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Union Budget 2015-16: A different perspective

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Union Budget 2015-16: A different perspective

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Published : Thursday, 5 March, 2015 10:45 AM
 
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 “Union Budget 2015-16: A different perspective”

On February 28, 2015, the Union Finance Minister (FM) Mr. Arun Jaitely presented his first full fledged budget which was riding on high expectations from poor, middles class as well as the corporate to usher a new era of growth. Though the Indian economy which deviated from its growth trajectory for a short while has now found its path and country is expected to grow at 7.4 percent in the year 2014-15. However, in order to eliminate the poverty and unemployment, we need to grow at least at 9-10% per annum.

Apart from this, high food inflation, income inequalities, containing the fiscal deficit are few of the challenges which are a challenge for the FM. With Finance Commission increasing the share of states in central pool of taxes from 32% to 42%, fewer funds are now left with the government for budgetary allocation.

Some of the challenges mentioned by the Finance Minister are: poor agricultural income, decline in manufacturing; and the need for fiscal discipline. Major announcements made in the budget are as under:
    
Taxes
  • No change in income tax slabs announced
  • Total exemption of up to Rs. 4,44,200 can be achieved
  • Additional 2% surcharge for the super rich with income of over Rs. 1 crore.
  • Rate of corporate tax to be reduced to 25% over next four years
  • Wealth tax abolished
  • 100% exemption for contribution to Swachch Bharat, apart from Corporate Social responsibility
  • Service tax increased to 14%
On its first glance, it seems that there is no incentive for the middle class as there is no change in the income tax slabs. However, lower-middle and middle class salaried households in the organised sector will also have some more money to balance their budgets through the increased medical reimbursements and transport allowance.

As the fiscal discipline is crucial for the health of economy, it is targeted at 3.9% for the year 2015-16. Fiscal discipline can only be achieved by containing non-plan expenditure and increasing the revenues. For that matter, FM kept the income tax slabs unchanged, imposed 2% surcharge on super rich and service tax is increased to 14%.
 
Agriculture
  • Rs. 25,000 crore for Rural Infrastructure Development Bank
  • Thrust to micro-irrigation. Rs. 5,300 crore to support Micro Irrigation Programme
  • Target for farmers credit at Rs 8.5 lakh crore
  • Paramparagat Krishi Vikas Yojana to improve soil health
  • Government to work with states for creation of Unified National Agriculture Market
  • Focus on improving quality and effectiveness of works undertaken under MNREGA
In India, share of agriculture in the GDP is around 15% but it employs 60% of the country’s work force. It means 60% population of the country shares only 15% country’s GDP while rest 40% working in secondary and tertiary sector have a share of 85% of the GDP. This is a significant reason of the rising inequalities in the economy. This anomaly can be removed by a two pronged strategy – first making the agriculture more productive and second, transferring the extra work force from agriculture to other industry and services. Micro-irrigation programmes, infrastructure funds, soil testing, unified agriculture market etc are some of the steps taken in right direction to improve the agriculture productivity. Moreover, the surplus labour from agriculture can be transferred to industry by giving a boost to the manufacturing sector.

Manufacturing
  • Loans to medium enterprises brought under the ambit of priority sector lending. Earlier, apart from agriculture, only loans to micro and small enterprises were considered as priority sector lending.
  • Small finance banks will augment the supply of credit to micro, small and medium enterprises (MSMEs).
  • A separate 7.5% sub target in priority sector is set aside for the micro enterprises.
  • Basic custom duty on 22 inputs and raw materials reduced.
  • Online central excise and service tax registration to be completed in two days
  • Micro Units Development and Refinance Agency (Mudra) Bank established with a capital of Rs 20,000 crore would regulate and refinance all micro-finance institutions which are in the business of lending to micro/small business entities engaged in manufacturing, trading and services activities.
Aforesaid initiatives are part of the Prime Minister’s ‘make in India’ campaign to boost the manufacturing activity in the country. However, merely easing the finances to manufacturing would not be enough. Required infrastructure and policies should be in synergy and in favour with manufacturing.

Infrastructure
  • Rs. 70,000 crores to Infrastructure sector
  • Tax-free bonds for projects in rail road and irrigation
  • PPP model for infrastructure development to be revitalised and government to bear majority of the risk
  • National Investment and Infrastructure Fund to be established with the annual flow of Rs 20,000 crores.
  • Atal Innovation Mission to be established to draw on expertise of entrepreneurs, and researchers to foster scientific innovations; allocation of Rs. 150 crore.
  • Government proposes to set up 5 ultra mega power projects, each of 4000MW
The budget provided a strong impetus to infrastructure, especially in deficit areas like roads, housing, energy and ports. The higher outlays on infrastructure should significantly aid economic activities in all sectors along with the job creation.

Ease Of Doing Business
  • Simplification, rationalization and digitization of process
  • Central Excise/ Service tax assesses to be allowed to issue digitally signed invoices and maintain record electronically
  • Online Central excise and service tax registration to be done in two days.
  • Domestic transfer pricing limit raised from Rs. 5 crores to Rs 20 crores.
On the index of ease of doing business, India has remained among the bottom countries despite several attempts by governments. Ease of doing business is as important as any other factor for a business to grow. It is believed that major reason behind the economic success of countries like Singapore and the United States is the ease of doing business there. Though small but steps announced for ease of doing a business in India are indeed a important initiatives and such steps would help in growing the economy.

Skill Development and Education
  • AIIMS in Jammu and Kashmir, Punjab, Tamil Nadu, Himachal Pradesh, Bihar and Assam
  • IIT in Karnataka; Indian School of Mines in Dhanbad to be upgraded to IIT
  • Kerala to have University of Disability Studies
  • Centre of film production, animation and gaming to come up in Arunachal Pradesh
  • IIM for Jammu and Kashmir and Andhra Pradesh
  • Deen Dayal Upadhyay Grameen Kaushal Yojana to enhance employability of youth.
  • A fully IT based Financial Aid Authority to administer and monitor all scholarships as well as educational loan schemes.
  • National Skill Mission through skill development and Entrepreneur Ministry to be launched soon.
  • Upgradation 80,000 secondary schools.
Along with the infrastructure, finance and ease of doing business, skilled workforce is also equally important for the successful manufacturing sector. Education is not only important for the employability but also to uplift the standard of living of the population. Any society, irrespective of the level of income, could never achieve a higher social status if the members of the society are largely illiterate. The latest budget gave equal importance to the skill development as well as higher education and promised to establish new IITs and IIMs in other states.

In gist, the budget as promised, tried to boost the economic growth in the country by making it easier to do business. Budget announced fresh initiatives for skill development, and finances of businesses.

However, it is also important that in the quest of economic growth, social development should not be neglected. Major social sector initiatives announced in the budget are as under –
  • GST and JAM trinity (Jan Dhan Yojana, Aadhaar and Mobile) to improve quality of life and to pass benefits to common man.
  • Six crore toilets across the country under the Swachh Bharat Abhiyan.
  • MUDRA bank will refinance micro finance organization to encourage first generation SC/ST entrepreneurs.
  • Housing for all by 2020
  • New scheme for physical aids and assisted living devices for people aged over 80
  • For the Atal Pension Yojana, govt. will contribute 50% of the premium limited to Rs. 1,000 a year.
  • Rs. 5,000 crore additional allocation for MGNREGA
  • Govt. to create universal social security system for all Indians .

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