By Arvind Padmanabhan
(Updated)
New Delhi, Feb 28 (IANS): Falling just short of big bang reforms called for by his own economic survey, Finance Minister Arun Jaitley Saturday presented a Rs.17.78 lakh crore (nearly $300 billion) national budget for the next fiscal that seeks to put more money in the hands of the average citizen, tackle the menace of black money more effectively and end an era of "scam, scandal and corruption".
In his 93-minute budget speech in the Lok Sabha, the finance minister said a new law on black money stashed abroad will call for an imprisonment of up to 10 years on its perpetrators with a penalty of 300 percent, while another proposed legislation will clamp down on benami property in India with both confiscation and prosecution.
This apart, the 62-year old lawyer-politician also proposed a new public procurement law for the consideration of the house that can encourage transparency in the way government buys goods and services while removing the reluctance in decision-making among the bureaucracy due to the fear of being questioned later by probe agencies.
The finance minister said while individual tax payers would stand to gain as much as Rs.440,200 by way of enhanced exemptions he has proposed in his two budgets since July last year, the corporate sector can benefit from a cut in tax rates from 30 percent to 25 percent over four years, albeit with a sharp reduction in the exemptions.
The other highlights of Jaitley's budget include universal social security with health insurance coverage for the poor, a new bankruptcy law, a fresh gold monetisation scheme, the deferment of much-criticised General Anti-Avoidance Rule by two years with prospective effect, a pan-India goods and services tax regime from April 1, 2017, tax-free bonds to fund rail, roads and irrigation projects and five new ultra mega power projects.
Prime Minister Narendra Modi hailed the budget as progressive and practical which delivers on job creation, equity and growth. "Union budget 2015 is a budget with a clear vision. It is a budget that is progressive, positive, practical, pragmatic and prudent," Modi tweeted.
The prime minister said it had a distinct focus on farmers, youth, poor and neo-middle class, while it laid down the goals over the next seven years on a host of areas such as housing for all, jobs, health, education and total electrification. It also signalled a stable, predictable and fair tax system, the prime minister added.
Industry, too, welcomed the proposals and said it will encourage investment with a better environment for doing business. The emphasis on infrastructure, agriculture, manufacturing and rural economy was particularly welcomed.
Regarding radical liberalisation suggested by the economic survey, Jaitley sought to give an explanation. "People who urge us to undertake big bang reforms also say that the Indian economy is a giant super tanker, or an elephant. An elephant, Madam Speaker, moves slowly but surely. Even our worst critics would admit that we have moved rapidly," he said.
Among the various welfare programmes, the finance minister outlined a new student loan scheme for higher education, Rs.8.5-lakh credit for farmers, significant hikes in the allocations for women safety, rural job guarantee scheme, and mid-day meal programme, a new pension fund and several skilling schemes for the youth.
He also made several references to two of Prime Minister Modi's pet projects, and said while policies outlined by him and various tax proposals were aimed to giving an impetus to "Make in India" campaign, particularly aimed at the youth and manufacturing, he also announced 100-percent tax rebate on money spent by the corporate sector towards the Swachh Bharat Abhiyan.
In the realm of taxation, Jaitley said wealth tax will be abolished, with a cess, instead, on the super rich, the service tax rate hiked, exemption limits for individual tax-payers significantly enhanced, notably in areas like insurance, excise and customs duty rationalised and corporate tax rate cut over four years from 30 percent to 25 percent, with the removal of a host of exemptions.
"My direct tax proposals would result in revenue loss of Rs.8,315 crore, whereas the proposals in indirect taxes are expected to yield Rs.23,383 crore. Thus, the net impact of all tax proposals would be revenue gain of Rs.15,068 crore," the finance minister said, while also earmarking a target of Rs.41,000 crore from divestment of stake in state-run enterprises.
At the same time, the finance minister said that he was not losing sight of financial discipline, sticking to the fiscal deficit target of 4.1 percent of GDP for the current fiscal and 3.9 percent for the next, and pruning it further to 3.5 percent and 3 percent over another two fiscals.
This, despite a near 6 percent increase in the total expenditure at Rs.1,777,477 crore for the next year over the revised estimates for the current fiscal. But the size of plan expenditure, which forms the more productive use of finances, has been cut marginally by 0.5 percent to Rs.465,277 crore.
The finance minister began his speech on a positive note on the India economy and said it was logging the fastest-growth among larger countries, with inflation easing significantly over the past year. He was also quick to take this credit for his government.
Through the day, key stock market indices fluctuated wildly, after opening in the green. The sensitive index (Sensex) of the Bombay Stock Exchange (BSE) opened nearly 200 points, or 0.7 percent higher, but went into the red with a loss of nearly 340 points over the previous close.
Intra-day, the fluctuation was as wide as nearly 530 points. But by the end of the day, the 30-share key index managed to float back into positive territory with a gain of around 140 points, or nearly 0.5 percent over the previous close. The case was the same with the broad CNX Nifty of the National Stock Exchange (NSE), which finally ended with a gain of 0.65 percent.
What is costlier, what is cheaper
Beverages, cigarettes, cement will now be costlier, while pacemakers, tablet computers and footwear will be cheaper.
Costlier:
* Service tax rate increased to 14 percent and new services added to the taxable list like services provided by a mutual fund agent to a mutual fund or assets management company, distributor to a mutual fund or asset management company and selling or marketing agent of lottery ticket to a distributor.
* Aerated water, iced tea, lemonade and other beverages, waters, including mineral water and aerated water, containing added sugar or other sweetening matter or flavour.
* Condensed milk in containers
* Peanut butter
* Sacks and bags (including cones) of plastics
* Cut tobacco, cigarettes
* Cement
Cheaper:
* Bituminous coal, ulexite ore, liquefied butane, ethylene dichloride, vinyl chloride monomer and styrene monomer, butyl acrylate, anthraquinone
* Wind power generators, solar water heater system
* Wafers for manufacture of integrated circuit (IC) modules for smart cards LED drivers and MCPCB for LED lights, fixtures and lamps
* Agarbattis
* Pacemakers
* Tablet computers
* Ambulances
* Leather footwear priced over Rs.1,000 per pair
Highlights
* Personal income tax rates unchanged
* Increase in limit of deduction in health insurance from Rs.15,000 to Rs.25,000
* For senior citizens, this limit to be increased from Rs.30,000 from present Rs.10,000
* Deduction limit of Rs.60,000 on account of serious diseases to be enhanced to Rs.80,000 for senior citizens
* Exemption on contributions to Pension Fund hiked from Rs.1 lakh to Rs.1.5 lakh per year
* All investment payments in 'Sukanya Scheme' will be fully exempted from tax
* Transport allowance exemption raised from Rs.800 to Rs.1,600 per month
* Universal social security system for all Indians, especially poor and disadvantaged sections
* Atal Pension Yojna for economically disadvantaged
* PPF and EPF corpus to be utilised for senior citizens' welfare fund
* Physical aids and assisting devices for physically challenged senior citizens
* Wealth Tax to be abolished and additional two percent tax on super rich to yield Rs.9,000 crore annually
* GDP growth at 7.4 percent in 2014-15 and at 8-8.5 percent in 2015-16; double-digit growth feasible
* Non-Plan expenditure in 2015-16 estimated at Rs.1,312,200 crore; Plan expenditure estimated at Rs.465,277 crore
* Tax collection in 2015-16 estimated at Rs.1,449,490 crore
* Adequate provision for defence with Rs.246,727 crore earmarked for 2015-16
* Investment on infrastructure to go up by Rs.70,000 crore in 2015-16 over 2014-15
* Education sector allocated Rs.68,968 crore; rural development gets Rs.79,526 crore
* Nirbhaya Fund gets another Rs.1000 crore in 2015-16
* Facilities at eight World Heritage Sites to be restored
* Government to soon launch National Skills Mission
* During 2015-16 AIIMS-like institutes to be set up in Jammu and Kashmir, Punjab, Tamil Nadu and Himachal Pradesh; Bihar to get second AIIMS-like institution
* Karnataka to get an IIT; Indian School of Mines in Dhanbad to be upgraded to IIT
* Fully IT-based student-help facility for needy students
* Corporate tax to be reduced to 25 percent from 30 percent in four years
* Tax exemption for contributions to 'Swachh Bharat Abhiyan' and 'Clean Ganga Fund' by corporates as part of CSR
* In last nine months several steps taken to effectively deal with problem of black money
* Comprehensive new law to be brought against black money
* Rigorous imprisonment of up to 10 years for concealing income
* Prevention of Money Laundering Act to be amended to provide for forfeiture of property in India if the one abroad cannot be attached
* Law against Benami property in fight against black money
* Quoting PAN essential in property transactions
* Forwards Markets Commission to be Merged with Sebi
* Splitting of transaction not to be permitted
* Changes in excise on tobacco items, including cigarettes, paan masala and gutkha
* Excise duty on footwear with leather uppers to be reduced to six percent
* Service tax and education levy to be consolidated from 12.36 percent to 14 percent
* Swachh Bharat cess of two percent, if necessary
* Tax regime to be rationalised
* Applicability of General Avoidance Rules (GAR) to be deferred by two years in view of problems faced in its implementation
* New structure to be put in place in banking sector for seamless integration of data
* Eastern states to be given opportunity to develop faster. Special boost to Bihar and West Bengal as in the case of Andhra Pradesh and Telangana
* Good progress in DMIC corridor and other infra-projects. Rs.1,200 crore earmarked and additional funds if pace of work picks up on ongoing projects
* Procurement law to be drawn up to ensure transparency and remove corruption
* Centenary of Deen Dayal Upadhyay to be celebrated; committee for this to be set up soon
* Good progress being made on Digital India
* To discourage transactions in cash, Rupee debit card to incentivise credit transactions
* In line with 'Act East Policy', steps to catalyse investment in this sector through a project development company to oversee investments in Cambodia, Laos and Vietnam
* Tourism has increased after Visa on Arrival introduced for 43 countries. This facility to be increased to 150 countries in different stages
* Public Debt Management Agency to be created to strengthen the bond market
* Gold Monetisation Scheme to be introduced; sovereign gold bonds to be introduced; working on developing Indian gold coin with Ashok Chakra on face
* Vision of making India cashless society
* Foreign Investment in alternative investment funds to be permitted
* Ports in public sector to be encouraged to utilise land under their control
* Make India investment-destination by streamlining permission procedures
* Five ultra-mega power projects each of 4,000 MW to be set up; Second unit of Kudankulam Nuclear Power Station will be commissioned in 2015-16
* Self Employment and Talent Utilisation (SETU) to be Established
* Integrated education and livelihood scheme to be launched
* National investment and infrastructure fund to be launched with corpus of Rs.20,000 crore to generate more funds
* Innovation initiative to be launched in NITI Aayog in the name of former prime minister Atal Bihari Vajpayee
* Government committed to increasing access of people to the banking system
* Postal network across the country to be used for increasing access to formal financial system
* Main challenges: increasing agricultural production; increasing investment in infrastructure; with manufacturing declining, Make in India will create jobs; cooperative federalism
* Agriculture credit targetted at Rs.8.5 lakh crore
* Rural jobs scheme to get Rs.34,699 crore; Allocation to be enhanced by Rs.5,000 crore if additional funds available; Every poor to get a job
* To work with NITI Aayog for creating a National Agricultural Market
* Need well-targeted system for subsidies.
* Direct transfer of subsidy to LPG consumers
* Appeal to well-off consumers to surrender subsidised LPG connections
* Organic farm schemes of agriculture ministry to be supported
* 'Per drop More crop' scheme for better irrigation
* Three achievements - Jan Dhan Yojna, coal auctions, Swachh Bharat
* Two more gamechanging reforms: Goods and Services Tax, JAM trinity (Jan Dhan Yojna, Aadhar, Mobile number) to ensure transparency
* Our achievement to conquer inflation, CPI inflation at five percent by year-end
* We are in an economic environment far more positive than in the recent past
* Undertaken several significant steps to energise the Indian economy in last nine months
* India's chance to fly
* Budget proposals lay down roadmap for economic growth.
* "The Everlasting Flame" exhibition on Parsis to be launched.