FARMING FOR VOTES :BUDGET 2008-09

With an eye on elections, Finance Minister P Chidambaram presents a budget full of highly ‘populist’ measures, including a whopping Rs 60,000-crore debt waiver for farmers

    In a budget that many said could bring in early polls, Finance Minister P Chidambaram gave a whopping Rs 60,000 crore largesse to over four crore farmers by writing off their loans, provided sops to income tax payers, imposed no fresh burden on corporates but brought down excise duties on production to stimulate economy.
    Spreading goodies in the fifth and last full-fledged budget of the UPA government, he brought down excise duties that will bring down prices of drugs, small and hybrid cars, two and three-wheelers, water purification devices, breakfast cereals, paper and paperboard. However, non-filtered cigarettes will become expensive.
    In a bid to boost demand and stimulus to manufacturing sector, the Finance Minister also reduced the general central value-added tax (CENVAT) across the board from 16 to 14 per cent.
BCTT OUT, BUT NEW ‘CTT’ IN
The controversial banking cash transaction tax (BCTT) has been withdrawn while commodities transaction tax – on the lines of securities transaction tax – is being introduced.
    Chidambaram’s direct tax proposals are revenue neutral while those on the indirect taxes side are estimated to result in a loss of Rs 5,900 crore.
    Without altering the rate of tax, Chidambaram sought to please the middle-class by raising income tax exemption limits. Consequently, Chidambaram made changes in tax slabs (see chart).
MIXED BAG FOR INDIA INC
The budget makes no change in the corporate tax rates and the rate of surcharge, but hiked the shortterm capital gains tax that did not go well with the stock markets.
    In a sop to corporates, the FM exempted crèche facilities, sports sponsorship and guest houses from the purview of fringe benefit tax (FBT).
DEFICIT AT 1 PER CENT OF GDP
Maintaining that it is widely acknowledged that the fiscal position has improved tremendously, Chidambaram said the revenue deficit for the current year will be 1.4 per cent as against an estimate of 1.5 per cent, and the fiscal deficit at 3.1 per cent as against 3.3 per cent.
    The minister said further progress will be made in 2008-09. The revenue receipts for the coming year are projected at Rs 6,02,935 crores, and the revenue expenditure at Rs 6,58,119 crores.
    Consequently, the revenue deficit is estimated at Rs 55,184 crores which amounts to 1 per cent of the GDP. The fiscal deficit is estimated at Rs 1,33,287 crores, which is 2.5 per cent of GDP.
ALLOCATION FOR FARM LOAN WAIVER TO COME LATER
In the post-budget briefing, Chidambaram was grilled about how he proposed to compensate banks for the Rs 60,000-crore farm loan waiver scheme.
    “We have to pay for the liquidity in the banking system over the period in which they would have recovered – three years,” he said.
    The budget itself does not make any allocation for the loan waiver scheme. Asked about this, the minister said, “Credit me with some intelligence. We have done our homework. We will tell you when we do it.” AGENCIES KNOW YOUR BUDGET FOR 2008-09

• No change in corporate income tax rates and surcharge

• Full loan waiver for 4 crore small, marginal farmers

• Rs 2,80,000 crore target set for farm credit in 2008-09

• Short-term crop loan to continue at 7 per cent interest

• Irrigation & Water Resources Finance Corp to be set up

• Rain-fed area development programme to be started

• Revenue deficit estimated at Rs 55,184 crore

• Fiscal deficit pegged at 2.5 per cent of GDP

• PAN mandatory for all financial market transactions

• No change in peak rate of customs duty

• Customs duty on project imports slashed to 5 per cent

• Duty of steel and aluminium scrap abolished

• Excise duty on pharma products halved to 8 per cent

• Small cars, 2/3-wheelers, buses, chassis to cost less

• Central Sales Tax to be reduced to 2 per cent from April 08

• CENVAT on all goods reduced to 14 per cent from 16 per cent

• Excise duty on bulk cement now on par with packaged one

• Four more services brought under tax net

• Small services providers earning Rs 10 lakh exempt from tax

• Defence allocation increased by 10 per cent to Rs 1,05,600 cr QUICK LOOK

 

STICK TO YOUR OLD MOBILE

 

GO BIG ON SMALL CARS

 

FILTER-LESS CIGGIES ON FIRE

 

DRUGS GET A HEALING TOUCH

 

CEMENT RATES TO HARDEN

 

 

 

 

 

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