INDIA BUDGET – 2014-15

The Union Budget for 2014-15 has been announced by Mr Arun Jaitley, Union Minister for Finance, Government of India, in Parliament on July 10, 2014

Highlights of Union Budget 2014-15 Overview of the Economyo Aiming at 7-8 per cent gross domestic product (GDP) growth in 3-4 years.o Decline in fiscal deficit from 5.7 per cent in 2011-12 to 4.5 per cent in 2013-14

mainly achieved by reduction in expenditure rather than by way of realisation of higher revenue.

o Road map for fiscal consolidation outlines fiscal deficit of 3.6 per cent for 2015-16 and 3 per cent for 2016-17.

o Improvement in current account deficit (CAD) from 4.7 per cent in 2012-13 to year end level of 1.7 per cent mainly achieved through restriction on non-essential import and slow-down in overall aggregate demand.

Administrative Initiativeso A stable and predictable taxation regime which will be investor friendly and spur

growth.o Resident tax payers enabled to obtain on advance ruling in respect of their

income-tax liability above a defined threshold.o New Urea Policy would be formulated.o Introduction of GST to be given thrust.o High level committee to interact with trade and industry on regular basis to

ascertain areas requiring clarity in tax laws is required to be set up.o Employment exchanges to be transformed into career centres. A sum of Rs 100

crore (US$ 1.67 million) provided. Foreign Direct Investment (FDI)o The composite cap in the insurance sector to be increased up to 49 per cent from

26 per cent with full Indian management and control through the FIPB route.o Requirement of the built up area and capital conditions for FDI to be reduced

from 50,000 square metres to 20,000 square metres and from US$ 10 million to US$ 5 million respectively for development of smart cities.

Bank Capitalizationo Requirement to infuse Rs 240,000 crore (US$ 40.09 billion) as equity by 2018 in

our banks to be in line with Basel-III norms.o Capital of banks to be raised by increasing the shareholding of the people in a

phased manner. PSU Capital Expenditureo PSUs will invest through capital investment a total sum of Rs 247,941 crore

(US$ 41.41 billion) in the current financial year. Smart Citieso A sum of Rs 7,060 crore (US$ 1.17 billion) is provided in the current fiscal for the

project of developing ‘one hundred Smart Cities’. Agricultureo A sustainable growth of 4 per cent in Agriculture will be achieved.o Government to establish two more Agricultural Research Institute of excellence

in Assam and Jharkhand with an initial sum of Rs 100 crore (US$ 1.67 million).o An amount of Rs 100 crore (US$ 1.67 million) set aside for ‘Agri-tech

Infrastructure Fund’.o Rs 200 crore (US$ 33.41 million) provided to open Agriculture Universities in

Andhra Pradesh and Rajasthan and Horticulture Universities in Telangana and Haryana.

o Technology driven second green revolution with focus on higher productivity including “Protein revolution” will be area of major focus.

o To provide institutional finance to landless farmers, it is proposed to provide finance to 500,000 joint farming groups of “Bhoomi Heen Kisan” through NABARD.

o A target of Rs 8 trillion (US$ 133.61 billion) has been set for agriculture credit during 2014-15.

o Corpus of Rural Infrastructure Development Fund (RIDF) raised by an additional Rs 5,000 crores (US$ 835.02 million) from the target given in the Interim Budget to Rs 25,000 crores (US$ 4.17 billion).

Educationo Government would strive to provide toilets and drinking water in all the girls’

schools in the first phase. An amount of Rs 28,635 crore (US$ 4.77 billion) is being funded for Sarv Shiksha Abhiyan (SSA) and Rs 4,966 crore (US$ 828.37 million) for Rashtriya Madhyamic Shiksha Abhiyan (RMSA).

o Rs 500 crore (US$ 83.40 million) provided for ‘Pandit Madan Mohan Malviya New Teachers Training Programme’ to infuse new training tools and motivate teachers.

o Jai Prakash Narayan National Centre for Excellence in Humanities to be set up in MP.

o Rs 500 crore (US$ 83.40 million) provided for setting up five more IITs in the Jammu, Chhattisgarh, Goa, Andhra Pradesh and Kerala.

o Five IIMs in the States of HP, Punjab, Bihar, Odisha and Rajasthan. Health and Family Welfareo Free Drug Service and Free Diagnosis Service to achieve ‘Health For All’.o Two National Institutes of Ageing to be set up at AIIMS, New Delhi and Madras

Medical College, Chennai.o A national level research and referral Institute for higher dental studies to be set

up.o AIIMS like institutions in Andhra Pradesh, West Bengal, Vidarbha in Maharashtra

and Poorvanchal in UP. A provision of Rs 500 crores (US$ 83.40 million) made.o 12 new government medical colleges to be set up.o 15 Model Rural Health Research Centres to be set up for research on local

health issues concerning rural population. Housing Sectoro Extended additional tax incentive on home loans shall be provided to encourage

people, especially the young, to own houses.o Mission on Low Cost Affordable Housing anchored in the National Housing Bank

to be set up.o A sum of Rs 4,000 crores (US$ 667.27 million) for NHB from the priority sector

lending shortfall with a view to increase the flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment is provided

Infrastructure and Industryo Central Government Departments and Ministries to integrate their services with

the e-Biz—a single window IT platform—for services on priority by December 31, 2014.o Rs 100 crore (US$ 16.68 million) provided for setting up a National Industrial

Corridor Authority.o Proposed to establish an Export promotion Mission to bring all stakeholders

under one umbrella.o An institution to provide support to mainstreaming PPPPs called 4PIndia to be

set up with a corpus of Rs 500 crore (US$ 83.40 million).o Rs 11,635 crore (US$ 1.94 billion) will be allocated for the development of Outer

Harbour Project in Tuticorin for phase I.o Scheme for development of new airports in Tier I and Tier II Cities to be launched.o An investment of an amount of Rs 37,880 crore (US$ 6.31 billion) in NHAI and

State Roads is proposed which includes Rs 3,000 crores (US$ 500.44 million) for the North East.

o Rs 100 crore (US$ 16.68 million) is allocated for a new scheme ‘Ultra-Modern Super Critical Coal Based Thermal Power Technology’.

o Rs 500 crore (US$ 83.40 million) provided for Ultra Mega Solar Power Projects in Rajasthan, Gujarat, Tamil Nadu, Andhra Pradesh and Laddakh.

o For venture capital in the MSME sector, a Rs 10,000 crore (US$ 1.66 billion) fund to act as a catalyst to attract private Capital by way of providing equity , quasi equity, soft loans and other risk capital for start-up companies with suitable tax incentives to participating private funds to be established.

o Rs 500 crore (US$ 83.40 million) provided for developing 5 tourist circuits around specific themes.

o Sum of Rs 500 crore (US$ 83.40 million) for developing a Textile mega-cluster at Varanasi and six more at Bareilly, Lucknow, Surat, Kutch, Bhagalpur and Mysore.

o Pan India programme ‘Digital India’ to with an outlay of Rs 500 crore (US$ 83.40 million) to be launched.

Skill Developmento Skill India to be launched to skill the youth with an emphasis on employability and

entrepreneur skills.o A programme for the up gradation of skills and training in ancestral arts for

development for the minorities ‘Up gradation of Traditional Skills in Arts, Resources and Goods’ to be launched.

Budget Estimateso Total expenditure of Rs 1,794,892 crore (US$ 299.49 billion) estimated.o Gross Tax receipts of Rs 1,364,524 crore (US$ 227.68 billion) estimated.o Net to centre of Rs 977,258 crore estimated.o Fiscal deficit of 4.1 per cent of GDP and Revenue deficit of 2.9 per cent

estimated.o New Statement to separately show plan allocation made for North Eastern

Region.o Allocation of Rs 53,706 crore (US$ 8.96 billion) for North East Regions.

Direct Taxes Proposalso Personal Income-tax exemption limit raised by Rs 50,000 (US$ 834.42) that is,

from Rs 200,000 (US$ 337.69) to Rs 250,000 (US$ 4,170.43) in the case of individual taxpayers, below the age of 60 years. Exemption limit raised from Rs 250,000 (US$ 4,170.43) to Rs 300,000 (US$ 5,004.51) in the case of senior citizens.

o Investment limit under section 80C of the Income-tax Act raised from Rs 100,000 (US$ 1,668.17) to Rs 150,000 (US$ 2,502.26).

o Investment allowance at the rate of 15 percent to a manufacturing company that invests more than Rs 25 crore (US$ 4.17 million) in any year in new plant and machinery. The benefit to be available for three years i.e. for investments upto March 31, 2017.

Indirect Tax Proposalso To encourage production of LCD and LED TVs below 19 inches in India, basic

customs duty on LCD and LED TV panels of below 19 inches reduced from 10 per cent to Nil.

o To give an impetus to the stainless steel industry, increase in basic customs duty on imported flat-rolled products of stainless steel from 5 per cent to 7.5 per cent.

o Reduction in the excise duty from 12 per cent to 6 percent on footwear of retail price exceeding Rs 500 (US$ 8.33) per pair but not exceeding Rs 1,000 (US$ 16.66) per pair.

o Reduction in basic customs duty from 10 per cent to 5 per cent on forged steel rings used in the manufacture of bearings of wind operated electricity generators.

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Key Features of Budget 2014-2015

THE CURRENT ECONOMIC SITUATION AND THE CHALLENGES

The state of world economy has been the most decisive factor affecting the fortunes ofevery developing country.

The world economy has been witnessing a sliding trend in growth, from 3.9 percent in2011 to 3.1 percent in 2012 and 3 percent in 2013.

The economic situation of major trading partners of India, who are also the majorsource of our foreign capital inflows, continues to be under stress. United States hasjust recovered from long recession, Euro zone, as a whole, is reporting a growth of 0.2per cent, and China’s growth has also slowed down.

The economic challanges faced by our country are common to all emerging economies.Despite these challanges, we have successfully navigated through this period of crisis.

Apart from embarking on the path of fiscal consolidation, the objectives of pricestability, self sufficiency in food, reviving the growth cycle, enhancing investments,promoting manufacturing, encouraging exports, quickening the phase of implementationof projects and reducing a stress on important sectors were the goals set in 2012-13.

STATE OF ECONOMY

Deficit and Inflation

The fiscal deficit for 2013-14 contained at 4.6 percent .

The currect account deficit projected to be at USD 45 billion in 2013-14 down fromUSD 88 billion in 2012-13.

Foreign exchange reserve to grow by USD 15 billion in this Financial Year

No more talk of down grade of Indian Economy by Rating Agencies.

Fiscal stability at the top of the Agenda.

Government and RBI have acted in tandem to bring down inflation.

WPI inflation down to 5.05 percent and core inflation down to 3.0 percent inJanuary 2014.

Food inflation down to 6.2 percent from a high of 13.8 per cent.

Agriculture

Agricultural sector has performed remarkably well.

Food grain production estimated for the current year is 263 million tonnes comparedto 255.36 million tonnes in 2012-13.

 

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Agriculture export likely to cross USD 45 billion higher from USD 41 billion in 2012-13.

Agricultural credit to exceed the target of ̀ 7 lakh crores.

Agricultural GDP growth for the current year estimated at 4.6 percent compared to4.0 percent in the last four years.

Investment

Savings rate at 30.1 percent and investment rate of 34.8 percent in 2012-13.

Government set up a Cabinate Committee on investment and the Project MonitoringGroup to boost investment. By end of January 2014, Projects numbering 296 with anestimated project cost of ̀ 660,000 crore cleared.

Foreign Trade

Despite a decline in growth of global trade, our export have recovered sharply.

The estimated merchandise export is estimated to reach USD 326 billion indicating agrowth rate of 6.3 percent in comparison to the previous year.

Manufacturing

The sluggish import is a matter of concern for manufacturing and domestic trade sector.

Due to deceleration in investment, the manufacturing sector has witnessed a sluggishgrowth.

The National Manufacturing Policy has set the goal of increasing the share ofmanufacturing in GDP to 25 percent and to create 100 million jobs over a decade.

8 National Investment and Manufacturing Zones (NIMZ) along Delhi Mumbai IndustrialCorridor (DMIC) have been announced. 9 Projects had been approved by theDMIC trust.

3 more Industrial Corridors connecting Chennai and Bengaluru, Bengaluru and Mumbai& Amritsar and Kolkata are under different stages of preparatory works.

Additional capacities are being installed in major manufacturing industries.

Notification of a public procurement policy, establishing technology and common facilitycentres, and launching the Khadi Mark are steps taken to promote Micro Small andMedium Enterprises.

Infrastructure

In 2012-13 and in nine months of the current financial year, 29, 350 MW of powercapacity, 3, 928 Kms of National Highways, 39, 144 Kms of Rural Roads, 3,343Kms of New Railway track and 217.5 milliion tonnes of capacity per annum in ourports have been created to give a big boost to infrastructure industries.

19 Oil and Gas blocks were given out for exploration and 7 new Air ports are underconstruction.

Infrastructure debt funds have been promoted to provide finances for infrastructureProjects.

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Exchange Rates

Rupee came under pressure following indications by US Federal Reserve of reductionin asset purchases in May 2013.

Government, RBI and SEBI undertook a number of measures to facilitate capital inflowsand stablize the foriegn exchange markets. As a result among emerging economycurrencies rupee was least affected when actual reduction took place inDecember 2013.

GDP Growth

The GDP slow-down which began in 2011-12 reaching 4.4 percent in Q1 of2013-14 from 7.5 percent in the corresponding period in 2011-12 has been controlledby numerous measures taken by the Government. Growth in the third and fourthquarter of the current year is expected to be 5.2 percent and that for the whole yearhas been estimated at 4.9 percent.

The declining fiscal deficit, stable Exchange Rate and reducing Current Account Deficit,moderation in inflation, increasing exports are reflection of a more stable economytoday.

UPA’s record of Growth

In India growth is an imperative but sustainable and inclusive growth model mustaddress the concerns of environment, inter generational equity, indebtedness etc.

Un paralleled record of growth in 10 years of UPA Government.

Production of food grains up from 213 million tonnes to 263 million tonnes, installedpower capacity up to 2,34,600 MW from 1,12,700 MW, coal production 554 milliontonnes from 361 million tonnes, 3,89,578 Kms of Rural Roads under PMGSY from51,511 Kms, over a period of 10 years.

The expenditure on Health & Family Welfare has reached ` 36,322 crore from` 7,248 ten years ago.

The expenditure on Education has reached ` 79,451 crore from ` 10,145ten years ago.

UPA-I & UPA-II Governments have delivered above the trend growth of 6.2 percent,which prevailed over a period of 33 years.

Report Card of 2013-14

De-controlling sugar, gradual correction of diesel prices, rationalization of railway fares,were some of the courageous and long over due decisions taken by the Government.

Applications were invited for issue of new bank licences.

DISCOMS, mostly sick are being restructured with generous central assistance.

12.8 lakhs land titles covering 18.80 lakh hectare were distributed under the ScheduledTribes and Other traditional Forest Dwellers Act.

The oppressive colonial law of 1894 was substituted with the Right to Fair Compensationand Transparency in Land Acquisition Rehabilitation and Resettlement Act.

 

 

 

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National Food Security Act was passed assuring food to 67 percent of the population/households.

The new companies Act replaced a law of 1956 vintage.

The PFRDA Act was passed to establish a statutory regulator for the New PensionScheme.

Economic Initiative

Centrally Sponsered Schemes were restructured into 66 Programs for greater Synergy.Funds under these programs will be released as Central assistance to State Plan, thusgiving greater authority and responsibility. As a result, Central assistance to plans ofStates & UTs will rise substantially from `136,254 crore in BE 2013-14 to`338,562 crore in 2014-15.

Record Capital expenditure of ` 257,641 crores in 2013-14 by public sectorenterprises.

About 50,000 MW of Thermal and Hydel Power capacity is under construction afterreceiving all clearances and approvals. 78,000 MW of power capacity have beenassured coal supply.

Liberalised FDI policy in tele-communication, pharmaceuticals, civil aviation, powertrading exchange, and multi brand retail to attract large investment.

Approval to establish 2 semi conductor wafer fab units.

Approval of IT modernization project of Department of Post.

Kudankulam Nuclear Power Plant Unit-I achieved criticality and is generating180 Milliion Units of power.

Fast breeder Reactor at Kalpakkam and 7 Nuclear Power Reactors under construction.

National Solar Mission to add 4 Ultra Mega Solar Power Projects each with thecapacity of over 500 MW in 2014-15.

Ministry of MSME will create the ‘India Inclusive Innovation Fund’ to promote grassroot innovations with social returns to support enterprises in the MSME sector with aninitial contribution of ̀ 100 crore to the corpus of the fund.

Social Sector Initiative

A Venture Capital Fund to provide concessional finance to Scheduled Caste will beset up by IFCI with an initial capital of ̀ 200 crore which can be supplemented everyyear.

The restructured ICDS, under implementation in 400 districts, will be rolled out inremaining districts from 1.4.2014.

A National Agro-Forestry Policy 2014 has been approved.

A mechanism for marketing minor Forest produce has been introduced and an allocationof ̀ 444.59 crore has been made to continue the Scheme in 2014-15.

 

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A new Plan Scheme with an allocation of ̀ 100 crore has been approved to promotecommunity radio station

New technologies such as JE vaccine, a diagnostic test for Thalassaemia andMagnivisualizer for detection of Cervical cancer have been delivered to people.

Additional Central Assistance to some States

A sum of ̀ 1200 crore as additional central assistance to North Eastern states, HimachalPradesh and Uttarakhand in this financial year.

Space

India joined a handful of countries when it launched the Mars Orbiter Mission.

The Country has acquired capability in launch vehicle technology, cryogenics andnavigation , meteorological and communication satellites.

Several flight tests, navigational satellites and space missions are planned for 2014-15

Redeeming promises

A Corpus has been created for ‘Nirbhaya Fund’ with a non lapsable grant of` 1000 crore. 2 Proposals to ensure the dignity and safety of women have beenapproved which will be funded from the Nirbhaya Fund . A sum of ̀ 1000 crore hasagain been provided in FY 2014-15

The National Skill Certification and monitary reward schemes launched in August 2013with an allocation of ̀ 1000 crore has been widely hailed as a success. A sum of` 1000 crore is proposed to be transferred to the NSD Trust to scale up its programmerapidly.

Government remains fully committed to Aadhar under which 57 crore Unique Numbershave been issued so far and to opening bank accounts for all Aadhar holders to promotefinancial inclusion.

Through the Direct Benefic Transfer (DBT) Scheme, a total of ̀ 628 crore (54,20,114transactions) has been transferred directly to the beneficiaries till 31st January 2014under 27 Schemes.

OVERVIEW OF THE INTERIM BUDGET

In order to sustain the pace of plan expenditure, it has been kept at the same level in2014-15 at which, it was budgeted in 2013-14.

Ministries/Departments which run key flagship programmes have been providedadequate funds in 2014-15 either equal to or higher than in the BE 2013-14. Theseinclude Ministries namely, Minority Affairs, Tribal Affairs, Housing & PovertyAlleviation, Social Justice & Empowerment, Panchayat Raj, Driniking Water andSanitation, Women & Child Development, Health & Family Welfare, Human ResourceDevelopment and Rural Development.

Railways

Budgetary support to Railways has been increased from ` 26,000 crore inBE 2013-14 to ` 29,000 crore in 2014-15.

 

 

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It is proposed to indentify new instruments and new mechanisms to raise funds forRailway Projects.

SC Sub-Plan and Tribal Sub-Plan, Gender Budget and Child Budget

` 48,638 crore and ̀ 30,726 crore are allocated to the SC Sub-Plan and Tribal Sub-Plan respectively.

Gender Budget and Child Budget has ̀ 97,533 crore and ̀ 81,024 crore respectively.

Non Plan Expenditure

Non Plan expenditure is estimated at ̀ 12,07,892 crore.

The expenditure on subsidies for food, fertilizer & fuel will be ̀ 246,472 crore slightlyhigher than the revised estimates of ̀ 245,453 crore in 2013-14.

` 115,000 crore has been allocated for food subsidies taking in to account,Government‘s firm and irrevocable committment to implement the National FoodSecurity Act throughout the country.

Defence

10 per cent hike in Defence allocation has been given in comparison to BE 2013-14.

Government has accepted the principle of one rank one pension for the Defence Forceswhich will be implemented prospectively from the FY 2014-15. A sum of ̀ 500crore is proposed to be transferred to the Defence Pension Account in the currentFinancial Year itself.

Central Armed Police Forces

A modernization Plan at a cost of ̀ 11,009 crore has been approved to strengthen thecapacity of Central Armed Police Forces and to provide them the state-of-art, equipmentand technology.

FINANCIAL SECTOR

All the announcements concerning the Financial sector made in the Budget Speech ofFebruary 2013 have been implemented.

` 11,300 crore is proposed to be provided for Capital infusion in Public Sector Banks.

5,207 new branches have been opened against the target of 8,023.

Bhartia Mahila Bank has been established.

` 6,000 crore and ̀ 2,000 crore have been provided to Rural and Urban HousingFunds respectively.

The target of ̀ 700,000 crore of Agricultural Credit is likely to be exceeded by theBanks. The target for 2014-15 is ̀ 800,000 Crore.

` 23,924 crore has been released under the Interest Subvention Scheme on farmloans, with effective rate of interest on farm loans at 4 percent including subvention of2 percent and incentive of 3 percent for prompt payment.

 

 

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Credit to Minority Communities

The number of bank accounts of minorities has increased to 43,52,000 at the end ofMarch 2013 from 14,15,000 ten years ago. The volume of lending has soared to` 66,500 crore from ̀ 4,000 crore in the same period.

Loans to minorities stood at ̀ 211,451 crore at the end of Decemeber 2013.

Self-Help Groups (SHGs) Loans

Ten years ago, only 9,71,182 women Self-Help Groups (SHGs) had ben credit linkedto banks. At the end of December 2013, 4,11,6000 women SHGs had been providedcredit and the outstanding amount of credit was ̀ 36,893 crore

Education Loans

A moratorium period is proposed for all education loans taken up to 31.3.2009 andoutstanding on 31.12.2013. Government will take over the liability for outstandinginterest as on 31.12.2013 but the borrower would have to pay interest for the periodafter 1.1.2014. An amount of ̀ 2,600 crore has been provided this year and it willbenefit nearly 9 lakh student borrowers.

Insurance

LIC and the four public sector general insurance companies have opened arround3000 offices in towns with a population of 10,000 or more to serve peri-urban andrural areas.

Financial Markets

Steps envisaged to deepen the Indian Financial Market :

• ADR/GDR Scheme revamp, an enlargement of the scope of depository receipt

• Liberalization of rupee denominated corporate bond market.

• Currency Derivatives Market to be deepened and strengthened to enable IndianCompanies to fully hedge against foriegn currency risk

• To create one record for all financial assets of every individual

• To enable smoother clearing and settlement for international investors looking toinvest in Indian bonds.

Commodity Derivatives Markets

Swift action taken to sequester National Spot Exchange Limited (NSEL) after thepayment crisis in the NSEL, this prevented spill over of the crisis to the other regualtedsegment of the financial markets.

Proposal to amend the Forward Contracts (Regualtion) Act.

Key Pending Bills

The Insurance Laws (Amendment) Bill and the Securities Laws (Amendment) Billhave not been passed by Parliament for reasons that have nothing to do with the meritsof the Bills.

 

 

 

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Public Debt Mangement Agency

Public Debt Management Agency Bill is ready with the Government. It is proposed toestablish a non statutory PDMA that can begin work in 2014-15.

VISION FOR FUTURE

India poised to be third largest economy along with US and China, to play a leading animportant role in global economy.

10 Tasks as part of the road map ahead include :

• Fiscal consolidation : We must achieve the target of fiscal deficit of 3 percent ofGDP by 2016-17 and remain below that level always.

• Current Account Deficit : CAD will be inevitable for some more years whichcan be financed only by foriegn investment. Hence, there is no room for anyaversion to foreign investment.

• Price Stability and Growth : In a developing economy, a high growth target entailsa moderate level of inflation. RBI must strike a balance between price stabilityand growth while formulating the monetary policy.

• Fianancial Sector reforms to be completed as laid down by Financial SectorLegislative Reforms Commission.

• Massive investment in infrastructure : to be mobilized through the Public PrivatePartnership.

• Manufacturing sector to be the base of India’s development : All taxes, Centraland State that go into an exported product should be waived or rebated. Thereshould be a minimum tariff protection to incentiwise domestic manufacturing.

• Subsidies, which are absolutely necessary should be choosen and targeted onlyto the absolutely deserving.

• Urbanisation to be managed to make cities governable and liveable.

• Skill development must be given priority at par with secondary and universityeducation, sanitation and universal health care.

• States to partner in development so as to enable the Centre to focus on Defence,Railways, National Highways and Tele-communication.

REVENUES

GST and DTC

Governement appeals to all political parties to resolve to pass the GST Laws and theDirect Tax Code in 2014-15

Funding Scientific Research

It is proposed to set up a Research Funding Orgnaisation that will fund ResearchProjects selected through a competitive process. Contribution to that organisation willbe eligible for tax benefits. The required legislative changes can be introduced at thetime of regular Budget.

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Off-shore Accounts

The Government has succeeded in obtaining information on illegal off-shore accountsheld by indians in 67 cases and action is under way. Prosecution for wilful tax evasionhave also been launched in 17 other cases. More enquiries have been initiated in toaccounts reportedly held by Indian entities in no tax or low tax jurisdictions.

Changes in Tax Rates

Following changes in some indirect tax rates are proposed:

• States to partner in development so as to enable the Centre to focus on Defence,Railways, National Highways and Tele-communication.

• The Excise Duty on all goods falling under Chapter 84 & 85 of the Schedule tothe Central Excise Tariff Act is reduced from 12 percent to 10 percent for theperiod upto 30.06.2014. The rates can be reviewed at the time of regular Budget.

• To give relief to the Automobile Industry, which is registering unprecended negativegrowth, the excise duty is reduced for the period up to 30.06.2014 as follows:

Small Cars, Motorcycle, Scooters - from 12 % to 8%and Commercial Vehicles

SUVs - from 30% to 24%

Large and Mid-segment Cars - from 27/24% to 24/20%

• It is also proposed to make appropriate reductions in the excise duties on chassisand trailors - The rates can be reviewed at the time of regular Budget

• To encourage domestic production of mobile handsets, the excise duties for allcategories of mobile handsets is restructured. The rates will be 6% with CENVATcredit or 1 percent without CENVAT credit.

• To encourage domestic production of soaps and oleo chemicals, the custom dutystructure on non-edible grade industrial oils and its fractions, fatty acids and fattyalcohols is rationalized at 7.5 percent.

• To encourage domestic production of specified road construction machinery, theexemption from CVD on similar imported machinery is withdrawn.

• A concessional custom duty 5 percent on capital goods imported by the BankNote Paper Mill India Private Limited is provided to encourage domesticproduction of security paper for printing currency notes.

The loading and un-loading, packing, storage and warehousing of rice is exemptedfrom Service Tax.

The services provided by cord blood banks is exempted from Service Tax.

 

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BUDGET ESTIMATE

The current financial year will end on a satisfactory note with the fiscal deficit at 4.6percent (below the red line of 4.8 percent) and the revenue deficit at 3.3 percent.

Fiscal Deficit in 2014-15 estimated to be 4.1 percent which will be below the targetset by new Fiscal Consolidation Path and Revenue Deficit is estimated at 3.0 percent.

The estimate of Plan Expenditure is `555,322 crore. Non Plan expenditure isestimated at ̀ 12,07,892 crore.