New Delhi: “India is over the days of incremental change and is waiting for a quantum jump,” Finance Minister Arun Jaitley said at the beginning of his Budget speech on Saturday as he read out the government’s first, full economic document that is being seen as a major test for Prime Minister Narendra Modi’s stomach for free-market economics and his promises for a much-needed roadmap to reform.
Jaitley did not disappoint as he concentrated on consolidating existing resources, cutting corners here and there, though he provided a major boost to infrastructure. The industry reacted positively to Jaitley’s ‘reformist’ plans to step up private investment in public projects. The stock market also reacted positively as Jaitley cut corporate tax from 30 per cent to 25 per cent
The finance minister did not announce any big-ticket projects while making it clear that his government’s major achievement has been to curb inflation.
He made a few key announcements, among which were a second unit of the Kudankulam nuclear power station, five ultra mega power projects, a mechanism for self employment to support all aspects of a start-up business and a boost to UPA’s MNREGA of Rs 5,000 crore. He also put another Rs 1,000 crore in the Nirbhaya fund.
More importantly, Jaitley came out with a strict law to deal with the “menace of black money”, unfurling stringent punishment for defaulters. Undisclosed income would be taxed on maximum marginal rate, he said, adding penalty would be 300 per cent of original tax. He said the proposed ‘Benami Property Transaction Bill’ would stop black money transactions in real estate.
He abolished the wealth tax and added an extra two per cent surcharge on the super rich that would benefit the government by Rs 9,000 crore. Existing exemptions for individual tax payers, however, remain unchanged while service tax has been hiked by 14 per cent. Jaitley also announced a slew of benefits for the common man in the health sector and several for senior citizens.
“I intend to create a direct tax regime, which will be internationally competitive and I would also like to discourage cash transactions to curb the menace of black money, Jaitley told Parliament.
Here are the highlights of Finance Minister Arun Jaitley’s Budget speech:
The rupee has become stronger by 6.4 per cent
Estimated GDP is 7.4 per cent, we have to think in terms of a quantum jump
One of the achievements of my government has been is to conquer inflation
Domestic and international investors are seeing us with renewed hope
Our objective is to improve quality of life and to pass benefits to common man
Will achieve target of building 6 crore toilets, 50 lakh toilets already constructed
Expect the CPI inflation to remain close to 5 per cent towards the end of year
The three achievements of our government have been – ‘Jan Dhan Yojana’, transparent auctions and ‘Swachh Bharat Abhiyan’
Domestic and international investors are seeing us with renewed hope
Our actions have not only being confined to core and macroeconomic areas alone
The latest CPI inflation is 5.1 per cent and WPI inflation is negative
We are round the clock, round the year government
The credibility of Indian economy has been re-established, the world is predicting that it’s India’s chance to fly
States more empowered more than before
Tax buoyancy is low, however, we will meet the promise of fiscal deficit of 4.1 per cent of GDP this year
2 crore houses in rural India, 4 crore in urban India by 2022
Agricultural income is under stress, have to increase investment in infrastructure
Manufacturing has declined from 18 per cent to 17 per cent of the GDP
Public Investment needs to step in to catalyse the investment in PPP
2015-16 GDP seen between 8-8.5 per cent, best in five years
Rs 6335 crores has been so far transferred directly as LPG subsidies to consumers
We intend to achieve to achieve fiscal deficit of 3 per cent in 3 years
National unified market for farm produce
Need a well-targeted system of subsidies rather than to cut subsidies
Double-digit growth seems feasible soon
Roadmap to achieve fiscal deficit of 3% of GDP in three years, target is 3.9% in 2015-16, 3.5% in 2016-17, 3% in 2017-18
Monetary Policy Committee to formed to target inflation
Mudra bank to refinance micro finance institution under PM’s ‘Mudra scheme’
Will bring a bankruptcy code in the year 2015-16 that will meet global standards and provide for judicial capacity
An accident insurance cover of Rs 2 lakh for a premium of Rs 12 per month
Will also launch the ‘Atal pension yojana’, which will provide a defined pension
Government is committed to bring a universal social security system for all
Government to contribute 50 per cent f beneficiary premium in its new accounts opened before December 31, 2015
Propose a new scheme of providing physical aids for senior citizens living below poverty line
Investment in infrastructure will go up by 70,000 crore in 2015-16
Propose the ‘Nayi Manzil’ scheme for youth
GST will put in place state of art indirect tax system by April 1, 2016
New scheme called ‘Nayi Manzil’ to enable minority youth without school leaving certificates to get employment
Tax-free infrastructure bonds for projects in railways and roads
Second unit of Kudankulam nuclear power station to be commissioned in 2016
PPP model of Infrastructure to be re-vitalized and re-aligned
5 ultra mega power projects through transparent auction system of 4,000 MW
Government is establishing a mechanism for ‘self employment’ to support all aspects of start-up business
Will enhance the allocations to MNREGA by 5,000 crore
Intend to create a direct tax regime, which is internationally competitive on rates
Unclaimed deposits of Rs 3,000 crore in EPF to be used for benefit of senior citizens
Discourage transaction in cash to discourage black money
Propose to introduce a gold monetisation scheme
Propose to work on developing Indian gold coin, which carries the Ashok Chakra. It will help recycle gold available in country
Will deepen Indian bond market at par with the world standards
Government to do away with distinctions between FII and FDI and replace it with Composite Caps
Have decided to provide another 1000 crores to Nirbhaya fund
After success of visas on arrival in 43 countries, propose to increase the countries covered under this scheme to 150
Will increase visa-on-arrival facility from 43 to 150 countries
Propose to increase visa-on-arrival to 150 countries to increase tourism
To allocate Rs 75 crore for electric vehicles
Aim to make India manufacturing hub of the world
Propose to setup an IT-based student financial aid system under the PM ‘Vidya Laxmi scheme’
Government proposes to bring in a regulatory reform law
Putting scam, scandal and corruption behind us, Parliament needs to look into a procurement law and how it will shape
Defence Budget enhanced to Rs 2,46,727 crore rupees
Revive growth, investment for jobs to youth
Rs 13, 12, 2000 crore for non-planned expenditure
GST is expected to play transformative role in the way our economy functions
It has been our endeavour in the last 9 months to foster a stable taxation policy
Corporate tax reduced from 30% to 25% for next four years
Exemptions for individual tax payers to continue
Propose to enact a comprehensive new law on black money
Non-filing of returns, or filing of returns with inadequate information will attract rigorous imprisonment
Concealment of income will be prosecutable with rigorous imprisonment
Quoting PAN a must for all purchases above Rs 100,000
Foreign Exchange Management Act to allow for seizure of foreign assets
‘Benami’ property transaction bill to tackle black money transaction in real estate soon
High corporate tax with too many exceptions gives us worst of both worlds, we neither get revenues nor investments
Implementation of GAAR deferred for two years, will be applied from 2017
Govt to abolish wealth tax
Retrospective tax provisions will be avoided
Tax department to put out a clarification on indirect transfer of assets and dividend paid by foreign firms
Reduced taxes on technical services to 10% from 25%
Propose to reduce rate of basic custom duty on certain imports to minimize impact of duty inversion
100 per cent tax exemption in CSR activities for Clean Ganga fund and Swachh Bharat
According to black money law, provision of punishment up to 10 years
Increase in exemption limit of health insurance premium from Rs 15,000 to Rs 30,000
Clean energy cess increased from Rs 100 to 200 per metric ton of coal to finance
For middleclass, for contribution to National Pension Scheme, exemption raised from Rs 1,00,000 to Rs.1,50,000
All contributions to Sukanya Samridhi scheme to be tax-free
Cigarettes and tobacco products set to get costlier
Transport allowance increased from Rs 800 to 1600 per month
He lauded the fact that CPI inflation was 5.1 per cent and WPI inflation was negative. The rupee is stronger by 6.4 per cent, Jaitley said, adding his government was “round-the-clock, round-the-year”.
Jaitley sounded optimistic as he announced that GDP was 7.4 per cent, and that his government had been able to “conquer inflation”.
Read: Budget 2015: Overall development to be achieved by 2022
He said the “three achievements of the government had been – Jan Dhan Yojana, transparent auctions and the Swachh Bharat Abhiyan”.
Jaitley admitted that agricultural income was under stress and that his government would have to invest in infrastructure. “Manufacturing has declined from 18 per cent to 17 per cent of the GDP, he said, adding that public investment needs to step in to catalyse investment in public-private partnerships.
The finance minister kept focus on rural India and announced plan to build two crore houses in rural areas and four crore in urban India by 2022.
Jaitley said the government intends to achieve fiscal deficit of three per cent in the next three years – “target is 3.9 per cent in 2015-16, 3.5 per cent in 2016-17 and 3 per cent in 2017-2018”. “Double digit growth seems feasible soon,” he said. He said a monetary policy committee would be formed to target inflation.
Read: Second unit of Kudankulam nuclear power station by 2015-16
He announced a national unified market for farm produce and said the country needed a “well-targetted system of subsidies than the cutting of subsidies”.
Jaitley said investment in infrastructure would go up by Rs 70,000 crore in 2015-16. He also announced that GST would put in place state-of-the-art indirect tax system by April 1, 2016. Tax-free infrastructure bonds would also be introduced for projects in railways and roads.
Jaitley set aside Rs 13,122,000 crore for non-planned expenditure and said it was very important to revive growth and investment to provide jobs for the youth.
Reaping the benefits of low global prices for oil, India’s main import, Modi’s government sees itself in a sweet spot with spare cash to modernise ageing roads and railways without busting fiscal deficit and inflation targets.
“Let us stop unnecessary expenditure so that money can reach the poor,” Modi told Parliament on Friday after a finance ministry report committed to bringing the fiscal deficit down to 3 per cent of gross domestic product — from more than 4 per cent at present — in the medium-term.
“We believe in optimum utilisation of our infrastructure,” he had said. An overhaul of economic data has propelled India to the top of the league of fast-growing major economies, and the current account deficit is projected to fall below 1 per cent next year, which would help stabilise the rupee and build up reserves.
But expectations for a further shift in expenditure from subsidies to infrastructure were sky high among investors who made India the best performing stock market in Asia after China last year on hopes that Modi’s government brings sweeping reforms to labour, tax and land laws. Spanish bank BBVA described the Budget as “the best opportunity for India to kick-start major structural reforms”. The rally has continued this year on expectations that legislative reform will push ahead stalled private investment and consumer demand, and reverse a decline in corporate earnings to make Asia’s third-largest economy a global growth driver.
The stakes are high after a part-year Budget that disappointed investors just after the government took over last year with a large majority in the lower house of Parliament. Analysts warn that Indian stocks are overvalued and that equity markets could see a sell off of 6-8 per cent if the pro-growth measures in the Budget fell short of expectations.