The Union Budget 2015-Come Fly With Me

 

 The Union Budget 2015- Come Fly With Me

 The budget is not just a collection of numbers, but an expression of our values and aspirations-Jacob Lew

The Finance Minister said, after setting the context for this budget, that it was ‘India’s chance to fly’. Long in the anticipation, this first full budget of the Modi Government has brought together many of the promises of the electoral campaign with the traction of delivery.

There is growth with jobs, combined with infrastructure projects expected to boost the GDP by at least 3%.  In fact, the GDP is expected to be at 7.5% in 2015, going up to 8.5% in 2016, and on to double- digits, thereafter.

Similarly, the fiscal deficit, maintained at 4.1% this year, is projected to reduce to 3% over the next three years. The Current Account deficit, presently at 1.3% , is likely to go into a surplus soon.

The Consumer Price Index (CPI) will be contained within 5%. The RBI, may start cutting interest rates afresh. Industry would like to see it reduce by at least 4%, with the first 1% in 2015.

The economy, as Arvind Subramanian put it, is in a ‘sweet spot’, caused in some measure because of soft petroleum prices and global deflation.

Nevertheless, the Centre now only keeps 38% of Government revenues, while the States, in line with Modi’s emphasis on greater autonomy and federalism, get 62%.

There is a crack-down on black money, with jail terms of up to 10 years, and punitive 300% penalties. The parallel economy may now think it wise to start merging with the official one. Benami property buying too will be fraught with danger because the Government intends taking a very dim view of it.

Incentives have also been announced to monetize an estimated 20,000 plus tonnes of gold held in private hands, via Gold Bonds, India’s own gold coins etc.

Individual PAN will now be recorded for transactions above Rs. 1 lakh. This flavour of accountability is continued with the corporatization of ports with their substantial land banks, and disinvestment, including loss-making PSUs, to the tune of $6.7 billion.

There is a push to deepen the debt market to boost the foreign investment under all heads from its present $ 55 billion. There is a bankruptcy law coming up and A Debt Market Board with greater integration with SEBI.

The Government will invest an additional Rs. 70,000 crores into infrastructure and raise far more via a slew of newly announced tax free bonds. There is also a $ 40 billion ambition for Defence, but this will have to be enhanced, in both money and technology terms, by foreign collaborators.

For the first time ever, there is a real effort to establish a universal social security foundation for the poor, inclusive of health insurance, life insurance and a pension.

Foreigners are delighted. This thrust is coming from the one ‘bright spot’ in the global economy as international rating agency S&P put it.

A prospective GAAR has been kicked down the pike by 2 years.  GST, the indirect tax structure that will both raise the revenue intake and reduce corruption and evasion, will be implemented by April 1, 2016.

Wealth Tax stands abolished. Corporate taxes will be reduced from 30% to 25% over the next four years. Income tax exemptions have been raised to add up to Rs. 4.42 lakhs if availed in full. This, after the tax slabs themselves were raised in the ‘half-budget’ of June 2014.

In welfare schemes, the  approach is to cut leakage and not the subsidy itself via massive direct transfers and digitization. Old UPA schemes like MNREGA  have not only been continued but funded generously.

Rural credit has been enhanced right down to the micro level and the vast post-office network will be organized into ‘payment banks’. The mission to provide housing for all has been given definition. There will be 2 lakh urban homes and 4 lakh rural homes of about 800 sq.ft size that will be built by 2022. All will have round-the-clock water, electricity, and access to a road.

Mostly stable indirect taxes, have been augmented with a consolidated Service tax at 14%, up from the earlier 12.36%.

Tourism, long on its indifferent growth path, was vastly boosted in 2014 with Modi’s initiative to allow 43 countries to avail of a visa on arrival. This is now going to be enhanced to 150 countries.

Ease of doing business is demonstrated by consolidating 14 different clearances required at one window.

 Higher educational institutions and health facilities have been announced, with special care to target those states where the BJP expects to  make  new inroads, such as Assam, West Bengal, Orissa, Bihar, as well as those where a thank-you is in order, such as Arunachal Pradesh and J&K.

Youth loans, R&D, clean energy, incentives for the local electronics industry, the laundry list is long and deep, but it has to said: This is a comprehensive Growth Budget.

For: NitiCentral

 (818 words)
February 28^th, 2015
Gautam Mukherjee