Budget looks to business, states to push growth
28 Feb 2015
The Union Budget for the year 2015-16, presented in Parliament by finance minister Arun Jaitley today, anchors on the enabling planks of empowering business and co-opting state governments for bringing about the necessary momentum to economic growth and overall development.
Presenting the annual budget for 2015-16, finance minister Arun Jaitley announced a slew of measures, including reduction in customs and excise duties for a number of industrial inputs and finished products, to attract investments.
With a 10-percentage point increase in the total devolution of central tax revenue to the states, estimated at Rs5,23,958 crore for the current fiscal, the central government will be left with a leaner tax kitty of Rs9,19,842 crore.
However, there is no clarity yet on how the centre will meet its Plan obligations without having the necessary resources or without resorting to debt financing.
In order to attract private investment in the economy, the finance minister underlined the pressing need to increase public investment in infrastructure.
He proposed to increase outlays on roads and gross budgetary support to the railways by Rs14,031 crore and Rs10,050 crore, respectively.
He said the capex of public sector units is expected to be Rs3,17,889 crore, an increase of approximately Rs80,844 crore over revised estimates for 2014-15.
He also proposed to establish a National Investment and Infrastructure Fund (NIIF) with an annual flow of Rs20,000 crore. He said that he also intends to permit tax-free infrastructure bonds for the projects in the rail, road and irrigation sector.
He said the PPP mode of infrastructure development has to be revisited and revitalised.
The finance minister also proposed to set up a Public Debt Management Agency (PDMA), which will bring both India's external borrowings and domestic debt under one roof.
He also proposed to merge the Forward Markets Commission with SEBI to strengthen regulation of commodity forward markets and reduce wild speculation. He said enabling legislation, amending the Government Securities Act and the RBI Act is proposed in the Finance Bill, 2015.
Highlighting the need for increasing investments from all sources, the finance minister proposed to allow foreign investments in Alternate Investment Funds. He said in order to catalyse investments from the Indian private sector in south east Asia, a project development company will set up manufacturing hubs in Cambodia, Myanmar, Laos and Vietnam.
Giving the budget estimates for the financial year 2015-16, Jaitley put total expenditure at Rs17,77,477 crore, which includes Plan expenditure estimated at Rs4,65,277 crore (which is very close to the revised estimates of 2014-15) and non-Plan expenditure estimated at Rs13,12,220 crore.
Gross tax receipts are estimated to be Rs14,49,490 crore. Non-tax revenue for the next fiscal is estimated to be Rs2,21,733 crore.
The Budget puts the fiscal deficit for the 2015-16 fiscal at 3.9 per cent of GDP and revenue deficit at 2.8 per cent of GDP.
Jaitley said the Indian economy has turned around dramatically in the last nine months with the real GDP growth expected to accelerate to 7.4 per cent, making India the fastest growing large economy in the world.
He said macro-economic stability has been restored and conditions have been created for sustainable poverty elimination, job creation and durable double digit economic growth.
Jaitley specifically mentioned three key achievements of the government - the financial empowerment scheme which brought over 125 million families into financial mainstream in a short period of 100 days, transparent coal block auctions to augment resources of the states and 'Swachh Bharat' which has become a movement to regenerate India. Jaitley said the three together would be game changer for the economy.
India, he said, has now embarked on two more game changing reforms which are GST and the `JAM Trinity' - Jan Dhan, Aadhar and Mobile - to implement direct transfer of benefits. He said the GST will put in place a state-of-the art indirect tax system by 1 April 2016 while the JAM Trinity will allow transfer benefits in a leakage-proof, well-targeted and cashless manner.
He also invoked the prime minister's vision of 'Team India' where the states are led and guided by the central government to assure a roof for each family which will require to complete 20 million houses in urban areas and 40 million houses in rural areas with each house having 24 hour power supply, clean drinking water, a toilet and road connectivity.
He said the vision includes that at least one member from each family should have access to the means of livelihood, substantial reduction in poverty, electrification of the remaining 20,000 villages, including off-grid solar power by 2020, connecting each of the 1,78,000 un-connected habitation, providing medical services in each village and city, ensuring a senior secondary school within 5 km reach of every child, strengthening rural economy-increase irrigated area, ensuring communication connectivity to all villages, to make India, the manufacturing hub of the world through Skill India and the Make in India Programmes.
The finance minister counted five major challenges faced by the Indian economy which are agricultural income under stress, weak private sector investment in infrastructure, decline in manufacturing, resource crunch in view of higher devolution in taxes to states and maintaining fiscal discipline.
Jaitley assured that the country will meet the challenging fiscal deficit target of 4.1 per cent of GDP, which the government had inherited, and achieve fiscal target of 3 per cent of GDP. He added that the journey for fiscal deficit target of 3 per cent will be achieved in three years rather than two years.
The centre, which has already announced an increase in the share of central taxes to states as per the Finance Commission's recommendations, however, proposed adequate provisioning for schemes for the poor, showing that it is not it is not shirking responsibility.
Accordingly, the Budget provides for allocation of Rs68,968 crore to the education sector, including mid-day meals, Rs33,152 crore to the health sector and Rs79,526 crore for rural development activities, including MGNREGA, Rs22,407 crore for housing and urban development, Rs10,351 crore for women and child development, Rs4,173 crore for water resources and Namami Gange.
The minister said that adequate funds have been provided for the needs of the armed forces. As against likely expenditure of this year of Rs2,22,370 crore the budget allocation for 2015-16 is Rs2,46,727 crore, he said.