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Highlights of Budget 2006-07

Here are highlights of the budget for 2006/07 (April-March):


  • Fiscal deficit in 2006/07 likely to be 3.8 percent of GDP, compared to an estimated 4.1 percent the previous year
  • Government revenue deficit seen at 2.1 percent of GDP in 2006/07, compared to 2.6 percent the year before
  • Finance minister says economic prospects for 2005/06 just as good as last year
  • GDP growth likely to be 8.1 percent in 05/06
  • Government aims to raise GDP growth to 10 percent
  • Gross budgetary support for 2006/07 at 1.73 trillion rupees
  • FDI inflows up to November 2005 at billion
  • Defence spending increased to 890 billion rupees in 06/07 from 830 billion in the previous year
  • Finance minister says services sector expected to contribute 54 percent of GDP in 06/07


  • No new direct taxes to be introduced
  • No change in personal and corporate tax
  • Services tax raised to 12 percent from 10 percent
  • The securities and transaction tax to be raised by 25 percent
  • Customs duty on non-ferrous metals to be reduced to 7.5 percent from 10 percent
  • India to reduce customs duties on life-saving cancer and AIDS drugs
  • Government to raise customs duty on vanaspati to 80 percent
  • The excise duty on small cars will be cut to 16 percent
  • Excise duties on man-made and filament yarns will be reduced
  • The food processing industry will get duty relief
  • The levy on crude, called a cess, will be raised to 2,500 rupees per tonne from 1,800 rupees
  • The excise duty on cigarettes will be increased by 5 percent
  • More services will be brought under the tax net. The new services to be taxed include ATM operations, sponsorship of events other than sports, and international travel other than economy class trips
  • The finance minister said that value-added tax had been a resounding success, and that he expects states outside the system to join
  • The government will set nationwide goods and services sales tax on April 1, 2010


  • Plan to let Indian mutual funds invest up to billion abroad
  • Government raises FII investment limit in government debt to billion
  • To introduce comprehensive bill on insurance in parliament in 2006/07
  • Government to set up single exchange for corporate debt trading


  • Farm sector output likely to grow 2.3 percent in 2005/06
  • Government to spend 143 billion rupees (.2 billion) on rural jobs guarantee scheme in 06/07, compared to 117 billion the year before.
  • Government to allocate 186.96 billion rupees for rural infrastructure projects in 2006/07
  • Banks to raise farm credit to 1.75 trillion rupees in 06/07 from 1.42 trillion
  • Farmers to receive short-term credit at 7 percent
  • Raises corpus for rural infrastructure development fund to 100 billion rupees from 73 billion


  • Education spending to be increased by 31.5 percent, and health spending by 22 percent
  • Allocation for primary education increased to 100.41 billion rupees from 71.56 billion.
  • Allocates more funds for education of minorities, schemes for lower caste people


  • Government to promote textiles, automobiles, leather, food processing and tourism for job creation
  • Food processing sector to be treated as a priority sector for bank lending
  • Petroleum, chemicals and petro-chemicals investment zones to be set up
  • India to be promoted as a semiconductor manufacturing hub
  • Finance minister says imports in 2005/06 are "high but welcome" as they reflect growing investment and industrial activity
  • India aims to double its share of world exports to 1.5 percent by 2008/09


  • Government aims to raise power generation capacity by 15,000 megawatts by March 2007
  • Comprehensive review of coal policy needed
  • Government expects investment of 220 billion rupees in oil refining over next few years. The government will encourage investment in refineries, pipelines and green fuel.
  • Highways development programme to receive 99.45 billion rupees in 2006/07. The government has identified three new road projects to be built under a new special purpose vehicle.



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