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Painting a bright picture of the Indian economy in his third consecutive annual Budget, Chidambaram said the economic growth in 2005-06 ending March 31 was likely to be 8.0 percent and the government was determined to step it up to 10 per cent in the next few years.
"The assault on poverty and unemployment continues. I believe that growth is the best antidote to poverty," he said
The Budget proposed an increase in agricultural credit. It is to be raised to Rs 175,000 crore in 2006-07 from Rs 141,500 crore in the current year, covering 50 lakh more farmers. A separate window for tenant farmers is to be set up to ensure them a loan share.
Chidambaram did not propose any changes in the rates of personal or corporate income tax, which pleased the salaried classes as well as businessmen. So, the reaction was one of appreciation. “It's 'good budget'” was the first reaction to the Budget..
Responding to the demand for tax exemption on fixed deposits of certain tenure, the finance minister proposed to include investments in fixed deposits in scheduled banks for a term of not less than five years in Section 80C of the Income Tax Act.

More services in Tax net
The Budget brought more and more services under the tax net. One of the services is ATM. The new services to be covered also include maintenance and management, registrars, share transfer between agents and bankers. The other services to be brought within the service tax net include sale of space or time for advertisements other than in the print media, sponsorship of events by companies other than sports events, international air travel excluding economy class passengers, container services on rail excluding the railway freight charges, business support services, auctioneering, recovery agents, ship management services, travel on cruise ships and public relations management services. In 2005-06, the services sector is estimated to contribute 54 per cent of GDP. Naturally, it should also contribute significantly to the exchequer, Chidambaram said.

Excise cut on small cars
Small cars have suddenly become a little cheaper. The Budget has proposed a cut in excise on small cars. Consequently, Maruti M800 and Alto, Hyundai Santro, and Tata Indica will cost a lot less from March 1, 2006. Indian car market leader Maruti Udyog announced a price cut ranging between Rs 13,000-22,000 across five models, including M800 and Alto.
"Maruti prices will reduce from tomorrow," company Managing Director Jagdish Khattar said, immediately after the budget announcement. That duty had been reduced by 8.0 percent to 16 per cent. The price cut on the popular M800 will be around Rs 13,000, hatchback Alto by Rs 15,000, and on WagonR between Rs 15,000 and Rs 22,000,
"We will incur a loss of Rs 30-40 crore because of this though it would be good in the long term," Khattar said. The other two models where prices will be cut are the Zen and Omni van. Minutes after the announcement on the excise duty cut, Hyundai announced a Rs 23,000 cut in prices of its flagship Santro car. "The Santro will cost Rs 23,000 less from tomorrow," Hyundai India President B V R Subbu said.
Welcoming the finance minister's announcement, he said it would give a fillip to the small car segment. "We hope that it leads to a significant growth in demand for small cars," he said.
Tata Motors on Tuesday said it will be reducing the prices of some of its cars, including the hatchback 'Indica,' following the reduction of excise duty on small cars. "We will be reducing the price, though exact details are being worked out," Tata Motors vice president (passenger car business unit) Rajiv Dube said The duty cut will be applicable to 1500 cc diesel cars and 1200 cc for petrol cars.

Duty cut on life-saving drugs
Certain life-saving drugs, kits and equipment will now be cheaper with the reduction in customs duty on them. The drugs on which customs duty has been reduced to five percent include 10 anti-AIDS and 14 anti-cancer drugs.
Duty has been reduced on life-saving drugs, kits and equipment from 15 percent to five percent. These drugs will also be exempt from excise duty and countervailing duty.

Defence spending raised
The budget increased the allocation for defence from Rs 83,000 crore to Rs.89,000 crore in 2006-07..
This will include Rs 37,458 crore for capital expenditure. The higher allocation has been made keeping in view the enhanced expenditure on modernization of the defence forces.
“The government has fulfilled the long-standing need of retired armed forces personnel below officer rank for better pension benefits,” the Finance Minister said.

No negatives
Captains of Indian industry and investment bankers lauded the Finance Minister for measures to bring in fiscal discipline and cut deficit. But they had a mixed view on the new tax proposals burdening the capital market.
"The industry will be happy as there are no major negatives. It has cut down customs duty and has covered lot of industries as well," CII chief mentor Tarun Das said immediately after presentation of the Budget.
J M Morgan Stanley Chairman Nimesh Kampani termed the budget as a good development on the fiscal side. "I think the minister has done a great job in fiscal deficit, which will be 3.8 per cent of GDP in 2006-07," he said.
Kotak Mahindra Bank Vice Chairman Uday Kotak also welcomed the budget saying it was a positive budget at a micro level and was good for long-term investors.
However, Ruchir Sharma of Morgan Stanley said it was an 'innocuous budget' and there were no policy initiatives to take the market to higher levels. "The market hoped much more than reforms... even the Prime Minister had talked about out of the box thinking," he regretted.

The highlights of the tax proposals:
• No changes in the rates of personal income tax, which will remain as they are currently.
• No change in corporate income tax rate.
• No new taxes on income.
• One by six scheme for filing of income tax returns has been abolished.
• Services tax net to be increased which include ATM operations, maintenance and management, share transfers, registration, international air travel excluding economy class, sponsorship other sports events, auctioneers, ship management and travel on cruise.
• 25 per cent across the board increase in securities transaction tax.
Cooperative lending banks and rural development banks to be exempted from taxes under Section 80(B).
Fixed deposits in scheduled commercial banks with at least five year maturity will get tax exemption for savings under section 80C of Income Tax Act.
• The Rs 10,000 exemption limit for investment in pension funds under Section 80CCC has been removed but these investments would be brought under Sec.80C subject to a ceiling of Rs 1 lakh.
• Donations to only religious institutions will be exempted from tax.
• Minimum alternative tax on corporates increased from 7.5 per cent to 10 per cent.
• More transactions to come under PAN.
• Constituency allowances of MLAs to be treated as
• constituency allowances of MPs for income tax purposes.
• Banking cash transaction tax introduced last year will
• continue. In one bank branch in Chandni Chowk, laundering to the tune of Rs 1,500 crore was detected.
• Fringe Benefit Tax modified. Threshold limits raised, but FBT will remain as it is justified for ensuring horizontal equity.
• Minimum alternative tax on corporates increased from 7.5 per cent to 10 per cent.