As it happened: Union Budget 2015
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Going beyond the accountant's task, Jaitley has used his budget to achieve two political objectives. He has tried to fight off the impression that the NDA government is indifferent to the poor by announcing a number of measures for them: housing for all, a rupee-a-month accident insurance cover aimed at unorganized labour, and extension of financial inclusion by making post offices payment banks. He has also announced the harshest penalty yet for those with unaccounted wealth.
While Jaitley may face criticism for relaxing the fiscal goals by pushing back the deadline by a year to cut the deficit to 3% of GDP, he has used the additional room to allocate an additional Rs 70,000 crore for infrastructure and has cleaned up the processes for investments to flow in, mainly for roads, railways, ports and power. Five new ultra mega power projects of 4,000mw are to be set up. Like the existing UMPPs, these will be in the 'plugand-play' mode, meaning all clearances would be in place before they are put up for bidding by the private sector.
The FM also promised 24-hour power, clean drinking water and toilets for all homes, at least one job for each household, connecting all habitations by allweather roads, electrifying all villages, and good health and education facilities in every town and village. The deadline for these goals — in line with the 'sabka saath, sabka vikas' motto of the Modi government — is 2022, which is the 75th year of India's independence and three years after the term of the current government ends. The FM also said the Jan Dhan programme would be moved further to a Jan Suraksha programme to create a "universal security system for all Indians, especially the poor".
Middle class sops it, cops it
For the middle class, eagerly anticipating some relief on the personal tax front, Jaitley's budget came as a bit of a dampener. While he hasn't taken away from them, there were no changes in the basic exemption limit or in tax slabs. However, he has allowed for more tax savings on health insurance, transport allowance and investments in infrastructure bonds and pension funds. But an increase in service tax from 12% to 14% will make everything from haircuts and telephone bills to eating out and watching a cricket match a little bit more expensive.
For the super rich, there is an additional surcharge on incomes above Rs 1 crore a year — from 10% to 12% — which means about Rs 70,000 more in taxes for every crore they earn. Together with this imposition, Jaitley abolished the wealth tax, which he said yielded very little revenue. Businessmen would be enthused by the promise of corporate tax being cut from 30% to 25% over the next four years, but they might be wary of celebration as all exemptions will be withdrawn.
Five months ago, Prime Minister Narendra Modi presented 'Make in India' as the centrepiece of his grand vision to boost manufacturing, foster innovation, attract investment, cut red tape, create jobs, and turbo-charge the economy. It's now been nine months since he took over as PM. Does this Budget deliver on the promise of restoring the nation's pride? Will it help India prove its mettle, and bring the shine back? Will it unleash animal spirits? While the elephant has traditionally represented the Indian economy, the lion is a symbol of Modi's home state and of his ambitious initiative; it also inspired our national emblem. We all know of the tiger economies; will the world now hear the roar of a sher economy? Can we be king of the jungle, ready to pounce on new opportunities (and we are tempted to add, steel the show)? Fans of English films would say, 'Enter, the Lion'. Us desis are rooting for 'Singham Returns'... (Imaging: Chanchal Kumar Mazumdar)
But what's the bigger picture? Is this budget great for the economy or a please all attempt? Any budget speech in India is part bare bones accounting of the government's income and spending for the year and part vision document for the future. Jaitley's budget was no different and any evaluation, therefore, should take both into account.
The FM promised that the government would rise to the challenge of boosting public investment to fill the void created by lagging private investment while ensuring the fiscal situation remained healthy. Whether the current year's outlays can be considered in line with this grand vision depends on what we measure them against. In most cases, there is a significant rise over the revised estimates for 2014-15 but little or no increase over what Jaitley himself had budgeted for in July last year. Thus total capital expenditure, which is an indicator of how much is being spent in creating assets for the future, is up an impressive 25.5% in 2015-16 over the revised estimates for 2014-15, but only 6.5% higher than the promised outlay for 2014-15. A similar pattern holds across many schemes and sectors.
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There is clearly a conscious effort to promise something for every section. For senior citizens there's a slew of benefits including tax breaks and a welfare fund by utilising unclaimed money lying in the Employees' Provident Fund and the Public Provident Fund. For the minorities there is the 'Nai Manzil' scheme which promises to provide those without formal education both education and better job opportunities. For the farmers, the budget promises that credit to them will reach Rs 8.56 lakh crore this year. For small businesses, owned largely by SCs, STs and OBCs, a 'MUDRA (micro units refinance agency) Bank' will ensure that the "unfunded are funded".
The criticism of the government's efforts in reining in black money seem to have triggered the announcement of stringent laws to deal with undisclosed incomes held abroad and in India. The fact that among the provisions of the proposed law was one that allows for 10 years of imprisonment seemed to send some jitters down the spines of many businessmen with 'draconian' being one of the words freely tossed around.
On the other hand, business will welcome the merging of caps on foreign direct investment (FDI) and foreign institutional investment (FII) into a single cap on foreign investments in Indian businesses. The assurance that tax administration would be simplified would be welcome too as would be the abolishing of wealth tax.
Disinvestment was another major plank of the budget, with the FM targeting Rs 69,500 crore from this source, including by way of strategic divestments, last done in the Vajpayee government.'
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