Finance Minister P Chidambram's Budget speech in Parliament today was more or less on expected lines. The finance minister announced a slew of sops and those dedicated to the agricultural sector stands out.

Small car manufacturers are also rejoicing with an announcement of a sizebale excise duty cut.

Although, the finance minister has spared individuals on the tax front, the service tax has gone up and the STT is proposed to increase by a whopping 25%. MAT rate has been increased from 7.5% to 10% and credit period has been increased to seven years.

In the Auto sector, Chidambaram has given special incentive to small car manufacturers by halving excise duty to 16%.

A quick look at the 2006-2007 Budget proposals:

Investment

• Investment rate up from 25.3% in FY03 to 30.1% in FY05
• Equity support of Rs10,901 crore to PSUs and and Rs 2,789 crore via loans in 2006-07

Agriculture

• Agricultural growth is back at 2.1%
• Non-food credit growth is at over 2.5%
• Foodgrain output is at 209.5 MT
• Farm credit to double in three years
• Rajiv Gandhi drinking water plan gets a hike
• Rs 944 crore to be privided for irrigation under the Bharat Nirman Project.
• Relief to the farmers who have availed of crop loans from scheduled commercial banks. Accordingly, an amount equal to 2% points of the borrowers interest liability on the principle amount up to Rs 1 lakh will be credited to her/his bank account before March 31 2006. A sum of Rs 1,700 crore provided for this purpose.
• To ensure that farmer receives short-term credit at 7%. With an upper limit of Rs 3 lakh on the principle amount

Manufacturing

• Manufacturing sector growth seen at 9.4% in FY07
• Grant to Textile Upgrade Fund upped from Rs 435 cr to Rs 535 cr
• To promote India as a semiconductor manufacturing hub

Infrastructure

• Allocation to National Highway Plan up to Rs 9,945 cr from Rs 9,320 cr
• 96% of Golden Quadilateral to be completed by June this year.
• The entire project will be completed by end of 2008.
• To raise power generation capacity by 15,000 MW by March 2005
• Indian infrastructure investment company to be set up
• Telecommunication: 250 million new connections proposed
• Indian Telegraph Act will be amended

Financial Sector

• FII investment in G-secs upped to $2 billion from $1.7 billion
• FII investment limit in corporate bonds upped from $0.5 billion to $1.5 billion
• Mutual funds to be allowed to invest $1bn in Overseas Exchange Rated Fund
• To remove 10% foreign investment cap for Mutual Funds
• Electronic bond trading net extended to mutual funds, pension, provident funds

Education

• University of Calcutta, University of Mumbai, and University of Madras to get grant of Rs 100 crore each. Punjab Agriculture University, Ludihana will get a grant of Rs 100 cr.
• Rs 97 crore will be granted for upgrading the ITIs
• Allocation for Sarva Siksha Abhiyan stands at Rs 10,041 crore.

Indirect Tax

• Customs: Customs duty peak reduced from 15% to 12.5%
• Duty on Naphtha reduced to nil
• Duties on anti AIDS and anti-cancer reduced from 10% to 5%
• Excise duty on small cars and aerated drinks reduced to 16% from 24%
• Duty on PVC, LDP reduced from 10% to 5%
• Duty on man-made yarn reduced to 8% from 16%
• Countervailing duty of 4% on most imports
• Customs duty on vanaspati raised to 18%
• 8% excise duty on packaged software
• Excise duty on instant food cut to 8%
• Excise duty on cigarettes upped by 5%
• DVD, flash, combo drives exempted from excise duty
• Excise duty on footwear reduced to 8%

Service Tax

• Increased from 10% to 12%.
• ATM Operations, Registrar, Sponsorship of events brought under service tax net

Direct Tax

• No new tax imposed
• No change in personal or corporate income tax structure
• STT raised by 25% across the board
• 1/6 scheme of filing tax returns abolished

FBT

• FBT on tour & travel reduced to be 5% from 20%
• Changes in computation of FBT
• Brand endorsement excluded

Other Proposals

• Defence allocation up from Rs 83,000 crore to 89000 crore in 2006-07
• Govt to spend Rs 11,700 cr on rural employment in FY06
• Plan allocation for shipping up 37% at Rs 3,500 crore
• Expert body to be set up for gems and jewellery sector
• Expect investment of Rs 22,000 cr in refining over next few years
• 5% customs duty imposed on iron, steel melting scrap
• LPG included in list of declared goods under CST Act
• To provide Rs 3,000 cr as VAT compensation to states