INTERIM
BUDGET 2014-2015
KEY FEATURES
THE CURRENT ECONOMIC SITUATION AND THE
CHALLENGES
♯
The state of world
economy has been the most decisive factor affecting the fortunes of every
developing country.
♯
The world economy
has been witnessing a sliding trend in growth, from 3.9 percent in 2011 to 3.1
percent in 2012 and 3 percent in 2013.
♯
The economic
situation of major trading partners of India, who are also the major source of
our foreign capital inflows, continues to be under stress. United States has just
recovered from long recession, Euro zone, as a whole, is reporting a growth of
0.2 per cent, and China’s growth has also slowed down.
♯
The economic
challanges faced by our country are common to all emerging economies. Despite
these challanges, we have successfully navigated through this period of crisis.
♯
Apart from
embarking on the path of fiscal consolidation, the objectives of price stability,
self sufficiency in food, reviving the growth cycle, enhancing investments, promoting
manufacturing, encouraging exports, quickening the phase of implementation of
projects and reducing a stress on important sectors were the goals set in
2012-13.
STATE
OF ECONOMY
1. Deficit and Inflation
♯ The fiscal deficit for 2013-14 contained at
4.6 percent .
♯ The currect account deficit projected to be
at USD 45 billion in 2013-14 down from USD 88 billion in 2012-13.
♯ Foreign exchange reserve to grow by USD 15
billion in this Financial Year
♯ No more talk of down grade of Indian Economy
by Rating Agencies.
♯ Fiscal stability at the top of the Agenda.
♯ Government and RBI have acted in tandem to
bring down inflation.
♯ WPI inflation down to 5.05 percent and core
inflation down to 3.0 percent in January 2014.
♯ Food inflation down to 6.2 percent from a
high of 13.8 per cent.
2.
Agriculture
♯
Agricultural
sector has performed remarkably well
♯ Food grain production estimated for the current year is
263 million tonnes compared to 255.36 million tonnes in 2012-13.
♯ Agriculture export likely to cross USD 45
billion higher from USD 41 billion in 2012-13.
♯ Agricultural credit to exceed the target of ` 7 lakh
crores.
♯ Agricultural GDP growth for the current year
estimated at 4.6 percent compared to 4.0 percent in the last four years.
3. Investment
♯ Savings rate at 30.1 percent and investment
rate of 34.8 percent in 2012-13.
♯ Government set up a Cabinate Committee on
investment and the Project Monitoring
♯ Group to boost investment. By end of January
2014, Projects numbering 296 with an estimated project cost of ` 660,000
crore cleared.
4. Foreign Trade
♯
Despite
a decline in growth of global trade, our export have recovered sharply.
♯
The
estimated merchandise export is estimated to reach USD 326 billion indicating a
growth rate of 6.3 percent in comparison to the previous year.
5. Manufacturing
♯
The
sluggish import is a matter of concern for manufacturing and domestic trade
sector.
♯
Due to
deceleration in investment, the manufacturing sector has witnessed a sluggish growth.
♯
The
National Manufacturing Policy has set the goal of increasing the share of manufacturing
in GDP to 25 percent and to create 100 million jobs over a decade.
♯
8
National Investment and Manufacturing Zones (NIMZ) along Delhi Mumbai
Industrial Corridor (DMIC) have been announced. 9 Projects had been approved by
the DMIC trust.
♯
3 more
Industrial Corridors connecting Chennai and Bengaluru, Bengaluru and Mumbai &
Amritsar and Kolkata are under different stages of preparatory works.
♯
Additional
capacities are being installed in major manufacturing industries.
♯
Notification
of a public procurement policy, establishing technology and common facility centres,
and launching the Khadi Mark are steps taken to promote Micro Small and Medium
Enterprises.
6. Infrastructure
♯ In 2012-13 and in nine months of the current
financial year, 29, 350 MW of power capacity, 3, 928 Kms of National Highways,
39, 144 Kms of Rural Roads, 3,343 Kms of New Railway track and 217.5 milliion
tonnes of capacity per annum in our ports have been created to give a big boost
to infrastructure industries.
♯ 19 Oil and Gas blocks were given out for
exploration and 7 new Air ports are under construction.
♯ Infrastructure debt funds have been promoted
to provide finances for infrastructure Projects.
7. Exchange Rates
♯
Rupee
came under pressure following indications by US Federal Reserve of reduction in
asset purchases in May 2013.
♯
Government,
RBI and SEBI undertook a number of measures to facilitate capital inflows and
stablize the foriegn exchange markets. As a result among emerging economy currencies
rupee was least affected when actual reduction took place in December 2013.
8. GDP Growth
♯ The GDP slow-down which began in 2011-12
reaching 4.4 percent in Q1 of 2013-14 from 7.5 percent in the corresponding
period in 2011-12 has been controlled by numerous measures taken by the
Government. Growth in the third and fourth quarter of the current year is
expected to be 5.2 percent and that for the whole year has been estimated at
4.9 percent.
♯ The declining fiscal deficit, stable Exchange
Rate and reducing Current Account Deficit, moderation in inflation, increasing
exports are reflection of a more stable economy today.
9. UPA’s record of Growth
♯ In India growth is an imperative but
sustainable and inclusive growth model must address the concerns of
environment, inter generational equity, indebtedness etc.
♯ Un paralleled record of growth in 10 years of
UPA Government.
♯
Production
of food grains up from 213 million tonnes to 263 million tonnes, installed power
capacity up to 2,34,600 MW from 1,12,700 MW, coal production 554 million tonnes
from 361 million tonnes, 3,89,578 Kms of Rural Roads under PMGSY from 51,511
Kms, over a period of 10 years.
♯ The expenditure on Health & Family
Welfare has reached ` 36,322 crore from` 7,248
ten years ago.
♯ The expenditure on Education has reached ` 79,451
crore from ` 10,145 ten years ago.
♯ UPA-I & UPA-II Governments have delivered
above the trend growth of 6.2 percent, which prevailed over a period of 33
years.
10.
Report
Card of 2013-14
♯ De-controlling sugar, gradual correction of
diesel prices, rationalization of railway fares, were some of the courageous
and long over due decisions taken by the Government.
♯ Applications were invited for issue of new
bank licences.
♯ DISCOMS, mostly sick are being restructured
with generous central assistance.
♯ 12.8 lakhs land titles covering 18.80 lakh
hectare were distributed under the Scheduled Tribes and Other traditional
Forest Dwellers Act.
♯ The oppressive colonial law of 1894 was
substituted with the Right to Fair Compensation and Transparency in Land
Acquisition Rehabilitation and Resettlement Act.
♯ National Food Security Act was passed
assuring food to 67 percent of the population/ households.
♯ The new companies Act replaced a law of 1956
vintage.
♯ The PFRDA Act was passed to establish a
statutory regulator for the New PensionScheme.
11.
Economic
Initiative
♯ Centrally Sponsered Schemes were restructured
into 66 Programs for greater Synergy. Funds under these programs will be
released as Central assistance to State Plan, thus giving greater authority and
responsibility. As a result, Central assistance to plans of States & UTs
will rise substantially from `136,254 crore in BE 2013-14 to `338,562
crore in 2014-15.
♯ Record Capital expenditure of ` 257,641
crores in 2013-14 by public sector enterprises.
♯ About 50,000 MW of Thermal and Hydel Power
capacity is under construction after receiving all clearances and approvals.
78,000 MW of power capacity have been assured coal supply.
♯ Liberalised FDI policy in tele-communication,
pharmaceuticals, civil aviation, power trading exchange, and multi brand retail
to attract large investment.
♯ Approval to establish 2 semi conductor wafer
fab units.
♯ Approval of IT modernization project of
Department of Post.
♯ Kudankulam Nuclear Power Plant Unit-I
achieved criticality and is generating 180 Milliion Units of power.
♯ Fast breeder Reactor at Kalpakkam and 7
Nuclear Power Reactors under construction.
♯ National Solar Mission to add 4 Ultra Mega Solar
Power Projects each with the capacity of over 500 MW in 2014-15.
♯ Ministry of MSME will create the ‘India
Inclusive Innovation Fund’ to promote grass root innovations with social
returns to support enterprises in the MSME sector with an initial contribution
of `100
crore to the corpus of the fund.
12.
Social
Sector Initiative
♯ A Venture Capital Fund to provide
concessional finance to Scheduled Caste will be set up by IFCI with an initial
capital of ` 200 crore which can be supplemented every year.
♯ The restructured ICDS, under implementation
in 400 districts, will be rolled out in remaining districts from 1.4.2014.
♯ A National Agro-Forestry Policy 2014 has been
approved.
♯ A mechanism for marketing minor Forest
produce has been introduced and an allocation of ` 444.59
crore has been made to continue the Scheme in 2014-15.
♯ A new Plan Scheme with an allocation of `100
crore has been approved to promote community radio station
♯ New technologies such as JE vaccine, a
diagnostic test for Thalassaemia and Magnivisualizer for detection of Cervical
cancer have been delivered to people.
1. Additional Central Assistance to some States
♯ A sum of `1200
crore as additional central assistance to North Eastern states, Himachal Pradesh
and Uttarakhand in this financial year.
2. Space
♯ India joined a handful of countries when it
launched the Mars Orbiter Mission.
♯ The Country has acquired capability in launch
vehicle technology, cryogenics and navigation , meteorological and
communication satellites.
♯
Several
flight tests, navigational satellites and space missions are planned for
2014-15
3. Redeeming promises
♯ A Corpus has been created for ‘Nirbhaya Fund’
with a non lapsable grant of ` 1000 crore. 2 Proposals to ensure the dignity
and safety of women have been approved which will be funded from the Nirbhaya
Fund . A sum of ` 1000 crore has again been provided in FY
2014-15
♯ The National Skill Certification and monitary
reward schemes launched in August 2013 with an allocation of ` 1000
crore has been widely hailed as a success. A sum of ` 1000
crore is proposed to be transferred to the NSD Trust to scale up its programme rapidly.
♯ Government remains fully committed to Aadhar
under which 57 crore Unique Numbers have been issued so far and to opening bank
accounts for all Aadhar holders to promote financial inclusion.
♯ Through the Direct Benefic Transfer (DBT)
Scheme, a total of ` 628 crore (54,20,114 transactions) has been
transferred directly to the beneficiaries till 31st January 2014 under 27
Schemes.
OVERVIEW OF THE INTERIM BUDGET
2 In order to sustain the pace of plan
expenditure, it has been kept at the same level in 2014-15 at which, it was
budgeted in 2013-14.
2 Ministries/Departments which run key flagship
programmes have been provided adequate funds in 2014-15 either equal to or
higher than in the BE 2013-14. These include Ministries namely, Minority Affairs,
Tribal Affairs, Housing & Poverty Alleviation, Social Justice &
Empowerment, Panchayat Raj, Driniking Water and Sanitation, Women & Child
Development, Health & Family Welfare, Human Resource Development and Rural
Development.
Railways
2 Budgetary support to Railways has been
increased from ` 26,000 crore in BE 2013-14 to ` 29,000
crore in 2014-15.
2 It is proposed to indentify new instruments
and new mechanisms to raise funds for Railway Projects.
SC Sub-Plan and Tribal Sub-Plan, Gender
Budget and Child Budget
2
` 48,638 crore and ` 30,726
crore are allocated to the SC Sub-Plan and Tribal Sub- Plan respectively.
2 Gender Budget and Child Budget has ` 97,533
crore and ` 81,024 crore respectively.
Non
Plan Expenditure
2
Non
Plan expenditure is estimated at ` 12,07,892 crore.
2
The
expenditure on subsidies for food, fertilizer & fuel will be ` 246,472
crore slightly higher than the revised estimates of ` 245,453
crore in 2013-14.
2
` 115,000 crore has been allocated for food
subsidies taking in to account,
2
Government‘s
firm and irrevocable committment to implement the National Food Security Act
throughout the country.
Defence
2
10 per
cent hike in Defence allocation has been given in comparison to BE 2013-14.
2
Government
has accepted the principle of one rank one pension for the Defence Forces which
will be implemented prospectively from the FY 2014-15. A sum of ` 500 crore
is proposed to be transferred to the Defence Pension Account in the current Financial
Year itself.
Central Armed Police Forces
2
A
modernization Plan at a cost of `11,009
crore has been approved to strengthen the capacity of Central Armed Police
Forces and to provide them the state-of-art, equipment and technology.
FINANCIAL SECTOR
2
All
the announcements concerning the Financial sector made in the Budget Speech of February
2013 have been implemented.
2
` 11,300 crore is proposed to be provided for
Capital infusion in Public Sector Banks.
2
5,207
new branches have been opened against the target of 8,023.
2
Bhartia
Mahila Bank has been established.
2
` 6,000 crore and ` 2,000
crore have been provided to Rural and Urban Housing Funds respectively.
2
The
target of ` 700,000 crore of Agricultural Credit is
likely to be exceeded by the Banks. The target for 2014-15 is ` 800,000
Crore.
2
` 23,924 crore has been released under the
Interest Subvention Scheme on farm loans, with effective rate of interest on
farm loans at 4 percent including subvention of 2 percent and incentive of 3
percent for prompt payment.
Credit to Minority Communities
2
The
number of bank accounts of minorities has increased to 43,52,000 at the end of March
2013 from 14,15,000 ten years ago. The volume of lending has soared to ` 66,500
crore from ` 4,000 crore in the same period.
2
Loans
to minorities stood at ` 211,451 crore at the end of Decemeber 2013.
Self-Help Groups (SHGs) Loans
2
Ten
years ago, only 9,71,182 women Self-Help Groups (SHGs) had ben credit linked to
banks. At the end of December 2013, 4,11,6000 women SHGs had been provided credit
and the outstanding amount of credit was ` 36,893
crore
Education Loans
2
A
moratorium period is proposed for all education loans taken up to 31.3.2009 and
outstanding on 31.12.2013. Government will take over the liability for
outstanding interest as on 31.12.2013 but the borrower would have to pay
interest for the period after 1.1.2014. An amount of ` 2,600
crore has been provided this year and it will benefit nearly 9 lakh student
borrowers.
Insurance
2
LIC
and the four public sector general insurance companies have opened around 3000
offices in towns with a population of 10,000 or more to serve peri-urban and rural
areas.
Financial Markets
2
Steps
envisaged to deepen the Indian Financial Market :
•
ADR/GDR
Scheme revamp, an enlargement of the scope of depository receipt
•
Liberalization
of rupee denominated corporate bond market.
•
Currency
Derivatives Market to be deepened and strengthened to enable Indian Companies
to fully hedge against foriegn currency risk
•
To
create one record for all financial assets of every individual
•
To
enable smoother clearing and settlement for international investors looking to invest
in Indian bonds.
Commodity Derivatives Markets
2
Swift
action taken to sequester National Spot Exchange Limited (NSEL) after the payment
crisis in the NSEL, this prevented spill over of the crisis to the other regulated
segment of the financial markets.
2
Proposal
to amend the Forward Contracts (Regualtion) Act.
Key Pending Bills
2
The
Insurance Laws (Amendment) Bill and the Securities Laws (Amendment) Bill have
not been passed by Parliament for reasons that have nothing to do with the
merits of the Bills.
VISION FOR FUTURE
Ä
India
poised to be third largest economy along with US and China, to play a leading
an important role in global economy.
Ä
10
Tasks as part of the road map ahead include :
ü Fiscal consolidation : We must achieve the target of
fiscal deficit of 3 percent of GDP by 2016-17 and remain below that level
always.
ü Current Account Deficit : CAD will be inevitable for some
more years which can be financed only by foreign investment. Hence, there is no
room for any aversion to foreign investment.
ü Price Stability and Growth : In a developing economy, a
high growth target entails a moderate level of inflation. RBI must strike a
balance between price stability and growth while formulating the monetary
policy.
ü Fianancial Sector reforms to be completed as laid down by
Financial Sector Legislative Reforms Commission.
ü Massive investment in infrastructure : to be mobilized
through the Public Private Partnership.
ü Manufacturing sector to be the base of India’s
development : All taxes, Central and State that go into an exported product
should be waived or rebated. There should be a minimum tariff protection to
incentiwise domestic manufacturing.
ü Subsidies, which are absolutely necessary should be
choosen and targeted only to the absolutely deserving.
ü Urbanisation to be managed to make cities governable and
liveable.
ü Skill development must be given priority at par with
secondary and university education, sanitation and universal health care.
ü States to partner in development so as to enable the
Centre to focus on Defence, Railways, National Highways and Tele-communication.
REVENUES
GST and DTC
F Governement appeals to all political parties
to resolve to pass the GST Laws and the Direct Tax Code in 2014-15
Funding Scientific Research
F It is proposed to set up a Research Funding
Orgnaisation that will fund Research Projects selected through a competitive
process. Contribution to that organisation will be eligible for tax benefits.
The required legislative changes can be introduced at the time of regular
Budget.
Off-shore Accounts
F The Government has succeeded in obtaining
information on illegal off-shore accounts held by indians in 67 cases and
action is under way. Prosecution for wilful tax evasion have also been launched
in 17 other cases. More enquiries have been initiated in to accounts reportedly
held by Indian entities in no tax or low tax jurisdictions.
Changes in Tax Rates
F Following changes in some indirect tax rates are
proposed:
Ø States to partner in development so as to enable the
Centre to focus on Defence, Railways, National Highways and Tele-communication.
Ø The Excise Duty on all goods falling under Chapter 84
& 85 of the Schedule to the Central Excise Tariff Act is reduced from 12
percent to 10 percent for the period upto 30.06.2014. The rates can be reviewed
at the time of regular Budget.
Ø To give relief to the Automobile Industry, which is
registering unprecended negative growth, the excise duty is reduced for the
period up to 30.06.2014 as follows: Small Cars, Motorcycle, Scooters - from 12
% to 8% and Commercial Vehicles SUVs - from 30% to 24% Large and Mid-segment
Cars - from 27/24% to 24/20%
Ø It is also proposed to make appropriate reductions in the
excise duties on chassis and trailors - The rates can be reviewed at the time
of regular Budget
Ø To encourage domestic production of mobile handsets, the
excise duties for all categories of mobile handsets is restructured. The rates
will be 6% with CENVAT credit or 1 percent without CENVAT credit.
Ø To encourage domestic production of soaps and oleo
chemicals, the custom duty structure on non-edible grade industrial oils and
its fractions, fatty acids and fatty alcohols is rationalized at 7.5 percent.
Ø To encourage domestic production of specified road
construction machinery, the exemption from CVD on similar imported machinery is
withdrawn.
Ø A concessional custom duty 5 percent on capital goods
imported by the Bank Note Paper Mill India Private Limited is provided to
encourage domestic production of security paper for printing currency notes.
F
The
loading and un-loading, packing, storage and warehousing of rice is exempted from Service Tax.
F The services provided by cord blood banks is
exempted from Service Tax.
BUDGET ESTIMATE
A The current financial year will end on a
satisfactory note with the fiscal deficit at 4.6 percent (below the red line of
4.8 percent) and the revenue deficit at 3.3 percent.
A Fiscal Deficit in 2014-15 estimated to be 4.1
percent which will be below the target set by new Fiscal Consolidation Path and
Revenue Deficit is estimated at 3.0 percent.
A The estimate of Plan Expenditure is `555,322
crore. Non Plan expenditure is estimated at `12,07,892
crore.
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