India's government unveiled its budget with a focus on agriculture-some excerpts from the budget speech below;
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.
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.
HIV/AIDS
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.
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.
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.
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.
V. INVESTMENT
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.
Tourism
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.
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).
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
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.
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.
PUBLIC FINANCE
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.
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