Indian Fiscal Budget 1997-98: LIVE UPDATE!

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The Indian Finance Minister
  • Mr. P.Chidambaram has started his budget speech, exactly on schedule. 1702 hrs
  • Last years budget presented on 22 July 1996. 8 months ago. This is the first budget to be presented by a FM representing a coalition of 13 regional and national parties.1704hrs
  • Therefore, this time, the budget represents a tryly federal national consensus.
    The basis of the budget, is the UF's common minimum program. (CMP)
    1706hrs
  • Of the 40 promises in the last Budget, the government has kept all barring one:
    The exception is setting up an expenditure management and reforms commision.
  • AREAS OF WEAKNESS IN ECONOMY:
    Sharp drop in domestic crude oil production , decline in rate of increase of power production. decline in export growth.
    1709hrs
  • Fresh proposals in budget:
    Government will not hesitate to import food grains in case domestic prices rise sharply and food grains not available for (PDS) public distribution system
    1709hrs
  • 250 crores for 97-97 for special schools for girl students. 1712hrs
  • Unprecedented increase of Rs 6,600 crores in investment in agriculture and agro industries last year. 1716hrs
  • NABARD additional 500 crores for share capital - same for 97-98. 1714hrs
  • Liberalisation for edible oil, coal , rice mills
  • SSI sector - new guidelines for RBI credit
    • 40% credit for units less than 5 lakhs
    • 20% 5-25 lakhs
    • 40% rest
      1718hrs
  • Housing:
    • Indira Awas Yojana got extra funds
    • Rural Housing credit enhanced for first time
    • National Housing Bank to give loans upto Rs 2 lakhs if borrower puts in 1/3 of house value - to grant 50,000 loans
      1722hrs
  • Employee Provident Fund
    • To make EPF more attractive for employees and employers, Rate of contributions will be up from 8.33% to 10% from 1.3.97
    • In scheduled industries it will be up from 10% to 12%
    • no requirement to keep 20% in fixed securities
      1722hrs
  • For PSU's:
    • 9 PSU's identified for the CMP to support such as ONGC, SAIL , NTPC
    • More monetary powers deregulated to profitable PSU's
      1725hrs
  • Oil Industry
    • Need to decrease dependancy on POL imports
    • New exploration Licencing Policy (NELP)
    • PNGC & OIL will be paid international prices.
    • Royalties will be ad valorem
    • Tax holiday for 7 years in North East
    • Cess Levy abolished
    • Refineries during 9 year plan will get concessional duties like the fertilizer industry 1727hrs
  • EXIM POLICY
    • If supplies under international competitive bidding will be treated as deemed exports, therefore will get the tax benefits 1730hrs
  • Foreign Investments
    • FII's will be allowed to invest upto 20% of their corpus funds ( earlier 5%) in any company
    • Companies will be allowed to buy back shares
    • Companies Act will be amended 1730hrs
  • FERA:
    • FERA, 1973 will be replaced to move towards capital accounts convertability bill to curb money laundering in this Parliamentary session
    • to open offices abroad, easier clearance from RBI 1734hrs
  • CAPITAL ACCOUNTS CONVERTABILITY:
    RBI to appoint Group of Experts to work out detailed timetable
    1734hrs
  • Science & Technology
    • CSIR, ICAR & IITs scheme that every Rs 1.00 commercially earned will be matched by Govt of India introduced last year, will continue indefinitely
    • Swarna Jayanti Fellowships for outstandig scientists under 45 years 1736hrs
  • Govt promoted Labs wil be allowed to invest in private sector companies 1738hrs
  • Information Technology:
    • One area In which India can emerge as the leader
    • In domestic market, upto 50% of the IT goods may be sold , rest exported 1738hrs
  • New Bills:
    • Direct taxes bill
    • Companies Bill
    • Both to be placed in the Parliamentary library next week
      Companies bill brought to Parliament in Monsoon session
      Direct taxes bill in the Winter session
      1740hrs
  • Infrastructure & Financial Reforms:
    • LIC & GIC to be given substantial financial autonomy
    • Pension funds will now be expanded under the UTI ( Unit Trust of India)
    • To expand Health insurance, joint ventures with foreign companies will be allowed with GIC.
    • Some other private sector companies ( indian controlled ) will be allowed 1740hrs
  • Last year, the FM promised that he will move to phase out ad hoc Treasury Bills by 1997-98.This will be discontinued from 1st April 1997
  • A 25 year capital bond indexed to inflation will be introduced Tenth finance Commission recommendation : that states will get 29% share of consumed total taxes/revenues collected : accepted
  • Sharp decrease in non - Plan expenditure.
  • Greatest satisfaction that Central Govt has given extra funds to State Govts for externally funded projects
  • Will honour the PM's assurance to give North East Rs 6,000 crores in the 9th Plan period 1750hrs
  • Revenue Deficits decreased Fiscal Deficit will remain at 5% of GDP
  • Budget 1997-98 Estimates Central support to Plans will be largest ever, concentrated on rural development, employment generation, HRD, poverty alleviation
  • Social services- Amount Rs 11,785 increased to Rs 15,000
  • Rs 41 crores for Minorities Investment Commission
  • Rs 47 Crores for National Backward classes Development Commission 1754hrs
  • Subsidies
    • Fertiliser subsidies increased to 5,240 crores
    • Subsidies on Imported Fertilisers also increased
    • Will provide more funds for targetted PDS if necessarry
  • Rs 8,907 crores for Defence Capital Expenditure 1757hrs
  • Rs 4,205 crores for 5th Pay Commision excluding Defence and Railways personnel which will be part of their own Budgets ( as proposed in the earlier Railway Budget )
  • The Government will approve more PSU Restructuring proposals this year 1800hrs
  • Tax Proposals
    • Plans to augment central tax revenues at least by 15-16%
    • Moderate rates, wider tax base. Need to increase the proportion of direct taxes.
    • To amend income tax, in metropolitan areas, those who own 4 wheel vehicle, reside in accomodation and have travelled abroad last year and have NOT filed tax returns, will be served IT notice
    • Traders with turnover less than Rs 8lakhs will be assessed at 5% of turnover
    • Lowering rates of personal income taxes of 10, 20 and 30% ( new rates) salaried class : standard deduction will be increased to Rs 20,000 this year anyone of an income of Rs 70,000 per annum and contributing 10% to PF will pay NO tax
  • Voluntary Disclosure Scheme till Dec 31st, 1997
  • Senior citizens will get Rs 10,000/- relief - those with annual income of upto Rs 1 lakh will pay no tax
  • 100% tax deduction for contributions to CM/Lieutentant Governer's funds.
  • Corporate Tax surcharge abolished
  • Tax rates decreased
    domestic Companies - 35%
    foreign companies - 48%
  • Should lead to better compliance, more revenues, and attract more FDI 1810hrs
  • NRI capital gains tax will be the same as FII's MAT
    Changes : Export profits exempted Credit for MAT paid will be carried forward for 5 years
    1812hrs
  • Tax on dividends
    • Abolish this for shareholders
    • Taxes on interest income on FI's will be decreased from 10% to 2% , which will decrease interest rates Indirect taxes 1813hrs
  • Duty on coking coal will be decreased duty on nickel from 20% to 10% to benefit steel industries
  • Non coking coal 20% to 10% to benefit power sector tax on ships brought for breaking wil be reduced 1815hrs
  • Indirect taxes duties on essential chemicals will be reduced across the board
  • Quantitative Restrictions (QR's) Will provide funds for textile industries to become more competive to be prepared to face the removal of QR's
  • Sharp decrease of duties
    • Computers: on computer parts and peripherals
    • on cellular telephones
    • the customs duties decreased on catalytic convertors and their parts
    • Medical Equipment
  • Reduction in duty tourism reduction on Hotel imports plus reduction of duty on foods imported for foreign tourists 1817hrs
  • Excise duties reduced across the board 1820hrs
  • Finance Minister closes speech with a long quote, as usual1838hrs

 

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