Jaitley cranks up growth engine

Sanjeev Sharma

Tribune News Service

New Delhi, February 28

With the clock ticking on the “acche din” promise, Finance Minister Arun Jaitley in his first full Union Budget has provided a future roadmap for the economy to accelerate investments and growth. In the immediate context, Jaitley provided sops for middle class, announced steps to tackle black money and wooed the youth with entrepreneurship schemes.

Coming days after the government accepted recommendations of the 14th Finance Commission, Jaitley had lesser room to maneouvre as the states have been given much higher funds devolution at 42 per cent compared to 32 per cent earlier. 

Given the need to revive growth and infrastructure, Jaitley has staggered the fiscal deficit target of 3 per cent from two to three years. Reminding those calling for big bang reforms, Jaitley ended his speech by saying that India is like a giant super tanker or an elephant which moves slowly but surely.

There is no change in income tax rates. However, savings have been sought to be pushed up by allowing for higher deduction on health insurance from Rs 15,000 to Rs 25,000. In addition, Rs 50,000 has been allowed for exemption under the new pension scheme. The transport allowance has been hiked from Rs 800 a month to Rs 1,600 a month. Jaitley pointed out that all the exemptions given last year and this year in income tax amount to Rs 4.42 lakh.

For employees, two options will be provided, the EPF or the New Pension Scheme (NPS). For employees below a certain threshold of monthly income, the contribution to the EPF should be optional, without affecting or reducing the employer’s contribution.

Service tax has gone up from 12.36 per cent to 14 per cent leading to eating out, mobile bills, entertainment and other activities getting costlier. Another hike of 2 per cent in service tax has been proposed for Clean India but will be notified later. 

Gold monetisation is among the big ideas of the Budget which will help gold holders to earn interest. The GST to be implemented from April 1 and targeting subsidies through the JAM Number Trinity (Jan Dhan, Aadhar and Mobile Numbers), Jaitley said will be gamechangers.

Calling for a quantum jump, the finance minister laid out a grand vision of the year 2022 or the 75th year of India’s independence with target of a roof for each family which will require completion of two crore houses in urban areas and four crore houses in rural areas. 

Each house will have 24-hour power supply, clean drinking water, a toilet and road connectivity. He said the vision included that at least one member from each family should have access to the means of livelihood, substantial reduction in poverty, electrification of the remaining 20,000 villages, including off-grid solar power by 2020, connecting each of the 1.78 lakh un-connected habitation.

The measures announced in the Budget focus on building more infrastructure, driving investments and creating jobs as compared to the entitlement-based approach of the previous UPA government. 

The government has set up an ambitious target of Rs 8.5 lakh crore of agricultural credit. Stating the government’s commitment to supporting employment through MNREGA, Jaitley proposed an initial allocation of Rs 34,699 crore for the programme.

The Rs 17.74 lakh Budget had several reform measures and new ideas the prominent being a new law for eradicating black money, creating a social safety net, boosting manufacturing, abolishing the wealth tax with a 2 per cent surcharge on the super rich and cutting corporate tax rates to 25 per cent from 30 per cent over a four-year period.

In a big boost to manufacturing, customs duty has been cut on 22 items to correct the inverted duty structure. There is good news for India Inc as corporate tax is being reduced from 30 per cent to 25 per cent over four years by cutting exemptions.

There is a renewed thrust on tackling black money. Quoting of PAN number is now mandatory for cash transactions above Rs 1 lakh. A benami transactions law will be introduced to check property. Prison sentence has been announced for those violating laws on foreign assets and holding black money abroad.

A new social safety net has been kicked off with low-cost pension and insurance schemes, including Atal Pension Yojana and Universal Social Security scheme. Atal Pension Yojana will provide defined pension according to contribution. Of this, 50 per cent contribution would be made by the government.

To boost entrepreneurship, the government will create a refinance agency Mudra Bank with an initial corpus of Rs 20,000 crore to provide credit facilities to SC/ST businesses. Sops were also announced for start-ups by youngsters in the tech space.

There is a big push for infrastructure with four large power plants with investment of Rs 1 lakh crore. Another Rs 70,000 crore has been set aside for infrastructure with roads and railways also getting tax-free bonds.

PAN for Rs 1 lakh transactions

To curb black money, quoting of Permanent Account Number (PAN) will be made mandatory for purchase or sale exceeding the value of Rs 1 lakh. “Splitting of reportable transactions” to avoid quoting of PAN is also being checked. The Budget includes a proposal to prohibit acceptance or payment of an advance of Rs 20,000 or more in cash for purchase of immovable property.

Edu cess subsumed in central excise

To implement the Goods and Services Tax (GST), the Education Cess and Secondary Higher Education Cess are to be subsumed in the Central Excise Duty. Finance Minister Arun Jaitley said GST will put in place a “state-of-the-art indirect tax system” by April 1, 2016. In effect, the general rate of Central Excise Duty of 12.36 pc, including the cesses, is being rounded off to 12.5 pc.

Commodity regulator-SEBI merger

India will have a unified regulator for commodities and capital markets, with the merger of the Forward Markets Commission and the Securities and Exchange Board of India (SEBI). It would help streamline monitoring of commodity futures trading and curb wild speculations, the FM said.

Visa on arrival for citizens of 150 countries

The government’s move to extend visa on arrival facility to 150 countries and make world heritage sites more tourist friendly has been welcomed by the industry. Finance Minister Arun Jaitley, in his first full-year Budget, said he proposed to “extend the visas on arrival facility to 150 countries, in stages, after the success of the same issued to travellers of 43 countries”.

Spectrum auction: Govt eyes Rs 42,865 cr

 

The government expects to earn Rs 42,865.62 crore from spectrum auctions and one-time spectrum charges in 2015-16. In 2013-14, the government had earned Rs 40,113.76 crore. The Department of Telecom is set to auction airwaves in various bands from March 4, from which the government expects to earn Rs 80,000 crore.

Coal cess may hike power tariff

Doubling of the clean energy cess on coal may lead to an increase in power tariff, with state-run Coal India Ltd anticipating an impact of Rs 5,000 crore. The power tariff could go up by 4 paise per unit. The cess, doubled to Rs 200 per metric tonne, is levied on coal, peat and lignite to finance and promote clean energy initiatives and fund research.

Bond markets at par with equity markets

To promote investment climate, the FM said bond markets would be deepened to bring these at par with the equity markets. He announced a Task Force to establish a sector-neutral Financial Redressal Agency to address consumer grievances against financial service providers. A Public Debt Management Agency is also to be set up to bring India’s external borrowings and domestic debt under one roof.

No service tax exemption to MF agents

Investment in mutual funds may turn expensive as service tax exemption given to MF agents of asset management companies has been withdrawn. However, some relief has come in the form of tax neutrality in case of merger of MF schemes with similar features. At present, 45 mutual fund houses manage assets worth nearly Rs 12 lakh crore in total.

Air travel becomes costly

First and business class air travellers would find flying costlier from the next fiscal with an almost 2 per cent hike in service tax proposed in the budget, which also earmarked Rs 2,500 crore for the ailing Air India in 2015-16. Finance Minister Arun Jaitley announced a hike in service tax from 12.36 pc to 14 pc for travel by air in first and business class.

MHA gets 10 pc jump in outlay

The Union Ministry of Home Affairs has been allocated Rs 62,124.52 crore, a 10.2 per cent jump over the outlay in last fiscal, focusing on safety of women, rehabilitation of Kashmiri Pandits, border management, state and Union Territory plans, Indo-Bangladesh border works, Intelligence Bureau, Central Police Forces and internal security. Another 1,000 crore has been provided to the Nirbhaya Fund.

Project Tiger allocation cut

Project Tiger has been allocated Rs 136.46 crore — a decrease of 15% from Rs 161.02 crore in 2014-15. The All India Tiger Estimation Report said the tiger population had increased by 30% from 2010 to 2,226 in 2014. Experts advocated a focused approach to maintain and protect the increase in population and work on tiger corridors and technological interventions for security. 

Streamlining FDI regime

Seeking to simplify the FDI regime, the government proposes to do away with the distinction between different types of foreign investment. Henceforth, portfolio and foreign direct investments will be treated as one category and will have to comply with FDI norms. 

MGNREGS given boost

Putting to rest doubts about the continuation of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), Finance Minister Arun Jaitley announced an initial allocation of Rs 34,699 crore for the programme. 

Excise on cement increased

The government has increased the excise duty on cement by Rs100 per tonne to Rs1,000 per tonne in the new Budget. Domestic cement makers said this is the upper limit of the excise duty that can be levied on cement. 

Mobile phone bills set to go up

The government has proposed an increase in excise duty on mobile phone devices imported into India to 12.5% from the existing 6% and the 1.5% increase in service tax rate to 14% from 12.36%, would not only hike the prices of the handsets, but would also marginally push up the mobile phone bills.

Import duty on steel increased

The basic customs duty on steel has been hiked to 15 per cent. The special additional duty on metal scrap of iron and steel, copper, brass and aluminium has been cut from 4 per cent to 2 per cent. The basic customs duty on metallurgical coke has been raised from 2.5 per cent to 5 per cent.

Sports budget down

The meagre budgetary allocation to the Ministry of Youth Affairs and Sports just goes to show how sports has slipped out of the NDA government's consciousness. For the coming fiscal, the Finance Minister has neatly cut down the budget to Rs 1,389.48 crore from the previous allocation of Rs1,643 crore, a whopping decrease of Rs 253.52 crore.