIDS control in FY08 .
  • Polio immunisation allocation in FY08 up at 12.90 bln rupee.
  • Polio eradication strategy revised.
  • Health insurance extended to ancillary workers.

Unorganised sector

  • Considering panel report on unorganised sector insurance.
  • Social security scheme for unorganised sector soon.

Women and children

  • Govt to expand Integrated Child Development Scheme.
  • ICDS allocation up at 47.61 bln rupees from 40.87 bln.
  • To expand Anganwadi scheme to cover all mothers.
  • To expand Anganwadi scheme to cover children below 6 yrs.
  • Spend 169.8 bln rupee under spl plan in 31 districts FY08.
  • 50 ministries have gender budgeting cells.
  • 87.95 bln rupees for women-specific programmes.

Physically challenged

  • 18 bln rupees for employment of physically challenged.
  • Govt to support 100,000 jobs for physically challenged.
  • Steps to boost regularised jobs for physically challenged.

Other social sector steps

  • Allocation for SC/STs raised to 32.71 bln rupees in FY08.
  • Public distribution system will be computerised.


  • To set up an autonomous debt management office.
  • Debt management distinct from monetary mgmt world over.
  • To release panel report to make Mumbai financial hub.
  • IT-PAN to be sole identification for capital mkt investor.
  • Allow short selling, settlement by delivery.
  • 2 new financial inclusion funds to get 5 bln rupee corpus.
  • To establish financial inclusion fund with NABARD.
  • Bill to amend insurance laws in Budget session.
  • To change law to allow creation of mortgage guarantee cos.


  • Allocated 18 bln rupees FY08 for self-employment plan.
  • Allocated 120 bln rupees for Rural Employment plan FY08.


  • New industrial policy for northeast before March.
  • FY08 allocation for North-East region 143.65 bln rupees.
  • National Urban Renewal FY08 allocation 49.87 bln rupees.
  • FY08 backward region grant fund 58 bln rupees.


  • Gave 7.19 bln rupees for e-governance FY08 vs 3.95 bln.
  • FY08 defence allocation 960 bln rupees.
  • FY08 provision for tourist infrastructure 5.2 bln rupees.
  • Announces scheme for coir industry.
  • FY08 integrated apparel park allocation 4.25 bln rupees.
  • Oil cos invested 970 bln rupees for oil exploration.
  • Road-cum-bridge on Bramhaputra a national project.
  • Energy security high on govt agenda.
  • FY08 APDRP support raised to 8 bln rupees vs 6.5 bln.

Lotus, IDBI - Budget Analysis

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Indiainfoline - Budget Speech

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Religare - Technicals

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The World's Finest Stock -

It's tempting to think that global stocks are only now "catching up" to our stalwarts here at home. But that's not quite right. The uglier truth is that American stocks, as a group, are underperformers when compared with the wider world.

For example, the world's finest stock of the past decade wasn't one of the 10 best on our domestic markets. And that includes 78-bagger American Eagle (Nasdaq: AEOS) -- its phenomenal 10-year return isn't even close.

Who tops them all? Little-known Gammon India, which -- wait for it -- rose more than 1,700 times in value for the investor who bought a position in February 1997. Put more simply: A $10,000 investment made then would be worth more than $17 million today.

Meet Gammon India
Not that you'd have been able to get those sorts of returns. For one, you would have had a hard time finding Gammon India -- it had a market cap of roughly $350,000 in 1997 and traded on the Mumbai Exchange. Even if you did find it, other intricacies of investing directly on foreign exchanges, such as taxation of capital gains and currency rates, may have significantly affected your returns.

Still, there's a lesson in this 1,700-bagger that applies to any Fool. Gammon India wasn't and isn't some bubble-gum-and-bailing-wire outfit reminiscent of the companies that took off in the dot-com bubble. Instead, it's a civil-engineering company that was founded in 1919. Today, Gammon India is one of its home country's largest construction firms and is capitalized at more than 34 billion rupees -- roughly $775 million.

Wide world of gains

In other words, many of the world's best stocks are relatively simple businesses that create extraordinary value.


10-year return

Home country




Imperial Tobacco


United Kingdom




Sometimes, they're hidden in plain sight and are accessible to any Fool. Here's a list of superior stocks from the past decade that hail from other parts of the world but, unlike Gammon India, trade on U.S. exchanges.

But these are the exception. More often, you'll have to look to the Pink Sheets or open an account to invest directly in international exchanges, such as London's FTSE, Germany's Xetra DAX, or the Mumbai Exchange.

A guide for going global
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If you want to go it alone, invest in a good screener and look for the same sorts of characteristics that the Global Gains team uses to define a great stock. Among the list: positive and rapidly growing free cash flow, multiples to earnings and cash flow that appear cheap when compared with the industry in general and rivals in particular, a clean balance sheet, and tenured management.

Stalking the 10-bagger overseas
Peter Lynch has famously advocated buying what you know, right here in the good ol' U.S. of A. But even Lynch spent time overseas studying foreign stocks that others wouldn't buy, such as Volvo. That's a key reason why he earned 29%-plus average annual returns while leading Fidelity Magellan.

Could similar returns be in your future? Maybe, but you'll never know for sure if you ignore what's over there in favor of what's here. So don't. Instead, get globetrotting and give your portfolio a chance to earn the 10-bagger returns it deserves.

Thanks Nag

Market reaction was harsher than measures affecting cos`s profits: Prateek Agrawal

Prateek Agrawal, head - equities, ABN AMRO Mutual Fund, commenting on today`s budget, said that the reaction of the market has been harsher than the impact of the budgetary measures on corporate profitability.

He further added that the budget has been an exercise in continuity. The FM had laid out a road map in the past as to what to expect, which has been broadly adhered to. The reaction of the market may seem to be harsh, but that may be more on account of the depressed global markets than the event itself.

The focus on education and training should be welcomed, he added. Ultimately it is the productive power of the people which translates into national wealth and if the earning capability of the masses improves, it would drive GDP growth.

The measures for controlling the prices of cement would seem to be harsh going by the trend of gradual duty reduction on commodities. It also raises concern over re-appearence of the black market. Similarly, MAT has been
imposed on the IT sector. However, the reaction of the market has been harsher than the impact of the measure itself on corporate profitability. For contracting companies, the tax exemptions under 80IA have been withdrawn with retrospective effect. This would increase tax outgo for the non-BOT business.

On the positive side, the tax structures have been left untouched, though against an expectation of a reduction in direct tax rates, there has been a small increase. New instruments have been introduced to enable project
funding. The market welcomes status quo on STT and capital gains taxes, Prateek says.

Measures on new hotels and convention centres, renewal of TUF, infrastructure and irrigation are positive. Real estate has also been left untouched, though there could be a marginal impact on account of service tax on rentals, he said.

Overall, the feeling is that the budget has focussed on micro management versus taking a big picture approach, he commented

Close: Global meltdown and Budget blues

Market started on the backfoot given the global meltdown triggered by China. Chinese stock market hit down 10% yesterday and that started the meltdown in US and spread to all of Asia. Global markets have been hitting highs and there seems to be some profit taking spreading across the globe. Investors in India have been jittery sitting on high valuations and worries about the global meltdown hit markets hard.

It was not only the Global markets. In such a situation most good news is ignored and bad news gets amplified. The cement stocks were shot by a double barrel excise gun by the FM and IT was put on the Mat quite literally. The construction companies got a shock of their lives as a tax rule was set to be implemented from retrospective effect. ACC, Ambuja, Infosys, Wipro, TCS, Nagarjuna Construction, HCC, IVRCL hit dirt on the back of this. ITC saw gains surprisingly as there was no VAT suggested and only a 5% increase in excise duty. All in all there was no boost to growth in any way and the spend on Infrastructure was talk as always. Education got some thrust and Irrigation plans seemed to offer some hope for future. A non event it was expected to be and thats what it turned out as a missed opportunity. However the positive takeaway was that Long term Capital Gains has not been introduced and thats what the market feared. Service tax also has been kept steady.

Sensex closed down over 541 points down at 12938. There was only one positive in the Sensex and that was ITC. Rest all saw a meltdown. Satyam down 8% at 412; Gujarat Ambuja down 8% to 116, ACC down 6% to 900, Wipro down 7% to 560 , HDFC down 6% at 1500 were the drags on the Sensex .

Sectors which lose out ; Cement, Construction, Cigarettes, IT, Petrochemicals, Mutual Funds

Cement has been imposed with a dual excise duty structure. Cement selling below Rs 190 per bag will face Rs 350 excise duty and above that will see excise duty at Rs 600 (earlier Rs 406). This implies that clearly Rs 10 per bag extra a big negative.

IT companies will now have to pay MAT (Minimum Alternative Tax) of 11.2% on Book profits. Also ESOPs to employees would fall under the FBT (fringe benefit tax). The STP benefits would not be extended beyond 2009 and thats the big negative.

Construction companies having availed of benefits under the section 80 I A for construction done in backward areas as contractors would now have to pay tax from earnings since year 2000 as these benefits have been disallowed to them from retrospective effect.

Dividend Distribution tax has been introduced for Mutual Funds as well and the rate overall has been increased from 12.5% to 15%. This is a big hit really. Mutual Fund industry will see slower growth. They were earlier competing with the Banks for consumers savings and this puts them at par really as dividend schemes would certainly find the going tough.

Import duty for PSF, POY and polyester intermediates PAT, MEG, DMT has been cut from 10% to 7.5%. Negative for Gail, Reliance and IPCL.. albeit only marginally.

Service tax introduced on Office Rentals and that means that costs for all commercial spaces would go up by 12.36%.

Sectors which find some positives : Refineries ; Textiles, Gas pipeline companies; Biscuits; Telecom

Refineries benefit from cut in excise duties on Petrol and diesel from 6-8% which means higher realisations by around 40 paise per litre. 4% CVD on Crude has been done away with as well.

The Textile sector has seen positives in the form of Textile Upgradation fund extended by 5 years and also the allocation increased. Textile parks allocation has been increased. Prices of man made fibre would be lower. The negative is that specified Textile machinery would see 8% excise duty against 0 earlier.

80IA benefit have been extended for cross country gas networks, pipeline projects and storage facilities which helps Gail, Reliance

Biscuits at less than Rs 50 / kg will see no excise. Positive for Britannia, Parle, ITC as it should help fight the unorganised sector. Benefits of food processing sector also in terms of lower duties on edible oil etc.

A committee to look into a lower licence fee regime for the Telecom sector... by and large that should happen. Thats a positive for the Telecom sector.

Technically Sensex took support at 12800 levels which was a gap support. Going ahead, Sensex is in a bit of oversold region.. though directionally its headed down. Supports are at 12720 and if thats gone the next big support would be at 12150. Resistance will now be seen at 13300.

Markets are a combination of valuation, sentiment and prospects. Clearly in the near term it loses out on perception of valuation and sentiment. Prospects continue to be bright. Is this an opportunity..Yes we believe but the opportunity will keep getting better as we move along.

Budget Initial View: No theme this budget.. and a missed opportunity !

All in all first things about which impact the Markets:

Cement: Cement business has been hit. They have been saddled with extra 50% excise which they will have to pay in case cement sells over Rs 190. Current price realisation is around Rs 240 per bag. Of this Rs 10 per bag will be now paid to the Government. Can Cement companies increase prices by Rs 10. Inflationary impact of Cement is not high but Government could ban exports. However we think that cement stocks have reacted down and rightly so. For the near term there is a Rs 10 hit to be taken either by the consumer or the Manufacturer given the demand supply situation.

IT companies will have to pay MAT now as its extended for them. Also ESOPs have to

Excise on plywood cut to 8% from 16%- good for Greenply , Century Ply . Greenply already had Uttaranchal operations which have 0% excise..but a cut in excise helps for sure.

Steel companies benefit from lower coking coal prices and the fact that more iron ore will be available domestically. Sesa Goa is negatively impacted from export duty on Iron ore.

Reduction in the duty on major bulk plastics like PVC, LDPE and PP from 10 per cent to 5 per cent and simultaneously the duty on naptha for plastics has been reduced to nil. Negatives for IPCL, Reliance, Bombay Dyeing.

TUF has been extended and thats the positive. The big positive is that it has been extended to 5 years doing away with the uncertainty of its cancellation. Reduction has been again made on customs duty in polyester fibres and yarns from 10% to 7.5%. Consequently, the customs duty on raw-materials such as DMT, PTA and MEG will also be reduced from 10% to 7.5%. 26 parks have been approved so far out of 30 sanctioned under the Scheme for Integrated Textiles Parks (SITP) and proposed to increase the provision for these parks from Rs.189 crore in 2006-07 to Rs.425 crore in 2007-08. Positive for Alok, Arvind, Raymonds, Century, Mahavir etc Small Airlines to get exemption on Aviation Turbine Fuel - clarity needed here but seems positive for Air Deccan and Spice Jet. Import duty of 3% to be levied on private aircrafts - No impact for airlines here

Small Tinkering has been done.. Education cess has been increased to 3% and exe

0 exise duty on biscuits below Rs. 50 / kg. So all biscuits which sell for less than Rs 5 per 100 gm pack will see benefits. This is a big benefit for Britannia , ITC and Parle to fight the unorganised sector.

Its always easy to criticise the Government for what its doing.. There has been an intention to try and reduce inflation. This with lowering duties and some ban on wheat and rice futures. Additionaly some action on cement and the on DMT PTA intermediates, coking coal point to that. However really the theme is missing. There is no major trigger which can be called as one big point which could be hailed as this years achievement. There is no substance. Fiscal deficit for this year has been pegged at 3.3%. Performance for last year is 3.7% against budgeted 3.8% which comes as a surprise as we expected 3.2% already. However thats inconsequential. More details need to be seen as to how the Government has planned its inflows and outflows.

Indiainfoline - Union Budget

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Thanks Sulagna

Industry reacts: Some +ve, some -ve

Gautam Hari Singhania, chairman & managing director, Raymond, said: The Union Budget 2007 - 2008 has strived to continue the reform process so that overall growth can be sustained. The increased allocation to agriculture in terms of rural infrastructure will spur agriculture to move beyond its present unsatisfactory growth rate of 2.3% to the targeted 4 %, in turn improving the lives of the people dependent on this sector.

"A very welcome note in this budget is the greater focus on the soft infrastructure – education and training, health so very critical to our country if it has to continue on its high path of growth.

"For the textile industry, the budget has been generally positive. The TUF scheme has been extended till the end of the 11th plan period. Allocation under the TUF scheme for the next year has been increased which should expedite the release of the subsidy. Peak rates of the duty have been cut & import duties on polyester have been reduced. Increased allocation to textile integrated parks is very welcome as it will boost the set up of additional capacities to cater to the growing domestic market and export.

"The extension of service tax to cover rental of commercial properties is unwelcome as it will increase the cost of operations of the retail sector.

"Overall the budget continues with the financial prudence mandate and attempts to keep price stability.

Deepak Ghaisas, CEO – India Operations and CFO, i-flex solutions

The budget from long term perspective provides positive incentives to increase investment in the educations system - both in secondary and higher education. That is a vital requirement for the IT industry in the coming years as the shortage of talent is a major constraint. However, there have been no major signals on upgrading infrastructure especially as we need large investments in infrastructure. Some estimates put the requirements at over $100 billion and the IT industry need infrastructure if it is to continue to grow.

The planned expansion of expenditure on E Governance is a good signal for the IT industry. It will serve to expand the domestic market and IT companies will see government spending coming their way which is a good thing. However from short term perspective I believe the budget provides debits and no credit.

The IT industry had some expectations – I don’t think the finance minister has taken them in to account and if he has introduced any measures that affect the IT industry the impact of the these measures is negative. One of the hopes was the government would consider extension the Software Technology Park scheme and Section 10A of the Income Tax Act beyond 2009. This would be especially important for IT SME sector.

Most IT industries are already paying tax but the MAT imposition on the IT industry would negatively impact those of SME enterprises who are not paying any tax.

The imposition of fringe benefit tax on ESOPs is most surprising. This will make current ESOPs expensive and would also make it difficult for IT industry that uses ESOP as a major tool to attract talent.

There has been no further clarification of the SEZ scheme and this will continue to keep many IT companies from finalizing their capital expenditure plans.

Though there has been mention of public-private partnership to expand education there the budget does not provide any clarity on how exactly this is going to work.

Commenting on the Union Budget, Ashank Desai, Non-Executive Chairman, Mastek; said: “With regard to the IT sector, the Budget has come as a mixed bag. The increase in allocation for e-governance measures is a commendable measure and should result in benefits for both the sector and the nation as a whole in the longer term. At the same time, we believe that extension of MAT to companies that had earlier been promised 10A and 10B exemptions is likely to have an adverse impact on certain players. In addition to that, the inclusion of ESOPs under FBT will add to the challenges being faced by employers in knowledge-intensive industries in attracting and retaining world-class talent.”

Sheshagiri Rao, director (finance), JSW Steel, said: “The budget is more biased towards controlling inflation rather than stimulating growth. The reduction in excise duties for certain products used for infrastructure building, would not only reduce the inflation but also increase the demand quite substantially while simultaneously increasing the revenues to the Government due to higher volumes.

The thrust on social sectors by increased allocations on education, health and employment is a positive step for inclusive growth.”

Steel Industry: “The steel industry was expecting that the Government would take certain steps to stimulate demand by reducing excise duty user specific, particularly infrastructure, white goods and automobiles but no step have been taken in this direction. However, imposition of export duty on ore / ore concentrated exports is expected to higher availability. These critical raw materials at better prices to domestic steel producers.”

Concern: “The reduction of customs duties on import of secondary steel products which may result in opening of floodgates for entry of inferior quality steel products into the country. This provision is likely to be abused by importing prime quality steel products also.”

Madhur Bajaj, president, SIAM said that the Finance Minister presented a budget that sought to continue the growth momentum in the economy, but added that the auto industry had hoped for some more concrete steps in respect of the sector which have not been announced this year.

The budget focused on Agriculture, infrastructure and social sector, all of which will have positive impact on the economy. The proposals in the agriculture sector if implemented correctly would increase overall growth”. Mr. Bajaj said.

The positive features of the budget in respect to the auto sector according to Mr. Bajaj were the reduction of CST from 4% to 3%, the continuation of the weighted deduction of R&D expenditure under Income Tax Act for the automobile sector for the next 5 years, and the retention of current customs duty structure on cars and two wheelers was a welcome step and would encourage local value addition in the domestic economy and generate employment.

The other positives in the budget were the increase in spending on roads both national highways and rural roads. The increase in outlay for the Urban Renewal Mission and its focus on transport would help increase public transportation in the country according to Mr. Bajaj. The increase in funds for ITI’s and the introduction of a PPP model would also help in the long term, Mr. Bajaj added.

“However, reduction of customs duty on commercial vehicles from 12.5% to 10% is going to affect the industry negatively, specially as this applies to used commercial vehicles also” Mr. Bajaj said. “This would open up imports from low cost economies”. The additional education cess of 1% and the service tax on design services would have a negative impact on prices, he added. Also, some companies are likely to be adversely affected by Dividend Distribution Tax.

SIAM president said that industry was hoping that the high incidence of excise duty on cars and utility vehicles would be addressed in this budget. Moreover, utility vehicles are the only means of transportation for semi urban and rural people where public transport network has not developed.

Currently cars and utility vehicles, other than small cars attract 24% excise duty, which is one of the highest in the country. SIAM has been requesting for an across the borad reduction in excise duty for cars and MUVs to 16%. SIAM hopes that this would be corrected soon.

For enhancing road safety and addressing pollution, SIAM had suggested a programme to modernize vehicle fleet. SIAM hoped that the Government would soon come out with a suitable policy in this regard and this would be looked at by the committee on green house gases. Also, the recommendations outlined in the Automotive Mission Plan 2006-2016 should be taken up.

Madhavan Menon, MD, Thomas Cook India, said: Increase in allocation to development of tourism infrastructure from Rs.423cr to Rs.520cr is a good sign but the amount is inadequate given the constraints faced by the tourism infrastructure in the country. There was no mention about airports/ports development which is disappointing as these would be key to tourism promotion in the country. The five year tax holiday for development of different category hotels & convention centers in the NCR region is a welcome move as it will help meet the increasing demand of rooms for the Commonwealth Games especially in the economy category. VC participation in development of hotels & convention centers would also help meet the room shortage in hospitality industry."

Cellular Operators Association of India (COAI) Director General TV Ramachandran said: "The proposal to constitute a committee to study levy structure in telecom is a step in the right direction and it will help the industry in the long-term. Otherwise, the industry was left untouched, which is a cause of concern and disappointment. The industry was accepting a reduction in the license fee structure, however the FM did not make any indication in this regard.” " Glenn Saldanha, CEO & MD, Glenmark Pharmaceuticals: "Given that the pharma industry is one of the growth sectors for the Indian economy and that India is now respecting IPR which would create challenges for Indian companies in the future, we were hoping there would be significant incentives to stimulate Indian R&D. However while we expected more, we are glad that the R&D 150% tax incentive will continue for an additional five years."

Kapil Wadhawan, MD & Chairman, DHFL: "Creation of mortgage guarantee companies will improve alternative resources to housing finance companies at a lower cost, which will improve profitability of housing finance companies and will provide greater comfort to the lenders

"Introduction of reverse mortgage by National Housing Bank is positive for DHFL as we were the first to initiate this product and are ready with procedural aspects.

"Emphasis on Bharat Nirman Yojna and the 31% increase in the fund allocation to this scheme will generate employment in rural areas which will increase income levels of working people in these areas and increase the potential demand for housing finance."

Industry Impact

Cement: Good
Oil and Gas: Good
Real Estate: No Impact
Healthcare: Good
Telecom: Good
Banking: No Major Impact
IT: Bad
Steel: Good
Infra & Construction: Good
FMCG: Good
Power: Bad

Play-safe budget, disappoints industry

In a play-safe budget, Finance Minister P Chidamabaram today gave marginal relief to income tax payers and announced some anti-inflationary measures in his fourth budgetary exercise which was received with disappointment by trade and industry.

Personal and corporate income tax rates remained unchanged while the threshold exemption limit has been raised by Rs 10,000 giving a relief of Rs 1,000 to all individuals.

The deduction for medical insurance premium has been hiked to Rs 15,000 and it will be Rs 20,000 for senior citizens.

The new threshold limit in income tax for women will be Rs 1.45 lakh and for senior citizens Rs 1.95 lakh.

However, Chidambaram hiked the education cess from two per cent to three per cent to net an additional Rs 5,000 crore to fund secondary and higher education.

As anti-inflationary measures, Chidambaram announced a ban on futures trading on staples wheat and rice in all commodities exchanges.

He also gave excise duty relief for cement sold in retail at Rs 90 per bag and exempted crude as well as refined edible oils from additional countervailing duty of four per cent to make them affordable.

The duty on sunflower oil, both crude and refined, was reduced by 15 percentage points.

However, for the industry the divident distribution tax has been hiked from 12.5% to 15% while money market mutual funds and liquid mutrual funds will attract 25% dividend distribution tax.

The scope of Fringe Benefit Tax has been expanded to include employees stock option plan (ESOP).

While the jittery stock market tanked 540 points with BSE closing below the 13,000 points level on top of global melt down, corporate leaders were disappointed at not not getting any industry-specific incentives or relief in corporate taxes and surcharge.

By and large, industry and market leaders feel that the budget gave negative sentiment in the short-term but expressed the hope that the economy would emerge stronger in the long run.

"I have not done anything to hurt growth," Chidambaram said at the traditional post-Budget briefing while stressing that a number of measures have been taken to moderate inflation.

Mkt Update: 13K Gone- Sensex slumps 541pts

Mirroring the heavy sell-off in the global markets, the Sensex opened with a huge negative gap of 434 points at 13,045, and soon tumbled to a low of 12,801 - a drop of points from the previous close.

The index, thereafter, swung to the Finance Minister's speech between 13,000 and 13,300. Though selling was seen across-the-board, cement and technology stocks were hammered following negative vibes from Budget 2007.

The Sensex finally settled with a huge loss of 541 points at 12,938. In the process, the index today recorded its biggest-ever loss in absolute terms on the Budget Day and the second-highest in percentage terms.

The BSE IT index crashed nearly 6% to 4870. The Metal index dropped 4.6% to 8514, and the Bankex slipped 4.3% to 6408.

The market breadth was fairly negative - out of 2,530 stocks traded, 1,900 declined, 598 advanced and the rest were unchanged today.


Satyam plunged 8.5% to Rs 413. TCS shed 6% to Rs 1,188, and Infosys slumped 5% to Rs 2,078.

HCL Technologies nose-dived nearly 10% to Rs 596. MphasiS BFL and Tech Mahindra also ended with steep losses.

Gujarat Ambuja crumbled 7.8% to Rs 116. ACC crashed 6.4% to Rs 900, and Grasim tumbled over 5% to Rs 2,213. UltraTech Cement plunged nearly 6% to Rs 891, and Shree Cement dropped over 7% to Rs 1,147.

HDFC dropped over 6% to Rs 1,502. Tata Steel and Maruti slipped around 5.5% each to Rs 443 and Rs 838, respectively.

ICICI Bank, Larsen & Toubro and HLL declined 5% each to Rs 832, Rs 1,488 and Rs 176, respectively.

Reliance Energy, Tata Motors, Reliance Communications and HDFC Bank shed around 4.5% each to Rs 479, Rs 784, Rs 407 and Rs 933, respectively.

ITC was the sole major gainer today - the stock swung from a low of Rs 157 to a high of Rs 180 before settling with a gain of 4% at Rs 172.


Reliance topped the value chart with a turnover of Rs 325.25 crore followed by Reliance Communications (Rs 187.50 crore), Infosys (Rs 173.90 crore), debutant SMS Pharma (Rs 125.20 crore) and ACC (Rs 119.90 crore).

IFCI led the volume chart with trades of around 3.49 crore shares followed by IDFC (1.23 crore), TV Today (84.62 lakh), IKF Technologies (80.90 lakh) and Nagarjuna Fertilisers (66.33 lakh).

Flooring the IT industry with MAT

THE MEASURE: The budget proposes introducing the minimum alternate tax (MAT) for companies besides increasing the dividend distribution tax from 12.5% to 15% cent (effective rate at 17.25% as they have to pay 15% surcharge) and extending the fringe benefit tax (FBT) to employee stock options (ESOPs).

The finance minister has exempted from service tax all services provided by technology business incubators. Those incubatees whose annual business turnover does not exceed Rs 50 lakh will be exempted from service tax for the first three years.

He also provided a pass-through status to venture capital (VC) funds only in respect of investments in VC undertakings in areas like biotechnology, information technology relating to hardware and software development, nanotechnology, seed research and development.

E-governance allocation has been increased from Rs 395 crore in 2006-07 to Rs 719 crore in 2007-08. The Centre has increased its support to state governments by allocating Rs 500 crore in 2007-08. Besides, Rs 33 crore has been allocated for a new scheme of manpower development for the software export industry.

THE CONTEXT: The finance minister reasons the effective rate of tax paid by all corporates, thanks to numerous tax concessions and exemptions was only 19.2 per cent. Hence, the proposal to extend MAT. But it comes at a time when the IT industry was expecting many sops including extension of the Software Technology Parks of India (STPI) scheme beyond 2009 besides reforming the duty structure to encourage domestic hardware manufacturing.

THE IMPACT: Analysts say MAT will apply to all corporate incomes and to income in respect of deduction claimed under section 10A and 10B of the Income Tax Act. MAT will affect the 100 per cent export oriented units (EOU) and those who come under the STPI scheme. Currently, these companies pay 14 per cent (surcharge included) dividend distributed tax and fringe benefit tax (FBT). This will affect the earnings per share (EPS) of IT companies immediately and as they are heavyweights in the Sensex. The industry is asking: Is the government hinting at an implicit commitment that the STPI scheme will be extended?

Bharat Varadachari, Partner, Ernst and Young, said, "Rather than giving an extension to the various tax holidays by 2009, the Minister has brought all companies under the tax bracket with MAT. Moreover, the increase in dividend distribution tax from 12.5 per cent to 15 per cent will be regressive." H V Harish, Partner, Grant Thornton, concurs with the view.

The good news is the additional investment in education and the training and the focus on education which will have a positive but longer term impact. The budget also provides a push for innovation and venture capitalist though with some reservations.

ICICIDirect - Rolta India - Result Update (Price: Rs 309.50, Target: Rs 328, Outperformer)

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Thanks Manish

ITC star of 'A' group

Revoking of excise duty on biscuits as well as on all food mixes, including instant mixes, was another reason for ITC’s rebound.

The ITC stock rose 4%, to settle at Rs 171.85. It was the top gainer in the 'A' group today. The stock rose on a high volume of 48.8 lakh shares on BSE.

Finance Minister P Chidambaram today proposed a complete exemption of excise duty on all instant food mixes and biscuits, whose retail price does not exceed Rs 50 a kilo. Besides being the top cigarette maker, ITC also makes biscuits and ready-to-eat food. Relief from excise duty for biscuits and ready-to-eat foods augurs well for the company. The Budget also proposed a cut in duty on food processing machinery to 5%.

The major driver of the stock’s surge was not bringing of cigarettes under value added tax (VAT). Though the excise duty on cigarette has been raised by 5%, it is reckoned that firms will pass on the hike to customers. The worst fears of the market were that cigarettes will be brought under value added tax with a 12.5% VAT, spawning concerns that higher tax may lead to a shift in tobacco consumption, to low-end products such as bidis and chewing tobacco.

Another food processing firm, Nestle India, surged 3% to Rs 970. It was the second highest gainer in the 'A' group today.

Oil refiner Chennai Petroleum Corporation (CPCL) rose 2.4% to Rs 194.90. It was the third biggest gainer in the 'A' group. The stock rose after the government today cut the ad valorem component of excise duty on petrol and diesel from 8% to 6%.

Gail (India) rose 2.3% to Rs 284. It was the fourth highest gainer in the 'A' group today. The stock edged up after the government extended income tax concession under Section 80 IA to gas pipelines.

Politically correct budget targets inflation

UPA Government’s fourth budget does not hold any surprises. It has turned out to be a politically correct exercise to tame inflation and price rise.

At the same time, Finance Minister Palaniappan Chidambaram’s budget does not take any major measures to further economic reforms.

And, it makes the right noises about thrust on education and healthcare that will go well with the electorate. Chidambaram went a step ahead to describe it an “ aam admi ” budget that brings in “include more people” as beneficiaries.

In a budget that talks about an expenditure of Rs 681,458 crore, Finance Minister has proposed to mop up just Rs 3000 crore mostly through the dividend distribution tax, one percent increase in education cess across all taxes and keep the macro-economic indicators intact.

There are no changes in the personal income tax slabs, rates; corporate income tax, central exercise, service tax rates and the other levies. Only the peak customs duties have been slashed by 2.5 percent on non-farm products to make the industrial inputs cheaper that is aimed at tempering with retail prices of consumer goods.

For the first time in years, a semblance of stability has been brought to tax rates - both direct and indirect - except for minor tinkering to address the politically volatile issue of inflation.

For both corporates and markets, it was a mixed bag. Stock market operators, investors and investors are particularly unhappy with the increase in dividend distribution tax by 2.5 percent and bring all knowledge-based companies under the minimum alternative tax (MAT).

FM's tax proposals, a mixed bag

It's a mix bag for individuals, corporates and those investing in the markets. While marginal relief has been given to individuals by raising the exemption limit by Rs 10,000, the corporate income tax has not been changed.

While the securities transaction tax has not been lowered, the dividend distribution tax has been hiked by 2.5%. For the professionals, the payout in the form of Fringe Benefit Tax is bound to be higher in case he or she is receiver of stock options.

For the different sectors, it is again a mixed-bag.

Following are the amended direct and indirect tax rates:
• Excise duty on Pan Masala without tobacco as mouth freshners reduced from 66 per cent to 45 per cent.
• Excise duty on cement reduced from Rs 400 per tonne to Rs.350 per tonne for cement bags sold at Rs.190 per bag at retail market. Those sold above Rs.190 will attract excise duty of Rs.600 per tonne.
• Two lakh people to benefit out of service tax exemption. Govt to lose Rs 800 crore as a result.
• Service tax on Residents Welfare Associations whose members contribute more than Rs 3,000.
• Income tax limit not to be changed. Threshold limit raised by Rs 10,000 giving every assessee a relief of Rs 1,000.
• Deduction in respect of medical insurance under Section 80 (D) increased to Rs 15,000 and Rs 20,000 for senior citizens.
• Surcharge on Corporate income tax on companies below Rs one crore removed.
• Tax free bonds to be issued by state-owned urban local bodies.
• Excise duty for plywood reduced from 16 per cent to eight per cent.
• Food mixes to be fully exempted from excise duty.
• Bio-diesel to be fully exempted from excise duty.
• Water purification devices, small and big, fully exempted from excise.
• Specific rates of excise duty on cigarettes increased.
• Three per cent import duty to be levied on private importers of aircraft including helicopters.
• No change in general CENVAT rate.

• Ad valorem duty on petrol and diesel to be brought down from eight to six per cent.
• Export duty on iron ore and concentrate at the rate of Rs.300 per tonne. Export duty on Chromium proposed at Rs.2000 tonne.
• Small scale industries excise duty exemption raised from Rs one crore to Rs 1.5 crore.

• Five year tax holiday for two, three, four star hotels and convention centres with a seating capacity of 3,000 in NCT of Delhi, Gurgaon, Ghaziabad, Faridabad and Gautam Buddha Nagar for Commonwealth Games. Twenty thousand more rooms required.
• Minimum Alternate Tax being extended.
• Benefits of investment in venture capital funds confined to IT, bio-technology, nano-technology, seed research, dairy among some others.
• Dividend distribution tax raised from 12.5 to 15 per cent.
• ESOPs to be brought under FBT.
• Expenditure on samples and free distribution items to be exempted from fringe benefit tax.
• Additional revenue from direct taxes to yield Rs.3000 crore and indirect taxes revenue neutral.
• Tax exemption on aviation turbine fuel sold to turbo prop aircraft extended to all small aircraft less than 40,000 kg.
• Withdrawals by central and state governments exempted from Banking Cash Transaction Tax. The limit for individuals and HUF raised from Rs 25,000 to Rs 50,000.

Service tax net widened

Finance Minister P Chidambaram today proposed to extend the service tax regime while unveiling a move to double the exemption limit for small service providers to Rs 8 lakh.

The revenue loss from the hike in the exemption limit will be Rs 800 crore, Chidambaram said while presenting the budget for 2007-08, adding he was happy to give this sum away in the interest of small service providers and consumers.

He proposed to extend the service tax to services outsourced for mining of minerals, oil or gas, renting of immovable property for use in commerce or business, development and supply of content for use in telecom and advertising purposes, asset management services provided by individuals, and design services.

Service tax will also be levied on services involved in execution of a works contract. Chidambaram also made a proposal for an optional composition scheme under which service tax will be levied at only two per cent of the total value of the works contract.

However, services provided by Resident Welfare Associations to their members who contribute Rs 3,000 or less per month will be exempted from paying the tax.

Service tax will also be exempted on clinical trial of new drugs and services provided by technology business incubators. Their incubates whose annual business turnover does not exceed Rs 50 lakh will be exempted from the tax for the first three years.

Sharekhan Commodities Buzz dated February 28, 2007

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Union Budget Speech 2007

Budget 2007-2008

Speech of

P. Chidambaram

Minister of Finance

February 28, 2007

Mr. Speaker, Sir

It is my privilege to present the Budget for 2007-08.


2. In November 2006, the UPA Government crossed the midpoint of its term of office. A midterm report card can now be presented. There are many pluses and a few minuses, and I shall deal with both candidly. The biggest plus is that the growth rate of GDP has improved from 7.5 per cent in 2004-05 to 9 per cent (Quick Estimate) in 2005-06 and, according to Advance Estimate, to 9.2 per cent in 2006-07. The average growth rate in the three years of the UPA Government is, therefore, 8.6 per cent. Thanks to this impressive performance, despite the poor start in 2002-03, the growth target set for the Tenth Plan of 8 per cent will be nearly achieved.

3. Manufacturing is the main driver of growth, and this augurs well for the future. In the three years of the UPA Government, the growth rate in manufacturing has accelerated from 8.7 per cent to 9.1 per cent and further to 11.3 per cent. The services sector continues to maintain impressive growth and has recorded, in the three years, a growth rate of 9.6 per cent, 9.8 per cent and 11.2 per cent respectively.

4. On the other hand, the agriculture sector has witnessed sharp ups and downs. Average growth during the Tenth Plan period is estimated at 2.3 per cent, which is below the desired level of 4 per cent a year. About 115 million families are classified as farming families. Furthermore, a country with a large population has to be nearly self-sufficient in essential food items; otherwise supply constraints could upset macro economic stability and growth prospects. Hence, agriculture must top the agenda of the policy makers and must hold the first charge on our resources. In a short while, I shall place before this House a number of proposals in this regard.

Income and Savings

5. To continue with the report card, per capita income in 2005-06, in real terms, increased by 7.4 per cent, and the savings rate has been estimated at 32.4 per cent and the investment rate at 33.8 per cent. Intuitively, I believe that these high rates have continued in the current year too.

6. The UPA Government has remained committed to economic reforms, fiscal prudence and monetary stability.

7. Revenues are buoyant for the third year in succession. We have garnered additional revenues and, as Honourable Members will notice presently, I have put these revenues to good use to promote inclusive growth, equity and social justice - goals that are at the core of the National Common Minimum Programme (NCMP) and close to the hearts of the UPA, its Chairperson and the Prime Minister.

Outlook on Inflation

8. Until February 2, 2007, bank credit, year on year, had grown by 29.6 per cent. Money supply (M3) had expanded by 21.3 per cent. Foreign exchange reserves stood at US$ 180 billion. While these are concomitant features of high growth, it cannot be denied that these monetary trends have put pressure on prices. Global commodity prices have also exerted pressure on domestic prices. At the same time, supply constraints have emerged in some essential commodities such as wheat, pulses and edible oils. Consequently, average inflation in
2006-07 is estimated at between 5.2 and 5.4 per cent, which is higher than 4.4 per cent last year. I wish to reiterate Government's concern over inflation. Government has already taken a number of measures on the fiscal, monetary and supply sides to maintain price stability and, if required, will not hesitate to take more measures. When the UPA Government assumed office in 2004, the inflation graph was on the rise; but we succeeded in moderating inflation and we are confident that we can moderate the present inflationary trend too.


9. Bharat Nirman remains the cornerstone of the Government's policy. I am glad to report that in the current financial year:

• Additional irrigation potential of 2,400,000 hectares, including 900,000 hectares under AIBP, will be created;

• Drinking water has been provided to 55,512 habitations until December 2006 against a target of 73,120 habitations;

• Until December 2006, 12,198 kilometres of rural roads have been completed. The separate window under RIDF will augment funds for the programme by Rs.4,000 crore a year;

• 783,000 rural houses have been constructed up to December 2006 and 914,000 houses are under construction, and the annual target of 1,500,000 houses is likely to be exceeded;

• 19,758 villages have been covered so far under the Rajiv Gandhi Grameen Vidyutikaran Yojana;

• 15,054 villages have been provided with a telephone against the target of 20,000 villages, and the balance will be covered by the end of the year;

Honourable Members will note that Bharat Nirman continues to make impressive progress.

10. The eight flagship programmes of the UPA Government will continue to receive high priority. Presently, I shall refer to these programmes in some detail.


11. The year 2007-08 will mark the beginning of the Eleventh Plan. The declared objective is "Faster and More Inclusive Growth". I can state with confidence that, on the eve of the Plan, the economy is in a stronger position than ever before. It therefore behoves us to set higher goals. The Approach Paper to the Eleventh Plan states that the Plan "will aim at putting the economy on a sustainable growth trajectory with a growth rate of approximately 10 per cent by the end of its period." Among the other objectives of the Plan are growth of 4 per cent in the agriculture sector, faster employment creation, reducing disparities across regions and ensuring access to basic physical infrastructure as well as health and education services to all. I have kept these objectives in mind while allocating resources to various sectors.

Gross Budgetary Support

12. Notwithstanding some constraints, I propose to increase substantially the Gross Budgetary Support (GBS) for the Plan. In 2006-07, the GBS was fixed at Rs.172,728 crore and, of this, support to the Central Plan was Rs.131,284 crore. GBS for 2007-08 will be increased to Rs.205,100 crore. Out of this, the Central Plan will receive Rs.154,939 crore.

Allocations for Major Sectors

13. For Bharat Nirman, as against Rs.18,696 crore (including the NER component) in 2006-07, I propose to provide Rs.24,603 crore in 2007-08, which marks an increase of 31.6 per cent.

14. The education and health sectors will also receive substantial funds. In 2007-08, I propose to enhance the allocation for education by 34.2 per cent to Rs.32,352 crore and for health and family welfare by 21.9 per cent to Rs.15,291 crore.

Sarva Shiksha Abhiyan and Mid-day Meal Scheme

15. In allocating resources, school education must have primacy. Hence, I propose to increase the allocation for school education by about 35 per cent from Rs.17,133 crore in 2006-07 to Rs.23,142 crore in 2007-08.

16. Out of this amount, Sarva Shiksha Abhiyan (SSA) will be provided Rs.10,671 crore. Further, I propose to increase the provision for strengthening teachers training institutions from Rs.162 crore to Rs.450 crore. Next year, we will appoint 200,000 more teachers and construct 500,000 more class rooms.

17. The Mid-day Meal Scheme will be provided Rs.7,324 crore next year. In addition to covering children in primary classes, beginning 2007-08, we propose to cover children in upper primary classes in 3,427 educationally backward blocks.

18. The transfer to Prarambhik Shiksha Kosh will increase from Rs.8,746 crore to Rs.10,393 crore.

19. As more students complete upper primary classes, it is necessary to increase access to secondary education. Schemes for this purpose are under formulation, and I propose to double the provision for secondary education from Rs.1,837 crore in 2006-07 to Rs.3,794 crore in 2007-08.

Means-Cum-Merit Scholarships

20. While the SSA has improved the enrolment ratio in schools to 96 per cent, the drop out ratio continues to be high. The critical year appears to be transition from class VIII to class IX. In order to arrest the drop out ratio and encourage students to continue their education beyond class VIII, I propose to introduce a National Means-cum-Merit Scholarship Scheme. Selection will be made through a national test from among students who have passed class VIII. Each student will be given Rs.6,000 per year for study in classes IX, X, XI and XII. I propose that 100,000 scholarships may be awarded every year. In order to fund this programme, I intend to create a corpus fund of Rs.750 crore this year, and add a like amount to the fund every year over the next three years. Accordingly, a sum of Rs.750 crore will be placed with the State Bank of India, and the yield from the fund will be used for awarding the scholarships.

Drinking Water and Sanitation

21. 55,512 habitations and 34,000 schools have been provided drinking water supply till December, 2006 under the Rajiv Gandhi Drinking Water Mission. More ambitious targets have been set for 2007-08 to deal with both non-coverage and slippage. I propose to enhance the allocation for the Mission from Rs.4,680 crore in 2006-07 to Rs.5,850 crore in 2007-08.

22. As regards the Total Sanitation Campaign, I propose to increase the provision from Rs.720 crore this year to Rs.954 crore next year.

Health Sector; National Rural Health Mission

23. In the second year of its implementation, the National Rural Health Mission (NRHM) is on schedule to meet its timelines. The institutional integration of all the health schemes at the district and lower levels has been achieved. All districts in the country will complete preparation of District Health Action Plans by March 2007. The major emphasis will be on mother and child care and on the prevention and treatment of communicable diseases such as tuberculosis and malaria. Through Monthly Health Days (MHD) organised at Anganwadi centres, convergence is sought to be achieved among various programmes such as immunization, ante natal care as well as nutrition and sanitation.

24. I am happy to report that 320,000 Associated Social Health Activists (ASHAs) have been recruited and over 200,000 have received orientation training. Besides, 90,000 link workers have been selected by the States. With trained ASHAs in place, I am confident there will be significant improvement in health care in rural areas. The Ayurveda, Yoga & Naturopathy, Unani, Sidha and Homeopathy (AYUSH) systems are also being mainstreamed into the health delivery system at all levels. I propose to increase the allocation for NRHM from Rs.8,207 crore in 2006-07 to Rs.9,947 crore in 2007-08.


25. Government has brought HIV/AIDS out of the closet and promised bold and determined efforts to achieve zero-level growth of the disease. The epidemic will be deemed 'stabilised' if the prevalence rate is less than one per cent of the population. National Aids Control Programme (NACP)-III, starting in 2007-08 and building on NACP-I and NACP-II, will target the high risk groups in all the States. We will expand access to condoms and ensure universal access to blood screening and safe blood. More hospitals will provide treatment to prevent transmission of HIV/AIDS from mother to child. Support will be given to the protocol on paediatric dosage developed by Indian doctors and launched in November 2006. For the year 2007-08, I propose to step up the provision for the AIDS control programme to Rs.969 crore.


26. Last year, I had expressed the hope that polio will be eliminated from the country by December 2007. However, there was an outbreak in western Uttar Pradesh in early 2006. The strategy for polio eradication has been revised. The number of polio rounds will be increased, monovalent vaccine will be introduced, and there will be intensive coverage in the 20 high risk districts of Uttar Pradesh and 10 districts of Bihar. The programme has been integrated into the NRHM. The ASHAs and the Anganwadi workers will visit every household and track every child for the immunization programme. To achieve the goal of eliminating polio, I propose to provide Rs.1,290 crore in 2007-08.

Integrated Child Development Services

27. In the second phase of expansion of the Integrated Child Development Services (ICDS), Government has sanctioned 173 ICDS projects, 107,274 Anganwadi centres and 25,961 mini-Anganwadi centres. Government is committed to expand the scheme in order to cover all habitations and settlements during the Eleventh Plan and to reach out to pregnant women, lactating mothers and all children below the age of six. I propose to increase the allocation for ICDS from Rs.4,087 crore in 2006-07 to Rs.4,761 crore in 2007-08.

National Rural Employment Guarantee Scheme

28. The National Rural Employment Guarantee Scheme (NREGS) was launched on February 2, 2006. The pace of implementation varies from State to State. Since NREGS is a demand-driven scheme carrying a legal guarantee of employment, the budget allocation would have to be supplemented according to need. I therefore propose to make an initial allocation of Rs.12,000 crore (including NER component) for NREGS. I am also happy to announce that NREGS will be expanded from the current level of 200 districts to 330 districts. In addition, I have provided Rs.2,800 crore for Sampoorna Gramin Rozgar Yojana (SGRY) for rural employment in the districts not covered by NREGS.

29. Swaranjayanti Gram Swarozgar Yojana (SGSY) is intended to promote self-employment among the rural poor through Self Help Groups (SHG). I propose to strengthen this programme by increasing the allocation from Rs.1,200 crore in the current year to Rs.1,800 crore (including NER component) next year.

Urban Unemployment

30. The issue of urban unemployment and poverty alleviation is equally critical. Hence, I propose to increase the allocation for Swarna Jayanti Shahari Rojgar Yojana from Rs.250 crore in 2006-07 to Rs.344 crore next year.

Jawaharlal Nehru National Urban Renewal Mission

31. The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) has evoked a positive response from State Governments. As on date, 538 projects with a total cost of Rs.23,950 crore have been sanctioned in sectors such as water supply, sanitation, transport, road and housing in many cities spread over several States. I propose to enhance the allocation from Rs.4,595 crore in
2006-07 to Rs.4,987 crore 2007-08.

Targeted Public Distribution System and Antyodaya Anna Yojana

32. The issue prices of food grains under the Public Distribution System (PDS) and for the beneficiaries of the Antyodaya Anna Yojana have been retained. A Plan scheme for evaluation, monitoring, management and strengthening of the targeted PDS will be implemented in 2007-08, and this will include computerisation of the PDS and an integrated information system in the Food Corporation of India.

Scheduled Castes and Scheduled Tribes

33. Continuing the practice that was started in 2005-06, a separate statement on the schemes for the welfare of Scheduled Castes (SCs) and Scheduled Tribes (STs) is placed in the Budget documents. The allocation in 2007-08 for SCs and STs has been substantially enhanced. In respect of schemes benefiting only SCs and STs, I have increased the allocation to Rs.3,271 crore. In respect of schemes with at least 20 per cent of the benefits earmarked for SCs and STs, I have increased the allocation to Rs.17,691 crore.

34. SC and ST students studying in M.Phil and PhD courses are supported by the Rajiv Gandhi National Fellowship Programme. I propose to enhance the allocation from Rs.35 crore in 2006-07 to Rs.88 crore in 2007-08.

Post-Matric Scholarships

35. There is a post-matric scholarship programme for SC and ST students. I propose to increase the provision for these scholarships from Rs.440 crore in 2006-07 to Rs.611 crore in 2007-08. I also propose to make a separate provision of Rs.91 crore for similar scholarships to be awarded to students belonging to socially and educationally backward classes.


36. Last year, I made a modest contribution of Rs.16.47 crore to the equity of the National Minorities Development and Finance Corporation (NMDFC). Following the Sachar Committee report, NMDFC would be required to expand its reach and intensify its efforts. Hence, I propose to provide a further sum of Rs.63 crore to the share capital of NMDFC.

37. There are a number of districts with a concentration of minorities. I propose to make a provision of Rs.108 crore for a multi-sector development programme in these districts.

38. Three scholarship programmes are being implemented for students belonging to minority communities. I propose to make the following allocations:

Pre-matric scholarships Rs.72 crore

Post-matric scholarships Rs.90 crore

Merit-cum-Means scholarships at

graduate and post-graduate levels Rs.48.60 crore


39. There is growing awareness of gender sensitivities of budgetary allocations. 50 ministries/departments have set up gender budgeting cells. For 2007-08, 27 ministries/departments and 5 Union Territories covering 33 demands for grants have contributed to a statement placed in the budget papers. The outlay for 100 per cent women specific programmes is Rs.8,795 crore and for schemes where at least 30 per cent is for women specific programmes is Rs.22,382 crore. We have made a sincere effort to remove the errors that were pointed out in last year's statement.

North Eastern Region (NER)

40. The total budget allocation in 2007-08 for the North Eastern Region, culled out from allocations under different ministries/ departments, has increased from Rs.12,041 crore in 2006-07 to Rs.14,365 crore in 2007-08. This includes Rs.1,380 crore provided to the Ministry of Development of North Eastern Region (DONER). The new industrial policy for NER, with suitable fiscal incentives, will be in place before March 31, 2007.

Supplement to the GBS

41. I have, so far, outlined the allocations under what may be called Plan 'A' which has a resource basket of Rs.205,100 crore. In consultation with the
Planning Commission, I have also drawn up Plan 'B'. Since the Eleventh Plan will begin on April 1, 2007, we recognize that there will be a need to take new initiatives in critical areas. Additional resources will be needed once the proposals are finalised and the pace of expenditure builds up. Therefore, I shall endeavour to find additional resources through better tax administration to the extent of Rs.7,000 crore during the course of the year. I have been advised by the Planning Commission that these additional funds, once voted by this House, will be allocated among sectors such as agriculture, rural development, health, women and child development, urban infrastructure, water resources, etc.

42. I also have Plan 'C'. Under Plan 'C', I propose to tap into resources available outside the Budget and leverage them for the purpose of investment, especially in the infrastructure sector. I shall deal with this subject a little later.


43. I shall now take up our main challenge: agriculture. I may recall the words of Jawaharlal Nehru, who said "Everything else can wait, but not agriculture".

44. The draft National Policy for Farmers submitted by the National Commission on Farmers is under consideration. Meanwhile, I have a number of proposals to improve the economic viability of farming and ensure that farmers earn a minimum net income.

Farm Credit

45. Farm credit continues to grow at a satisfactory pace. The goal of doubling farm credit in three years was achieved in two years. The target of Rs.175,000 crore set for 2006-07 will be exceeded comfortably and is likely to reach Rs.190,000 crore. This year, until December 2006, 53.37 lakh new farmers were brought into the institutional credit system. For 2007-08, I propose to fix a target of Rs.225,000 crore as farm credit and an addition of 50 lakh new farmers to the banking system.

46. The two per cent interest subvention scheme for short-term crop loans will continue in 2007-08, and I am making a provision of Rs.1,677 crore for that purpose.

47. A special plan is being implemented over a period of three years in 31 especially distressed districts in four States of the country involving a total amount of Rs.16,979 crore. Of this, about Rs.12,400 crore will be on water related schemes. In order to provide subsidiary income to the farmer, the special plan includes a scheme for induction of high yielding milch animals and related activities. I propose to provide Rs.153 crore for this scheme.

Agricultural Indebtedness

48. Government had appointed a Committee under Dr. R. Radhakrishna to examine all aspects of agricultural indebtedness. The Committee has held wide ranging consultations across the country and is in the process of finalising its recommendations. Government will act on the report as soon as it is received.

A Mission for Pulses

49. Government is concerned about the stagnation in the production and productivity of pulses. A critical deficiency is the availability and quality of certified seeds. I therefore propose to expand the Integrated Oilseeds, Oil palm, Pulses and Maize Development programme. There will be a sharper focus on scaling up the production of breeder, foundation and certified seeds. The Indian Institute of Pulses Research (IIPR), Kanpur, the National and State level seeds corporations, agricultural universities, ICAR centres, KRIBHCO, IFFCO and NAFED as well as large private sector companies will be invited to submit plans to scale up the production of seeds. Government will fund the expansion of IIPR, Kanpur, and offer the other producers a capital grant or concessional financing in order to double the production of certified seeds within a period of three years.

Plantation Sector

50. A Special Purpose Tea Fund has been launched for re-plantation and rejuvenation of tea. Government will soon put in place similar financial mechanisms for coffee, rubber, spices, cashew and coconut.

Accelerated Irrigation Benefit Programme

51. The Accelerated Irrigation Benefit Programme (AIBP) has been revamped in order to complete more irrigation projects in the quickest possible time. 35 projects are likely to be completed in 2006-07 and additional irrigation potential of 900,000 hectares will be created. As against an outlay of Rs.7,121 crore in 2006-07, the outlay for 2007-08 will be increased to Rs.11,000 crore. Of this, the grant component to State Governments will be Rs.3,580 crore, an increase from Rs.2,350 crore.

Rainfed Area Development Programme

52. The National Rainfed Area Authority was established a few months ago to coordinate all schemes relating to watershed development and other aspects of land use. I propose to allocate Rs.100 crore for the new Rainfed Area Development Programme.

Water Resources Management: Restoring Water Bodies

53. Honourable Members will recall that, in March 2005, a pilot project to repair, renovate and restore water bodies was launched in 13 States. I am happy to inform the House that the World Bank has signed a loan agreement with Tamil Nadu for Rs.2,182 crore to restore 5,763 water bodies having a command area of 400,000 hectares. An agreement for Andhra Pradesh is expected to be concluded in March 2007 and will cover 3,000 water bodies with a command area of 250,000 hectares. Preparation of similar projects for Karnataka, Orissa and West Bengal are at different stages and at least two more agreements are likely to be concluded before June 2007. I would urge other State Governments to come forward with proposals so that the whole country can be covered within the next two years.

Ground Water Recharge

54. Depletion of ground water has assumed grave proportions. The Central Ground Water Board has identified 1,065 assessment blocks in the country as 'over-exploited' or 'critical'. Over 80 per cent of these blocks are in 100 districts in seven States. The strategy for ground water recharge is to divert rain water into 'dug wells'. Each structure will cost about Rs.4,000. The requirement is seven million structures, including about two million structures on land belonging to small and marginal farmers. I propose to provide 100 per cent subsidy to small and marginal farmers and 50 per cent subsidy to other farmers. Ministry of Water Resources will finalise the scheme shortly. In anticipation, I intend to transfer a sum of Rs.1,800 crore to NABARD. The amount will be held in escrow and will be disbursed through the lead bank of the district concerned to the beneficiaries.

Training of Farmers

55. With minimum instruction and training, our farmers will easily absorb good water management practices. I therefore propose that the Indian Council of Agricultural Research (ICAR) may set up one teaching-cum-demonstration model of water harvesting in each of 32 selected State Agricultural Universities and ICAR institutes. Each institution will train 100 trainers and 1,000 farmers every year in two-week and one-week programmes respectively. Based on estimates of recurring costs, I intend to provide an interest free loan of Rs.3 crore to each institution to create a corpus fund. The yield from the fund will be used for implementing the training programme. The total cost is estimated at Rs.100 crore.

Extension System

56. The green revolution of the 1960s was brought about by thousands of agricultural extension workers who worked side by side with our farmers under a programme called Training and Visit (T&V). Sadly, the extension system seems to have collapsed. In order to revive extension work, the Ministry of Agriculture will, in consultation with State Governments, draw up a new programme that will replicate T&V with suitable changes.

57. The Agriculture Technology Management Agency (ATMA) that is now in place in 262 districts will be extended to another 300 districts in 2007-08. I propose to enhance the provision for ATMA from Rs.50 crore to Rs.230 crore next year.

Fertiliser subsidies

58. I had budgeted Rs.17,253 crore for fertiliser subsidies in 2006-07. According to Revised Estimates, this will rise to Rs.22,452 crore, and there is a demand for more money. While fertilisers should indeed be subsidised, we must find an alternative method of delivering the subsidy directly to the farmer. The fertiliser industry has agreed to work with the Department of Fertilisers to conduct a study and find a solution. Based on the report, Government intends to implement a pilot programme in at least one district in each State in 2007-08.

Agricultural Insurance

59. The National Agricultural Insurance Scheme (NAIS) will be continued in its present form for Kharif and Rabi 2007-08. I propose to make a provision of Rs.500 crore for the scheme.

60. Agricultural Insurance Corporation (AIC) has been running a pilot weather insurance scheme since Kharif 2004 and it appears to be a more promising risk mitigation scheme. Hence, Government will ask AIC to start a weather based crop insurance scheme on a pilot basis in two or three States, in consultation with the State Governments concerned, as an alternative to the NAIS. The scheme will be operated on an actuarial basis with an element of subsidy. I intend to allocate Rs.100 crore for this purpose in 2007-08.

National Bank for Agriculture and Rural Development (NABARD)

61. NABARD provides refinance to cooperative institutions. As the volume of farm credit increases and the Vaidyanathan Committee recommendations for reform of rural credit cooperatives are implemented, the demand for refinance will increase. In order to augment its resources, I propose to allow NABARD to issue rural bonds to the extent of Rs.5,000 crore. These bonds will be guaranteed by the Government and will be eligible for suitable tax exemption.

Rural Infrastructure Development Fund

62. The Rural Infrastructure Development Fund (RIDF) continues to sanction and disburse funds to State Governments. In 2006-07, out of a corpus of Rs.10,000 crore, NABARD has so far issued sanctions for Rs.8,440 crore and will achieve its target. Keeping in view the growing demand for these funds, I propose to raise the corpus of RIDF-XIII in 2007-08 to Rs.12,000 crore. I would urge State Governments to use these funds primarily in the distressed districts of the State.

63. A separate window for rural roads under RIDF was opened with Rs.4,000 crore. Against this, projects for Rs.2,311 crore have been sanctioned in 2006-07. I propose to continue the separate window under RIDF-XIII in 2007-08 with a corpus of Rs.4,000 crore.

Social Security

64. One of the commitments made in the NCMP is that Government will introduce a social security scheme for unorganised workers. A committee chaired by Dr. Arjun Sengupta has given its report which is under consideration. Pending a decision, in order to signal the UPA Government's concern for the welfare of unorganised workers, I propose to make a beginning. I propose to extend death and disability insurance cover through Life Insurance Corporation of India (LIC) to rural landless households under a new scheme called 'Aam Admi Bima Yojana' (AABY). According to NSS Report No. 491, the estimate of such households is about 1.5 crore. By end March 2007, 70 lakh households will be covered through existing schemes of the LIC with the support of some State Governments and the social security fund with the LIC. Under AABY, I propose to cover the rural landless households which enjoy no cover at all today, and the number may be actually more than what is indicated in the NSS report. The head of the family or one earning member in the family will be insured. The Central Government will bear 50 per cent of the premium of Rs.200 per year per person and I would urge the State Governments to come forward to bear the other 50 per cent on behalf of the beneficiaries. Taking into account the annual cost to the Central Government, I intend to place a sum of Rs.1,000 crore in a fund that will be maintained by LIC. I propose to finalise the scheme in consultation with State Governments and begin to implement it in 2007-08.

65. Mr. Speaker, Sir, I have devoted the last 15 minutes or so to agriculture. There is no dearth of schemes; there is no dearth of funds. What needs to be done is to deliver the intended outcomes. Saint Tiruvalluvar watches over us and warns:-

"Uzhavinar Kai Madangin Illai Vizhaivathoom

Vittame Enbarkum Nilai"

[ If ploughmen keep their hands folded

Even sages claiming renunciation cannot find salvation]


66. All indicators point to an accelerating rate of investment in the economy. For example, gross domestic capital formation (GDCF) in 2005-06 grew by 23.7 per cent over the previous year to Rs.11,47,254 crore. I believe that this trend continues in 2006-07. In April-January, 2006-07, foreign direct investment amounted to US$12.5 billion and outpaced portfolio investment which was US$6.8 billion.

67. Central Public Sector Enterprises (CPSEs) will, through internal and extra budgetary resources, invest Rs.165,053 crore in 2007-08. Government will provide equity support of Rs.16,361 crore and loans of Rs.2,970 crore to CPSEs.

68. Further, in the current year, we have restructured eight CPSEs with a cash infusion of Rs.1,590 crore and non-cash sacrifices of Rs.1,612 crore.



69. Electricity generation has recorded a growth rate of 7.5 per cent in April-December this year. However, as we complete the Tenth Plan, we would have added only 23,163 MW of additional capacity in the five year period including 16,339 MW added in the three years beginning 2004-05. Hence, it is imperative that we take new initiatives.

70. The Ministry of Power has awarded two Ultra Mega Power Projects (UMPP) in Sasan and Mundra. Seven more UMPPs are under process and we are confident that at least two more will be awarded by July, 2007. Other initiatives taken by the Ministry of Power include facilitating setting up of merchant power plants by private developers and private participation in transmission projects.

71. Besides, the Accelerated Power Development and Reforms Project (APDRP) has reduced significantly Aggregate Technical and Commercial (ATC) losses in 213 towns. APDRP is being restructured to cover all district headquarters and towns with a population of more than 50,000. I propose to increase the budgetary support for APDRP from Rs.650 crore in 2006-07 to Rs.800 crore next year.

Rajiv Gandhi Grameen Vidyutikaran Yojana

72. Having regard to the pace of implementation under the Rajiv Gandhi Grameen Vidyutikaran Yojana and the annual target, I propose to increase the allocation from Rs.3,000 crore in 2006-07 to Rs.3,983 crore in 2007-08.


73. Following the announcement last year, 26 coal blocks with reserves of 8,581 million tonnes and four lignite blocks with reserves of 755 million tonnes have been allotted, up to December 2006, to Government companies and approved end users. The definition of specified end use will be enlarged to include underground coal gasification and coal liquefaction.

National Highways

74. Work on the golden quadrilateral is nearly complete and there is considerable progress in the North-South, East-West corridor project which is expected to be completed by 2009. NHDP-III, NHDP-V and NHDP-VI are in advanced stages of planning or implementation. So far, National Highways Authority of India (NHAI) has given Rs.2,072 crore as viability gap funding but has also received Rs.1,900 crore as negative grant. The private sector investment leveraged under NHDP is Rs.25,366 crore. Under the programme for the North Eastern Region (SARDP-NE), 450 kilometres have been awarded in 2006-07 and the balance will be awarded in 2007-08. I propose to increase the provision for the National Highway Development Programme (NHDP) from Rs.9,945 crore in 2006-07 to Rs.10,667 crore next year.

75. The road-cum-rail bridge at Munger, Bihar, over the Ganga, has been taken up as a national project. Likewise, the road-cum-rail bridge at Bogibeel, Assam, over the Brahmaputra, will be taken up as a national project.

Public Private Partnership and Viability Gap Funding

76. The Public Private Partnership (PPP) model has enabled greater private sector participation in the creation and maintenance of infrastructure. So far, under the viability gap funding scheme, 37 proposals have been received of which 21 proposals have been granted 'in-principle' approval with a total project cost of Rs.9,842 crore and an estimated viability gap funding of Rs.2,521 crore. The pace is slow, and there is a need to adopt a more aggressive approach for preparing a shelf of bankable projects that can be offered for competitive bidding. Apart from the steps already taken for capacity building and engaging consultants, I intend to set up a revolving fund with a corpus of Rs.100 crore to quicken project preparation. The fund will contribute up to 75 per cent of the preparatory expenditure in the form of interest free loan that will be eventually recovered from the successful bidder. Guidelines for operating the fund will be announced in due course.


Petroleum and Natural Gas

77. Energy security is high on the Government's agenda. In the six rounds of New Exploration Licensing Policy (NELP) so far, 162 production sharing contracts have been awarded. Indian and foreign companies have already made an investment of Rs.97,000 crore in exploration. Similarly, after three rounds of bidding, 23 coal bed methane blocks have been awarded for exploration.


78. A rejuvenated textile industry is geared to meet the global challenge. 26 parks have been approved so far out of 30 sanctioned under the Scheme for Integrated Textiles Parks (SITP). I propose to increase the provision for these parks from Rs.189 crore in 2006-07 to Rs.425 crore in 2007-08.

79. I am also glad to announce that the Technology Upgradation Fund (TUF) scheme will be continued during the Eleventh Plan. Against a provision of Rs.535 crore in 2006-07, I propose to provide Rs.911 crore in 2007-08. As before, handlooms will be covered under the TUF scheme.


80. A cluster approach for the development of the handloom sector was introduced in 2005-06 and 120 clusters have been selected. 273 new yarn depots have been opened in the current year and the Handloom Mark was launched. Government proposes to take up an additional 100-150 clusters in 2007-08. The 12 schemes that are now implemented will be grouped into five schemes in the Eleventh Plan period. The health insurance scheme has so far covered 300,000 weavers and will be extended to more weavers. The scheme will also be enlarged to include ancillary workers. I propose to enhance the allocation for the sector from Rs.241 crore in 2006-07 to Rs.321 crore next year.

Small and Medium Enterprises

81. Following the credit policy for small and medium enterprises (SME) announced in August 2005, outstanding credit to the SME sector increased from Rs.135,200 crore at end December 2005 to Rs.173,460 crore at end December 2006. While encouraging banks to lend more to the SME sector, I propose to ask banks to have regard to the credit rating acquired by an SME while fixing the interest rate.

Coir Industry

82. Coir is an eco-friendly fibre. The coir industry provides employment to a large number as well as earns valuable foreign exchange. I am happy to announce a scheme for the modernisation and technology upgradation of the coir industry with special emphasis to major coir producing States such as Kerala, Karnataka, Tamil Nadu, Andhra Pradesh and Orissa. I propose to make a provision of Rs.22.50 crore.


Foreign Trade

83. Our merchandise exports crossed the milestone of US$100 billion in 2005-06 and are expected to cross another milestone of US$125 billion by the end of the current fiscal. Foreign trade is growing at a rate more than twice the growth rate of GDP. Government will continue to follow export friendly policies.


84. I propose to increase the provision for building tourist infrastructure from Rs.423 crore in 2006-07 to Rs.520 crore in 2007-08.



85. In addition to the important legislative measures now before Parliament, Government proposes to take a number of initiatives in banking and insurance.

86. Government proposes to acquire RBI's equity holding in State Bank of India. I have provided a sum of Rs.40,000 crore for this purpose, but the transaction will be deficit neutral to the Government.

87. The Differential Rate of Interest (DRI) scheme provides finance at a rate of 4 per cent to the weaker sections of the community engaged in gainful occupations. I propose to raise the limit of the loan from Rs.6,500 to Rs.15,000 and the limit of the housing loan from Rs.5,000 to Rs.20,000 per beneficiary.

Regional Rural Banks

88. Regional Rural Banks (RRBs) have emerged as the third arm for delivering rural credit, and the sponsor banks have assured me that RRBs are willing to take on greater responsibilities. The Committee on Financial Inclusion, chaired by Dr. C. Rangarajan, has also made certain recommendations concerning RRBs. I, therefore, propose to:

• ask RRBs to undertake an aggressive branch expansion programme and, in 2007-08, open at least one branch in the 80 uncovered districts of the country;

• extend the Securitisation and Reconstruction of Financial Assets and Enforcement of Securitisation of Interest (SARFAESI) Act to loans advanced by RRBs;

• permit RRBs to accept NRE/FCNR deposits; and

• recapitalize, in a phased programme, the RRBs which have a negative net worth.

Housing Loans

89. The National Housing Bank (NHB) will shortly introduce a novel product for senior citizens: a 'reverse mortgage' under which a senior citizen who is the owner of a house can avail of a monthly stream of income against the mortgage of his/her house, while remaining the owner and occupying the house throughout his/her lifetime, without repayment or servicing of the loan.

90. Our people want housing loans. Banks and housing finance companies that lend against mortgages would have greater comfort if the mortgage can be guaranteed through a three way contract among borrower, lender and guarantor. Regulations will be put in place to allow the creation of mortgage guarantee companies.


91. On December 6, 2006, Rashtrapatiji launched an exclusive health insurance scheme for senior citizens offered by National Insurance Company. I have asked the other three public sector insurance companies to offer a similar product to senior citizens, and they have agreed to do so in 2007-08.

92. The Micro Financial Sector (Development and Regulation) Bill as well as a comprehensive Bill to amend the insurance laws will be introduced in the Budget Session.

Financial Inclusion

93. Financial inclusion is the process of ensuring access to timely and adequate credit and financial services by vulnerable groups at an affordable cost. The Committee on Financial Inclusion has given an interim report. While we await the final report, Government has decided to implement, immediately, two recommendations. The first is to establish a Financial Inclusion Fund with NABARD for meeting the cost of developmental and promotional interventions. The second is to establish a Financial Inclusion Technology Fund to meet the costs of technology adoption. Each fund will have an overall corpus of Rs.500 crore, with initial funding to be contributed by the Central Government, RBI and NABARD.

Capital Markets

94. The capital market is an important instrument for intermediating financial resources. Recognising the strength of the Indian capital market, the International Organisation of Securities Commissions (IOSCO) has decided to hold its annual conference in Mumbai in April 2007. In line with measures announced every year to strengthen the market, I propose to:

• make PAN the sole identification number for all participants in the securities market with an alpha-numeric prefix or suffix to distinguish a particular kind of account;

• take forward the idea of Self Regulating Organisations (SRO) for different market participants under regulations that will be made by SEBI and, if necessary, supported by an enabling law;

• promote the flow of investment to the infrastructure sector by permitting mutual funds to launch and operate dedicated infrastructure funds;

• converge the different regulations that allow individuals and Indian mutual funds to invest in overseas securities by permitting individuals to invest through Indian mutual funds;

• allow short selling settled by delivery, and securities lending and borrowing to facilitate delivery, by institutions;

• put in place an enabling mechanism to permit Indian companies to unlock a part of their holdings in group companies for meeting their financing requirements by issue of Exchangeable Bonds.

Innovative Financing for Infrastructure

95. The minimum obligation of States to borrow from the National Small Savings Fund (NSSF) has been brought down to 80 per cent of net collections. Repayments of past NSSF loans by the Central and State Governments have also commenced from 2005-06, making available resources for long-term lending. I therefore propose that these funds may also be borrowed from NSSF by India Infrastructure Finance Company Limited (IIFCL).

96. An initiative that has borne fruit is the launch of the US$5 billion infrastructure financing initiative by Citigroup, Blackstone, IDFC and IIFCL.

97. A committee chaired by Shri Deepak Parekh has made a number of recommendations for financing infrastructure. One of the recommendations is to use a small part of the foreign exchange reserves without the risk of monetary expansion. The Committee has suggested the establishment of two wholly-owned overseas subsidiaries of IIFCL with the following objectives:

(i) to borrow funds from the RBI and lend to Indian companies implementing infrastructure projects in India, or to co-finance their ECBs for such projects, solely for capital expenditure outside India; and

(ii) to borrow funds from the RBI, invest such funds in highly rated collateral securities, and provide 'credit wrap' insurance to infrastructure projects in India for raising resources in international markets.

The loans by RBI to these two subsidiary companies will be guaranteed by the Government of India and the RBI will be assured of a return higher than the average rate of return on its incremental investment. Government proposes to examine the legal and regulatory aspects of the recommendation, in consultation with RBI, in order to find an innovative method of enhancing the financial resources for infrastructure.


Defence Expenditure

98. I propose to increase the allocation for Defence to Rs.96,000 crore. This will include Rs.41,922 crore for capital expenditure. Needless to say, any additional requirement for the security of the nation will be provided.

Information Technology

99. Government has launched an ambitious programme for e-governance. The goal is to improve efficiency, convenience, accessibility and transparency in Government functions and take Government services to the common citizen.
I propose to increase the allocation for e-governance from Rs.395 crore in
2006-07 to Rs.719 crore in 2007-08. The Central Government supports
e-governance action plans at State levels, and I propose to increase the allocation for such support from Rs.300 crore in 2006-07 to Rs.500 crore in 2007-08. I also propose to provide Rs.33 crore for a new scheme of manpower development for the software export industry.

Backward Regions Grant Fund

100. The Backward Regions Grant Fund received Rs.5,000 crore in 2006-07. I propose to increase the allocation to Rs.5,800 crore in 2007-08. This will finance two components, one pertaining to 250 districts and the other pertaining to the special plan for Bihar. KBK districts of Orissa, which are included in the 250 districts, will continue to receive the same quantum of assistance as they have been receiving in the past.

Mumbai as a Financial Centre

101. The High Powered Expert Committee to make Mumbai a regional financial centre has submitted its report recently. I intend to place the report in the public domain and obtain feedback. It is my hope that we would be able to build a consensus on the key recommendations of the Committee, promote a world class financial centre in Mumbai, and realise the objective of making 'financial services' the next growth engine for India.

Vocational Education Mission

102. To sustain a high level of economic growth, it is essential to have a reservoir of skilled and trained manpower. Shortages have already emerged in a number of sectors. Moreover, we can take advantage of the demographic dividend thrown up by an increase in the working age population only if our young men and women have the required skills. The Prime Minister spoke of a Vocational Education Mission in his Independence Day address in 2006. A taskforce in the Planning Commission is chalking out strategies for vocational education programmes. Alternate models may be adopted, but the approach will be based on public-private partnership. I propose to make an initial provision of Rs.50 crore for beginning work on this mission.

Upgradation of ITIs

103. Honourable Members will recall that Government had taken up a programme for upgradation of 500 ITIs over five years beginning 2005. Revised courses in the first lot of 100 upgraded ITIs were started in August 2005 and in the second lot of 100 upgraded ITIs in August 2006. I expect that another 300 ITIs will be covered by August 2009. That would still leave 1,396 Government ITIs.

104. I propose that the 1,396 ITIs be upgraded into centres of excellence in specific trades and skills under public-private partnership. Under the proposed scheme, the State Government, as the owner of the ITI, will continue to regulate admissions and fees; the new management will be given academic and financial autonomy; and the Central Government will provide financial assistance by way of seed money. ITIs will be encouraged to start a second shift. Once a tripartite MoU is signed among the three stakeholders, I propose to grant an interest free loan up to Rs.2.5 crore to each ITI for upgradation and revision of courses. I seek the cooperation of State Governments in upgrading at least 300 ITIs every year, beginning 2007-08, under the PPP mode. I have kept aside Rs.750 crore for this purpose.

Employment for the Physically Challenged

105. Among the disadvantaged sections of the society are physically challenged persons. They face difficulties in obtaining regular employment. In order to incentivise employers in the organised sector to provide regular employment, I propose a scheme whereunder Government will reward the employer once the physically challenged employee is regularised and is enrolled under the Employees Provident Fund (EPF) and the Employees State Insurance (ESI). Under the scheme, Government will reimburse the employer's contribution to the EPF and ESI for the first three years. Government is ready to support the creation of about 100,000 jobs every year for physically challenged persons with a salary limit of Rs.25,000 per month. I estimate the cost to Government at Rs.150 crore per annum rising to Rs.450 crore per annum when the scheme is fully rolled out. I have therefore earmarked Rs.1,800 crore.

Debt Management Office

106. World over, debt management is distinct from monetary management. The establishment of a Debt Management Office (DMO) in the Government has been advocated for quite some time. The fiscal consolidation achieved so far has encouraged us to take the first step. Accordingly, I propose to set up an autonomous DMO and, in the first phase, a Middle Office will be set up to facilitate the transition to a full-fledged DMO.

Development Cooperation

107. In keeping with India's growing stature in international affairs, we must willingly assume greater responsibility in promoting development in other developing countries. At present, India extends development cooperation through a number of Ministries and agencies and the total sum is about US$ 1 billion per annum. It is felt that all activities relating to development cooperation should be brought under one umbrella. Accordingly, Government proposes to establish the India International Development Cooperation Agency (IIDCA). The Ministries of External Affairs, Finance and Commerce and other stakeholders will be represented on IIDCA.

Climate change

108. India is not a significant contributor to green house gas (GHG) emissions, nor will it be so in the foreseeable future. Nevertheless, in line with the principle of "common but differentiated responsibility", India has taken important steps to mitigate GHG emissions and adapt to climate change impact. India has also strongly promoted the clean development mechanism (CDM) under the Kyoto Protocol and has the world's largest number of CDM projects. Nevertheless, India is among the countries more vulnerable to climate change. Hence, Government proposes 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.

Commonwealth Games

109. India bid for and won for the city of Delhi the Commonwealth Games 2010. The nation was filled with pride when, under the guidance of Shri Rajiv Gandhi, we successfully hosted the Asian Games in 1982. We owe it to our people to make the Commonwealth Games an equally memorable event. I propose to provide in 2007-08 Rs.150 crore to the Ministry of Youth Affairs and Sports and Rs.350 crore to the Delhi Government for the Games. Similarly, I propose to provide Rs.50 crore for the Commonwealth Youth Games 2008 to be held in Pune.

History and Culture

110. As we celebrate the 150th year of the First War of Independence and the centenary year of the Satyagraha Movement, our thoughts go to the institutions that continue the work of Gandhiji and other constructive work. I intend to set apart Rs.30 crore for four institutions whose work we gratefully acknowledge. These are Sabarmati Ashram, Ahmedabad; Sevagram Ashram, Wardha; Bhandarkar Oriental Research Institute, Pune; and Rajendra Smriti Sanghrahalaya, Patna. I also intend to provide Rs.20 crore to reposition the Nehru Memorial Museum and Library, Delhi, as a major centre of intellectual activity.

111. The Ministry of Culture proposes to engage scholars from Indian and foreign institutions to work on specific projects. The terms of engagement will provide freedom and flexibility to the scholars. I intend to make an initial grant of Rs.5 crore to encourage this effort.

Institutions of Excellence

112. As in the last two years, I propose to make a special grant of Rs.100 crore to recognise excellence. Government has selected the Govind Ballabh Pant University of Agriculture & Technology, Pantnagar and the Tamil Nadu Agricultural University, Coimbatore, and each will be given Rs.50 crore.


113. Thanks to the Fiscal Responsibility legislations, the Central Government and the State Governments have regained lost fiscal ground. Rs. 110,268 crore of States' debt has been consolidated. Twenty States have availed of the benefit of debt waiver to the tune of Rs.8,575 crore.

114. In 2006-07, the Centre will give to the States as their share of taxes and duties Rs.120,377 crore. In 2007-08, this amount will increase to Rs.142,450 crore. Besides, total grants and loans, both under Plan and non-Plan, to States and Union Territories will increase from Rs.90,521 crore in 2006-07 to Rs.106,987 crore in 2007-08.

VAT, CST and a Roadmap towards GST

115. VAT has proved to be an unqualified success. VAT revenues of the implementing States increased by 13.8 per cent in 2005-06 and by 24.3 per cent in the first nine months of 2006-07. The next logical step is to phase out Central Sales Tax (CST). I am glad to report that the Central Government has reached an agreement with State Governments to phase out CST. Consequently, the CST rate will be reduced from 4 per cent to 3 per cent with effect from April 1, 2007. I have provided Rs.5,495 crore for compensation for losses, if any, on account of VAT and also on account of CST.

116. I wish to record my deep appreciation of the spirit of cooperative federalism displayed by State Governments and especially their Finance Ministers. At my request, the Empowered Committee of State Finance Ministers has agreed to work with the Central Government to prepare a roadmap for introducing a national level Goods and Services Tax (GST) with effect from April 1, 2010.

117. So far as the Central Government is concerned, the fiscal consolidation is proceeding according to the FRBM Act. Based on Revised Estimates, I am happy to report that the revenue deficit for the current year will be 2.0 per cent (against a BE of 2.1 per cent) and the fiscal deficit will be 3.7 per cent (against a BE of 3.8 per cent).


118. I turn to the Budget Estimates for 2007-08.

Plan Expenditure

119. I estimate Plan expenditure for 2007-08 at Rs.205,100 crore. As a proportion of total expenditure (net of the SBI share acquisition), Plan expenditure will be 32.0 per cent.

Non-Plan Expenditure

120. Non-Plan Expenditure in 2007-08 (net of the SBI share acquisition) is estimated at Rs.435,421. The increase over 2006-07 is only 6.5 per cent.

Revenue Deficit and Fiscal Deficit

121. Mr. Speaker, Sir, in the Budget Estimates for 2007-08, the total expenditure is estimated at Rs.680,521 crore (including Rs.40,000 crore for the SBI share acquisition). The total revenue receipts of the Central Government are projected to be Rs.486,422 crore and the revenue expenditure to be Rs.557,900 crore. Consequently, the revenue deficit is estimated at Rs.71,478 crore which is 1.5 per cent of the GDP. The fiscal deficit is estimated at Rs.150,948 crore, which is 3.3 per cent of the GDP. I am happy to report that we are on course to achieve the FRBMA targets.

Part - B


122. Mr. Speaker, I shall now present my tax proposals.

123. The UPA Government promised that "tax rates will be stable and conducive to growth, compliance and investment". The increase in gross tax revenue is proof of a promise fulfilled. While we have raised more tax revenue, we have also left more money in the hands of the people as savings and for investment.

124. Gross tax revenue has grown by 19.9 per cent, 20.0 per cent and 27.8 per cent in the first three years of this Government. The tax to GDP ratio has increased from 9.2 per cent in 2003-04 to 11.4 per cent in 2006-07. We intend to keep our tax rates moderate and stable and administer the tax laws in a tax payer-friendly manner.

Indirect Taxes

125. I shall begin with indirect taxes. Firstly, customs duties.

126. In January 2007, Government announced wide ranging reductions in tariffs. Import duties on capital goods, project imports, metals and specified inorganic chemicals were reduced by 2.5 percentage points and, in some cases, by 5 percentage points. Duties on some edible oils were reduced by 10 to 12.5 percentage points.

127. In order to take one more step towards comparable East Asian rates, I propose to reduce the peak rate for non-agricultural products from 12.5 per cent to 10 per cent.

128. I propose to reduce the duties on most chemicals and plastics from 12.5 per cent to 7.5 per cent.

129. The duty on prime steel is 5 per cent. Seconds and defectives augment supply. Keeping in mind the need for a differential, I propose to reduce the duty on seconds and defectives of steel from 20 per cent to 10 per cent.

130. I propose to fully exempt from duty all coking coal irrespective of the ash content.

131. Last year, I reduced the excise duty on all man-made fibres and yarns from 16 per cent to 8 per cent. To further encourage this industry, I propose to reduce the customs duty on polyester fibres and yarns from 10 per cent to 7.5 per cent. Consequently, the customs duty on raw-materials such as DMT, PTA and MEG will also be reduced from 10 per cent to 7.5 per cent.

132. Another industry that is a growth- and employment- driver is gem and jewellery. I propose to bring down the duty on cut and polished diamonds from 5 per cent to 3 per cent; on rough synthetic stones from 12.5 per cent to 5 per cent; and on unworked corals from 30 per cent to 10 per cent.

133. I propose to fully exempt dredgers from import duty.

134. To augment irrigation facilities and processing of agricultural products, I propose to reduce the duty on drip irrigation systems, agricultural sprinklers and food processing machinery from 7.5 per cent to 5 per cent.

135. While specified medical equipment attract a concessional duty of 5 per cent, other equipment are taxed at 12.5 per cent. I propose to bring down the general rate of import duty on medical equipment to 7.5 per cent.

136. In order to make edible oils more affordable, I propose to exempt crude as well as refined edible oils from the additional CV duty of 4 per cent. I also propose to reduce the duty on sunflower oil, both crude and refined, by 15 percentage points.

137. I have good news for cat and dog lovers. I propose to reduce the duty on pet foods from 30 per cent to 20 per cent.

138. I propose to reduce the duty on watch dials and movements as well as umbrella parts from 12.5 per cent to 5 per cent.

139. In order to promote research and development, I propose to extend the concessional rate of 5 per cent duty available to public funded research institutions to all research institutions registered with the Directorate of Scientific and Industrial Research. For the pharmaceutical and biotechnology sector, I propose to reduce the duty on 15 specified machinery from 7.5 per cent to 5 per cent.

140. Import of aircraft, including helicopters, by Government and scheduled airlines is, at present, exempt from all duties, and that position will continue. However, there is no reason to allow the exemption to other private importers. Hence, I propose to levy an import duty of 3 per cent, which is the WTO bound rate, on all private import of aircraft including helicopters. Such import will also attract countervailing duty and additional customs duty.

141. The Hoda Committee has submitted a report on mineral policy. Taking a leaf out of the report, and in order to conserve our natural resources as well as to raise revenue, I propose to impose an export duty of Rs.300 per metric tonne on export of iron ores and concentrates and Rs.2,000 per metric tonne on export of chrome ores and concentrates.

142. I shall now turn to my proposals on excise duties and service tax.

143. There will be no change in the general CENVAT rate or in the service tax rate.

144. On February 15, 2007, Government reduced the price of petrol and diesel by Rs.2 per litre and Re.1 per litre, respectively. I had agreed that the Revenue will bear a part of the burden. Hence, I propose to reduce the ad valorem component of excise duty on petrol and diesel from 8 per cent to 6 per cent.

145. Keeping in mind the special needs of several sectors and the interest of the consumers, I propose to grant relief from excise duty in deserving cases, especially job creating sectors:

• I propose to raise the exemption limit for small scale industry (SSI) from Rs.1 crore to Rs.1.5 crore.

• The food processing sector is poised to achieve high growth. Concessions were extended last year to several items of food. This year, I propose to fully exempt from excise duty biscuits whose retail sale price does not exceed Rs.50 per kilogram. I also propose to fully exempt from excise duty all kinds of food mixes including instant mixes. I can no longer be accused of being partial to idli and dosa mixes.

• I propose to reduce excise duty on umbrellas and parts of footwear from 16 per cent to 8 per cent.

• Plywood helps to save wood. Hence, I propose to reduce excise duty on plywood from 16 per cent to 8 per cent.

• Biodiesel will greatly reduce our dependence on fossil fuels. Hence, I propose to fully exempt biodiesel from excise duty.

146. To provide access to pure drinking water for households and communities, I propose to fully exempt from excise duty water purification devices operating on specified membrane based technologies as well as domestic water filters not using electricity.

147. Pipes used for carrying water from a water supply plant to a storage facility are exempt from excise duty. I propose to extend the exemption to all pipes of diameter exceeding 200 mm used in water supply systems.

148. There has been a significant increase in the retail price of cement. Last year, at this time, a bag of 50 kilogram was sold at a Maximum Retail Price (MRP) of Rs.190 or less which, I understand, is a remunerative price. I propose to reward cement manufacturers who hold the price line and tax those who do not. Accordingly, I propose to reduce the present rate of excise duty of Rs.400 per metric tonne to Rs.350 per metric tonne on cement which is sold in retail at not more than Rs.190 per bag. On cement that has a higher MRP, the excise duty will be Rs.600 per metric tonne.

149. I strongly support the campaign "say no to tobacco". Hence, I propose to increase the specific rates of excise duty on cigarettes by about 5 per cent. Similarly, excise duty (excluding cess) on biris, which was last fixed in 2001, will be raised from Rs.7 to Rs.11 per thousand for non-machine made biris and from Rs.17 to Rs.24 per thousand for machine made biris. There is an exemption from excise duty for unbranded biris up to 20 lakh biris in a year. Complaints have been received of misuse of the exemption. This exemption will henceforth be available subject to fulfilment of the condition of declaration with the Department of Central Excise and regular monitoring.

150. Pan masala containing tobacco will continue to bear an excise duty of 66 per cent. However, in the case of pan masala not containing tobacco, the duty will be reduced from 66 per cent to 45 per cent. I also propose to withdraw the exemption for pan masala containing tobacco and other tobacco products that is now given to units in the North Eastern States.

151. Based on a comprehensive review of exemptions and having posted them on the website and having invited comments, I propose to remove certain excise duty exemptions which are redundant or have outlived their utility.

152. I propose to raise the exemption limit for small service providers from Rs.400,000 to Rs.800,000. Consequently, 200,000 assessees out of a total of 400,000 assessees will go out of the service tax net. The revenue loss will be Rs.800 crore, but I am happy to give away this sum in the interest of the small service provider and the consumer.

153. While I bid goodbye to 200,000 assessees, I welcome the new assessees who will be brought into the fold. I propose to extend service tax to:

• Services outsourced for mining of mineral, oil or gas;

• Renting of immovable property for use in commerce or business; however, residential properties, vacant land used for agriculture and similar purposes, land for sports, entertainment and parking purposes, and immovable property for educational or religious purposes will be excluded;

• Development and supply of content for use in telecom and advertising purposes;

• Asset management services provided by individuals; and

• Design services.

154. State Governments levy a tax on the transfer of property in goods involved in the execution of a works contract. The value of services in a works contract should attract service tax. Hence, I propose to levy service tax on services involved in the execution of a works contract. However, I also propose an optional composition scheme under which service tax will be levied at only 2 per cent of the total value of the works contract.

155. I propose to exempt service tax on services provided by Resident Welfare Associations to their members who contribute Rs.3000 or less per month for services rendered.

156. In order to encourage innovation, I propose to exempt from service tax all services provided by technology business incubators. Similarly, their incubatees whose annual business turnover does not exceed Rs.50 lakhs will be exempt from service tax for the first three years.

157. To make India a preferred destination for drug testing, I propose to exempt clinical trial of new drugs from service tax.

158. The scope of some services that are currently taxed is being expanded or redefined. However, I shall not burden the House with the details.

159. The telecommunications industry has repeatedly requested that the multifarious taxes, charges and fees applicable to the industry should be unified and a single levy on revenue should be collected. The request merits consideration. Hence, I propose to request the Department of Telecommunications to constitute a committee to study the present structure of levies and make suitable recommendations to Government.

Direct Taxes

160. I shall now move to direct taxes.

161. In the current year, there has been better tax compliance by individuals. I hope this trend will continue.

162. The current slabs and rates of personal income tax (PIT) were introduced only two years ago. They constitute a moderate tax regime. A comprehensive review should await the proposed Income Tax code which will be introduced in Parliament this year. Nevertheless, without altering the rates, I am inclined to consider giving some relief to tax payers, especially in view of the cooperation they have extended to the Department of Revenue. Accordingly, I propose that:

• the threshold limit of exemption in the case of all assessees be increased by Rs.10,000, thus giving every assessee a relief of Rs.1,000;

• consequently, in the case of a woman assessee, the threshold limit be increased from Rs.135,000 to Rs.145,000, giving her a relief of Rs.1,000;

• the threshold limit of exemption in the case of a senior citizen be increased from Rs.185,000 to Rs.195,000, giving him or her a relief of Rs.2,000; and

• the deduction in respect of medical insurance premium under section 80D be increased to a maximum of Rs.15,000 and, in the case of a senior citizen, a maximum of Rs.20,000.

163. On the corporate income tax (CIT) side too, there has been better compliance. Consequently, I propose to keep the same rate of CIT with one important modification. In order to encourage small and medium enterprises to invest and grow, I propose to remove the surcharge on income tax on all firms and companies with a taxable income of Rs.1 crore or less. This will benefit about 1,200,000 firms and companies.

164. Profit-making cooperative banks, other than primary societies and primary banks (i.e., PACs and PCARDBs), have been brought on par with other banks. However, I have noticed some anomalies and I propose to correct them in the interest of the cooperative banks. Accordingly, the benefit of Section 36(1)(viii) will be available to cooperative banks. Likewise, cooperative banks will also be allowed deduction in respect of provision for bad and doubtful debts under section 36(1)(viia). Amalgamation and de-merger of banking companies is tax neutral and this benefit will be extended to cooperative banks.

165. Section 80IA of the Income Tax Act lists the infrastructure facilities that are entitled to tax concessions. There are some obvious claimants to this benefit. One is cross country natural gas distribution network, including gas pipeline and storage facilities integrated to the network. The second is navigation channel in the sea. I propose to extend the tax concession to these two facilities.

166. In order to facilitate the creation of urban infrastructure, I propose to allow issue of tax-free bonds through State Pooled Finance Entities formed for raising funds for a group of urban local bodies.

167. Last year, I had constituted an expert body to advise the Government on tax policy in respect of the gem and jewellery industry. Taking into account its recommendations, the best international practices and the need for a simple tax regime, I propose to introduce a benign assessment procedure for assessees engaged in diamond manufacturing and trading who declare profits from such activities at 8 per cent or more of the turnover. Instructions in this regard will issue shortly.

168. We will require 20,000 more hotel rooms for the Commonwealth Games. Hence, I propose a five year holiday from income tax for two, three or four star hotels as well as for convention centres with a seating capacity of not less than 3,000. They should be completed and begin operations in the National Capital Territory of Delhi or in the adjacent districts of Faridabad, Gurgaon, Ghaziabad or Gautam Budh Nagar during the period April 1, 2007 to March 31, 2010.

169. Section 35(2AB) allows a weighted deduction of 150 per cent for expenditure relating to in-house research and development. I propose to extend the concession for five more years until March 31, 2012.

170. Undertakings in Jammu & Kashmir presently enjoy a tax holiday that is due to end on March 31, 2007. Considering the importance of promoting further investment in that State, I propose to extend the benefit for another five years up to March 31, 2012.

171. E-filing of corporate returns introduced this financial year has been a resounding success. Until January 31, 2007, 301,736 returns were electronically filed by corporates. Our analysis shows that the effective rate of tax paid by all corporates, thanks to numerous tax concessions and exemptions - several of them well-intended - was only 19.2 per cent. In 1996-97, we introduced the Minimum Alternate Tax (MAT) for companies with book profits, and its purpose is to bring about horizontal equity in taxation. MAT should therefore apply, as far as possible, to all corporate incomes. Hence, I propose to extend MAT to income in respect of which deduction is claimed under sections 10A and 10B of the Income Tax Act.

172. I also propose to partially modify a deduction that is available to certain companies. Without altering the overall limit of the special reserve equal to twice the net worth under section 36(1)(viii) of the Income Tax Act, I propose to stretch out the period by restricting the deduction to 20 per cent of the profits each year and limit the benefit to banks and certain financial corporations.

173. Venture capital funds are a useful source of risk capital, especially for start-up ventures in the knowledge-intensive sectors. Since such funds enjoy a pass-through status, it is necessary to limit the tax benefit to investments made in truly deserving sectors. Accordingly, I propose to grant pass-through status to venture capital funds only in respect of investments in venture capital undertakings in biotechnology; information technology relating to hardware and software development; nanotechnology; seed research and development; research and development of new chemical entities in the pharmaceutical sector; dairy industry; poultry industry; and production of bio-fuels. In order to promote business tourism, I also propose to allow this benefit to venture capital funds that invest in hotel-cum-convention centres of a certain description and size.

174. In December 2006, I put a limit of Rs.50 lakh per investor per year with respect to capital gains bonds issued by NHAI and REC under section 54EC of the Income Tax Act. As a result, many small investors could obtain these bonds and save on capital gains. I propose to continue this provision and, accordingly, I propose to amend section 54EC to that effect.

175. I propose to expand the tax base of capital gains to include certain works of art.

176. I believe that my direct tax proposals have brought about more horizontal equity. It is also necessary to improve vertical equity. Having regard to the capacity to pay, I propose to raise the rate of dividend distribution tax from 12.5 per cent to 15 per cent on dividends distributed by companies.

177. Dividends distributed by money market mutual funds and liquid mutual funds enjoy concessional tax rates giving rise to huge arbitrage opportunities. I propose to address this distortion by raising the dividend distribution tax on dividends paid by such entities to 25 per cent for all investors.

178. Fringe Benefit Tax (FBT) has now stabilized. I have received a few representations regarding some aspects of sales promotion. Hence, I propose to clarify the doubts by excluding expenditure on free samples as well as expenditure on displays from the scope of FBT.

179. A number of companies provide fringe benefits to employees through Employees' Stock Option Plan (ESOP). I propose to bring ESOPs under FBT. The value of the fringe benefit will be determined, in accordance with a prescribed method, on the date of exercise of the option.

180. The Banking Cash Transactions Tax (BCTT) continues to be an extremely useful tool to track unaccounted monies and trace their source and destination. It has led the Income Tax Department to many money laundering and hawala transactions. Having regard to the experience gained, I propose to exclude cash withdrawals by the Central and State Governments from the scope of BCTT. Further, I propose to raise the exemption limit for individuals and HUFs from Rs.25,000 to Rs.50,000. As other instruments become more effective, I think it would be possible to review BCTT next year.

181. I have a proposal regarding the cess for education. While the cess of 2 per cent on all taxes to fund basic education will remain, I propose to levy an additional cess of 1 per cent on all taxes to fund secondary education and higher education and the expansion of capacity by 54 per cent for reservation for socially and educationally backward classes.

182. Finally, there is a small matter which has large beneficial consequences. In 2001, 'Aviation Turbine Fuel sold to turbo-prop aircraft' was included in the list of declared goods under section 14 of the CST Act. Turbo-prop aircraft have been replaced by new generation small aircraft which have taken air services to smaller airports and to the remote parts of the country. Hence, I propose to amend the provision to cover all small aircraft with maximum takeoff mass of less than 40,000 kgs operated by scheduled airlines.

183. Along with tax reforms, the Government has laid great emphasis on tax administration. The cost of collection of taxes in India is among the lowest in the world. A number of administrative goals have been set for 2007-08. These include expanding the coverage of Annual Information Returns, extending the Refund Banker System to more areas, extending the e-payment facility through more banks, making electronic filing of returns mandatory for more categories of assessees and creating new Large Tax Payer Units.

184. My tax proposals on direct taxes are estimated to yield a gain of Rs.3,000 crore. On the indirect taxes side, the proposals are revenue neutral.


185. Mr. Speaker, Sir, our human and gender development indices are low not because of high growth but because growth is not high enough. Faster economic growth has given us, once again, the opportunity to unfurl the sails and catch the wind. Without growth, I could not have given a new thrust to agriculture. I could not have given relief to the small tax payer, the small service provider and to small scale industry. I could not have promised 100,000 scholarships or 100,000 jobs for the physically challenged. I could not have promised a massive ground water recharge programme or social security for rural landless households.

186. The UPA Government has delivered on the promise of savings and investment, and will deliver on the promise of encouraging more savings and translating the savings into more investment. It has delivered on the promise of growth, and will deliver on the promise of making growth more inclusive. I believe that, given a right mix of policies, the poor will benefit from growth that is driven by savings and investment and that is more inclusive. As Dr. Muhammad Yunus, the Nobel laureate, said, "Faster growth rate is essential for faster reduction in poverty. There is no other trick to it."

187. Sir, with these words, I commend the Budget to the House.