Budget 2005-06: Highlights

Budget 2005-06: Highlights

MAIN POINTS

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* Economic growth estimated at 6.9 per cent in 2004-05.

* Fiscal deficit at 4.5 per cent of GDP in 2004-05.

* Total 2005-06 spending at Rs 5.14 trillion. Tax receipts for 2005-06 at Rs 2.73 trillion.

* The Government is to borrow a gross amount of Rs 1.25 trillion from the bond market in 2005-06. Also to raise Rs 150.19 billion under the market stabilisation scheme.

* No targets set for state asset sales in 2005-06.

* Finance Minister Palaniappan Chidambaram says "no more room for spending beyond our means."

* Defence spending raised to Rs 830 billion, up by 7.8 per cent over the previous year.

* Corporate taxes for domestic firms reduced. Sweeping changes in personal income taxes.

* Subsidies on food, petroleum. fertiliser to continue. Total subsidy bill for 2005-06 at Rs 474.32 billion.

* Peak Custom tariffs reduced to 15 per cent from 20 per cent.

* Inflation has been reined in.

* All engines of economy running at nearly full speed.

* Investments in 2004-05 buoyant.

GROWTH MEASURES

* Chidambaram says to look at more FDI in pensions, mining.

* To introduce legislation for pension funds sector.

* Foreign exchange reserves can be used for infrastructure; Special Purpose Vehicles to fund infrastructure with reserves. Borrowing limit of SPVs set at Rs 100 billion.

* Aims to further liberalise trade policy.

* Govt to permit mutual funds to introduce gold traded exchange fund. The gold units will be traded in the same manner as units of mutual funds.

* Stable environment for biotechnology and pharmaceutical sectors.

* Allocates Rs 93.2 billion to fund highways including Rs 14 billion for high density highways programme.

* Sets aside Rs 55 billion for urban infrastructure

* Increase flow of funds to agriculture sector by 30 per cent.

* Agriculture policy to focus on crop diversification.

* Scheme for tea replanting, Government to continue farmer friendly crop insurance sector.

* New scheme to promote small, medium manufacturing.

* Financial package for sugar industry announced. Sugar factories registered in 2002-03 will be provided assistance to re-structure and a moratorium on repayment of loans and interests announced. Sugar mills allowed to re-negotiate high interest rate with banks.

* Allocates Rs 300 billion for textile industry,including modernisation and assistance to handloom and powerloom sector.

TAX MEASURES

* Corporate tax for domestic firms reduced to 30 pct. Domestic companies to pay tax surcharge of 10 per cent. Effective corporate tax to be 33 per cent.

* No change in taxes for foreign companies

* Sweeping changes in personal income taxes.

* Services tax maintained at 10 per cent.

* Direct taxes to yield an additional Rs 60 billion.

* Securities transaction tax raised to 0.02 per cent for day traders.

* Custom duty on some capital goods reduced to between five to 10 per cent. Customs duty on capital goods for IT manufacturing removed.

* Cuts custom duty on crude oil to five per cent from 10 per cent; customs duty on petrol diesel reduced to 10 per cent.

* Proposes 10 per cent surcharge on tobbaco products.

* Removes excise duty of Re 1 per kg on edible oil and Rs 1.25 on Vanaspati oil.

* A stable tax policy for services sector.

OTHER MEASURES

* Budget allocates Rs 80 billion to build rural infrastructure.

* A Rs 102.16 billion assistance package for victims of the December 26 tsunami.

* Extra funding of Rs 250 billion in 2005-06 for social sectors.

* Total allocation for health increased to Rs 102.8 billion.

* Spending on primary education increased to Rs 71.56 billion.

* Government sets aside Rs 62.53 billion for backward classes of society.