labels: economy - general, union budget 2007
Highlights of Union Budget 2007-08 news
28 February 2007

The finance minister commenced his Union Budget proposals for 2007-08 by proposing to raise spending on health and education and measures to improve the productivity of the agricultural sector to spread the growth objectives of the UPA government.

He also promised more measures to control inflation, which had reached 6.73 per cent in February, against the government''s expectation of 5 to 5.5 per cent. The Economic Survey released yesterday said that primary food articles constituted 40 per cent of the inflation.

Chidambaram has raised the outlay for education by 34.2 per cent in the coming fiscal year, raised health and family welfare spending by 21.9 per cent and expanded the days of reach of the National Rural Employment Guarantee Programme from 200 to 330 of the poorest districts in the country.

He said "Revenues were buoyant for the third year in succession. I have put the revenues to good use to promote inclusive growth, equity and social justice." (See: Video)

The finance minister said, that the economy was in a stronger position than ever before and "it therefore behoves us to set higher goals."

Chidambaram said a country with such a large population must be almost self-sufficient in basic food items; otherwise supply constraints could upset macroeconomic stability and growth prospects. "Hence agriculture must top the agenda of the policymakers," he added.

For the common man, who witnessed an average per capita income increase of 7.6 per cent last year, tax exemption thresholds have been raised for 2007-08 on the back of better revenue collections in the current fiscal.

Budget highlights:


  • Tax to GDP ratio up 11.4 per cent in 2007-08
  • No change in CENVAT rate and Service Tax rate

Direct Taxes

  • Better tax compliance
  • Threshold limit of exemption to be increased by Rs10,000 taking it up from Rs1,00,000 to Rs1,10,000
  • Threshold limit of exemption for women increased to Rs1,45,000
  • Threshold limit of exemption for senior citizens increased to Rs195,000
  • Deduction for medical insurance under Section 80D set at Rs15,000 Rs20,000 for senior citizens
  • Surcharge on tax removed for companies with income up to Rs1 crore to benefit 12 lakh companies.
  • Five-year tax holiday for hotels in the 2-star to 4-star categories and convention halls with seating capacity 300 onwards in Gurgaon, Noida, Ghaziabad and Delhi


  • GDP growth rate at 9.2 per cent for FY 2006-07
  • India has registered average 8.6 per cent growth rate in last 3 years
  • Agriculture growth down to 2.3 per cent in 10th Plan period below targeted 4 per cent
  • Farm supply imbalances can disrupt growth
  • 150 mn families into farming
  • Economy is in stronger position than ever before
  • Faster more inclusive growth main 11th Plan objective
  • Gross domestic capital formation up 23.7 per cent
  • Apr-Jan FDI at $12.5 bn, outpaces portfolio investment
  • All indicators point to accelerating rate of investment
  • Rs1.65 trillion investment by central PSUs in FY 08
  • Gross Budget Support of Rs2.05 trillion compared to Rs1.73 trillion earlier
  • Central FY 08 plan allocation Rs1.55 trillion versus Rs1.31 trillion

Savings rate

Savings rate estimated at 32.4 per cent in FY-07

Banking sector

Bank credit Apr 1-Feb 2 expanded 29.6 per cent on year


  • Emphasis on inflation control
  • This fiscal year average inflation seen at 5.2 per cent - 5.4 per cent
  • Global commodity prices pushing local prices
  • Governmwent confident of moderating inflation
  • Emphasizes state government''s role in taming inflation
  • Monetary trends had put pressure on prices

Futures trading

  • No new forward contracts in wheat and rice
  • Expert committee headed by Prof Abhijit Sen to look into forward trading in commodities. Report in 2 months


  • 12,198km of rural road has been built till December
  • 15,054 villages to be connected by phones till December
  • Allocated Rs40 billion for rural roads
  • 75 per cent growth rate in electricity generation in April - December
  • Govt to award two more ultra power projects by July
  • Imperative to take new steps to up power generation
  • Rural electrification allocation at 39.83 billion rupee FY 08
  • Rajiv Gandhi Vidyatikaran Yojana allocation 39.8 billion rupee
  • National highway plan to get 106.7 billion FY 08
  • FY 08 APDRP support raised to 8 billion rupees versus 6.5 billion
  • Energy security high on government agenda
  • Rs120 billion more earmarked for RIDF for FY 07-08
  • Separate window for rural roads under RIDF to continue


  • Agriculture to top the agenda of policy makers
  • Draft National Policy for farmers under consideration
  • Bank farm loans doubled in 2 years v/s 3 year aim
  • FY 07 farm credit seen Rs1.9 trillion v/s Rs1.75 trillion target
  • 5.3 million farmers brought under credit till December
  • Farm credit growing at satisfactory rate
  • Farm loan target at Rs2.25 trillion in FY 08
  • To create additional irrigation for 2.4-million hectares
  • Pilot project for weather based crop insurance scheme at Rs1 billion
  • Weather-based insurance to replace farm insurance scheme
  • Farm insurance scheme stays in FY 08, gets Rs5 billion
  • New insurance scheme for rural landless households
  • FY 07 fertilizer subsidy seen at Rs224.52 billion
  • World Bank lent 21.8 billion rupees to renew 5,763 water bodies
  • Depletion of ground water is a concern
  • New training programme planned for water harvesting
  • To extend farm tech agency to 300 more districts
  • 100 per cent subsidy for small, marginal farmers, 50 per cent subsidy for small farmers for water management
  • Outlay for Rainfed Irrigation Programme at Rs1 billion in FY 08
  • Irrigation FY 08 outlay at Rs110 billion v/s Rs71.21 billion
  • Special purpose fund for coffee, rubber, spices proposed
  • World Bank loan for water body renewal for Tamil Nadu
  • 2 more World Bank loans seen for water body renewal plan
  • Allocated 18 billion rupee to NABARD for farmer subsidy
  • NABARD can issue tax-free rural bonds up to Rs 50 bn
  • NABARD bond raising to augment re-finance capacity
  • Panel on farm sector indebtedness to submit report soon
  • Special development programme for oil seeds, maize
  • To focus on improving productivity of pulses


  • Education spending up 34.2 per cent to INR 323.5 billion for FY 07-08
  • Secondary education allocation doubled to Rs37.94 billion
  • FY 08 school education allocation up 35 per cent to Rs231.4 billion
  • 5 lakh more classroom to be built. Children in upper primary classes to be covered
  • Scholarship scheme for class 8 students. 1 lakh scholarships to be awarded every year. 750 cr to be given to SBI for this purpose


  • FY 08 health allocation Rs99.47 billion up from Rs82.07 billion
  • To start National Aids Control Programmme

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Highlights of Union Budget 2007-08