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.
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)
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