Union Budget 2015-16: Provisions & promises
- Part 2 -

K Kenish *

Finance Minister Arun Jaitley leaving office for Parliament on February 28 2015 :: Pix - TSE / Agencies

* The government plans to use technology to reach to the beneficiaries and to cut leakage in the system. The JAM (Jan Dhan Yojana, Aadhaar and mobile) trinity will allow government to transfer benefits in a leakage proof, well targeted and cashless manner. The technology is also aimed at reducing subsidies. Official estimates peg the fiscal cost of subsidies at Rs.3.78 trillion or 4.24% of GDP. The governments says that the richer households benefit more than poorer households and about 15% of rice, 54% of wheat and 48% of sugar distributed under the PDS is lost. Eventually all subsidies may be converted into direct benefit transfers.

* Announcement of a new Scheme – NayaManzil- for the welfare of minorities. It will enable minority youth who do not have a formal school leaving certificate to obtain one and find better employment. It is a skill enhancing/imparting scheme.

* Government will launch a National Skill Mission which will consolidate skill initiatives by different Ministries and standardise procedures and outcomes across 31 sector skill councils. The proposed Micro Units Development Refinance Agency (MUDRA) Bank will aim at providing easier access to formal systems of credit to bottom-of-the –pyramid entrepreneurs. The Agency is aimed at encouraging skilled or educated workers to become first generation entrepreneurs.

* DeenDayal Upadhyay Gramin Kaushal Yojana with a corpus of Rs.1,500 crore to enhance the employability of rural youth. This step is being taken up in view of the fact that only 2% of the workforce is skilled. It is 96% in South Korea and 80% in Japan.

* 5 new AIIMS in J&K, Punjab, Tamil Nadu, Himachal Pradesh and Assam announced. Also one IIT in Karnataka and IIMs in J&K and Andhra Pradesh also announced in the Budget.ISM, Dhanbad to be upgraded to full-fledged IIT. Other proposals in the Budget announcement include a Post Graduate Institute of Horticulture Research and Education in Amritsar; three new National institutes of Pharmaceutical Education and Research in Maharastra, Rajasthan and Chhattisgarh;Institute of Science and Education Research in Nagaland and Orissa and Apprenticeship Training Institute for Women in Haryana and Uttarakhand.

* The FM also proposed a fully-IT based Student Financial Aid Authority to administer and monitor scholarship as well as educational loan scheme through the PradhanMantriVidya Lakshmi Karyakram.

* The Government intends to set up a Public Debt ManagementAgency (PDMA) for the purpose studying the debt requirement, monitor the utilisation and the cost of the debt. This agency will not only look into the requirement of the development of bond market but also to prevent leakages of public funds. PDMA will bring both India's external borrowings and domestic debt under one roof.

* The Government plans to introduce gold monetisation schemes and sovereign gold bond in a bid to curb imports of yellow metal which is a key contributor to the current account deficit. According to a report, around 20,000 tonnes of gold are lying idle in Indian households. India imports around 800-1,000 tonnes of gold hurting trade balance. The new scheme will allow the depositors of gold to earn interest in their metal accounts, and jewellers to obtain loans on their metal accounts. On gold bonds, it would carry a fixed rate of interest and be redeemable in cash in terms of the face value of gold at the time of redemption.

* The Government also plans to introduce Indian gold coins carrying the Ashok Chakra on its face. It will help reduce the demand for coins minted outside India and also help to recycle the gold available in the country.

* This budget has also increased the allocation for the UPA government's flagship scheme, MGNREGS.

* Launch of Atal Innovation Mission within the NITI Ayog with initial fund of Rs.150 crore. The Mission will be an innovation promotion platform involving academics, entrepreneurs and researchers and will draw upon national and international experiences to foster a culture of innovation, research and development and scientific research in India.

* The Budget has promised a roof for each family by providing Housing for All by 2020. This means construction of 6 crore new houses over the next 7 years. Of these 4 crore will be in rural areas and 2 crore in urban areas. This could mean boom in housing sector in India, more business for real estate firms and raw materials suppliers and creation of more jobs.

* Government sets record selloff target of Rs.69,500 crore( Rs.41,000 crore through stake sales+ Rs.28,500 crore through strategic disinvestment) for the next fiscal. This is to generate non-debt resources to both expand public investment and contain the fiscal deficit.

* Monetary Policy Framework Agreement concluded between the Government of India and RBI to tackle inflation. Under this agreement, a Monetary Policy Committee is formed comprising the Governor, RBI and the Deputy Governor in-charge of Monetary Policy besides a Government nominee. The Committee will also have a number of specialists which will form the majority. The Committee is the outcome of the Urjit Patel Committee.

* Infrastructure has received the top priority of the Government and the same is reflected in the Budget. As per estimates, till the end of December 2014, projects worth Rs.8.8 lakh crore or 7% of GDP is stalled due to difficulties in clearances, litigation, poor performance of contractors or financial difficulties. The Government plans to spend Rs.70,000 crore as investment in infrastructure. A National Investment and Infrastructure Fund (NIIF) is being set up with an annual corpus of Rs.20,000 crore. The Government plans to raise fund various infrastructure projects by issuing tax-free bonds in the coming months in railways and roads.

* The Government also plans to complete 1 lakh km of highways already under construction and another 1 lakh km of new projects which will boost demands for inputs like cement, steel, etc.

* Also the Government plans to invest Rs.1 lakh crore in 5 Ultra Mega Power Projects (UMPP) of 4000 mw each under the plug-and-play model. This means winners of the contract can start implementing the project immediately without worrying about all the regulatory clearances and coal/ gas linkages.

FOR BUSINESS :

* The Budget proposes to merge commodity futures market regulator Forward Market Commission (FMC) with stock market watchdog, the SEBI which is intended to strengthen regulation of 11-year commodities market, facilitate domestic and international institutional participation and launch a new product like options. According to the FM, the merger of FMC and SEBI will strengthen regulation of commodity forward market and reduce wild speculation.

* GAAR has been deferred for two more years and would be applicable to prospective transactions only. This has brought cheers amongst FIIs as the new law would have empowered the tax authorities to examine deals which had been structured to mitigate taxes. Also FPI (Foreign Portfolio Investors) would not pay Minimum Alternate Tax (MAT). This provision has been considered to be the biggest takeaway from this budget.

* Also the budget has done away with the provision of imposing capital gains tax on merger of similar mutual fund schemes.

* Reduction in tax rate on royalty and fees for technical services from 25% to 10%. This will facilitate technology inflow to small businesses at low costs.

* Tax breaks for corporate taxpayers engaged in manufacturing who hire new staff, extended to all manufacturing firms, irrespective of corporate status. The minimum threshold for hiring new staff lowered from 100 to 50, so even SMEs that have created most jobs in recent years can use tax benefit that allows taxpayers to claim a deduction against extra salary payment. The deduction is available for 30% of wages paid to new recruits for three years.

* Excise duty slashed to bolster domestic production.

* A relook into PPP model prevalent in India is proposed in the budget with the sovereign taking more risk in prijects.

Changes in the new Budget :

Certain sectors have seen changes in budget allocation and the same is shown as under:

* For 8 schemes/programmes, Central Government has completely stopped its budgetary support. This includes the Backward Regions Grant Funds, Modernisation of Police, National e-Governance Plan, Rajiv Gandhi Panchayat Sashaktikaran Abhiyan, Scheme for Central Assistance to the States for developing export infrastructure, Scheme for setting up of 6000 Model Schools, National Mission on Food Processing and Tourist Infrastructure.

* For 24 Schemes, States will now have to shoulder additional responsibility as Union government step backwards. This includes inter alia RMSA, NHM, ICDS, National AIDS & STD Control Programme and Rural Housing Scheme.

* However for 31 Schemes, including MGNREGS, the Mid Day Meal Scheme, the SSA, etc will remain fully funded by Government of India.

Source : ET and the Hindu.

Concluded..