Mar 022015
 

Highlights: Budget 2015

FISCAL DEFICIT
  • Fiscal deficit seen at 3.9 percent of GDP in 2015/16
  • Will meet the challenging fiscal target of 4.1 percent of GDP
  • Remain committed to meeting medium term fiscal deficit target of 3 percent of GDP
  • Current account deficit below 1.3 percent of GDP
  • Jaitley says have to keep fiscal discipline in mind despite need for higher investment
GROWTH
  • GDP growth seen at between 8 percent and 8.5 percent y/y
  • Nominal economic growth seen between 11 and 12 percent
  • Aiming double digit growth rate, achievable soon
INFLATION
  • Expects consumer inflation to remain close to 5 percent by March, opening room for more monetary policy easing
  • Monetary policy framework agreement with the RBI clearly states objective of keeping inflation below 6 percent
  • “One of the achievements of my government has been to conquer inflation. This decline in my view represents a structural shift.”
REVENUES
  • Revenue deficit seen at 2.8 percent of GDP
  • Non tax revenue seen at 2.21 trillion rupees
  • Agricultural incomes are under stress
  • Net receipts under market stabilisation scheme estimated at 200 billion rupees
DISINVESTMENT
  • Government targets 410 billion rupees ($6.7 billion) from stake sales in companies in 2015/16
  • Total stake sale in 2015/16 seen at 695 billion rupees
  • Sets stake sale target for 2016/17 at 550 billion rupees
  • Revises down stake sale target for 2014/15 to 313.5 billion rupees
MARKET REFORMS
  • Propose to merge commodities regulator with SEBI
  • To bring a new bankruptcy code
  • Jaitley says will move to amend the RBI act this year, and provide for a monetary policy committee
  • To set up public debt management agency
  • Proposes to introduce a public contract resolution of disputes bill
  • To establish an autonomous bank board bureau to improve management of public sector banks
POLICY REFORMS
  • To enact a comprehensive new law on black money
  • Propose to create a universal social security system for all Indians
  • To launch a national skills mission soon to enhance employability of rural youth
  • To raise visa-on-arrival facility to 150 countries from 43
  • Allocates 346.99 billion rupees for rural employment guarantee scheme
  • Raises threshold for application of transfer pricing rules to 200 million rupees from current 50 million rupees
BORROWING
  • Gross market borrowing seen at 6 trillion rupees
  • Net market borrowing seen at 4.56 trillion rupees
  • GENERAL ANTI-AVOIDANCE RULES (GAAR)
  • Government defers rollout of anti-tax avoidance rules GAAR by two years
  • GAAR to apply prospectively from April 1, 2017
  • Retrospective tax provisions will be avoided
TAXATION
  • To abolish wealth tax
  • Replaces wealth tax with additional 2 pct surcharge on super rich
  • Proposes to cut to 25 percent corporate tax over next four years
  • Corporate tax of 30 percent is uncompetitive
  • Net gain from tax proposals seen at 150.68 billion rupees
  • Jaitley proposes modification of permanent establishment norms so that the mere presence of a fund manager in India would not constitute a permanent establishment of the offshore fund, resulting in adverse tax consequences.
  • Proposes to rationalise capital gains tax regime for real estate investment trusts
  • Extends withholding tax concession on foreign debt purchases by two years
  • Expects to implement goods and services tax by April 2016
  • To reduce custom duty on 22 items
  • Basic custom duty on commercial vehicle doubled to 20 percent
  • Proposes to increase service tax rate and education cess to 14 percent from 12.36 percent
  • Plans to introduce direct tax regime that is internationally competitive on rates without exemptions
  • Exemptions for individual tax payers to continue
  • To enact tough penalties for tax evasion in new bill
  • Tax dept to clarify indirect transfer of assets and dividend paid by foreign firms
PERSONAL INCOME TAX
  • No revision of income tax brackets
  • Limit of deduction of health insurance premium increased to 25,000 rupees from 15,000 rupees; limit increased to 30,000 rupees from 20,000 rupees for the elderly
  • People aged above 80 and not covered by health insurance to be allowed deduction of 30,000 rupees for medical expenses
  • Additional deduction of 25,000 rupees for the disabled
  • Limit on deduction for contributions to pension fund and new pension scheme increased to 150,000 rupees from 100,000 rupees
  • Additional deduction of 50,000 rupees for contribution to new pension scheme under section 80CCD
  • Monthly transport allowance exemption doubled to 1,600 rupees
IMPORT TAX
  • Import tax on iron and steel increased to 15 percent from 10 percent
  • Import tax on metallurgical coke increased to 5 percent from 2.5 percent
INFRASTRUCTURE
  • Investment in infrastructure will go up by 700 bln rupees in 2015/16 over last year
  • Plans to set up national investment infrastructure fund
  • Proposes tax-free infrastructure bonds for projects in roads, rail and irrigation projects
  • Proposes 5 “ultra mega” power projects for 4,000 MW each
  • Second unit of Kudankulam nuclear power station to be commissioned
  • Will need to build additional 100,000 km of road
  • Ports in public sector will be encouraged to corporatise under Companies Act
EXPENDITURE
  • Plan expenditure estimated at about 4.65 trillion rupees
  • Non-plan expenditure seen at about 13.12 trillion rupees
  • Allocates 2.46 trillion rupees for defence spending
  • Allocates 331.5 billion rupees for health sector
  • If revenue improves, hope to raise budgeted allocations for rural job scheme by 50 billion rupees
INVESTMENT
  • Government to provide 79.4 billion rupees capital infusion to state-run banks
  • Propose to do away with different types of foreign investment caps and replace them with composite caps
  • To allow foreign investment in alternative investment funds
  • Public investment needed to catalyse investment
GOLD
  • To launch gold deposit accounts and sovereign bond
  • Import duty stays at 10 percent; disappoints jewellers
  • To work on Indian-made gold coin to cut imports
CIGARETTES
  • Raises excise duty on cigarettes by 25 percent for cigarettes of length not exceeding 65 mm
  • Raises excise duty by 15 percent for cigarettes of other lengths
SUBSIDIES
  • Food subsidy seen at 1.24 trillion rupees
  • Fertilizer subsidy seen at 729.69 billion rupees
  • Fuel subsidy seen at 300 billion rupees
  • Major subsidies estimated at 2.27 trillion rupees
  • We are committed to subsidy rationalization based on cutting leakages

Sensys

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