In the first Budget of the NDA's Narendra Modi Administration, Union Finance Minister Arun Jaitley presented a cautious testament of fiscal prudence combined with steps for encouraging increased investments, for boosting industrial infrastructure through roads, airports, ports and smart cities, and for providing cost breaks to specific industries. He also lowered prices of some middle-level consumer products to stoke demand.
However, he neither attacked government expenditure dramatically, nor opened up Foreign Direct Investment in a big way, besides raising the cap from 26 per cent to 49 per cent in defence manufacturing and insurance.
Jaitley's Budget included several proposals, and a clear statement of intent, for improving India's industrial infrastructure. Proposals for roads, airports, ports, housing, and uninterrupted power set a strong basis for economic revival, but in the absence of the strategy planned behind the expenditure, these did not appear significantly different from the Budget proposals of earlier governments.
The Finance Minister did state at the outset that it was 'not wise to expect' that everything could be done or must be done in the first Budget presented within 45 days of the government's being elected. The markets have reacted with great volatility, starting with a jump, then falling a long way after the retrospective tax was not scrapped, but recovering dramatically after Jaitley announced tax incentives for financial sector players.
Most of the experts on CNN-IBN panel described the Budget as "average" which had too many details without focusing on a few.
Here are the highlights:
Fiscal deficit
* 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
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
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
Pension schemes
* Pension Scheme to be revived for a year (Aug 15-14) for citizens above 60
Infrastructure
* Earmarks Rs 500 crore for 24x7 uninterrupted power in all homes
Education
* Five more IITs and IIMs
* Four more AIIMs
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
Others
* Earmarks Rs 200 crore for Sardar Patel statue
Finance Minister comments
* "We have no option but to take some bold steps to spurt economy; these are only the first steps and are directional."
* "Slow decision making has resulted in a loss of opportunity"
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