Highlights of India’s Budget 2014-2015

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Last week India’s new government has unveiled the much awaited first budget of structural reforms aimed at reviving its debilitating economy, and winning appreciations from investors.

Highlights:

Fiscal deposit

  • Accepts fiscal deficit target of 4.1 percent of GDP for 2014/15
  • Fiscal deficit seen at 3.6 percent of GDP in 2015/16
  • Finance Minister says: “We cannot spend beyond our means”
  • Tax-to-GDP ratio must be raised

Growth

  • Aims for sustained growth of 7-8 percent in the next 3-4 years
  • Finance minister says he is bound to usher in policies for higher growth, lower inflation

Taxation

    • Aims to approve goods and services tax by end of this year
    • Will not change rules on retrospective taxation
    • All pending cases of retrospective tax for indirect transfers to be examined by a high-level committee before action is taken
    • Proposes changes in transfer pricing mechanism
    • Extends 5 percent withholding tax on corporate bonds until June 30 2017
    • Income tax exemption limit raised by Rs 50,000 to Rs 2.5 lakh and for senior citizens to Rs 3 lakh

  • Government expects Rs 9.77 lakh crore revenue crore from taxes
  • Long term capital gain tax for mutual funds doubled to 20 per cent; lock-in period increased to three years
  • Excise duty on footwear reduced from 12 per cent to 6 per cent
  • Net effect of direct tax proposals is revenue loss of Rs 22,200 crore
  • Tax proposals on indirect tax front would yield Rs. 7,525 crore

Investment

  • Raises limit on foreign direct investment in defence sector from 26 per cent to 49 per cent; raises FDI limit in insurance sector to 49 percent
  • Earmarks Rs 7000 Crore to create 100 “smart cities”
  • Will provide the necessary tax changes to introduce real estate investment trusts and infrastructure investment trusts
  • Proposes Rs 4000 crore for affordable housing through national housing bank and extends tax incentives for housing loans
  • Exemption limit for investment in financial instruments under 80C raised to Rs 1.5 lakh from Rs 1 lakh.
  • Investment limit in PPF raised to Rs 1.5 lakh from Rs 1 lakh

Foreign Direct Investment

  • Raises limit on foreign direct investment in defence sector from 26 percent to 49 percent
  • Raises FDI limit in insurance sector from 26 percent to 49 percent

Spending

  • Capital outlay for defence raised by 50 billion rupees over interim budget
  • Earmarks Rs 7000 crore to create 100 “smart cities”
  • Proposes Rs 5000 crore for warehousing capacity; 100 billion rupees of private capital for start-up companies; and 378 billion rupees of investment in national and state highways
  • Rs 4000 crore for affordable housing proposed through national housing bank and extends tax incentives for housing loans
  • Proposes Rs 8000 crore for rural housing scheme

Subsidies

  • Plans to make food and petroleum subsidies more targeted
  • Rural job-guarantee scheme, which provides 100 days of paid employment a year, will become more focused on asset creation
  • Proposes Rs 8000 crore for rural housing scheme

Agriculture

  • Will focus on achieving 4 growth per year in agriculture
  • Proposes a long-term rural credit fund with an initial corpus of Rs 5000 crore
  • Rs 100 crore for development of organic farming

Social sector

  • Pension Scheme to be revived for a year (Aug 15-14) for citizens above 60
  • Rs 50,548 crore for SC welfare schemes.
  • Rs 32,387 crore for ST welfare schemes.

Infrastructure

  • Earmarks Rs 500 crore for 24×7 uninterrupted power in all homes
  • Rs 100 crore for metro projects in Lucknow and Ahmedabad
  • Rs 2,037 crore set aside for Integrated Ganga Conservation Mission called ‘Namami Gange’
  • Rs 200 crore for world-class sports stadium in Jammu and Kasmir
  • Trade Facilitation Centre in Varanasi Handloom and Crafts Museum
  • Rs 1000 crore to enhance rail connectivity in the Northeast
  • Rs 2250 crore for the development and modernization of the border infrastructure
  • A project on the river Ganga called ‘Jal Marg Vikas’ for inland waterways between Allahabad and Haldia; Rs 4,200 crore set aside for the purpose
  • War memorial to be set up along with a war museum; Rs 100 crore set aside for this
  • Rs 7,060 crore for setting up 100 Smart Cities

Education

  • Five more IIMs to be opened in HP, Punjab, Bihar, Odisha and Rajasthan
  • Five more IITs in Jammu, Chattisgarh, Goa, Andhra Pradesh and Kerala.
  • Four more AIIMS like institutions to come up in Andhra Pradesh, West Bengal, Vidarbha in Maharashtra and Poorvanchal in Uttar Pradesh

Tourism

  • E-Visas to be introduced at 9 airports
  • Finance Minister says tourism helps in job creation and e-visas will encourage more tourists to visit India
  • A provision of Rs 500 crore for five tourism sector.

Banking

  • Deduction limit on interest on loan for self-occupied house raised to Rs 2 lakh from Rs 1.5 lakh.
  • Set aside Rs 11,200 crore for PSU banks capitalisation
  • Government in favour of consolidation of PSU banks
  • Government considering giving greater autonomy to PSU banks while making them accountable
  • PSUs to invest to over Rs 2.47 lakh crore this fiscal

Others

  • Earmarks Rs 200 crore for Sardar Patel statue
  • Proposes Rs 150 crore for improving women safety
  • LCD, LED TV become cheaper
  • Cigarettes, pan masala, tobacco, aerated drinks become costlier
  • Government proposes to launch Digital India’ programme to ensure broad band connectivity at village level
  • Rs 100 crore scheme to support about 600 new and existing Community Radio Stations
  • Rs 150 crore for Communication facilities in Andaman and Nicobar Islands
  • Rs 188 crore for disaster preparedness in Puducherry
  • Rs 3,600 crore for providing safe drinking water
  • North-stop 24-hour channel is proposed to be introduced
  • Farmer TV channel will be launched for the benefit of farmers.
  • Rs 200 crore to make Delhi a world class city for social welfare and Rs 500 crore for energy
  • Kisan Vikas Patra to be reintroduced, National Savings Certificate with insurance cover to be launched
  • ‘Pandit Madan Mohan Malviya New Teachers Training Programme’ launched with initial sum of Rs 500 crore
  • Government provides Rs 500 crore for rehabilitation of displaced Kashmiri migrants
  • Indian Custom Single Window Project to be taken up for facilitating trade
  • Pradhan Mantri Krishi Sichayin Yojana to be started for irrigation.
  • E-visas to be introduced at nine airports in India in phased manner. (Read story here)
  • FDI in insurance to be increased to 49%
  • FM announces FDI in defence up from 26 to 49 % with Indian management and control
  • Aim to achieve 7-8 per cent economic growth rate in next 3-4 years.
  • GST will streamline tax administration and result in higher tax collection for center and states. (Read story here.)
  • Green shoots of recovery seen in world economy.
“We have no option but to take some bold steps to spurt economy; these are only the first steps and are directional.” – Finance Minister Arun Jaitley)

List of 100 Cr projects:

  • *”Van Bandhu Kalyan Yojana” for welfare of the tribals
  • “Beti Bachao, Beti Padhao Yojana” for improving the efficiency of delivery of welfare services meant for women
  • “Start Up Village Entrepreneurship Programme” for encouraging rural youth to take up local entrepreneurship programmes
  • Setting up virtual classrooms as Communication Linked Interface for Cultivating Knowledge (CLICK) and online courses
  • A programme for promoting “Good Governance”
  • Supporting about 600 new and existing Community Radio Stations
  • Metro Projects in Lucknow and Ahemdabad
  • Modernisation of Madarsas
  • Indian Agricultural Research Institutes in Assam and Jharkhand
  • Setting up an “Agri-Tech Infrastructure Fund”
  • A scheme to provide every farmer a soil health card
  • A “National Adaptation Fund” for climate change
  • Kisan TV
  • Setting up a National Industrial Corridor Authority
  • A new scheme called “ultra modern super critical coal based thermal power technology”
  • Development of 1 MW Solar Parks on the banks of canals
  • War museum
  • Setting up a Technology Development Fund to support research and development of defence systems
  • National Mission on Pilgrimage Rejuvenation and Spiritual Augmentation Drive
  • Preservation of archeological sites
  • Preparation of the Detailed Project Reports for interlinking of rivers
  • Ghat development and beautification of river
  • Sports university in Manipur
  • Training of sports women and men for the forthcoming Asian and Commonwealth games
  • Overhauling Employment exchanges
  • “A Young Leaders Programme” to promote leadership skills
  • A National Centre for Himalayan Studies in Uttarakhand
  • Development of commercial organic farming

(Sources:  Times of India, Hindustan Times, Economics Times, IBNLive)