India's defence budget has been hiked by 10 percent to Rs.1,056 billion ($26.5 billion), Finance Minister P. Chidambaram announced Friday, saying even more money would be provided if required.
"The allocation for defence is being raised by 10 percent from Rs.96,000 crore (Rs.960 billion) to Rs. One lakh five thousand six hundred crore (Rs.1,056 billion)," the minister said while delivering his budget speech in parliament.
"I have assured the raksha mantri (defence minister) that more money would also be provided if necessary, especially for capital expenditure," he added.
Indo-Asian News Service
Showing posts with label Union Budget 2008. Show all posts
Showing posts with label Union Budget 2008. Show all posts
Friday, February 29, 2008
Union Budget 2008: Complete waiver of all loans for marginal and small farmers: Chidambaram (Budget Highlights)
The highlights of the Indian budget for 2008-09 presented by Finance Minister P. Chidamabaram in the Lok Sabha Friday:
1. Over 8 percent growth for 12 successive years
2. Maintaining growth with price stability
3. Maintaining supply of food main task in coming fiscal
4. Concern: Inflationary trends
5. Concern: Capital inflow exceeds current account deficit
Farm growth disappointing at 2.6 percent
6. Gross budgetary support rises to Rs.380 billion
7. Education gets 20 percent more to Rs.344 billion from Rs.286.8 billion
8. Rural infrastructure scheme Bharat Nirman to get Rs.312.8 billion
9. School enrolment scheme Sarva Shiksha Abhiyan to get Rs.131 billion
10. Government and Reserve Bank of India to manage capital inflow
11. 16 new central universities
12. 3 new Indian Institutes of Technology
13. Government to raise additional resources worth Rs.100 billion
14. Midday meal scheme for schoolchildren to get Rs.80 billion
15. National Rural Employment Guarantee Scheme (NREGS) extended to all 596 rural districts
16. NREGS to get Rs.160 billion, more money will be provided on need
17. Jawaharlal Nehru Urban Renewal Mission to get Rs.68.66 billion, up from Rs.54.82 billion
18. National health insurance for poor introduced
19. Northeast development to get Rs.14.55 billion
20. Scheduled Castes, Scheduled Tribes, minorities get special allocations
21. Rs.5.5 billion for minority dominated districts
22. HIV/AIDS prevention to get Rs.9.93 billion
1. Over 8 percent growth for 12 successive years
2. Maintaining growth with price stability
3. Maintaining supply of food main task in coming fiscal
4. Concern: Inflationary trends
5. Concern: Capital inflow exceeds current account deficit
Farm growth disappointing at 2.6 percent
6. Gross budgetary support rises to Rs.380 billion
7. Education gets 20 percent more to Rs.344 billion from Rs.286.8 billion
8. Rural infrastructure scheme Bharat Nirman to get Rs.312.8 billion
9. School enrolment scheme Sarva Shiksha Abhiyan to get Rs.131 billion
10. Government and Reserve Bank of India to manage capital inflow
11. 16 new central universities
12. 3 new Indian Institutes of Technology
13. Government to raise additional resources worth Rs.100 billion
14. Midday meal scheme for schoolchildren to get Rs.80 billion
15. National Rural Employment Guarantee Scheme (NREGS) extended to all 596 rural districts
16. NREGS to get Rs.160 billion, more money will be provided on need
17. Jawaharlal Nehru Urban Renewal Mission to get Rs.68.66 billion, up from Rs.54.82 billion
18. National health insurance for poor introduced
19. Northeast development to get Rs.14.55 billion
20. Scheduled Castes, Scheduled Tribes, minorities get special allocations
21. Rs.5.5 billion for minority dominated districts
22. HIV/AIDS prevention to get Rs.9.93 billion
Chidambaram presents India's national budget 2008
Finance Minister P. Chidambaram Friday began presenting India's central budget for the the next fiscal year with the hope that the country will maintain a high growth rate of 8.7 percent even as challenges remained, notably in increasing farm production.
Thanking the United Progressive Alliance (UPA) government for allowing him to present all its five national budgets, Chidambaram said this was a "rare honour" which he shared with Prime Minister Manmohan Singh.
"The economy is expected to grow by 8.7 percent," he said, referring to the growth for this fiscal projected by the Economic Survey tabled by him a day earlier. "But I personally think, the growth would be slightly higher at 8.8 percent."
Starting his speech with concerns over inflationary pressures on account of both domestic and global developments, Chidambaram said the intention of his government was to make growth more inclusive with focus on the social sector and agriculture.
Indo-Asian News Service
Thanking the United Progressive Alliance (UPA) government for allowing him to present all its five national budgets, Chidambaram said this was a "rare honour" which he shared with Prime Minister Manmohan Singh.
"The economy is expected to grow by 8.7 percent," he said, referring to the growth for this fiscal projected by the Economic Survey tabled by him a day earlier. "But I personally think, the growth would be slightly higher at 8.8 percent."
Starting his speech with concerns over inflationary pressures on account of both domestic and global developments, Chidambaram said the intention of his government was to make growth more inclusive with focus on the social sector and agriculture.
Indo-Asian News Service
Markets decline ahead of Union Budget presentation
The Indian capital market opened on a negative note with weak cues from global markets and investor apprehension ahead of the national budget for 2008-09 to be presented by Finance Minister P. Chidambaram Friday.
The 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE) opened with a loss of 44.94 points at 17,779.54. Within 10 minutes into trade, it was trading at 17,696.21, with a loss of 128 points compared to its previous close.
The broader 50-share S&P CNX Nifty index of the National Stock Exchange was down by 28.55 points at 5,256.45 points.
The market breadth at BSE was negative with low volumes. In the initial trade 386 shares advanced, 370 declined and 25 remained unchanged.
All the Asian markets were trading in red.
In US markets, Dow Jones and Nasdaq indices ended with hefty losses Thursday.
At BSE, metal, IT, energy and banking stocks opened in red.
Major gainers in early trade at BSE were TCS, NTPC, Reliance Industries, Nagarjuna Fertiliser and GMR Infrastructure.
Tata Power, ICICI bank, Wipro, Infosys, Satyam, GAIL and NALCO were significant shares on the top losers' list.
Indo-Asian News Service
The 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE) opened with a loss of 44.94 points at 17,779.54. Within 10 minutes into trade, it was trading at 17,696.21, with a loss of 128 points compared to its previous close.
The broader 50-share S&P CNX Nifty index of the National Stock Exchange was down by 28.55 points at 5,256.45 points.
The market breadth at BSE was negative with low volumes. In the initial trade 386 shares advanced, 370 declined and 25 remained unchanged.
All the Asian markets were trading in red.
In US markets, Dow Jones and Nasdaq indices ended with hefty losses Thursday.
At BSE, metal, IT, energy and banking stocks opened in red.
Major gainers in early trade at BSE were TCS, NTPC, Reliance Industries, Nagarjuna Fertiliser and GMR Infrastructure.
Tata Power, ICICI bank, Wipro, Infosys, Satyam, GAIL and NALCO were significant shares on the top losers' list.
Indo-Asian News Service
Thursday, February 28, 2008
Highlights of Economic Survey 2008
The salient points of the Economic Survey for 2007-08 presented by Finance Minister P. Chidamabaram in the Lok Sabha Thursday:
1. Indian economy projected to grow 8.7 percent in 2007-08
2. To top $1 trillion this fiscal at market exchange rate
3. Inflation projected to decline to 4.1 percent in 2007-08, from 5.6 percent in 2006-07
4. Focus on containing inflation
5. Fiscal deficit to decline to 3.3 percent
6. Revenue deficit to decline to 1.5 percent
7. Gross tax GDP ratio to rise to 11.8 percent
8. Domestic investment and savings drive growth
9. Bank credit grows by 21.5 percent
10. Increased activity at stock markets, key indices giving returns of around 38 percent
11. Money registers annual average growth of 19.5 percent in 2006-07
12. Gross foreign direct investments (FDI) inflows reaching $11.2 billion in first six months of 2007-08
13. 150 percent increase in net FDI inflows in 2006-07 to $23 billion.
14. 70 percent export target achieved during April-Dec 2007
15. Concern: Rupee appreciation
16. Exporters provided relief to offset rising rupee
17. Industrial sector achieves 9.2 percent growth during April-Dec 2007
18. Services sector growth continues, transport and communications leads the way with 15.3 percent growth
19. 13.9 percent growth in financial services in 2006-07
20. Revenue expenditure grows 17 percent, higher than target of 5.4 percent
21. Concern: infrastructure constraints
22. Concern: slowdown in consumer goods sector
23. Non-food crops production exceeds target
24. Food grain production in 2007-08 expected to fall short of the target by 2.2 million tonnes
25. Food stocks comfortable
26. Concern: loss of dynamism in agriculture and allied sectors
27. 42.7 million self-help groups covered under micro finance
28. Fundamentals continue to inspire confidence
29. Investment climate full of optimism
30. 100 percent foreign direct investment (FDI) in home appliances, rural agricultural banks
31. 51 percent FDI in rural health
32. Some FDI in retail trade
33. Concern: Labour force growing faster than employment growth
34. Challenge: Maintaining 9 percent GDP growth
Indo-Asian News Service
1. Indian economy projected to grow 8.7 percent in 2007-08
2. To top $1 trillion this fiscal at market exchange rate
3. Inflation projected to decline to 4.1 percent in 2007-08, from 5.6 percent in 2006-07
4. Focus on containing inflation
5. Fiscal deficit to decline to 3.3 percent
6. Revenue deficit to decline to 1.5 percent
7. Gross tax GDP ratio to rise to 11.8 percent
8. Domestic investment and savings drive growth
9. Bank credit grows by 21.5 percent
10. Increased activity at stock markets, key indices giving returns of around 38 percent
11. Money registers annual average growth of 19.5 percent in 2006-07
12. Gross foreign direct investments (FDI) inflows reaching $11.2 billion in first six months of 2007-08
13. 150 percent increase in net FDI inflows in 2006-07 to $23 billion.
14. 70 percent export target achieved during April-Dec 2007
15. Concern: Rupee appreciation
16. Exporters provided relief to offset rising rupee
17. Industrial sector achieves 9.2 percent growth during April-Dec 2007
18. Services sector growth continues, transport and communications leads the way with 15.3 percent growth
19. 13.9 percent growth in financial services in 2006-07
20. Revenue expenditure grows 17 percent, higher than target of 5.4 percent
21. Concern: infrastructure constraints
22. Concern: slowdown in consumer goods sector
23. Non-food crops production exceeds target
24. Food grain production in 2007-08 expected to fall short of the target by 2.2 million tonnes
25. Food stocks comfortable
26. Concern: loss of dynamism in agriculture and allied sectors
27. 42.7 million self-help groups covered under micro finance
28. Fundamentals continue to inspire confidence
29. Investment climate full of optimism
30. 100 percent foreign direct investment (FDI) in home appliances, rural agricultural banks
31. 51 percent FDI in rural health
32. Some FDI in retail trade
33. Concern: Labour force growing faster than employment growth
34. Challenge: Maintaining 9 percent GDP growth
Indo-Asian News Service
A populist budget is not a bad thing
There are two people whom I hope Finance Minister P Chidambaram pays heed to when he presents his budget on February 29th. The first Railway Minister Lalu Prasad Yadav, the second P Chidambaram, the author and columnist.
Lalu has cut passenger fares. That should please the UPA, the alliance that is at power in the center, and their voters. But the cut is no give away. Lalu has been cutting rates over the past few budgets, you can call it populist but the cuts don’t put any serious strain on the finances of the railways. That’s a position endorsed by my friend and CNBC TV18’s Economic Policy Editor, Vivian Fernandes.
And P C the author and columnist: Well he exhorts us from bookshop displays across the country that Good Economics Works for Everyone. Bad Economics, I may add, Works for No One. Not even for a Party that faces over a dozen elections in the next 15 months, about 10 states go to the polls before the BIG one. Just look at what Jaswant Singh “gave away” as finance minister just a month before the NDA was voted out in May 2004.
Am I asking P C not to present an “election” budget? Of course not. In fact I would be disappointed in him as a politician if his last full budget before the next elections did not make a political statement. All I am asking is that he leaves the fisc in the health that it is in today or at least don't bleed it too much. Don’t give away with the abandon of a man who knows that the ills of his actions will only visit future finance ministers and governments. Remember that as healthy as the tax collections have been over the last four years India’s fiscal deficit at 6.8% of GDP remains amongst the highest in the world.
Now that number is in itself not such a worrying thing as India also remains one of the fastest growing economies in the world, and while it may not touch last years 9.6% it is still expected to move ahead at a rollicking 8.7%. This, now brings me to what I would like to see him do in this budget, concentrate on growth.
In previous budgets growth was almost taken for granted, the focus was on inflation control. There was nothing wrong with that, after all India was riding the tail wind of a Global boom that pretty much took care of growth. On the other hand high oil prices could have pushed inflation higher than desirable.
But this year things are different. There is the weakness in the global economy, and even if it does not translate into a global recession, the Indian economy will no longer have the benefit of booming global trade. Further there are signs that the five-year old surge in India’s industrial growth may have peaked as long ago as in the last quarter of last year. I would argue then that it is time to cosset the “animal spirit” of industry that drives investment growth.
What can the Chidambaram do to help? . Cutting rates is the most obvious thing. Two rates, interest and tax. The first is not his to do and God knows he has given the RBI enough signals, I just hope he continues doing this doggedly.
Tax rates then. The good thing about an election year is that some tax rates will come down. Actually even if it were not election year, P C is committed to bringing down excise and custom rates. He could also bring down personal income tax rates. All of this will put more money in the pockets of Indian consumers and that is always a good thing. On the Corporate tax side the surcharge on corporate taxes could go but he may find it difficult to get cut in Corporate tax rates past the Left.
But you know something, while Corporate India would welcome a cut in these rates and would be happy to see some of the more “irritating” taxes go they would this time happily settle for anything he does to make it easier to do business in India.
They would like for instance tax compliance costs to come down drastically. Gaurav Taneja, the head of consulting and audit firms Ernst and Young Tax practise, in a discussion on CNBC VT18 pointed out that the compliance cost for a company that a turnover of Rs 10 crore and for that with a turnover of Rs 10,000 crore is about the same. The most recent bugbear here is the Fringe Benefit Tax. In it’s present form it not just pushes up compliance costs but by taxing genuine business expenditure it harks back to the days of disallowance of business expenditure.
Corporate India would also like to see him do something about tax litigation. At last estimate Rs 120 Thousand crore was caught in litigation. This is money that has been paid as taxes, accounted for in the government’s books as receipts but is being disputed by those who have paid the taxes. The Finance minister says corporates are being too litigious. But Dinesh Kannabar, the head of tax practise at audit and consulting firm Price Waterhouse Coopers says the government is the biggest litigant. He argues that it is Tax officers who had lost their cases when it went before the Commissioner of Appeals who have brought up the majority of the 1.5 million cases pending at the Income Tax Appellate tribunal.
The way forward here. Some radical steps. First, fall into the global practise of not allowing a taxman who has lost an appeal heard by his own superior, a commissioner of appeals in this case, to go before the I T Appellate Tribunal. Second; allow a wider scale of advance tax rulings. This means that even before a transaction is carried out the tax department should advise the concerned persons what the tax liability would be. If the tax paid is agreed upon there would be far fewer cases going to court!.
The other thing that needs to be done to keep growth on course is Infrastructure. Current government estimates are that India needs $ 490 billion over the next five years. Equity can only bring in some of this so steps are needed to deepen the debt markets. In addition the extension of exemptions for Power Projects that run out in 2010 and maybe priority sector status for power. More money for rural infrasructure and urban transport would also be welcome. And lets not forget the softer side of infrastructure, a trained, educated work force. Lets hope we see more money spent on education and policy to encourage private sector participation here.
Finally Agriculture. Growth is as much about investment as it is about demand. Tax cuts, employment guarantee programmes all of them certainly help put money into the pockets of rural India. But nothing can do it better than increasing agricultural growth. The 11th plan document hints at the need for another Green Revolution, the programme that in the 60s and the 70s took Indian farm yields to higher trajectory, it would be interesting to see what he does here.
So yes there will be the flavour of elections in this budget. But if Chidambaram were to stick by the Britannica Concise Encyclopedia definition of Populism as a “Political program or movement that champions the common person” and remembers that nothing can Champion the Aam Admi better than Growth, it won’t be a bad thing. Good Economics Works For Everybody.
Source : moneycontrol.com
Lalu has cut passenger fares. That should please the UPA, the alliance that is at power in the center, and their voters. But the cut is no give away. Lalu has been cutting rates over the past few budgets, you can call it populist but the cuts don’t put any serious strain on the finances of the railways. That’s a position endorsed by my friend and CNBC TV18’s Economic Policy Editor, Vivian Fernandes.
And P C the author and columnist: Well he exhorts us from bookshop displays across the country that Good Economics Works for Everyone. Bad Economics, I may add, Works for No One. Not even for a Party that faces over a dozen elections in the next 15 months, about 10 states go to the polls before the BIG one. Just look at what Jaswant Singh “gave away” as finance minister just a month before the NDA was voted out in May 2004.
Am I asking P C not to present an “election” budget? Of course not. In fact I would be disappointed in him as a politician if his last full budget before the next elections did not make a political statement. All I am asking is that he leaves the fisc in the health that it is in today or at least don't bleed it too much. Don’t give away with the abandon of a man who knows that the ills of his actions will only visit future finance ministers and governments. Remember that as healthy as the tax collections have been over the last four years India’s fiscal deficit at 6.8% of GDP remains amongst the highest in the world.
Now that number is in itself not such a worrying thing as India also remains one of the fastest growing economies in the world, and while it may not touch last years 9.6% it is still expected to move ahead at a rollicking 8.7%. This, now brings me to what I would like to see him do in this budget, concentrate on growth.
In previous budgets growth was almost taken for granted, the focus was on inflation control. There was nothing wrong with that, after all India was riding the tail wind of a Global boom that pretty much took care of growth. On the other hand high oil prices could have pushed inflation higher than desirable.
But this year things are different. There is the weakness in the global economy, and even if it does not translate into a global recession, the Indian economy will no longer have the benefit of booming global trade. Further there are signs that the five-year old surge in India’s industrial growth may have peaked as long ago as in the last quarter of last year. I would argue then that it is time to cosset the “animal spirit” of industry that drives investment growth.
What can the Chidambaram do to help? . Cutting rates is the most obvious thing. Two rates, interest and tax. The first is not his to do and God knows he has given the RBI enough signals, I just hope he continues doing this doggedly.
Tax rates then. The good thing about an election year is that some tax rates will come down. Actually even if it were not election year, P C is committed to bringing down excise and custom rates. He could also bring down personal income tax rates. All of this will put more money in the pockets of Indian consumers and that is always a good thing. On the Corporate tax side the surcharge on corporate taxes could go but he may find it difficult to get cut in Corporate tax rates past the Left.
But you know something, while Corporate India would welcome a cut in these rates and would be happy to see some of the more “irritating” taxes go they would this time happily settle for anything he does to make it easier to do business in India.
They would like for instance tax compliance costs to come down drastically. Gaurav Taneja, the head of consulting and audit firms Ernst and Young Tax practise, in a discussion on CNBC VT18 pointed out that the compliance cost for a company that a turnover of Rs 10 crore and for that with a turnover of Rs 10,000 crore is about the same. The most recent bugbear here is the Fringe Benefit Tax. In it’s present form it not just pushes up compliance costs but by taxing genuine business expenditure it harks back to the days of disallowance of business expenditure.
Corporate India would also like to see him do something about tax litigation. At last estimate Rs 120 Thousand crore was caught in litigation. This is money that has been paid as taxes, accounted for in the government’s books as receipts but is being disputed by those who have paid the taxes. The Finance minister says corporates are being too litigious. But Dinesh Kannabar, the head of tax practise at audit and consulting firm Price Waterhouse Coopers says the government is the biggest litigant. He argues that it is Tax officers who had lost their cases when it went before the Commissioner of Appeals who have brought up the majority of the 1.5 million cases pending at the Income Tax Appellate tribunal.
The way forward here. Some radical steps. First, fall into the global practise of not allowing a taxman who has lost an appeal heard by his own superior, a commissioner of appeals in this case, to go before the I T Appellate Tribunal. Second; allow a wider scale of advance tax rulings. This means that even before a transaction is carried out the tax department should advise the concerned persons what the tax liability would be. If the tax paid is agreed upon there would be far fewer cases going to court!.
The other thing that needs to be done to keep growth on course is Infrastructure. Current government estimates are that India needs $ 490 billion over the next five years. Equity can only bring in some of this so steps are needed to deepen the debt markets. In addition the extension of exemptions for Power Projects that run out in 2010 and maybe priority sector status for power. More money for rural infrasructure and urban transport would also be welcome. And lets not forget the softer side of infrastructure, a trained, educated work force. Lets hope we see more money spent on education and policy to encourage private sector participation here.
Finally Agriculture. Growth is as much about investment as it is about demand. Tax cuts, employment guarantee programmes all of them certainly help put money into the pockets of rural India. But nothing can do it better than increasing agricultural growth. The 11th plan document hints at the need for another Green Revolution, the programme that in the 60s and the 70s took Indian farm yields to higher trajectory, it would be interesting to see what he does here.
So yes there will be the flavour of elections in this budget. But if Chidambaram were to stick by the Britannica Concise Encyclopedia definition of Populism as a “Political program or movement that champions the common person” and remembers that nothing can Champion the Aam Admi better than Growth, it won’t be a bad thing. Good Economics Works For Everybody.
Source : moneycontrol.com
Slowing growth, polls could push finance minister into cutting taxes in Union Budget 2008
Finance minister Palaniappan Chidambaram may cut taxes in this week’s Budget, aiming to spur an economy that last quarter probably grew at the slowest pace in more than two years.
Chidambaram may reduce corporate levies and make more personal income tax exempt in his 29 February Budget, said Tushar Poddar, an economist at Goldman Sachs Group Inc. Data due the same day will show the economy expanded 8.4% in the three months to 31 December, slowing from 8.9% in the previous quarter, according to a Bloomberg survey.
The Harvard-trained minister may use the Budget to stimulate Asia’s third largest economy after inflation-fighting interest rate increases by the Reserve Bank of India (RBI) since October 2004 hurt consumer demand. Lower taxes will also help secure voter support at general elections coming up anytime before May 2009.
“The overarching theme for this year’s Budget will be populism,” Goldman’s Poddar said. “With growth expected to slow due to higher rates and uncertainty regarding the impact of the US recession, we expect the finance minister to provide some stimulus by reducing corporate and income taxes.” Chidambaram, whose Congress party also faces nine state elections this year, may remove levies amounting to 3.9% imposed in addition to the company tax rate, effectively reducing corporate tax liability to 30%, Poddar said.
JPMorgan Chase and Co. senior economist Rajeev Malik expects a cut in excise duties on consumer goods, such as two-wheelers, besides an increase in the income tax exemption limit to Rs125,000 from Rs110,000 in a nation where only 32 million of the population of 1.1 billion pay taxes.
The minister this month described the growth forecast for the current year as “disappointing” after the statistics department said India’s $906 billion (Rs35.9 trillion) economy will expand 8.7% in the year to 31 March, the first slowdown in three years. Growth averaged 9.5% in the last two years.
“Fiscal measures will help to keep the economy going,” said Devan Kaloo, who helps manage $9 billion for Aberdeen Asset Management Ltd in London. “However, rising expenses on subsidies limit the ability for a major cut in tax rates.”
Though Chidambaram may forecast a reduction in the budget deficit to 3% of gross domestic product (GDP) by 31 March 2009, from a targeted 3.3% of GDP in the previous year—in line with the requirements of law—he has treated bonds issued by the government to oil and fertilizer companies in the past two years as “off-budget” items.
In the 10 months to January, the government has given bonds worth Rs15,200 crore to oil and fertilizer companies for selling below market prices. The International Monetary Fund estimates India’s budget deficit to be closer to 4.5% of GDP in the current year ending 31 March 2008, including these “off-budget” subsidies.
Concerns over the country’s budget deficit and total debt, which is more than 75% of its GDP, have hurt India’s credit ratings, increasing borrowing costs for companies.
Moody’s Investors Service has a Ba2 on India’s long-term local currency rating, which is two levels below investment grade, while Standard and Poor’s has assigned a BBB-, their lowest investment grade.
India, which outlays 40% of its revenue on interest payments, subsidies and defence, has additional spending pressure in an election year. The Sixth Pay Commission, formed in 2006 to revise salaries of government workers, is scheduled to submit its report this year.
Chidambaram may provide for basic salaries of government staff to rise as much as 40% in addition to higher pensions and other benefits, HSBC Group Plc. economist Robert Prior-Wandesforde estimates.
And with the Congress party suffering electoral reverses in almost all state polls in the past year with consumer prices remaining high, Chidambaram may waive farmers’ debt and spend more in rural areas, he said.
Source: Mint
Chidambaram may reduce corporate levies and make more personal income tax exempt in his 29 February Budget, said Tushar Poddar, an economist at Goldman Sachs Group Inc. Data due the same day will show the economy expanded 8.4% in the three months to 31 December, slowing from 8.9% in the previous quarter, according to a Bloomberg survey.
The Harvard-trained minister may use the Budget to stimulate Asia’s third largest economy after inflation-fighting interest rate increases by the Reserve Bank of India (RBI) since October 2004 hurt consumer demand. Lower taxes will also help secure voter support at general elections coming up anytime before May 2009.
“The overarching theme for this year’s Budget will be populism,” Goldman’s Poddar said. “With growth expected to slow due to higher rates and uncertainty regarding the impact of the US recession, we expect the finance minister to provide some stimulus by reducing corporate and income taxes.” Chidambaram, whose Congress party also faces nine state elections this year, may remove levies amounting to 3.9% imposed in addition to the company tax rate, effectively reducing corporate tax liability to 30%, Poddar said.
JPMorgan Chase and Co. senior economist Rajeev Malik expects a cut in excise duties on consumer goods, such as two-wheelers, besides an increase in the income tax exemption limit to Rs125,000 from Rs110,000 in a nation where only 32 million of the population of 1.1 billion pay taxes.
The minister this month described the growth forecast for the current year as “disappointing” after the statistics department said India’s $906 billion (Rs35.9 trillion) economy will expand 8.7% in the year to 31 March, the first slowdown in three years. Growth averaged 9.5% in the last two years.
“Fiscal measures will help to keep the economy going,” said Devan Kaloo, who helps manage $9 billion for Aberdeen Asset Management Ltd in London. “However, rising expenses on subsidies limit the ability for a major cut in tax rates.”
Though Chidambaram may forecast a reduction in the budget deficit to 3% of gross domestic product (GDP) by 31 March 2009, from a targeted 3.3% of GDP in the previous year—in line with the requirements of law—he has treated bonds issued by the government to oil and fertilizer companies in the past two years as “off-budget” items.
In the 10 months to January, the government has given bonds worth Rs15,200 crore to oil and fertilizer companies for selling below market prices. The International Monetary Fund estimates India’s budget deficit to be closer to 4.5% of GDP in the current year ending 31 March 2008, including these “off-budget” subsidies.
Concerns over the country’s budget deficit and total debt, which is more than 75% of its GDP, have hurt India’s credit ratings, increasing borrowing costs for companies.
Moody’s Investors Service has a Ba2 on India’s long-term local currency rating, which is two levels below investment grade, while Standard and Poor’s has assigned a BBB-, their lowest investment grade.
India, which outlays 40% of its revenue on interest payments, subsidies and defence, has additional spending pressure in an election year. The Sixth Pay Commission, formed in 2006 to revise salaries of government workers, is scheduled to submit its report this year.
Chidambaram may provide for basic salaries of government staff to rise as much as 40% in addition to higher pensions and other benefits, HSBC Group Plc. economist Robert Prior-Wandesforde estimates.
And with the Congress party suffering electoral reverses in almost all state polls in the past year with consumer prices remaining high, Chidambaram may waive farmers’ debt and spend more in rural areas, he said.
Source: Mint
What will Chidambaram do in Union Budget 2008?
Mr speaker, Sir, it is my privilege to present the budget for 2008-09.” It’s the same line that Finance Minister Palaniappan Chidambaram will use on February 29 to open his Budget speech, but what follows thereafter may not be as cheerful as the four previous Budget speeches he has delivered as the UPA government’s chief financial officer. For, in a matter of a few months, things have gone from rosy pink to a cautious grey, if not pitch black. That’s because the good times that made prosperity possible seem to be slacking off.
Even as the latest industrial production or excise collection numbers betray telltale signs of some slowdown in the country, the global economy, too, is showing signs of stress. The International Monetary Fund has cut the forecast for global economic growth from 4.4 per cent to 4.1 per cent this year. And the impact is being felt by both in software services exporters and manufactured goods exporters; while the former have started reining in hikes and headcount, the latter have had to shed jobs by the thousands. The culprit? A near 12 per cent appreciation in the rupee versus the dollar in 2007. Add to it the rising costs in the economy— right from the cost of food and fuel to the cost of money.
What makes the job even harder for Chidambaram is the fact that some 10 states are due for elections later this year, followed by general elections next year. Not surprisingly, there’s clamour all around him for sops—from his own coalition government and allies, who are keen to return to power next year as well; from industry, which fears rising inflation will push up costs of funds and soften consumer demand; from the aam aadmi, who wants tax breaks and cheaper goods in the face of rising prices. What the champions of sops will also cite to buttress their case is the surge in tax collections. Heady economic buoyancy, aided by a widening tax base, helped improve collections (see Cushy Coffers). Direct taxes as a percentage of GDP jumped from 4.2 in 2004-05 to 5.1 in 2006-07. In December ’07, perhaps for the first time ever, takings from direct taxes exceeded those from indirect taxes.
That has automatically increased expectation levels from the Budget (See Top 10 Expectations). A BT-Synovate survey of CEOs, fund managers and corporate executives across metros (see page 76) captures their high expectations. Prominent on the list of expectations is a relief on direct taxes, mainly in the form of increased exemptions, and the removal of surcharges. Says Adi Godrej, Chairman of the Godrej Group, who believes there is a bit of a demand slowdown at present: “The Budget is an ideal opportunity to provide a fiscal stimulus to the economy.
Reducing direct tax rates will spur the economy, if not add to the tax collections.” Godrej also thinks it is a good year to cut indirect taxes such as excise as well. And if one recalls the near consistent stance of the FM on taxes—enhanced compliance makes a case for moderation in taxes—then there is cause for hope and cheer. This Budget should be a significant one for indirect taxes, but more on that later.
For the aam aadmi
The pressure to deliver largesse may force Chidambaram to script an aam aadmi budget. That, in short, means loud announcements and enhanced outlays for agriculture, rural development, water-related programmes, education, health and other social schemes in line with the 11th Plan (2007-2012) targets. In the immediate term, that also means continued subsidies (see Subsidies: Necessary Evil?).
Siddhartha Roy, Economic Advisor to the Tata Group, expects capital expenditure in the rural sector, particularly agriculture, to be the top priority for the government as agriculture’s share in GDP capital formation has declined from 2.27 per cent in 1999-2000 to 1.9 per cent in 2005-06. “This trend needs to be reversed by giving tax breaks and other incentives needed for private investments in the agricultural sector and agro-business industries,” says Roy. However, the actual Budget proposals might well be more direct. “If not outright loan waivers, we might see some relief for indebted farmers. Banks with farm sector non-performing loans could also get some relief,” says Ajit Ranade, Chief Economist, A.V. Birla Group.
On health, the government has been talking of a National Urban Health Mission on the lines of the rural-centric programme. More details of the same could probably be fleshed out in the Budget. On education and skills development, there will be significant announcements with probably some handles on making sure that the states implement these schemes diligently.
Even as the latest industrial production or excise collection numbers betray telltale signs of some slowdown in the country, the global economy, too, is showing signs of stress. The International Monetary Fund has cut the forecast for global economic growth from 4.4 per cent to 4.1 per cent this year. And the impact is being felt by both in software services exporters and manufactured goods exporters; while the former have started reining in hikes and headcount, the latter have had to shed jobs by the thousands. The culprit? A near 12 per cent appreciation in the rupee versus the dollar in 2007. Add to it the rising costs in the economy— right from the cost of food and fuel to the cost of money.
What makes the job even harder for Chidambaram is the fact that some 10 states are due for elections later this year, followed by general elections next year. Not surprisingly, there’s clamour all around him for sops—from his own coalition government and allies, who are keen to return to power next year as well; from industry, which fears rising inflation will push up costs of funds and soften consumer demand; from the aam aadmi, who wants tax breaks and cheaper goods in the face of rising prices. What the champions of sops will also cite to buttress their case is the surge in tax collections. Heady economic buoyancy, aided by a widening tax base, helped improve collections (see Cushy Coffers). Direct taxes as a percentage of GDP jumped from 4.2 in 2004-05 to 5.1 in 2006-07. In December ’07, perhaps for the first time ever, takings from direct taxes exceeded those from indirect taxes.
That has automatically increased expectation levels from the Budget (See Top 10 Expectations). A BT-Synovate survey of CEOs, fund managers and corporate executives across metros (see page 76) captures their high expectations. Prominent on the list of expectations is a relief on direct taxes, mainly in the form of increased exemptions, and the removal of surcharges. Says Adi Godrej, Chairman of the Godrej Group, who believes there is a bit of a demand slowdown at present: “The Budget is an ideal opportunity to provide a fiscal stimulus to the economy.
Reducing direct tax rates will spur the economy, if not add to the tax collections.” Godrej also thinks it is a good year to cut indirect taxes such as excise as well. And if one recalls the near consistent stance of the FM on taxes—enhanced compliance makes a case for moderation in taxes—then there is cause for hope and cheer. This Budget should be a significant one for indirect taxes, but more on that later.
For the aam aadmi
The pressure to deliver largesse may force Chidambaram to script an aam aadmi budget. That, in short, means loud announcements and enhanced outlays for agriculture, rural development, water-related programmes, education, health and other social schemes in line with the 11th Plan (2007-2012) targets. In the immediate term, that also means continued subsidies (see Subsidies: Necessary Evil?).
Siddhartha Roy, Economic Advisor to the Tata Group, expects capital expenditure in the rural sector, particularly agriculture, to be the top priority for the government as agriculture’s share in GDP capital formation has declined from 2.27 per cent in 1999-2000 to 1.9 per cent in 2005-06. “This trend needs to be reversed by giving tax breaks and other incentives needed for private investments in the agricultural sector and agro-business industries,” says Roy. However, the actual Budget proposals might well be more direct. “If not outright loan waivers, we might see some relief for indebted farmers. Banks with farm sector non-performing loans could also get some relief,” says Ajit Ranade, Chief Economist, A.V. Birla Group.
On health, the government has been talking of a National Urban Health Mission on the lines of the rural-centric programme. More details of the same could probably be fleshed out in the Budget. On education and skills development, there will be significant announcements with probably some handles on making sure that the states implement these schemes diligently.
Chidambaram likely to present budget for 'aam aadmi'
Personal and corporate income tax cuts, excise duty relief and simplification of taxes are expected in the Union Budget for 2008-09, the last full-fledged budget before the next general elections.
Finance Minister P Chidambaram, who will be presenting his seventh budget on Friday in the Parliament, has a tough exercise on hand of balancing conflicting interests in coming out with a budget for the 'aam aadmi' (common man).
He is expected to announce massive funds for social sector projects like National Rural Employment Guarantee (NREG), Sarva Shiksha Abhiyan, rural health and power sectors and a debt-relief package for farmers to "share the benefits of high growth" especially in view of the coming Lok Sabha elections by this year-end or early next year.
The Indian middle-class and the industry, who still remember his "dream" budget of 1997-98, are expecting a bonanza from the Finance Minister in terms of relief in income tax and excise duties and simplification of other taxes.
Government servants are expecting an announcement on implementation of the Sixth Pay Commission.
Sources say that the Finance Minister is unlikely to introduce any new tax in the budget for 2008-09, although some controversial taxes like the banking cash transaction tax may be reviewed, adding that with buoyancy in revenue collections he is capable of working out packages for every constituency.
Apart from meeting the fiscal and revenue deficit targets, the budget is likely to aim at sustaining nine per cent GDP growth, while containing politically sensitive inflation rate around four per cent.
Concerned over the slump in agricultural growth, Chidambaram is expected to announce a package for irrigation sector and farm production. PTI
Finance Minister P Chidambaram, who will be presenting his seventh budget on Friday in the Parliament, has a tough exercise on hand of balancing conflicting interests in coming out with a budget for the 'aam aadmi' (common man).
He is expected to announce massive funds for social sector projects like National Rural Employment Guarantee (NREG), Sarva Shiksha Abhiyan, rural health and power sectors and a debt-relief package for farmers to "share the benefits of high growth" especially in view of the coming Lok Sabha elections by this year-end or early next year.
The Indian middle-class and the industry, who still remember his "dream" budget of 1997-98, are expecting a bonanza from the Finance Minister in terms of relief in income tax and excise duties and simplification of other taxes.
Government servants are expecting an announcement on implementation of the Sixth Pay Commission.
Sources say that the Finance Minister is unlikely to introduce any new tax in the budget for 2008-09, although some controversial taxes like the banking cash transaction tax may be reviewed, adding that with buoyancy in revenue collections he is capable of working out packages for every constituency.
Apart from meeting the fiscal and revenue deficit targets, the budget is likely to aim at sustaining nine per cent GDP growth, while containing politically sensitive inflation rate around four per cent.
Concerned over the slump in agricultural growth, Chidambaram is expected to announce a package for irrigation sector and farm production. PTI
Chidambaram presents his 7th budget for India Friday
Finance Minister P. Chidambaram presents India's Union budget for 2008-09 Friday. It will be his seventh budget for the country and the last in the present tenure of the United Progressive Alliance (UPA) government.
Chidambaram tabled the Economic Survey for 2007-08 in parliament Thursday, which presented the current status the Indian economy with suggested policy measures on a wide range of areas.
The budget will come against the backdrop of a slowdown in India's economic growth this fiscal, and the impending elections in several states and to the Lok Sabha in the months to come.
Indo-Asian News Service
Chidambaram tabled the Economic Survey for 2007-08 in parliament Thursday, which presented the current status the Indian economy with suggested policy measures on a wide range of areas.
The budget will come against the backdrop of a slowdown in India's economic growth this fiscal, and the impending elections in several states and to the Lok Sabha in the months to come.
Indo-Asian News Service
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