Budget 2015-2016: Recommendations and Key Highlights

Budget 2015-2016: Recommendations and Key Highlights

Q. “Budget 2015-2016 is a step forward in the right direction.” Discuss in light of key recommendations and highlights of the Budget.

Budget At A Glance: Key Recommendations

State to be equal partners in development to overcome challenges such as:
• Poor agricultural income
• Fall in manufacturing
• Requirement for fiscal discipline

New dawn of cooperative federalism and empowerment of states through:
• National Institution of Transforming India/NITI
• Acceptance of recommendations of 14th Finance Commission

• Budget marks start of award period (2015-2020) of the FFC; idea to build “Team India with Stronger States” because “India Grows when States Grow”

• Total plan outlay for 2015-2016 is INR 465277 crore; Plan Outlay is kept at the level of RE 2014-2015

• Higher devolution to States of the divisible pool mean fiscal space of Centre shrinks to same degree

Current Central Plan Outlay is there for:
• Agriculture,
• Rural Development,
• Animal Husbandry,
• Dairying and Fisheries,
• Minority Affairs,
• Women and Child Development,
• Development of Ayurveda, Yoga, Sidha and Homeopathy,
• Export Promotion,
• Industrial Corridor Development,
• Development of North East,
• Drinking Water and Sanitation,
• Health and Family Welfare,
• Health Research,
• AIDS Control,
• School Education,
• Higher Education,
• Renewable Energy,
• Science and Technology,
• Bio-technology,
• Shipping,
• Social Justice and Empowerment,
• Disability Affairs,
• Tribal Affairs and Urban Development,

• Allocation for Roads and Railways sector have been increased to enhance infrastructure development; Allocation for DMIC/Delhi Mumbai Industrial Corridor has been nearly doubled

• Resource allocation for Pradhan Mantri Krishi Sinchal Yojana, Sagar Mala Project and Rural Electrification

• States to have flexibility in design and running of programmes and schemes

• Continued support for State Plans of national priorities, especially those associated with poverty alleviation and social disadvantage

• Certain programmes will continue unaltered by the Centre keeping in mind they are constitutionally/legally required or further privileges are available to elected reps for constituent welfare

• For some Centrally sponsored schemes, sharing pattern will undergo a change

Highlights of the Budget

Credibility of Indian economy established as adverse macroeconomic indicators overcome; real GDP growth pegged at 7.4% (New Series):

• Second best performance of stock market in 2014
• Macroeconomic conditions for alleviation of poverty and job creation
• Durable double digit growth
• Financial inclusion
• Transparent coal block auctions

• Reforms on the anvil such as GST, JAM (Jan Dhan, Aadhar and Mobile)

State of the Economy

• Structural shift and decline in inflation
• CPI inflation projections close to 5% by year end and easing of monetary policy
• Monetary policy framework agreement with the central bank to keep inflation below 6%
• GDP growth projected between 8 to 8.5%

Vision for Team India
• Housing for all
• Basic facilities and utility services such as power 24/7
• Minimum of one member access to livelihood
• Electrification of remaining villages
• Connections in un-connected habitation
• Provision of medical services in villages and cities
• Access for each child to senior secondary school within distance of 5 km
• Strengthening the rural economy with increase in irrigated area and improvement in existing systems
• Communication connectivity in all villages
• India as a manufacturing hub through Skill India and Make in India
• Encouragement of entrepreneurial spirit

Major Challenges

• Agricultural income under pressure
• Increased investment in infrastructure
• Fall in manufacturing
• Resource crunch following higher devolution in taxes to states
• Maintenance of fiscal discipline

Public sector needs to:
• Catalyse investment
• Support job creation through Make in India
• Continue support programmes in areas of national importance
• Challenge of maintaining fiscal deficit of 4.1% of GDP met in 2014-2015, regardless of nominal GDP growth resulting from lower inflation and subdued tax buoyancy

• Roadmap for Fiscal Growth

• GoI focused on attaining fiscal target of 3% of GDP to be achieved in 3 years
• Improved economy, pressure for acceleration of fiscal consolidation falls

• Fiscal deficit targets are 3.9% in FY 2015-2016, 3.5% in FY 2016-2017 and 3.0% in 2017-2018

• Additional fiscal space will be for financing infrastructure investment

• Need to cut down on subsidy leakages; disinvestment in loss making units and strategic disinvestment

• Direct Transfer of Benefits to be further extended from 1 crore to 10.3 crore

Provisions Regarding Agriculture

• Steps taken to address issue of soil and irrigation
• Full support for ‘Paramparagat Krishi Vikas Yojana’
• ‘Pradhan Mantri Gram Sinchai Yojana’ for ‘Per Drop More Crop’
• INR 5,300 crore to support irrigation and watershed development
• INR 25,000 crore in 2015-2016 to RIDF/Rural Infrastructure Development Fund established by NABARD
• INR 15,000 crore for Long Term Rural Credit Fund
• INR 45,000 crore for Short Term Cooperative Rural Credit Refinance Fund
• INR 15,000 crore for Short Term RRB Refinance Fund
• Target of INR 8.5 lakh crore of agricultural credit in the year 2015-2016

• Focus on enhancing quality as well as effectiveness of activities under MGNREGA

• National Agricultural Market for benefitting farmers with incidental benefit of moderating price rises

• Government to work for Unified National Agricultural Market

Funding Proposals

• Micro Units Development Refinance Agency/MUDRA Bank with corpus of INR 20,000 crores and credit guarantee corpus of INR 3,000 crores in place with scheme of Pradhan Mantri Mudra Yojana
• Priority to SC/ST enterprises in lending
• Trade Receivables Discounting System/TReDS: electronic platform for boosting financing of trade receivables of MSMEs
• Comprehensive Bankruptcy Code of global standards this fiscal
• Postal network for increasing farmer access to finance
• NBFCs with asset size of INR 500 crore and above registered with RBI to be considered for notification as Financial Institution under the SARFAESI Act 2002

Jan Suraksha

• Functional security system for Indians especially poor and underprivileged
• Accidental death prism of INR 2 lakh for premium of just 12K per year: Pradhan Mantri Suraksha Bima Yojana
• Atal Pension Yojana for providing defined pension based on period and nature of contribution
• Pradhan Mantri Jeevan Jyoti Bima Yojana to cover both natural and accidental death risk
• Scheme for providing Physical Aids and Assisted Living Devices for senior citizens below the poverty line
• Creation of Senior Citizen Welfare Fund
• Government committed to ongoing schemes for SCs, STs and Women

Infrastructure

• Rise in outlay of roads and railways; capital expenditure on PSUs up
• Annual flow of INR 20,000 crores to establish National Investment and Infrastructure Fund
• Tax less infrastructure bonds for rail, road and irrigation sector projects
• PPP mode of infrastructure to be revisited and rejuvenated
• AIM/Atal Innovation Mission for providing Innovation Promotion Platform with academics and national as well as international expertise
• SETU/Self Employment and Talent Utilisation established as a techno-financial, incubation and facilitation programme for supporting all aspects of start up
• Ports in PSUs to be encourages; PSUs to become more professional and leverage land resources
• 5 New Power projects of 4000 MW in Plug and Play mode

Financial Market

• PDMA/Public Debt Management Agency for uniting external and domestic borrowings into one
• Improving legislation, amendment of the Government Securities Act and RBI Act including Financial Bill 2015
• SEBI-Forward Markets Commission merger
• Section 6 of FEMA to undergo amendment through the Finance Bill to provide greater control on capital flows
• Task force to establish sector neutral financial redressal agency
• Indian Financial Code to be launched
• A direct tax regime in place that is globally competitive
• Enabling legislation for allowing employees to opt for EPF or New Pension Scheme

Gold

• Focus on monetising gold
• Gold monetisation scheme for allowing depositors to earn interest in metal accounts; jewellers to obtain loans in metal accounts to be introduced
• Sovereign Gold Bond, alternative to purchase of metal gold scheme to be developed
• Indian gold coin with Ashok Chakra on its face to be released

Investment
• Foreign investments in Alternate Investment Funds to be permitted
• Distinction between different types of foreign investments including foreign portfolio investments and FDIs to be done away with
• Replacement with composite caps; project development for establishing manufacturing hubs in CMLV or Cambodia, Myanmar, Laos and Vietnam

Safety and Security
• INR 1000 crores to be allocated to Nirbhaya Fund

Tourism
• Resources for restoration of landscape, interpretation and signage centres, parking, access for differently abled persons, amenities for visitors and plans for improving community welfare
• Visa on arrival expanded to 150 more countries stage wise

Renewable Energy and Green India

• Target of renewable energy capacity revised to 175,000 MW till 2022:
• 100,000 MW: Solar
• 60,000 MW: Wind
• 10,000 MW: Biomass
• 5,000 MW: Small Hydro

• Public Contracts (Resolution of Disputes) Bill to streamline institutional arrangements

• Introduction of regulatory reform

Skill India

• National Skill Mission
• Deen Dayal Upadhyay Gramin Kaushal Yojana to increase rural youth employability
• Student Financial Aid Authority to be established and administer educational loan/scholarship schemes via the Pradhan Mantri Vidya Lakshmi Karyakram
• IIT to be established in Karnataka; Indian School of Mines, Dhanbad to be upgraded to full status IIT
• AIIMS to be established in Assam, HP, TN, Punjab and J&K, AIIMS like institute in Bihar
• Several new educational institutions to be established in fields such as horticulture, pharmaceuticals education, science and education research and so forth
• Autonomous Bank Board Bureau to be established to improve PSU bank governance
• NOFNP/National Optical Fibre Network Programme to be further expanded
• Special assistance to Bihar and West Bengal; help to AP and Telangana

Budget Estimates

• Non Plan Expenditure: INR 13,12,200 crore
• Plan Expenditure: INR 4,65,277 crore
• Total Expenditure: INR 17,77,477 crore
• Gross Tax Receipts: INR 14,49,490 crore
• Devolution to States: INR 5,23,958 crore
• Share of Centre: INR 9,19,842 crore
• Non Tax Revenues for Next Fiscal: INR 2,21,733 crore
• Fiscal Deficit: 3.9% of GDP
• Revenue Deficit: 2.8% of GDP

Taxation and Money

• Stable tax policy
• Implementation of GST from next year
• No change in personal income tax
• Reduction of corporate tax from 30 to 25 percent over next 4 years
• Rationalisation and removal of tax exemptions and incentives to lower tax disputes and enhance administration
• Key measures to curb and bring back black money
• Improvement in ease of doing business: Make in India
• Minimum government and maximum governance
• Improvement in quality of life and public health through Swachh Bharat
• Evasion of tax pertaining to foreign assets to be punished with jail term of 10 years, non compoundable and penalty rate of 300%
• Concealment of income/evasion of income pertaining to foreign asset to be made offence under PML Act 2002
• Benami Transactions (Prohibition) Bill to curb black money
• PAN complulsory for sale or purchase of more than INR 1 lakh
• Third party reporting entities to furnish information regarding foreign currency sales and inter-border transactions
• CBDT and CBEC to leverage technology and access data from data bases
• GAAR-General Anti Avoidance Rule to be deferred by 2 years
• Abolition of wealth tax
• Additional 2% surcharge for super rich with income of more than INR 1 crore
• Rate of corporate tax to be reduced to 25% over coming 4 years
• Total exemption of INR 4,44,200 can be attained
• 100% exemption for contribution to Swacch Bharat and CSR
• Service tax increase by 14%

• Make in India
• Job creation; establishment of manufacturing hub
• Tax Pass Through allowed in Category 1 and 2 investment funds
• Rationalisation of capital gains regime for sponsors exiting at time of REIT and InvITs listing
• Fund managers to relocate to India following PE norm modification

Defence

• Allocation of INR 2,46,726 crore; increase from last year by 9.87%
• Focus on Make in India for quick manufacturing of defence equipment