Mr. Arun Jaitley, the Finance Minister of India, delivered his budget speech while presenting the Union Budget of India, also called the Indian General Budget, for the Financial Year 2014-2015 on Thursday, July 10, 2014 in New Delhi.
Ministry of Finance, Government of India – Finance Minister’s Budget Speech for Financial Year 2014-2015
New Delhi (Delhi, India), August 12, 2018
Mr. Arun Jaitley, the Finance Minister of India, delivered his budget speech while presenting the Union Budget of India, also called the Indian General Budget, for the Financial Year 2014-2015 on Thursday, July 10, 2014 in New Delhi.
Budget Speech by Hon’ble Minister of Finance Mr. Arun Jaitley on July 10, 2014
Budget Speech – PART A
Madam Speaker,
I rise to present the Budget for the Year 2014-15.
I. State of the Economy
2. The people of India have decisively voted for a change. The verdict represents the exasperation of the people with the status-quo. India unhesitatingly desires to grow. Those living below the poverty line are anxious to free themselves from the curse of poverty. Those who have got an opportunity to emerge from the difficult challenges have become aspirational. They now want to be a part of the neo middle class. Their next generation has the hunger to use the opportunity that society provides for them. Slow decision-making has resulted in a loss of opportunity. Two years of sub five per cent growth in the Indian economy has resulted in a challenging situation. We look forward to lower levels of inflation as compared to the days of double-digit rates of food inflation in the last two years. The country is in no mood to suffer unemployment, inadequate basic amenities, lack of infrastructure and apathetic governance.
3. The slowdown in India broadly reflects the trend in many economies. In contrast to the aftermath of the crisis of 2008-09 when restoration of growth in advanced economies was the primary concern, the continuing slowdown being presently witnessed in many emerging economies has posed a threat to a sustained global recovery. Fortunately, there are green shoots of recovery being seen in the global economy. As per IMF, the world economy is projected to grow at 3.6 per cent in 2014 vis-à-vis 3.0 per cent in 2013, with the Euro area expected to register a positive growth after the contraction witnessed in 2012 and 2013. However, the performance of the US economy with attendant implication for the unconventional monetary policy stance and global financial conditions is pivotal to the fate of global recovery in the coming years. These are the head winds against which the Indian economy would have to maneuver its way to attain high growth trajectory.
4. As Finance Minister, I am duty bound to usher in a policy regime that will result in the desired macro-economic outcome of higher growth, lower inflation, sustained level of external sector balance and a prudent policy stance. The Budget is the most comprehensive action plan in this regard. In the first Budget of this NDA government that I am presenting before the august House, my aim is to lay down a broad policy indicator of the direction in which we wish to take this country. The steps that I will announce in this Budget are only the beginning of a journey towards a sustained growth of 7-8 per cent or above within the next 3-4 years along with macro-economic stabilization that includes lower levels of inflation, lesser fiscal deficit and a manageable current account deficit. Therefore, it would not be wise to expect everything that can be done or must be done to be in the first Budget presented within forty-five days of the formation of this Government.
5. While higher growth is a sine qua non, we cannot be oblivious of the fact that there is a large population of this country, which is below the poverty line. It is the poor who suffer the most. We have to ensure that our anti-poverty programs are well targeted. The growing aspirations of the people will be reflected in the development strategy followed by the Government led by the Prime Minister Shri Narendra Modi and its mandate of “Sab ka Saath Sab ka Vikas”. Allow me to assure this House that we have taken up the challenge in the right earnest. We shall leave no stone unturned in creating a vibrant and strong India.
6. The prevailing economic situation presents a great challenge. It calls for a conscious choice to be made by all of us. Should we allow this drift to carry on and watch helplessly? Should we allow our future to suffer because of our indecisiveness? Should we be victims of mere populism or wasteful expenditure? To me, the response and the remedy are both clear. The task before me today is very challenging because we need to revive growth, particularly in manufacturing and infrastructure to raise adequate resources for our developmental needs. On the other hand, the task is simple if we accept the principle that we cannot spend beyond our means. We need to introduce fiscal prudence that will lead to fiscal consolidation and discipline. Fiscal prudence to me is of paramount importance because of considerations of inter-generational equity. We cannot leave behind a legacy of debt for our future generations. We cannot go on spending today which would be financed by taxation at a future date. There is an urgent need to generate more resources to fuel the economy. For this, the tax to GDP ratio must be improved and non-tax revenues increased. We must remember that the decline in fiscal deficit from 5.7 per cent of GDP in 2011-12 to 4.8 per cent in 2012-13 and 4.5 per cent in 2013-14 was mainly achieved by reduction in expenditure rather than by way of realization of higher revenue. Although, the external sector witnessed a turn-around with the year ending with a Current Account Deficit of 1.7 per cent of the GDP against 4.7 per cent in 2012-13, this was mainly achieved through restriction on non-essential imports and slowdown in overall aggregate demand. Going forward, we must continue to be watchful of the CAD.
7. My predecessor has set up a very difficult task of reducing fiscal deficit to 4.1 per cent of the GDP in the current year. Considering that we had two years of low GDP growth, an almost static industrial growth, a moderate increase in indirect taxes, a large subsidy burden and not so encouraging tax buoyancy, the target of 4.1 per cent fiscal deficit is indeed daunting. Difficult, as it may appear, I have decided to accept this target as a challenge. One fails only when one stops trying. My Road map for fiscal consolidation is a fiscal deficit of 3.6 per cent for 2015-16 and 3 per cent for 2016-17. I am conscious of the fact that Iraq crisis is leaving an impact on oil prices and the situation in the Middle-East continues to be volatile. Monsoon this year appears more unpredictable. While inflation has remained at elevated levels relative to what is perceived as acceptable, there has been a gradual moderation in WPI recently, from a high of 7.35% in 2012-13 and 5.98% in 2013-14. But we are still not out of the woods. We also must address fully the problem of black money which is curse of our economy. Faced with these adversities we have no option but to undertake some bold steps in order to enhance economic activity and spur growth in the economy. These steps are only the beginning of our effort to revive the growth spirit of the Indian Economy. They are directional.
Expenditure Management Commission
8. My Government is committed to the principle of “Minimum Government Maximum Governance”. To achieve this goal, time has come to review the allocative and operational efficiencies of Government expenditure to achieve maximum output. The Government will constitute an Expenditure Management Commission, which will look into various aspects of expenditure reforms to be undertaken by the Government. The Commission will give its interim report within this financial year. I also propose to overhaul the subsidy regime, including food and petroleum subsidies, and make it more targeted while providing full protection to the marginalized, poor and SC/STs. A new urea policy would also be formulated.
GST
9. The debate whether to introduce a Goods and Services Tax (GST) must now come to an end. We have discussed the issue for the past many years. Some States have been apprehensive about surrendering their taxation jurisdiction; others want to be adequately compensated. I have discussed the matter with the States both individually and collectively. I do hope we are able to find a solution in the course of this year and approve the legislative scheme, which enables the introduction of GST. This will streamline the tax administration, avoid harassment of the business and result in higher revenue collection for both the Centre and the States. I assure all States that government will be more than fair in dealing with them.
Tax Administration
10. The sovereign right of the Government to undertake retrospective legislation is unquestionable. However, this power has to be exercised with extreme caution and judiciousness keeping in mind the impact of each such measure on the economy and the overall investment climate. This Government will not ordinarily bring about any change retrospectively, which creates a fresh liability. Hon’ble Members are aware that consequent upon certain retrospective amendments to the Income Tax Act 1961 undertaken through the Finance Act 2012, a few cases have come up in various courts and other legal fora. These cases are at different stages of pendency and will naturally reach their logical conclusion. At this juncture I would like to convey to this August House and also the investors community at large that we are committed to provide a stable and predictable taxation regime that would be investor friendly and spur growth. Keeping this in mind, we have decided that henceforth, all fresh cases arising out of the retrospective amendments of 2012 in respect of indirect transfers and coming to the notice of the Assessing Officers will be scrutinized by a High Level Committee to be constituted by the CBDT before any action is initiated in such cases. I hope the investor community both within India and abroad would repose confidence on our stated position and participate in the Indian growth story with renewed vigour.
Advance Ruling and Other Tax Related Measures
11. Tax demand of more than Rs. 4 lakh crore is under dispute and litigation before various Courts and Appellate authorities. This is one of the serious concerns of all taxpayers in this country. In order to reduce litigation in direct taxes, I propose to make certain legislative and administrative changes.
12. Currently, an advance ruling can be obtained about the tax liability of a non-resident from the Authority for Advance Rulings. This facility is not available to resident taxpayers except Public Sector Undertakings. I propose to enable resident taxpayers to obtain an advance ruling in respect of their income tax liability above a defined threshold. I also propose to strengthen the Authority for Advance Rulings by constituting additional benches. I further propose to enlarge the scope of the Income-tax Settlement Commission so that taxpayers may approach the Commission for settlement of disputes. This would continue to be once in a lifetime opportunity for any taxpayer.
13. As an administrative measure, I propose to set up a High Level Committee to interact with trade and industry on a regular basis and ascertain areas where clarity in tax laws is required. Based on the recommendations of the Committee, the Central Board of Direct Taxes and the Central Board of Excise and Customs shall issue appropriate clarifications, wherever considered necessary, on the tax issues within a period of two months.
14. Transfer Pricing is a major area of litigation for both resident and non-resident taxpayers. I have proposed certain changes in the Transfer Pricing regulations, which I would spell out in Part-B of my speech.
15. I hope these measures would go a long way in improving the confidence of taxpayers in the tax system and would provide certainty and clarity in tax laws.
FDI
16. The policy of the NDA Government is to promote Foreign Direct Investment (FDI) selectively in sectors where it helps the larger interest of the Indian Economy. FDI in several sectors is an additionality of resource, which helps in promoting domestic manufacture and job creation. India today needs a boost for job creation. Our manufacturing sector in particular needs a push for job creation.
17. India today is the largest buyer of Defence equipment in the world. Our domestic manufacturing capacities are still at a nascent stage. We are buying substantial part of our Defence requirements directly from foreign players. Companies controlled by foreign governments and foreign private sector are supplying our Defence requirements to us at a considerable outflow of foreign exchange. Currently we permit 26 per cent FDI in Defence manufacturing. The composite cap of foreign exchange is being raised to 49 per cent with full Indian management and control through the FIPB route.
18. The Insurance sector is investment starved. Several segments of the Insurance sector need an expansion. The composite cap in the Insurance sector is proposed to be increased up to 49 per cent from the current level of 26 per cent, with full Indian management and control, through the FIPB route.
19. To encourage development of Smart Cities, which will also provide habitation for the neo-middle class, requirement of the built up area and capital conditions for FDI is being reduced from 50,000 square metres to 20,000 square metres and from USD 10 million to USD 5 million respectively with a three year post completion lock in.
20. To further encourage this, projects which commit at least 30 per cent of the total project cost for low cost affordable housing will be exempted from minimum built up area and capitalisation requirements, with the condition of three year lock-in.
21. FDI in the manufacturing sector is today on the automatic route. The manufacturing units will be allowed to sell its products through retail including E-commerce platforms without any additional approval.
Bank Capitalization
22. Financial stability is the foundation of a rapid recovery. Our banking system needs to be further strengthened. To be in line with Basel-III norms there is a requirement to infuse Rs. 2,40,000 crore as equity by 2018 in our banks. To meet this huge capital requirement we need to raise additional resources to fulfill this obligation. While preserving the public ownership, the capital of these banks will be raised by increasing the shareholding of the people in a phased manner through the sale of shares largely through retail to common citizens of this country. Thus, while the government will continue to have majority shareholding, the citizens of India will also get direct shareholding in these banks, which currently they hold indirectly. We will also examine the proposal to give greater autonomy to the banks while making them accountable.
PSU Capital Expenditure
23. To give a thrust to investment in the economy, PSUs will also play their part constructively. I am assured that the PSUs will invest through capital investment a total sum of Rs. 2,47,941 crores in the current financial year to create a virtuous investment cycle.
Smart Cities
24. As the fruits of development reach an increasingly large number of people, the pace of migration from the rural areas to the cities is increasing. A neo middle class is emerging which has the aspiration of better living standards. Unless, new cities are developed to accommodate the burgeoning number of people, the existing cities would soon become unlivable. The Prime Minister has a vision of developing ‘one hundred Smart Cities’, as satellite towns of larger cities and by modernizing the existing mid-sized cities. To provide the necessary focus to this critical activity, I have provided a sum of Rs. 7,060 crore in the current fiscal.
e-Visa
25. Tourism is one of the larger job creators globally. Many economies world over are supported by tourism. In order to give a major boost to tourism in India, the facility of Electronic Travel Authorization (e-Visa) would be introduced in a phased manner at nine airports in India where necessary infrastructure would be put in place within the next six months. The countries to which the Electronic Travel authorisation facility would be extended would be identified in a phased manner. This would further facilitate the visa on arrival facility.
REITs & InvITs
26. Real Estate Investment Trusts (REITS) have been successfully used as instruments for pooling of investment in several countries. I intend to provide necessary incentives for REITS, which will have pass through for the purpose of taxation. As an innovation, a modified REITS type structure for infrastructure projects is also being announced as Infrastructure Investment Trusts (InvITs), which would have a similar tax efficient pass through status, for PPP and other infrastructure projects. These structures would reduce the pressure on the banking system while also making available fresh equity. I am confident these two instruments would attract long-term finance from foreign and domestic sources including the NRIs.
Kissan Vikas Patra
27. Kissan Vikas Patra (KVP) was a very popular instrument among small savers. I plan to reintroduce the instrument to encourage people, who may have banked and unbanked savings to invest in this instrument.
Skill India
28. A national multi-skill programme called Skill India is proposed to be launched. It would skill the youth with an emphasis on employability and entrepreneur skills. It will also provide training and support for traditional professions like welders, carpenters, cobblers, masons, blacksmiths, weavers etc. Convergence of various schemes to attain this objective is also proposed.
Pradhan Mantri Krishi Sinchayee Yojana
29. Bulk of our farm lands are rain fed and dependent on monsoons. Therefore, there is a need to provide assured irrigation to mitigate risk. To improve access to irrigation we propose to initiate the scheme “Pradhan Mantri Krishi Sinchayee Yojana”. I propose to set aside a sum of Rs. 1,000 crore for this purpose.
Swatchh Bharat Abhiyan
30. The need for sanitation is of utmost importance. Although the Central Government is providing resources within its means, the task of total sanitation cannot be achieved without the support of all. The Government intends to cover every household by total sanitation by the year 2019, the 150th year of the Birth anniversary of Mahatma Gandhi through Swatchh Bharat Abhiyan.
Shyama Prasad Mukherji Rurban Mission
31. Gujarat has demonstrated successfully the Rurban development model of urbanization of the rural areas, through which people living in the rural areas can get efficient civic infrastructure and associate services. Shyama Prasad Mukherji Rurban Mission will be launched to deliver integrated project based infrastructure in the rural areas, which will also include development of economic activities and skill development. The preferred mode of delivery would be through PPPs while using various scheme funds for financing.
Deendayal Upadhyaya Gram Jyoti Yojana
32. Power is a vital input for economic growth and the Government is committed to providing 24×7 uninterrupted power supply to all homes. “Deen Dayal Upadhyaya Gram Jyoti Yojana” for feeder separation will be launched to augment power supply to the rural areas and for strengthening sub-transmission and distribution systems. I propose to set aside a sum of Rs. 500 crore for this purpose.
Statue of Unity
33. Government of Gujarat has embarked upon the mission to build the largest statue of Sardar Vallabh Bhai Patel. Sardar Patel stands as the symbol of the unity of the country. To support the Gujarat Government in this initiative to erect the Statue of Unity, I propose to set aside a sum of Rs. 200 crore.
II. Plan & Budgetary Allocations
34. I now turn to budgetary allocations. While announcing the allocations, I want to reiterate my Government’s firm commitment to strengthen the federal structure of the country and our resolve to work closely with the state governments for the larger good of the people.
Welfare of Scheduled Castes/Scheduled Tribes
35. Government is committed to the welfare of SCs and STs. This year an amount of Rs. 50,548 crore is proposed under the SC Plan and Rs. 32,387 crore under TSP.
36. To provide credit enhancement facility for young start up enterpreneurs from Scheduled Castes, who aspire to be part of the neo-middle class, I propose to set aside a sum of Rs. 200 crore which will be operationalised through a scheme by IFCI.
37. For the welfare of the tribals “Van Bandhu Kalyan Yojana” is being launched with an initial allocation of Rs. 100 crore.
Welfare of Senior Citizens
Varishtha Pension Bima Yojana
38. NDA Government during its last term in office had introduced the Varishtha Pension Bima Yojana (VPBY) as a pension scheme for senior citizens. Under the scheme a total no. of 3.16 lakh annuitants are being benefitted and the corpus amounts to Rs. 6,095 crore. I propose to revive the scheme for a limited period from 15 August 2014 to 14 August 2015 for the benefit of citizens aged 60 years and above.
39. A large amount of money is estimated to be lying as unclaimed amounts with PPF, Post Office, saving schemes etc. These are mostly out of investments belonging to the senior citizens and on their demise, remain unclaimed for want of relevant payment instructions. I propose to set up a committee to examine and recommend how this amount can be used to protect and further financial interests of the senior citizens. The committee will give its report not later than December this year.
40. Government is fully committed to the social security and welfare of employees serving in the organized sector. The Government is notifying minimum pension of Rs. 1,000 per month to all subscriber members of EP Scheme and has made an initial provision of Rs. 250 crore in the current financial year to meet the expenditure. Further, increase in mandatory wage ceiling of subscription to EPS from Rs. 6,500 to Rs. 15,000 has been made and a provision of Rs. 250 crore has been provided in the current budget. For the convenience of the subscribers, EPFO will launch the “Uniform Account Number” Service for contributing members to facilitate portability of Provident Fund accounts.
Empowerment of the Differently Abled Persons
41. Government will make all out efforts to create a more inclusive society for Persons with Disabilities to enable them to enjoy equal opportunities to lead an empowered life with dignity. I propose to extend the scheme for Assistance to Disabled Persons for purchase/fitting of Aids and Appliances (ADIP) to include contemporary aids and assistive devices. It is also proposed to establish National level institutes for Universal Inclusive Design and Mental Health Rehabilitation and also a Centre for Disability Sports.
Incentives for the Visually Challenged
42. The Braille Presses in the Government and private sector are not able to meet the demand of Braille Text books for the visually impaired students. It is proposed to provide assistance to the State Governments to establish fifteen new Braille Presses and modernize ten existing Braille Presses in the current financial year. Government will also print currency notes with Braille like signs to assist the visibly challenged persons.
Women & Child Development
43. Women’s safety is a concern shared by all the honourable members of this House. We need to test out different approaches that can be validated and scaled up quickly. An outlay of Rs. 50 crores will be spent by Ministry of Road Transport & Highways on pilot testing a scheme on “Safety for Women on Public Road Transport”. A sum of Rs. 150 crores will also be spent by Ministry of Home Affairs on a scheme to increase the safety of women in large cities. It is also proposed to set up “Crisis Management Centres” in all the districts of NCT of Delhi this year in all government and private hospitals. The funding will be provided from the Nirbhaya Fund.
Beti Bachao, Beti Padhao Yojana
44. It is a shame that while the country has emerged as a major player amongst the emerging market economies, the apathy towards girl child is still quite rampant in many parts of the country. Therefore, I propose to launch Beti Bachao, Beti Padhao Yojana, which will be a focused scheme which would help in generating awareness and also help in improving the efficiency of delivery of welfare services meant for women. I propose to set aside a sum of Rs. 100 crore for this.
Gender Mainstreaming
45. Government would focus on campaigns to sensitize people of this country towards the concerns of the girl child and women. The process of sensitization must begin early; therefore, the school curriculum must have a separate chapter on gender mainstreaming.
Rural Development
Pradhan Mantri Gram Sadak Yojana
46. Pradhan Mantri Gram Sadak Yojana initiated during the NDA-I under the stewardship of Prime Minister Atal Behari Vajpayee has had a massive impact in improvement of access for Rural population. It is time to reaffirm our commitment to a better and more energetic PMGSY under the dynamic leadership of Prime Minister Shri Narendra Modi. I propose to provide a sum of Rs. 14,389 crore.
MGNREGA
47. The Government is committed to providing wage and self-employment opportunities in rural areas. However, wage employment would be provided under MGNREGA through works that are more productive, asset creating and substantially linked to agriculture and allied activities.
National Livelihood Mission
48. Ajeevika, the National Rural Livelihood Mission (NRLM), aims to eliminate rural poverty through sustainable livelihood options. Under this mission, Women SHGs are provided bank loans at 4% on prompt repayment in 150 districts and at 7% in all other districts. I propose to extend the provision of bank loan for women SHGs at 4% in another 100 districts. I also propose to set up a “Start Up Village Entrepreneurship Programme” for encouraging rural youth to take up local entrepreneurship programs. I am providing an initial sum of Rs. 100 crore for this.
Rural Housing
49. The Rural Housing Scheme has benefited a large percentage of rural population who have availed credit through Rural Housing Fund (RHF). Accordingly, I propose to increase the allocations for the year 2014-15 to Rs. 8,000 crore for National Housing Bank (NHB) with a view to expand and continue to support Rural Housing in the country.
Watershed Development
50. To give an added impetus to watershed development in the country, I propose to start a new programme called “Neeranchal” with an initial outlay of Rs. 2,142 crores in the current financial year.
Panchayati Raj
51. Backward Region Grant Fund (BRGF) is being implemented in 272 backward districts in 27 States, to fill up the critical gaps in development of basic infrastructure facilities and for capacity building of Panchayats/ Gram Sabhas in backward areas. It is proposed to restructure the BRGF to address intra-district inequalities to ensure that backward sub-districts units within States receive adequate support.
Safe Drinking Water
52. Many of our drinking water sources have excess impurities like flouride, arsenic and manmade contaminations due to untreated sewage, industrial effluents and leaching of pesticides and fertilizers. It is proposed to earmark Rs. 3,600 crore under National Rural Drinking Water Programme for providing safe drinking water in approximately 20,000 habitations affected with arsenic, fluoride, heavy/ toxic elements, pesticides/ fertilizers through community water purification plants in next 3 years.
Health and Family Welfare
53. To move towards “Health for All”, the two key initiatives i.e. the Free Drug Service and Free Diagnosis Service would be taken up on priority.
54. In order to achieve universal access to early quality diagnosis and treatment to TB patients, two National Institutes of Ageing will be set up at AIIMS, New Delhi and Madras Medical College, Chennai. A national level research and referral Institute for higher dental studies would be set up in one of the existing Dental institutions.
55. It is a matter of great satisfaction that all the six new AIIMS at Jodhpur, Bhopal, Patna, Rishikesh, Bhubaneswar and Raipur, which are part of Pradhan Mantri Swasthya Suraksha Yojana, have become functional. A plan to set up four more AIIMS like institutions at Andhra Pradesh, West Bengal, Vidarbha in Maharashtra and Poorvanchal in UP is under consideration. I propose to set aside a sum of Rs. 500 crore for this. Presently 58 government medical colleges have been approved. It is also proposed to add 12 more government medical colleges. In addition, dental facilities would also be provided in all the hospitals.
56. For the first time, the Central Government will provide central assistance to strengthen the States’ Drug Regulatory and Food Regulatory Systems by creating new drug testing laboratories and strengthening the 31 existing State laboratories.
57. In keeping with the Government’s focus on improving affordable healthcare and to augment the transfer of technology for better health care facilities in rural India, fifteen Model Rural Health Research shall be set up in the states, which shall take up research on local health issues concerning rural population.
Education
School Education
58. Elementary education is one of the major priorities of the Government. There is a residual gap in providing minimal school infrastructure facilities. Government would strive to provide toilets and drinking water in all the girls’ school in first phase. An amount of Rs. 28,635 crore is being funded for Sarva Shiksha Abhiyan and Rs. 4,966 crore for Rashtriya Madhyamik Shiksha Abhiyan. A School Assessment Programme is being initiated at a cost of Rs. 30 crore. To infuse new training tools and motivate teachers, “Pandit Madan Mohan Malviya New Teachers Training Programme” is being launched. I am setting aside an initial sum of Rs. 500 crore for this.
59. To take advantage of the reach of the IT, I propose to allocate a sum of Rs. 100 crore for setting up virtual classrooms as Communication Linked Interface for Cultivating Knowledge (CLICK) and online courses.
Higher Education
60. The country needs a large number of Centres of higher learning, which are world class. I propose to set up Jai Prakash Narayan National Centre for Excellence in Humanities in Madhya Pradesh. I also intend to set up five more IITs in the Jammu, Chattisgarh, Goa, Andhra Pradesh and Kerala. Five IIMs would be set up in the States of Himachal Pradesh, Punjab, Bihar, Odisha and Maharashtra. I propose to set aside a sum of Rs. 500 crore for this.
61. Government also proposes to ease and simplify norms to facilitate education loans for higher studies.
Digital India
62. There is an imminent need to further bridge the divide between digital “haves” and “have-nots”. For this it is proposed to launch a pan India programme “Digital India”. This would ensure Broadband connectivity at village level, improved access to services through IT enabled platforms, greater transparency in Government processes and increased indigenous production of IT hardware and software for exports and improved domestic availability. Special focus would be on supporting software product startups. A National Rural Internet and Technology Mission for services in villages and schools, training in IT skills and E-Kranti for government service delivery and governance scheme is also proposed. I have provided a sum of Rs. 500 crore for this purpose.
63. A programme for promoting “Good Governance” would be launched and I propose to set aside a sum of Rs. 100 crore for this.
Information and Broadcasting
64. So far, around 400 permissions for setting up of a Community Radio Stations have been issued. To encourage the growth in this sector, a new plan scheme is being taken up with an allocation of Rs. 100 crore. This scheme would support about 600 new and existing Community Radio Stations.
65. Film & Television Institute, Pune and Satyajit Ray Film & Television Institute, Kolkata are proposed to be accorded status of Institutes of national importance and a “National Centre for Excellence in Animation, Gaming and Special Effects will be set up.
Urban Development
Urban Renewal
66. It is time that our cities and towns undergo urban renewal and become better places to live in. While developing housing and other infrastructure, both physical and economic, which can have local variations, four fundamental activities must underpin such development. These are provision of safe drinking water and sewerage management, use of recycled water for growing organic fruits and vegetable, solid waste management and digital connectivity. It is the vision of this Government that at least five hundred (500) such habitations must be provided support, while harnessing private capital and expertise through PPPs, to renew their infrastructure and services in the next ten years.
Pooled Municipal Debt Obligation Facility
67. Pooled Municipal Debt Obligation Facility: This facility was set up in 2006 with participation of several Banks to promote and finance infrastructure projects in Urban Area on shared risk basis. Present corpus of this facility is Rs. 5,000 Crores. This Government has a major focus of providing good infrastructure, including public transport, solid waste disposal, sewerage treatment and drinking water in the urban areas. In keeping with the Hon’ble Prime Minister’s vision for urban areas, it is proposed to enlarge it to Rs. 50,000 Crores with extension of the facility by five years to March 31, 2019.
Urban Transportation
68. Urban Metro Projects have proven to be very useful in decongesting large cities. For two million plus cities, planning of metro projects must begin now. Government will encourage development of metro rail systems, including light rail systems, in the PPP mode, which will be supported by the Central Government through VGF. In the current financial year, I propose to set aside a sum of Rs. 100 crore for Metro Projects in Lucknow and Ahemdabad.
Housing for All
69. Our government is committed to endeavour to have housing for all by 2022. For this purpose, I intend to extend additional tax incentive on home loans to encourage people, especially the young, to own houses.
70. I propose setting up a Mission on Low Cost Affordable Housing, which will be anchored in the National Housing Bank. Schemes will be evolved to incentivize the development of low cost affordable housing. I propose to allocate this year also a sum of Rs. 4,000 crores for NHB with a view to increase the flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment. I have already outlined some other incentives such as easier flow of FDI in this sector. Government is willing to examine other suggestions that would spur growth in this sector.
71. I also propose to add inclusion of slum development in the list of Corporate Social Responsibility (CSR) activities to encourage the private sector to contribute more towards this activity.
Malnutrition
72. A national programme in Mission Mode is urgently required to halt the deteriorating malnutrition situation in India, as present interventions are not adequate. A comprehensive strategy including detailed methodology, costing, time lines and monitorable targets will be put in place within six months.
Minorities
73. A programme for the up gradation of skills and training in ancestral arts for development for the minorities called “Up gradation of Traditional Skills in Arts, Resources and Goods” would be launched to preserve the traditional arts and crafts, which are rich heritage.
74. An additional amount of Rs. 100 crores for Modernization of Madarsas has been provided to the Department of School Education.
III. Agriculture
75. Farming as an activity contributes nearly 1/6th to our National GDP and a major portion of our population is dependent on it for livelihood. It has risen to the challenge of making India largely self-sufficient in providing food for a growing population. To make farming competitive and profitable, there is an urgent need to step up investment, both public and private, in agro-technology development and creation and modernization of existing agri-business infrastructure. Indian Agricultural Research Institute, Pusa has been at the forefront of research in this area. However, since independence only one such centre has been established. Government will establish two more such institutions of excellence on similar pattern in Assam and Jharkhand with an initial sum of Rs. 100 crore in the current financial year. In addition, an amount of Rs. 100 crores is being set aside for setting up an “Agri-Tech Infrastructure Fund”.
76. It is also proposed to establish Agriculture Universities in Andhra Pradesh and Rajasthan and Horticulture Universities in Telangana and Haryana. An initial sum of Rs. 200 crores has been allocated for this purpose.
77. Deteriorating soil health has been a cause of concern and leads to sub optimal utilization of farming resources. Government will initiate a scheme to provide to every farmer a soil health card in a Mission mode. I propose to set aside a sum of Rs. 100 crore for this purpose and an additional Rs. 56 crores to set up 100 Mobile Soil Testing Laboratories across the country. There have also been growing concerns about the imbalance in the utilization of different types of fertilizers resulting in deterioration of the soil.
78. Climate change is a reality which all of us have to face together. Agriculture as an activity is most prone to the vagaries of climate change. To meet this challenge, I propose to establish a “National Adaptation Fund” for climate change. As an initial sum an amount of Rs. 100 crore will be transferred to the Fund.
79. We are committed to sustaining a growth of 4% in Agriculture and for this, we will bring technology driven second green revolution with focus on higher productivity and include “Protein revolution” as an area of major focus.
80. As a very large number of landless farmers are unable to provide land title as guarantee, institutional finance is denied to them and they become vulnerable to moneylenders’ usurious lending. I propose to provide finance to 5 lakh joint farming groups of “Bhoomi Heen Kisan” through NABARD in the current financial year.
81. Price volatility in the agriculture produce creates uncertainties and hardship for the farmers. To mitigate this I am providing a sum of Rs. 500 crore for establishing a Price Stabilization Fund.
82. The farmers and consumers’ interest will be further served by increasing competition and integrating markets across the country. To accelerate setting up of a National Market, the Central Government will work closely with the State Governments to re-orient their respective APMC Acts., to provide for establishment of private market yards/ private markets. The state governments will also be encouraged to develop Farmers’ Markets in town areas to enable the farmers to sell their produce directly.
83. I also propose to set aside a sum of Rs. 50 crores for the development of indigenous cattle breeds and an equal amount for starting a blue revolution in inland fisheries.
Agriculture Credit
84. Banks are providing strong credit support to the agriculture sector. A target of Rs. 8 lakh crore has been set for agriculture credit during 2014-15 which, I am confident, the banks will surpass this.
Interest Subvention Scheme for Short Term Crop Loans
85. Under the Interest Subvention Scheme for short-term crop loans, the banks are extending loans to farmers at a concessional rate of 7%. The farmers get a further incentive of 3% for timely repayment. I propose to continue the Scheme in 2014-15.
Rural Infrastructure Development Fund
86. NABARD operates the Rural Infrastructure Development Fund (RIDF), out of the priority sector-lending shortfall of the banks, which helps in creation of infrastructure in agriculture and rural sectors across the country. I propose to raise the corpus of RIDF by an additional Rs. 5,000 crores from the target given in the Interim Budget to Rs. 25,000 crores in the current financial year.
Warehouse Infrastructure Fund
87. Increasing warehousing capacity for increasing the shelf life of agriculture produces and thereby the earning capacity of the farmers is of utmost importance. Keeping in view the urgent need for availability of scientific warehousing infrastructure in the country, I propose an allocation of Rs. 5,000 crore for the fund for the year 2014-15.
Creation of Long Term Rural Credit Fund
88. The share of long-term investment credit in agriculture is going down as compared to short-term crop loan. This is severely hampering the asset creation in agriculture and allied activities. In order to give a boost to long-term investment credit in agriculture, I propose to set up “Long Term Rural Credit Fund” in NABARD for the purpose of providing refinance support to Cooperative Banks and Regional Rural Banks with an initial corpus of Rs. 5,000 crore.
Allocation of STCRC (Refinance) Fund
89. The Short Term Cooperative Rural Credit (STCRC) – Refinance Fund was announced in Union Budget 2008-09 with initial corpus of Rs. 5,000 crore. In order to ensure increased and uninterrupted credit flow to farmers and to avoid high cost market borrowings by NABARD, I propose to allocate an amount of Rs. 50,000 crore for STCRC Fund during 2014-15.
Producers Development and Upliftment Corpus (PRODUCE)
90. The issue of profitability of small holding based agriculture has assumed importance in view of increasing proportion of small and marginal farmers in the country. I propose to supplement NABARD’s Producers’ organization development fund for Producer’s development and upliftment called PRODUCE with a sum of Rs. 200 crore which will be utilized for building 2,000 producers organizations across the country over the next two years.
Food Security
91. Government is committed to reforms in the food sector. Restructuring FCI, reducing transportation and distribution losses and efficacy of PDS would be taken up on priority.
92. Government is also committed to provide wheat and rice at reasonable prices to the weaker sections of the society. Even if due to inadequate rainfall there is a marginal decline in agriculture production, stocks in the Central pool are adequate to meet any exigency. Government shall, when required, undertake open market sales to keep prices under control.
Kisan TV
93. Kisan TV, dedicated to the interests of the agriculture and allied sector will be launched in the current financial year. This will disseminate real time information to the farmers regarding new farming techniques, water conservation, organic farming, etc. I propose to set aside a sum of Rs. 100 crore for this purpose.
IV. Industry
94. The eBiz platform aims to create a business and investor friendly ecosystem in India by making all business and investment related clearances and compliances available on a 24×7 single portal, with an integrated payment gateway. All Central Government Departments and Ministries will integrate their services with the eBiz platform on priority by 31 December this year.
95. A National Industrial Corridor Authority, with its headquarters in Pune, is being set up to coordinate the development of the industrial corridors, with smart cities linked to transport connectivity, which will be the cornerstone of the strategy to drive India’s growth in manufacturing and urbanization. I have provided an initial corpus of Rs. 100 crore for this purpose.
96. The Amritsar Kolkata Industrial master planning will be completed expeditiously for the establishment of industrial smart cities in seven States of India. The master planning of three new smart cities in the Chennai-Bengaluru Industrial Corridor region, viz., Ponneri in Tamil Nadu, Krishnapatnam in Andhra Pradesh and Tumkur in Karnataka will also be completed.
97. The perspective plan for the Bengaluru Mumbai Economic corridor (BMEC) and Vizag-Chennai corridor would be completed with the provision for 20 new industrial clusters.
98. Kakinada, its adjoining area and the port will be developed as the key drivers of economic growth in the region with a special focus on hardware manufacturing.
99. Exports cannot be exponentially increased unless the states play a very active role in export promotion by providing good infrastructure and full facilitation. It will be our endeavor to engage with the states to take India’s exports to a higher growth trajectory. It is proposed to establish an Export promotion Mission to bring all stakeholders under one umbrella.
Special Economic Zones
100. The Government is committed to revive the Special Economic Zones (SEZs) and make them effective instruments of industrial production, economic growth, export promotion and employment generation. For achieving this, effective steps would be undertaken to operationalize the Special Economic Zones, to revive the investors’ interest to develop better infrastructure and to effectively and efficiently use the available unutilized land.
Apprenticeship
101. Comparing the size of the Indian economy, the performance of the Apprenticeship Training Scheme is not satisfactory and a large number of training facilities in the industry are unutilized. Apprenticeship Act will be suitably amended to make it more responsive to industry and youth. We will also encourage MSMEs to avail of the benefits of this scheme.
Micro, Small and Medium Enterprises Sector
102. SMEs form the backbone of our Economy. They account for a large portion of our industrial output and employment. The bulk of service sector enterprises are also SMEs. Most of these SMEs are Own Account Enterprises. Most importantly a majority of these enterprises are owned or run by SCs, STs and OBCs. Financing to this sector is of critical importance, particularly as it benefits the weakest sections. There is need to examine the financial architecture for this sector. I propose to appoint a committee with representatives from the Finance Ministry, Ministry of MSME, RBI to give concrete suggestions in three months.
103. Promotion of entrepreneurship and start-up Companies remains a challenge. While there have been some efforts to encourage, one principal limitation has been availability of start-up capital by way of equity to be brought in by the promoters. In order to create a conducive eco-system for the venture capital in the MSME sector it is proposed to establish a Rs. 10,000 crore 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.
104. To establish technology centre network to promote innovation, entrepreneurship and agro-industry, I propose to set up a fund with a corpus of Rs. 200 crore.
105. The definition of MSME will be reviewed to provide for a higher capital ceiling. A programme to facilitate forward and backward linkages with multiple value chain of manufacturing and service delivery will also be put in place.
106. Entrepreneur friendly legal bankruptcy framework will also be developed for SMEs to enable easy exit. A nationwide “District level Incubation and Accelerator Programme” would be taken up for incubation of new ideas and providing necessary support for accelerating entrepreneurship.
Textiles
107. I propose to set up a Trade Facilitation Centre and a Crafts Museum with an outlay of Rs. 50 crore to develop and promote handloom products and carry forward the rich tradition of handlooms of Varanasi, where I also intend to support a Textile mega-cluster. I also propose to set up six more Textile mega-clusters at Bareily, Lucknow, Surat, Kuttch, Bhagalpur, Mysore and one in Tamil Nadu. I am allocating a sum of Rs. 200 crore for this purpose.
108. I also propose to set up a Hastkala Academy for the preservation, revival, and documentation of the handloom/handicraft sector in PPP mode in Delhi. I have set aside a sum of Rs. 30 crore for this purpose.
109. I propose to start a Pashmina Promotion Programme (P-3) and a programme for the development of other crafts of Jammu & Kashmir. I am setting aside a sum of Rs. 50 crore for this purpose.
V. Infrastructure
110. India has emerged as the largest PPP market in the world with over 900 projects in various stages of development. PPPs have delivered some of the iconic infrastructure like airports, ports and highways which are seen as models for development globally. But we have also seen the weaknesses of the PPP framework, the rigidities in contractual arrangements, the need to develop more nuanced and sophisticated models of contracting and develop quick dispute redressal mechanism. An institution to provide support to mainstreaming PPPs called 3P India will be set up with a corpus of Rs. 500 crores.
Shipping
111. A policy for encouraging the growth of Indian controlled tonnage will be formulated to ensure increase in employment of the Indian seafarers. Development of ports is also critical for boosting trade. Sixteen new port projects are proposed to be awarded this year with a focus on port connectivity. Rs. 11,635 crore will be allocated for the development of Outer Harbour Project in Tuticorin for phase I. SEZs will also be developed in Kandla and JNPT. A comprehensive policy will also be announced to promote Indian ship building industry in the current financial year.
Inland Navigation
112. Development of inland waterways can improve vastly the capacity for the transportation of goods. A project on the river Ganga called ‘Jal Marg Vikas’ (National Waterways-I) will be developed between Allahabad and Haldia to cover a distance of 1620 kms, which will enable commercial navigation of at least 1500 tonne vessels. The project will be completed over a period of six years at an estimated cost of Rs. 4,200 crore.
New Airports
113. Despite increase in air connectivity air travel is still out of reach of a large number of aspirational Indians. Scheme for development of new airports in Tier I and Tier II will be launched for implementation through Airport Authority of India or PPPs.
Roads Sector
114. Roads sector constitutes a very import artery of communication in the country. The sector had taken shape from 1998-2004 under NDA-I. The sector again needs huge amount of investment along with debottlenecking from maze of clearances. I propose investment in National Highways Authority of India and State Roads of an amount of Rs. 37,880 crores, which includes Rs. 3,000 crores for the North East. During CFY a target of NH construction of 8500 km will be achieved.
115. A modern nation needs multiple sources of transport. A country of the size of India must have a transport network, which can ensure faster travel across cities, which are geographically distant. This will also improve the supply chain in transporting goods across cities. We will initiate work on select expressways in parallel to the development of the Industrial Corridors. For project preparation NHAI shall set aside a sum of Rs. 500 crore.
Power
116. To promote cleaner and more efficient thermal power, I propose to allocate an initial sum of Rs. 100 crore for preparatory work for a new scheme “Ultra-Modern Super Critical Coal Based Thermal Power Technology.”
Coal
117. Comprehensive measures for enhancing domestic coal production are being put in place along with stringent mechanism for quality control and environmental protection, which includes supply of crushed coal and setting up of washeries. The existing impasse in the coal sector will be resolved and adequate quantity of coal will be provided to power plants, which are already commissioned or would be commissioned by March 2015, to unlock dead investments. An exercise to rationalize coal linkages, which will optimize transport of coal and reduce cost of power is underway.
New & Renewable Energy
118. New and Renewable energy deserves a very high priority. It is proposed to take up Ultra Mega Solar Power Projects in Rajasthan, Gujarat, Tamil Nadu, and Laddakh in J&K. I have set aside a sum of Rs. 500 crores for this. We are launching a scheme for solar power driven agricultural pump sets and water pumping stations for energizing one-lakh pumps. I propose to allocate a sum of Rs. 400 crores for this purpose. An additional Rs. 100 crore is set aside for the development of 1 MW Solar Parks on the banks of canals. Implementation of the Green Energy Corridor Project will be accelerated in this financial year to facilitate evacuation of renewable energy across the country.
Petroleum & Natural Gas
119. It is my Government’s intention to accelerate production and exploitation of Coal Bed Methane reserves. The possibility of using modern technology to revive old or closed wells will also be explored to maximize production from such fields.
120. The usage of PNG will be rapidly scaled up in a Mission mode as it is “clean” and efficient to deliver.
121. We have at present about 15,000 km of gas pipeline systems in the country. In order to complete the gas grid across the country, an additional 15,000 km of pipelines are required. It is proposed to develop these pipelines using appropriate PPP models. This will help increase the usage of gas, domestic as well as imported, which, in the long-term will be beneficial in reducing dependence on any one energy sources.
Mining
122. It is my Government’s intention to encourage investment in mining sector and promote sustainable mining practices to adequately meet the requirements of industry without sacrificing environmental concerns. The current impasse in mining sector, including, iron ore mining, will be resolved expeditiously. Changes, if necessary, in the MMDR Act, 1957 would be introduced to facilitate this.
Revision of Royalty Rate
123. There have been requests from several State Governments to revise rate of Royalty on minerals. Hon’ble Members are aware that rate of Royalty can be revised after a period of three years. Last revision took place in August 2009. Therefore, another revision, which is due, will be undertaken to ensure greater revenue to the State Governments.
VI. Financial Sector
Capital Market
124. Financial sector is at the heart of the growth engine. Globalization helps channelize external savings to India to bridge the resource gap but also renders the financial sector vulnerable to the vagaries of the global economy. We have seen this in the recent past in ample measure. It is essential to strengthen and modernize the legislative regulatory framework. There are some important recommendations of the Financial Sector Legislative Reforms Commission like the enactment of the Indian Financial Code, which is considered necessary for better governance and accountability. It will be my endeavor to complete the ongoing process of consultations with all the stakeholders expeditiously on this. It is also essential to have a modern monetary policy framework to meet the challenge of an increasingly complex economy. Government will, in close consultation with the RBI, put in place such a framework.
125. While the impact of the above measures will be felt in the medium term, towards the same objective, I propose to:
i. Advise financial sector regulators to take early steps for a vibrant, deep and liquid corporate bond market and deepen the currency derivatives market by eliminating unnecessary restrictions.
ii. Extend a liberalized facility of 5% withholding tax to all bonds issued by Indian corporate abroad for all sectors and extend the validity of the scheme to 30.06.2017.
iii. Liberalize the ADR/GDR regime to allow issuance of depository receipts on all permissible securities.
iv. Allow international settlement of Indian debt securities.
v. Completely revamp the Indian Depository Receipt (IDR) and introduce a much more liberal and ambitious Bharat Depository Receipt (BhDR).
vi. Clarify the tax treatment on income of foreign fund whose fund managers are located in India to resolve a long-standing problem. Details will be presented in Part B.
126. The Indian capital markets have been a source of risk capital for a growing India. I propose to take a number of measures to further energize these markets including:
i. Introduction of uniform KYC norms and inter-usability of the KYC records across the entire financial sector.
ii. Introduce one single operating demat account so that Indian financial sector consumers can access and transact all financial assets through this one account.
127. As part of strengthening the regulatory framework for commodity markets, the Warehouse Development and Regulatory Authority (WD&RA) has begun a transformation plan to invigorate the warehousing sector and significantly improve post-harvest lending to farmers against negotiable warehouse receipts. This plan will be implemented with vigor.
128. There is an urgent need to converge the current Indian accounting standards with the International Financial Reporting Standards (IFRS). I propose for adoption of the new Indian Accounting Standards (Ind AS) by the Indian companies from the financial year 2015-16 voluntarily and from the financial year 2016-17 on a mandatory basis. Based on the international consensus, the regulators will separately notify the date of implementation of AS Ind for the Banks, Insurance companies etc. Standards for the computation of tax would be notified separately.
Banking
129. There have been some suggestions for consolidation of Public Sector Banks. Government, in principle, agrees to consider these suggestions.
130. To provide all households in the country with banking services, a time bound programme would be launched as Financial Inclusion Mission on 15 August this year. It would particularly focus to empower the weaker sections of the society, including women, small and marginal farmers and labourers. Two bank accounts in each household are proposed to be opened which will also be eligible for credit.
131. Long term financing for infrastructure has been a major constraint in encouraging larger private sector participation in this sector. On the asset side, banks will be encouraged to extend long term loans to infrastructure sector with flexible structuring to absorb potential adverse contingencies, sometimes known as the 5/25 structure. On the liability side, banks will be permitted to raise long-term funds for lending to infrastructure sector with minimum regulatory pre-emption such as CRR, SLR and Priority Sector Lending (PSL).
132. After making suitable changes to current framework, a structure will be put in place for continuous authorization of universal banks in the private sector in the current financial year. RBI will create a framework for licensing small banks and other differentiated banks. Differentiated banks serving niche interests, local area banks, payment banks etc. are contemplated to meet credit and remittance needs of small businesses, unorganized sector, low-income households, farmers and migrant work force.
133. The rising Non Performing Assets of Public Sector Banks is a matter of concern for the Government. Six new Debt Recovery Tribunals would be set up at Chandigarh, Bengaluru, Ernakulum, Dehradun, Siliguri and Hyderabad. Government will work out effective means for revival of other stressed assets.
Insurance Sector
134. Benefits of insurance in India have not reached a large section of the people and insurance penetration and density are very low. The Government would work towards addressing this situation in multi-pronged manner with the support of all stakeholders concerned. This would include suitable incentives, using banking correspondents, strengthening micro-offices opened by public sector insurance. It is also proposed to take up the pending insurance laws (amendment) Bill for consideration of the Parliament.
135. As part of the legislative initiatives under financial sector reforms, it is proposed to bridge the regulatory gap under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978. This step is expected to facilitate effective regulation of companies and entities, which have duped a large number of poor and vulnerable people in this country.
Small Savings
136. To address the concerns of decline in savings rate and improving returns for small savers, I propose to revitalize small savings.
137. My Government attaches utmost importance to the welfare of Girl Child. A special small savings instrument to cater to the requirements of educating and marriage of the Girl Child will be introduced. A National Savings Certificate with insurance cover will also be launched to provide additional benefits for the small saver.
138. In the PPF Scheme, annual ceiling will be enhanced to Rs. 1.5 lakh p.a. from Rs. 1 lakh at present.
VII. Defence & Internal Security
139. There can be no compromise with the defence of our country. I therefore propose to allocate an amount of Rs. 2,29,000 crore for the current financial year for Defence.
One Rank One Pension
140. We reaffirm our commitment to our brave soldiers. A policy of “One Rank One Pension” has been adopted by the Government to address the pension disparities. We propose to set aside a further sum of Rs. 1,000 crore to meet this year’s requirement.
Modernization
141. Modernization of the armed forces is critical to enable them to play their role effectively in the Defence of India’s strategic interests. I, therefore, propose to increase the capital outlay for Defence by Rs. 5,000 crore over the amount provided for in the interim Budget. This includes a sum of Rs. 1,000 crore for accelerating the development of the Railway system in the border areas. Urgent steps would also be taken to streamline the procurement process to make it speedy and more efficient.
War Memorial
142. The country is deeply indebted to the officers and the jawans of the armed forces for having made huge sacrifices to defend its honour. In doing so, a very large number of them gave up their lives. It is a privilege for the nation to erect a befitting memorial in their memory. I am happy to announce that a War Memorial will be constructed in the Princes Park. It will be supplemented by a War Museum. I am allocating a sum of Rs. 100 crore for this purpose.
The Defence Production
143. In the year 2011, a separate fund was announced to provide necessary resources to public and private sector companies, including SMEs, as well as academic and scientific institutions to support research and development of Defence systems that enhance cutting-edge technology capability in the country. However, beyond the announcement, no action was taken. Therefore, I propose to set aside an initial sum of Rs. 100 crore to set up a Technology Development Fund to support this objective.
Internal Security
144. The scheme for modernization of state police forces would be reviewed. I propose to enhance the allocation from a sum of Rs. 1,847 crore in the BE of 2013-14 to Rs. 3,000 crore in the current financial year. I am also allocating adequate funds for carrying out small but much needed developmental activities as Additional Central Assistance for Left Wing Extremist Affected districts.
145. In order to strengthen and modernize border infrastructure, a sum of Rs. 2,250 crore has been set aside. In addition, a sum of Rs. 990 crore has been allocated for the socio economic development of the villages along the borders. A sum of Rs. 150 crore has also been earmarked for the construction of Marine Police Station, Jetties, for the purchase of boats etc.
National Police Memorial
146. The nation is equally indebted to the officers and the jawans of the Police forces, including the central armed police forces, who are constantly engaging with the enemy within and in the process sacrificing their lives in the line of duty. I announce the construction of a befitting National Police Memorial. I propose to set aside a sum of Rs. 50 crores for this purpose in the current financial year.
VIII. Culture & Tourism
147. India’s rich cultural, historical, religious and natural heritage provides a huge potential for the development of tourism and job creation as an Industry. I propose to create 5 tourist circuits around specific themes and set aside a sum of Rs. 500 crore for this purpose.
148. National Mission on Pilgrimage Rejuvenation and Spiritual Augmentation Drive (PRASAD) shall be launched in this financial year. A sum of Rs. 100 crore is being set aside for this purpose.
149. National Heritage City Development and Augmentation Yojana (HRIDAY) will also be launched for conserving and preserving the heritage characters of these cities. To begin with, I propose to launch this programme in the cities such as Mathura, Amritsar, Gaya, Kanchipuram, Vellankani and Ajmer. I propose to set aside a sum of Rs. 200 crore for this purpose. The Project will work through a partnership of Government, academic institutions and local community combining affordable technologies.
150. Archeological sites preservation requires urgent attention lest our ancient heritage is lost to all future generations. For this purpose, I intend to set aside a sum of Rs. 100 crore.
151. Sarnath-Gaya-Varanasi Buddhist circuit would also be developed with world-class tourist amenities to attract tourists from all over the world.
152. Goa has emerged as a major international convention centre. It has also been declared as the permanent venue for International Film Festival of India. There is an urgent need to develop world-class convention facilities. This can best be done in close collaboration with the private sector. Government of India will fully support this initiative to develop the facilities in PPP mode through the VGF scheme.
Water Resources and cleaning of Ganga
Linking of Rivers
153. Rivers form the lifeline of our country. They provide water not only for producing food for the multitudes but also drinking water. Unfortunately, the country is not uniformly blessed with perennial rivers. Therefore, an effort to link the rivers can give rich dividends to the country. It is time that we made a serious effort to move in this direction. To expedite the preparation of the Detailed Project Reports, I propose to set aside a sum of Rs. 100 crore.
Sacred Rivers
154. Substantial amount of money has been spent in the conservation and improvement of the Ganga, which has a very special sacred place in the collective consciousness of this country. However, the efforts have not yielded desired results because of the lack of concerted effort by all the stakeholders. I propose to set up Integrated Ganga Conservation Mission called “Namami Gange” and set aside a sum of Rs. 2,037 crores for this purpose.
Development of Ghats and beautification of Riverfront
155. Our Riverfronts and Ghats are not only places of rich historical heritage but many of these are also sacred. To start this process in the country, I propose to set aside a sum of Rs. 100 crore for Ghat development and beautification of river-front at Kedarnath, Haridwar, Kanpur, Varanasi, Allahabad, Patna and Delhi in the current financial year.
NRI Ganga Fund
156. NRIs have been a very important contributor to the development process in India, in areas such as education, health and preservation of culture. In this context, to harness their enthusiasm to contribute towards the conservation of the river Ganga, NRI Fund for Ganga will be set up which will finance special projects.
Science and Technology
Technology Research Centres
157. The Department of Science & Technology has some of country’s leading research centres in the areas such as nanotechnology, materials science and bio-medical device technology. The government will strengthen at least five such institutions as Technical Research Centres to make them more effective in the innovation space through Public Private Partnerships.
Stimulating Investment in Biotechnology
158. The development of biotech clusters in Faridabad and Bengaluru will be scaled up and taken to the highest international quality. This effort will include global partnerships in accessing model- organism resources for disease biology, stem cell biology and for high-end electron microscopy.
159. The nascent agri-biotech cluster in Mohali will be scaled up to include plant-genetic and phenotype platforms. Secondary agriculture will be a major thrust in Mohali through collaborations in the public and private sector. In addition, two new clusters, in Pune and Kolkata will be established.
160. Global partnerships will be developed under India’s leadership to transform the Delhi component of the International Centre for Genetic Engineering and Biotechnology (ICGEB) into a world-leader in life sciences and biotechnology.
Indian Space Programme
161. Several major space missions are planned for 2014-15, which include the experimental flight of India’s future heavy capacity launcher GSLV Mk-III, one commercial launch of PSLV and two more navigational satellites.
162. Our Mars Orbiter spacecraft is in its 300 days long voyage to Planet Mars along the designated helio-centric trajectory. Mars Orbiter Spacecraft is expected to be orbiting around Mars on September 24, 2014.
Sports and Youth Affairs
Sports
163. Sports are an integral part of growing up and personality development. Unfortunately, in our country, sports have not been main-streamed to date. Government will set up national level Sports Academies for major games in different parts of the country to mainstream sports.Academies with international level facilities for training of accomplished athletes and for nurturing best talent in the country at junior and sub-junior level will also be set up for Shooting, Archery, Boxing, Wrestling, Weightlifting and various Track and field events.
164. Jammu & Kashmir has a lot of sporting talent, which is not finding expression due to inadequate sports facilities. I propose to provide a sum of Rs. 200 crore for upgrading the indoor and outdoor sports stadiums to international standards in Jammu and in Kashmir Valley.
165. I also propose to set up a sports university in Manipur. For this, I am providing a sum of Rs. 100 crore in the current financial year.
166. Unique sports traditions have developed in the Himalayan region in the countries and the states that are a part of it. To promote these, India will start an annual event to promote these games and would invite countries such as Nepal and Bhutan also to participate in addition to the Indian states such as J&K, Uttarakhand, Himachal Pradesh, Sikkim and the North Eastern States.
167. I also propose to set aside a sum of Rs. 100 crore for the training of our sports women and men for the forthcoming Asian and Commonwealth games.
Youth
168. Employment exchanges will be transformed into career centres and in addition for providing information about job availability. These centers will also extend counseling facilities to the youth for selecting the jobs best suited to their ability and aptitude. I have set aside a sum of Rs. 100 crore for this purpose.
169. Youth of India are pragmatic and forward looking and wish to be leaders in all fields. In order to promote leadership skills, I propose to set up “A Young Leaders Programme” with an initial allocation of Rs. 100 crore.
IX. Other Proposals
Displaced Kashmiri Migrants
170. Displaced Kashmiri migrants require our special support for rehabilitation. For this, I intend to provide a sum of Rs. 500 crore in the current financial year.
Conservation of Himalayas
171. There is a great need to increase the capacity in the country for Himalayan Studies. I propose to set up a National Centre for Himalayan Studies in Uttarakhand with an initial outlay of Rs. 100 crore.
Academy for Customs
172. It is proposed to set up the National Academy for Customs & Excise at Hindupur in Andhra Pradesh.
North Eastern States
Organic Food
173. North Eastern Region of India has tremendous potential for development of organic farming. With a growing global demand for organic food, people living in the NE states can reap rich harvest from development of commercial organic farming. To facilitate this, I propose to provide a sum of Rs. 100 crore for this purpose in the current financial year.
North East Railway Connectivity
174. North Eastern Region has suffered from under development and a sense of isolation due to lack of proper connectivity. Development of rail system is urgently required to bridge this gap. I intend to expedite the development of rail connectivity in the region and for this purpose I propose to set aside an additional sum of Rs. 1,000 crore over and above the amount provided for in the interim Budget.
24×7 Channel for the North East
175. TV is a very powerful tool for the expression of cultural identities and for creating greater awareness of the richness of the diversity of our country. To provide a strong platform to rich cultural and linguistic identity of the North-East, a new 24×7 channel called “Arun Prabha” will be launched.
Andhra Pradesh and Telangana
176. My Government is committed to addressing the issues relating to development of Andhra Pradesh and Telangana in the AP Re-organization Act, 2014. Provision has been made by various Ministries/Departments to fulfill the obligation of Union Government for both the States.
National Capital Territory of Delhi
177. NCT of Delhi faces large in-migration every year. Delhi is plagued by frequent transmission related problems and issues of water distribution and supply. In order to overcome this and make Delhi a world-class city, I propose to provide Rs. 200 crore for power reforms and Rs. 500 crore for water reforms.
178. In addition, to solve the long-term water supply issues to the capital region, construction of long pending Renuka Dam would be taken up on priority. I have provided an initial sum of Rs. 50 crore for this.
Andaman and Nicobar Island and Puducherry
179. Andaman and Nicobar Island are part of our rich cultural heritage. In order to tide over communication related problems of the Island, I propose to allot a sum of Rs. 150 crore.
180. Similarly, I propose to provide Rs. 188 crore to Puducherry for meeting commitments for Disaster preparedness.
X. Budget Estimates
181. I now turn to the Budget estimates for Main Budget 2014-15. We have inherited a legacy, wherein, continuance of fiscal consolidation cannot be compromised while providing for the essential items. However, we have mandate to fulfill for the people. Keeping this in mind, we have prepared the estimates of expenditure and receipts for Financial Year 2014-15.
182. Non-Plan expenditure estimates for the Financial Year are Rs. 12,19,892 crore. While preparing Non-Plan estimates due care has been taken to fully provide for all the essential activities. Additional amounts have been provided for fertilizer subsidy and capital expenditure of Armed Forces.
183. While preparing estimates of plan expenditure, attention was paid to the absorptive capacity of the Department and on achieving greater outcome with the same financial outlay. In 2013-14, plan funds to the tune of Rs. 4,53,085 crore could be utilised. Plan allocation of Rs. 5,75,000 crore in the Main Budget 2014-15 mark an increase of 26.9% over actuals for 2013-14 and have been targeted towards Agriculture, capacity creation in Health and Education, Rural Roads and National Highways Infrastructure, Railways network expansion, clean energy initiatives, development of water resources and river conservation plans. Further thorough convergence of programmes greater impact from the money spent will be achieved.
184. Total expenditure estimates thus stands at Rs. 17,94,892 crore.
185. To finance this expenditure, it is estimated that Gross Tax receipts will be Rs. 13,64,524 crore. After devolving the share of states, share of centre will be Rs. 9,77,258 crore. Non Tax Revenues for the current Financial Year will be Rs. 2,12,505 crore and capital receipts other than borrowings will be Rs. 73,952 crore.
186. With the above estimates, fiscal deficit will be 4.1% of GDP and Revenue deficit will be 2.9 per cent of GDP.
187. Hon’ble Members will recall that it was the initiative of the previous NDA Government under Shri Atal Bihari Vajpayee, which had made compulsory 10% allocation of plan funds for North Eastern Region and had made them Non-lapsable in nature. From the current Budget, we have introduced a Statement, which will separately show plan allocation made for North Eastern Region. In Financial Year 2014-15, an allocation of Rs. 53,706 crore has been made for North Eastern Region. We have further made an allocation of Rs. 98,030 crore for women and Rs. 81,075 crore for child welfare.
Budget Speech – PART B
XI. Tax Proposals
188. Madam Speaker, I shall now present my tax proposals.
189. Taxes are important for every economy to fund Government expenditure on security and welfare of its people. In the interim Budget 2014-15, my predecessor had set revenue collection targets for direct taxes as well as indirect taxes, which appear to be ambitious. I propose to retain these targets and it shall be my endeavour to achieve the same. The impact of the tax changes now proposed have of course been factored into the Budget Estimates, 2014-15.
190. While preparing the tax proposals, I had to encounter the challenge of an extremely limited fiscal space. Nonetheless, I propose to introduce measures to revive the economy, promote investment in manufacturing sector and rationalize tax provisions so as to reduce litigation as well as to address the problem of inverted duty structure in certain areas. I also propose to give relief to individual taxpayers and to certain sectors of the economy.
Direct Taxes
191. Let me begin with direct taxes.
192. Madam Speaker, I do not propose to make any change in the tax rate. However, with a view to provide relief to small and marginal taxpayers and senior citizens, I propose to increase personal income tax exemption limit by Rs. 50,000 that is, from Rs. 2 lakh to Rs. 2.5 lakh in the case of individual taxpayers who are below the age of 60 years. Similarly, I also propose to raise the exemption limit from Rs. 2.5 lakh to Rs. 3 lakh in the case of senior citizens.
193. I do not propose to make any change in the rate of surcharge either for the corporates or the individuals, HUFs, firms etc.
194. The education cess for all taxpayers shall continue at 3 percent.
195. In the year 2012-13, the gross domestic savings were 30.1% of the GDP as compared to 33.7% in the year 2009-10. Increase in savings and their productive use leads to higher economic growth. The households are the main contributors to savings. Therefore, to encourage domestic investment in long-term savings, I propose to increase the investment limit under section 80C of the Income-tax Act from Rs. 1 lakh to Rs. 1.5 lakh.
196. Housing continues to be an area of concern for middle and lower middle class due to high cost of financing. Therefore, to reduce this burden, I propose to increase the deduction limit on account of interest on loan in respect of self occupied house property from Rs. 1.5 lakh to Rs. 2 lakh.
197. Infrastructure and construction sectors have a significant role in the economy. Growth in these sectors is necessary to revive the economy and generate jobs for millions of our young boys and girls. As stated earlier and with a view to attract large-scale investment in these sectors, I have provided a conducive tax regime for Infrastructure Investment Trusts and Real Estate Investment Trusts to be set up in accordance with regulations of the Securities and Exchange Board of India.
198. The manufacturing sector is of paramount importance for the growth of our economy. This sector has multiplier effect on creation of jobs. Last year, an incentive in the form of investment allowance to a manufacturing company that invests more than Rs. 100 crore in plant and machinery during the period from 01.04.2013 to 31.03.2015 was announced. Considering the need to incentivize smaller entrepreneurs, I propose to provide investment allowance at the rate of 15 percent to a manufacturing company that invests more than Rs. 25 crore in any year in new plant and machinery. This benefit will be available for three years i.e. for investments up to 31.03.2017. The Scheme announced last year will continue to operate in parallel till 31.03.2015.
199. I also propose to extend the investment-linked deduction to two new sectors, namely, slurry pipelines for the transportation of iron ore, and semi-conductor wafer fabrication manufacturing units. This will boost investment in these two critical sectors.
200. Supply of power continues to be a major area of concern for the country. Therefore, instead of annual extensions, I propose to extend the 10-year tax holiday to the undertakings, which begin generation, distribution and transmission of power by 31.03.2017. This stability in our policy will help the investors to plan their investments better.
201. Foreign Portfolio Investors (FPIs) have invested more than Rs. 8 lakh crore (about 130 billion US $) in India. One of their concerns is uncertainty in taxation on account of characterization of their income. Moreover, the fund managers of these foreign investors remain outside India under the apprehension that their presence in India may have adverse tax consequences. With a view to put an end to this uncertainty and to encourage these fund managers to shift to India, I propose to provide that income arising to foreign portfolio investors from transaction in securities will be treated as capital gains.
202. The concessional rate of tax at 15 percent on dividends received by Indian companies from their foreign subsidiaries has resulted in enhanced repatriation of funds from abroad. I propose to continue with this concessional rate of 15 percent on foreign dividends without any sunset date. This will ensure stability of taxation policy.
203. In order to augment low cost long-term foreign borrowings for Indian companies, I propose to extend the eligible date of borrowing in foreign currency from 30.06.2016 to 30.06.2017 for a concessional tax rate of 5 percent on interest payments. I also propose to extend this tax incentive to all types of bonds instead of only infrastructure bonds. I hope this measure will enable the companies to step up their investments in India.
204. In order to reduce litigation on transfer pricing issues, I propose to make certain changes in Transfer Pricing regulations.
(1) An Advance Pricing Agreement (APA) scheme was introduced in the year 2012. It has received good response. I propose to strengthen the administrative set up of APA to expedite disposal of applications. Further, I propose to introduce a “Roll Back” provision in the APA scheme so that an APA entered into for future transactions may also be applied to international transactions undertaken in previous four years in specified circumstances.
(2) In order to align Transfer Pricing regulations in India with the best available practices, I propose to introduce range concept for determination of arm’s length price. However, the arithmetic mean concept will continue to apply where number of comparable is inadequate. The relevant data is under analysis and appropriate rules will be prescribed.
(3) As per existing provisions of Transfer Pricing Regulations, only one-year data is allowed to be used for comparable analysis with some exception. I propose to amend the regulations to allow use of multiple year data.
Necessary legislative amendments to give effect to the above proposals including those relating to the Authority for Advance Rulings and Income-tax Settlement Commission will be moved in the current session of the Parliament.
205. In the case of Mutual Funds, other than equity oriented funds, the capital gains arising on transfer of units held for more than a year is taxed at a concessional rate of 10% whereas direct investments in banks and other debt instruments attract a higher rate of tax. This allows tax arbitrage opportunity. This arbitrage has hardly benefitted retail investors, as their percentage is very small among such Mutual Fund investors. With a view to remove this tax arbitrage, I propose to increase the rate of tax on long-term capital gains from 10 percent to 20 percent on transfer of units of such funds. I also propose to increase the period of holding in respect of such units from 12 months to 36 months for this purpose.
206. In the year 2003, the tax liability on income by way of dividends was shifted from the shareholder to the company. The shareholder was required to pay tax on the gross dividends, but now the company pays tax on the dividend amount net of taxes. Similarly, in the case of Mutual Fund, income distribution tax is paid on the income distributed net of taxes. I propose to remove this anomaly both in the case of the company and the Mutual Fund.
207. Currently, where an assessee fails to deduct and pay tax on specified payments to residents, 100 percent of such payments are not allowed as deduction while computing his income. This has caused undue hardship to taxpayers, particularly where the rate of tax is only 1 to 10%. Hence, I propose to provide that instead of 100 percent, only 30% of such payments will be disallowed.
208. The Direct Taxes Code Bill, 2010 has lapsed with the dissolution of the 15th Lok Sabha. Having considered the report of the Standing Committee on Finance and the views expressed by the stakeholders, my predecessor had placed a revised Code in the public domain in March 2014. The Government shall consider the comments received from the stakeholders on the revised Code. The Government will also review the DTC in its present shape and take a view in the whole matter.
209. Income-tax Department is expected to function not only as an enforcement agency but also as a facilitator. A number of Aykar Seva Kendras (ASK) have been opened in different parts of the country. I propose to extend this facility by opening 60 more such Seva Kendras during the current financial year to promote excellence in service delivery.
210. The focus of any tax administration is to broaden the tax base. Our policy thrust is to adopt non-intrusive methods to achieve this objective. In this direction, I propose to make greater use of information technology techniques.
211. Net Effect of the direct tax proposals is revenue loss of Rs. 22,200 crore.
Indirect Taxes
212. I now turn to indirect taxes and shall begin with customs duties.
213. Manufacturing sector is under stress due to a variety of reasons. To boost domestic manufacture as also to address the issue of inverted duties, I propose to reduce the basic customs duty (BCD) on:
– Fatty acids, crude palm stearin, RBD and other palm stearin, specified industrial grade crude oils from 7.5 percent to Nil for manufacture of soaps and oleo-chemicals;
– Crude glycerin from 12.5 percent to 7.5 percent and crude glycerin used in the manufacture of soaps from 12.5 percent to Nil;
– Steel grade limestone and steel grade dolomite from 5 percent to 2.5 percent;
– Battery waste and battery scrap from 10 percent to 5 percent;
– Coal tar pitch from 10 percent to 5 percent;
– Specified inputs for manufacture of spandex yarn from 5 percent to Nil.
214. In order to encourage new investment and capacity addition in the chemicals and petrochemicals sector, I propose to reduce the basic customs duty on reformate from 10 percent to 2.5 percent; on ethane, propane, ethylene, propylene, butadiene and ortho-xylene from 5 percent to 2.5 percent; on methyl alcohol and denatured ethyl alcohol from 7.5 percent to 5 percent; and on crude naphthalene from 10 percent to 5 percent.
215. The demand for electronics is growing very fast. To boost domestic production and reduce our dependence on imports, I intend to take the following steps:
– Impose basic customs duty at 10 percent on specified telecommunication products that are outside the purview of the Information Technology Agreement;
– Exempt all inputs/components used in the manufacture of personal computers from 4 percent special additional duty (SAD);
– Impose education cess on imported electronic products to provide parity between domestically produced goods and imported goods;
– Exempt 4 percent SAD on PVC sheet and ribbon used for the manufacture of smart cards.
216. Cathode ray TVs are used by weaker sections who cannot afford to buy more expensive flat panel TVs. I propose to exempt colour picture tubes from basic customs duty to make cathode ray TVs cheaper. The duty concession will help revive manufacturing of TVs in the SME sector and create employment opportunities. At the same time, to encourage production of LCD and LED TVs below 19 inches in India, I propose to reduce the basic customs duty on LCD and LED TV panels of below 19 inches from 10 percent to Nil. Further, to encourage manufacture of LCD and LED TV panels, I propose to exempt from basic customs duty specified inputs used in their manufacture.
217. The domestic stainless steel industry is presently suffering from severe under-utilization of capacity. To give an impetus to the stainless steel industry, I propose to increase the basic customs duty on imported flat-rolled products of stainless steel from 5 percent to 7.5 percent.
218. We need to maximize our utilization of solar power. The existing duty structure incentivizes imports rather than domestic manufacture of solar photovoltaic cells and modules. Therefore, I propose to exempt from basic customs duty:
– Specified inputs for use in the manufacture of EVA sheets and back sheets;
– Flat copper wire for the manufacture of PV ribbons.
A concessional basic customs duty of 5 percent is also being extended to machinery and equipment required for setting up of a project for solar energy production.
219. To promote wind energy, I propose to reduce the basic customs duty from 10 percent to 5 percent on forged steel rings used in the manufacture of bearings of wind operated electricity generators. Also, I propose to exempt the SAD of 4 percent on parts and raw materials required for the manufacture of wind operated generators. Further, I propose to prescribe a concessional basic customs duty of 5 percent on machinery and equipment required for setting up of compressed biogas plants (Bio-CNG).
220. I have only highlighted some of the proposals in the Budget 2014-15. I am sure these measures would incentivize value addition, generate income and create more jobs in India.
221. I have also undertaken several tax rationalization measures. At present, coal attracts customs duties at different rates. I propose to rationalize the duty structure on all non-agglomerated coal at 2.5 percent basic customs duty and 2 percent CVD. Henceforth, anthracite coal, bituminous coal, coking coal, steam coal and other coal will attract the same duty. This will eliminate all assessment disputes and transaction costs associated with testing of various parameters of coal.
222. Metallurgical coke is manufactured out of coking coal. The basic customs duty on metallurgical coke is being increased from Nil to 2.5 percent in line with the duty on coking coal.
223. Ships imported for breaking up attract basic customs duty at 5 percent. As against this, melting scrap of iron or steel attracts basic customs duty at 2.5 percent. I propose to rationalize the duty on ship breaking scrap and melting scrap of iron or steel by reducing the basic customs duty on ships imported for breaking up from 5 percent to 2.5 percent.
224. Semi-processed, half cut or broken diamonds are presently exempt from basic customs duty. As against this, cut and polished diamonds and coloured gemstones attract basic customs duty of 2 percent. To prevent mis-use and avoid assessment disputes, the basic customs duty on semi-processed, half cut or broken diamonds, cut and polished diamonds and coloured gemstones is being rationalized at 2.5 percent. To encourage exports, pre-forms of precious and semi-precious stones are being fully exempted from basic customs duty.
225. To encourage exports of readymade garments I propose to increase the duty free entitlement for import of trimmings, embellishments and other specified items from 3 percent to 5 percent of the value of their exports.
226. Considering the need to conserve our natural resources, I propose to increase the export duty on bauxite from 10 percent to 20 percent.
227. The free baggage allowance under the baggage rules was last revised in 2012. As a measure of passenger facilitation, I propose to increase the free baggage allowance from Rs. 35,000 to Rs. 45,000.
228. I shall now deal with excise duties.
229. To provide a fillip to the capital goods, consumer durables and automobile sectors, and given our commitment to revive economic growth, I have already extended the excise duty concessions beyond 30th June 2014 for a period of 6 months up to 31st December 2014. We expect the industry to show positive results in the coming months.
230. In continuation, I have a few more proposals to boost domestic production. Minimization of harvest and post harvest losses of agricultural produce is an important measure for tackling food inflation and ensuring food security. The losses in fruits and vegetables are mainly due to lack of adequate processing capacity. To incentivize expansion of processing capacity, I propose to reduce the excise duty on specified food processing and packaging machinery from 10 percent to 6 percent.
231. As a measure of relief to the footwear industry, most of which are in SME sector, I propose to reduce the excise duty from 12 percent to 6 percent on footwear of retail price exceeding Rs. 500 per pair but not exceeding Rs. 1,000 per pair. Footwear of retail price up to Rs. 500 per pair will continue to remain exempted.
232. I propose to withdraw the concessional excise duty (2 percent without Cenvat benefit and 6 percent with Cenvat benefit) on smart cards and levy a uniform excise duty at 12 percent. Consequently, imports will attract higher CVD. This will help domestic industry.
233. To develop renewable sources of energy, I propose to exempt from excise duty:
– EVA sheets and solar back sheets and specified inputs used in their manufacture;
– Solar tempered glass used in the manufacture of solar photovoltaic cells and modules;
– Flat copper wire for the manufacture of PV ribbons for use in solar cells and modules;
– Machinery and equipment required for setting up of a project for solar energy production;
– Forged steel rings used in the manufacture of bearings of wind operated generators;
– Machinery and equipment required for setting up of compressed biogas plants (Bio-CNG).
234. To set at rest an on-going dispute, I propose to exempt PSF and PFY manufactured from plastic waste and scrap including PET bottles from excise duty with effect from 29th June, 2010 to 7th May, 2012. I also propose to levy prospectively a nominal duty of 2 percent without Cenvat benefit and 6 percent with Cenvat benefit on such PSF and PFY.
235. To encourage sports, I propose to prescribe a concessional excise duty of 2 percent without Cenvat benefit and 6 percent with Cenvat benefit on sports gloves.
236. While undertaking all these measures, I also need to mobilize resources. Accordingly, I propose to increase the specific excise duty on cigarettes in the range of 11 percent to 72 percent. Similar increases are proposed on cigars, cheroots and cigarillos. Likewise, the excise duty is being increased from 12 percent to 16 percent on pan masala, from 50 percent to 55 percent on unmanufactured tobacco and from 60 percent to 70 percent on gutkha and chewing tobacco. I also propose to levy an additional duty of excise at 5 percent on aerated waters containing added sugar. These are healthy measures and I hope everyone would welcome them from the point of view of human and fiscal health.
237. Clean Energy Cess is presently levied on coal, peat and lignite for the purposes of financing and promoting clean energy initiatives and funding research in the area of clean energy. I propose to expand the scope of purposes of levying the said cess to include financing and promoting clean environment initiatives and funding research in the area of clean environment. To finance these additional initiatives, I propose to increase the Clean Energy Cess from Rs. 50 per tonne to Rs. 100 per tonne.
238. I shall now deal with service tax.
239. In recent times, among indirect taxes, service tax has shown the highest rate of growth. Since my overall objective is to prepare the indirect tax regime for a smooth transition to Goods and Services Tax, changes have been kept minimal at this stage. The twin objectives in this sector of indirect taxes are to widen the tax base and enhance compliance. My proposals in relation to Service Tax are in line with these objectives.
240. To broaden the tax base in Service Tax, it is necessary to prune the negative list and exemptions to the extent possible. Accordingly, the negative list has been reviewed and service tax leviable currently, on sale of space or time for advertisements in broadcast media, is being extended to cover such sales on other segments like online and mobile advertising. Sale of space for advertisements in print media however would remain excluded from service tax. Similarly, tax is being proposed on the service provided by radio-taxis to place them on par with rent-a-cab service. These new levies will come into effect from a date to be notified after the passing of the Finance Bill.
241. In furtherance of the effort to broaden the tax base, certain exemptions are being withdrawn, including those extended to services by air-conditioned contract carriages and technical testing of newly developed drugs on human participants.
242. To spur growth in certain sectors, I have tried to correct the bottlenecks, which have been brought to my knowledge. Indian shipping industry had been representing that they are losing business in a tough global scenario, due to a provision in the Place of Provision of Services Rules, which is now being addressed through an amendment. Similarly, to encourage growth in the transport of goods through coastal vessels, the tax incidence is being reduced. In response to the request of the tourism sector, services provided by Indian tour operators to foreign tourists in relation to a tour wholly conducted outside India is being taken out of the tax net. A long-standing demand of this sector has been to allow Cenvat credit for services of rent-a-cab and tour operators. I now propose to allow credit in the same line of business.
243. I had to accept a few requests for exemptions from the social sector, since exemption-induced distortion would be comparatively less in such sectors. At the request of the Ministry of Agriculture, service tax on loading, unloading, storage, warehousing and transportation of cotton, whether ginned or baled, is being exempted to bring it on par with certain other agricultural produce. Services provided by the Employees’ State Insurance Corporation for the period prior to 1st July 2012 is being exempted.
244. For the benefit of the common man, the exemption presently available for specified micro insurance schemes is being expanded to cover all life micro-insurance schemes where the sum assured does not exceed Rs. 50,000 per life insured. Since taxes should not come in the way of safe disposal of medical and clinical wastes, services provided by common bio-medical waste treatment facilities are being exempted.
245. Certain changes are also proposed for bringing about greater clarity and for reducing litigation regarding the scope of exemptions. These include functions ordinarily entrusted to a municipality and services in relation to education.
246. There are a few more decisions, which entail small gains or losses of revenue. Certain amendments are also being proposed in the Customs and Central Excise Acts and in the Finance Act, 1994 relating to service tax. These changes are reflected in the budget documents.
247. My tax proposals on the indirect taxes side are estimated to yield Rs. 7,525 crore.
248. I have some more proposals, which are in the nature of facilitating trade and resolving disputes. I shall highlight only a few.
249. Faster clearance of import and export cargo reduces transaction costs and improves business competitiveness. To help achieve these objectives, measures are being initiated to extend the existing 24×7 customs clearance facility to 13 more airports in respect of all export goods and to 14 more seaports in respect of specified import and export goods.
250. It is also proposed to implement an ‘Indian Customs Single Window Project’ to facilitate trade. Under this, importers and exporters would lodge their clearance documents at a single point only. Required permissions, if any, from other regulatory agencies would be obtained online without the trader having to approach these agencies. This would reduce interface with Governmental agencies, dwell time and the cost of doing business.
251. The scheme of Advance Ruling in indirect taxes is being expanded to cover resident private limited companies. This will allow these companies to seek advance ruling in respect of new activities being proposed to be undertaken by them. The scope of Settlement Commission is being enlarged to facilitate quick dispute resolution.
252. To expedite the process of disposal of appeals, amendments have been proposed in the Customs and Central Excise Acts with a view to freeing appellate authorities from hearing stay applications and to take up regular appeals for final disposal.
Conclusion
253. Madam Speaker, with these words I commend the Budget to the House.
Interim Budget Speech by Hon’ble Minister of Finance Mr. Palaniappan Chidambaram on February 17, 2014
Madam Speaker,
Introduction
I rise to present the Interim Budget for 2014-15.
The Current Economic Situation
2. As I prepared to write this speech, I found that whether it is a regular Budget for the full year or an interim Budget, some things remain the same. For example, our goals are the same and the global context is the same. As I said last year, we are not unaffected by what happens in the rest of the world. Since September 2008, the state of the world economy has been the most decisive factor impacting the fortunes of every developing country. Hence, it is pertinent to say a few words on the global economy as well as on the global risks.
3. World economic growth was 3.9 percent in 2011, 3.1 percent in 2012 and 3.0 percent in 2013. Those numbers tell the story. Among India’s major trading partners, who are also the major sources of our foreign capital inflows, the United States has just recovered from a long recession; Japan’s economy is responding to the stimulus; the Eurozone, as a whole, is reporting a growth of 0.2 percent; and China’s growth has slowed from 9.3 percent in 2011 to 7.7 percent in 2013.
4. The Global Risks 2014 report has mapped 31 global risks. Of highest concern are ten risks that include fiscal crisis, structurally high unemployment or underemployment, income disparity, governance failure, food crisis, and political and social instability. The challenges that we face are common to all emerging economies. 2012 and 2013 were years of turbulence. Only a handful of countries were able to keep their head above the water, and among them was India. I shall presently give you an account of how we navigated the Indian economy through this turbulent period.
Challenges and Goals
5. Within days of my return to the Ministry of Finance, I had declared that our objectives were fiscal consolidation, price stability, self-sufficiency in food, reviving the growth cycle, enhancing investments, promoting manufacturing, encouraging exports, quickening the pace of implementation of projects, and finding practical solutions to certain stressed sectors such as petroleum, power, coal, highways and textiles.
State of the Economy
The Twin Deficits and Inflation
6. Let me begin with the good news. The fiscal deficit for 2013-14 will be contained at 4.6 percent of GDP, well below the red line that I had drawn last year. More importantly, the Current Account Deficit, that threatened to exceed last year’s CAD of USD 88 billion, will be contained at USD 45 billion, and I am happy to inform the House that we expect to add about USD 15 billion to the foreign exchange reserves by the end of the financial year. Analysts and rating agencies had acknowledged our efforts some months ago and no longer speak about a downgrade. I hope that domestic experts will now agree that the UPA Government meant what it said when it put fiscal stability at the top of the agenda. Going forward, I appeal to all political parties to join me in the pledge that we shall not – we shall never – do anything that will affect the stability of the foundations of India’s economy.
7. Last year, when I read the Budget speech, WPI headline inflation stood at 7.3 percent and core inflation at 4.2 percent. Through the year, inflation saw its ups and downs. At the end of January 2014, WPI inflation was 5.05 percent and core inflation 3.0 percent. Both the Government and the RBI have acted in tandem. While our efforts have not been in vain, there is still some distance to go. Food inflation is still the main worry, although it has declined sharply from a high of 13.6 percent to 6.2 percent.
Agriculture
8. We are proud of the stellar performance of the agriculture sector. Foodgrain production in 2012-13 was 255.36 million tonnes and the estimate for the current year is 263 million tonnes. Estimates of production of sugarcane, cotton, pulses, oilseeds and quality seeds point to new records. Agriculture exports in 2012-13 stood at USD 41 billion versus imports of USD 20 billion. In 2013-14, agriculture exports are likely to cross USD 45 billion. Agricultural credit is likely to touch Rs. 735,000 crore, exceeding the target of Rs. 700,000 crore. Agricultural GDP growth increased to 3.1 percent in the five year period of UPA-I and further to 4.0 percent in the first four years of UPA-II. In the current year, agricultural GDP growth is estimated at 4.6 percent.
Investment
9. Even after the slowdown, the savings rate was 31.3 percent in 2011-12 and 30.1 percent in 2012-13. The corresponding investment rate was 35.5 percent and 34.8 percent, respectively, indicating there was no steep decline in investment, except in mining and manufacturing. If the incremental capital output ratio (ICOR) had remained more or less the same, the outcome should have been a growth rate higher than the 6.7 percent and the 4.5 percent reported so far by the CSO for the two years, but that did not happen. It was obvious that projects were not achieving commercial operation date (COD) and there were too many obstacles on the path of implementation. At a time when it appeared that a number of projects would fail because of the logjam, Government took the bold step to set up the Cabinet Committee on Investment and the Project Monitoring Group. Thanks to the swift decisions taken by them, by the end of January 2014, the way was cleared for completing 296 projects with an estimated project cost of Rs. 660,000 crore.
Foreign Trade
10. Exports have recovered sharply, and the recovery must be seen in the context of growth of global trade declining from 6.1 percent in 2011 to 2.7 percent in 2013. India’s merchandise exports reached a level of USD 300.4 billion in 2012-13 registering a negative growth of 1.8 percent over the previous year. Though 2013-14 began on a pessimistic note, I am happy to inform the House that the year will end with estimated merchandise exports of USD 326 billion, indicating a growth rate of 6.3 percent. However, imports are down, and this does not augur well for either manufacturing or domestic trade. Our aim must be robust growth in both exports and imports, with trade in balance over a period of time.
Manufacturing
11. Manufacturing is the Achilles’ heel of the Indian economy. The deceleration in investment in manufacturing is particularly worrying. Consequently, there is no uptick yet in manufacturing. The National Manufacturing Policy has set the goal of increasing the share of manufacturing in GDP to 25 percent and to create 100 million jobs over a decade. Eight National Investment and Manufacturing Zones (NIMZ) have been announced along the Delhi-Mumbai Industrial Corridor and nine projects have been approved by the DMIC Trust. Five NIMZs outside DMIC have also been given in-principle approval. Three more corridors connecting Chennai and Bengaluru, Bengaluru and Mumbai, and Amritsar and Kolkata are under different stages of preparatory work. Additional capacities are being installed in major manufacturing industries such as steel, cement, refinery, power and electronics. Several measures have been taken to promote micro, small and medium enterprises including notifying a public procurement policy, establishing technology centres and common facility centres, and launching the Khadi mark.
Infrastructure
12. We have given a big push to infrastructure and capacity addition in infrastructure industries. In 2012-13 and in the nine months of the current financial year, we have added 29,350 megawatts of power capacity, 3,928 kilometres of national highways, 39,144 kilometres of rural roads under PMGSY, 3,343 kilometres of new railway track, and 217.5 million tonnes of capacity per annum in our ports. Besides, 19 oil and gas blocks were given out for exploration and 7 new airports are under construction. We have also facilitated Infrastructure Debt Funds to provide take-out finance for infrastructure projects and ease the pressure on the banking system.
Exchange Rate
13. Risks to capital flows were accentuated due to volatile global conditions and the indication, in May 2013, of a reduction in asset purchases by the US Federal Reserve. The rupee came under pressure. Government, RBI and SEBI undertook a number of measures to facilitate capital inflows and stabilise the foreign exchange market. Among emerging economy currencies, the rupee was affected least when the actual reduction took place in December 2013 and January 2014.
GDP Growth – Decline and Rise
14. Hon’ble Members will recall that the slowdown began in 2011-12. In nine quarters, the GDP growth rate declined from 7.5 percent in Q1 of 2011-12 to 4.4 percent in Q1 of 2013-14. Thanks to the numerous measures that I have narrated, I was confident that the decline will be arrested and the growth cycle will turn in the second quarter. I believe I have been vindicated. Growth in Q2 of 2013-14 has been placed at 4.8 percent and growth for the whole year has been estimated at 4.9 percent. This means that growth in Q3 and Q4 of 2013-14 will be at least 5.2 percent.
15. I can confidently assert that the economy is more stable today than what it was two years ago. The fiscal deficit is declining, the current account deficit has been contained, inflation has moderated, the quarterly growth rate is on the rise, the exchange rate is stable, exports have increased, and hundreds of projects have been unblocked.
16. Madam Speaker, all this is the result of hard work. I may add, among other mentors, my mother and Harvard taught me the value of hard work.
UPA’s Record of Growth
17. Over the last ten years, the UPA Governments have gently nudged India and Indians into accepting that growth is an imperative; that it must be made more inclusive and converted into development; and that the growth model, in order to be sustainable, must address other concerns such as environment, inter-generational equity, indebtedness, ownership and control of resources, financing etc.
18. The UPA Governments’ record on growth is unparalleled.
19. Ten years ago, we produced 213 million tonnes of food grains; today, we produce 263 million tonnes of food grains. Ten years ago, the installed power capacity was 112,700 MW; today, it is 234,600 MW. Ten years ago, coal production was 361 million tonnes per year; today, we produce 554 million tonnes per year. Ten years ago, there were 51,511 km of rural roads under PMGSY; today, we have 389,578 km. Ten years ago, the Central Government’s expenditure on education was Rs. 10,145 crore; this year, we allocated Rs. 79,451 crore. Ten years ago, the Central Government spent Rs. 7,248 crore on health; this year, it will spend Rs. 36,322 crore. I could multiply the examples, but what I have given will suffice.
20. Madam Speaker, I reject the argument of policy paralysis. Just as there are business cycles, there is a cycle around the trend growth rate of an economy. Over a period of 33 years, the trend growth rate in India has been 6.2 percent. Average annual GDP growth during the period 1999-2004 was 5.9 percent that is below the trend rate. In the next five-year period 2004-2009, it was 8.4 percent and, in the period 2009-2014, going by the CSO’s estimate, it will be 6.6 percent. UPA-I and UPA-II have delivered above the trend growth rate.
21. Let history be the judge of the last ten years.
Report Card of 2013-14
22. I owe a duty to my colleagues to report on some of the major achievements in the current financial year that concerns the economy of the country and the welfare of the people. We are not simply looking back, we are actually looking forward, and therefore I shall also report on the initiatives that are being taken by my colleagues.
Path-Breaking Decisions
23. Government took several notable decisions including some that were described as courageous and long overdue. Sugar was fully decontrolled. A gradual correction of diesel prices was started. Railway fares were rationalised for the first time in a decade. Applications were invited for issue of new bank licences. DISCOMS, mostly sick, are being restructured with generous Central assistance.
Historic Legislations
24. 12.8 lakh land titles covering 18.80 lakh hectare were distributed under the Scheduled Tribes and Other Traditional Forest Dwellers Act.
25. The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act was notified on 1.1.2014, finally putting to rest an oppressive colonial law of 1894.
26. The National Food Security Act was passed assuring foodgrain to 67 percent of the population.
27. The new Companies Act replaced a law of 1956 vintage.
28. The PFRDA Act was passed placing the New Pension System on a statutory basis and establishing a statutory regulator.
Economic Initiatives
29. Centrally Sponsored Schemes were restructured into 66 programmes for greater synergy. Funds under these programmes will be released as Central assistance to State plans, thus giving States greater authority and responsibility. As a result, Central assistance to plans of States and Union Territories will rise substantially from Rs. 136,254 crore in BE 2013-14 to Rs. 338,562 crore in 2014-15.
30. Public sector enterprises will achieve a new record in capital expenditure of Rs. 257,641 crore in 2013-14.
31. About 50,000 MW of thermal and hydel power capacity is under construction after receiving all clearances and approvals. 78,000 MW of power capacity has been assured coal supply.
32. The FDI policy was liberalized to attract larger investments in telecommunication, pharmaceuticals, civil aviation, power trading exchanges and multi-brand retail.
33. Approval was granted to establish two semi-conductor wafer fab units that will be the bedrock of the electronics hardware industry.
34. The IT modernisation project of the Department of Posts, with an outlay of Rs. 4,909 crore, will be operational by 2015 in all 155,000 locations.
35. The Kudankulam Nuclear Power Plant Unit I achieved criticality and is generating 180 million units of power. The 500 MW prototype fast breeder reactor at Kalpakkam is nearing completion. Seven nuclear power reactors are under construction with the aim of achieving an installed capacity of 10,080 MW by the end of the Twelfth Plan.
36. After exceeding the target and achieving 1,684 MW of grid connected solar power, the National Solar Mission entered the second phase on 1.4.2013. It is proposed to take up four ultra mega solar power projects each with a capacity of over 500 MW in 2014-15.
37. Ministry of MSME will create the ‘India Inclusive Innovation Fund’ to promote grassroot innovations with social returns to support enterprises in the MSME sector. I propose to make an initial contribution of Rs. 100 crore to the corpus of the Fund.
Social Sector Initiatives
38. In order to promote entrepreneurship among the scheduled castes and to provide concessional finance to them, IFCI will set up a Venture Capital Fund for Scheduled Castes. I propose to provide an initial capital of Rs. 200 crore, which can be supplemented every year.
39. The restructured ICDS has been implemented in 400 districts and will be rolled out in the remaining districts from 1.4.2014.
40. Government has approved the National Agro-Forestry Policy 2014, which has multiple objectives including employment, productivity, conservation and adaptation.
41. A mechanism for marketing minor forest produce has been introduced, and the Budget has allocated Rs. 444.59 crore to continue the scheme in 2014-15.
42. A new plan scheme with an allocation of Rs. 100 crore has been approved to promote community radio stations.
43. Ministry of Health and Family Welfare has delivered new technologies to the people: the JE vaccine, a diagnostic test for Thalassaemia, and a Magnivisualizer for detection of cervical cancer.
Additional Central Assistance to Some States
44. The North Eastern States, Himachal Pradesh and Uttarakhand deserve special attention. In addition to funds allocated in the current year, I propose to release a sum of Rs. 1,200 crore as Additional Central Assistance to these States before the end of the year.
Space
45. India joined a handful of countries when it launched the Mars Orbiter Mission. We now have the capability in launch vehicle technology, cryogenics, and navigation, meteorological and communication satellites, and are largely self-reliant. Several flight tests, navigational satellites and space missions are planned for 2014-15.
Redeeming Our Promises
46. Last year, I had made three promises and I had asked Hon’ble Members to keep before them the faces of the girl child, the young student, and the poor. To ensure the dignity and safety of women, I promised the Nirbhaya Fund and put Rs. 1000 crore into the Fund. So far, we have approved two proposals that will receive support from the Fund. In order to make it clear that the Fund will be a permanent fund, I intend to declare the grant of Rs. 1000 crore as non-lapsable. And in order to support more proposals, I propose to contribute to the Fund another sum of Rs. 1000 crore next year.
47. Secondly, I had promised an ambitious programme to skill millions of young men and women and had tasked the National Skill Development Corporation to implement the programme. The National Skill Certification and Monetary Reward Scheme was launched in August 2013 and has been widely hailed as a success. At last count, 24 Sector Skill Councils, 442 Training Partners and 17 Assessment Agencies had joined the programme. 204 job roles have been finalised. 168,043 youth had enrolled and 77,710 have completed their training. Hon’ble Members will recall that I had set apart Rs. 1,000 crore for the scheme. The whole of that amount will be transferred to the NSD Trust and I propose to transfer another sum of Rs. 1,000 crore next year to enable the Trust to scale up the programme of NSDC rapidly. I may add that NSDC actually complements the initiatives of several ministries, which steer skill development programmes such as UDAAN in Jammu and Kashmir.
48. Thirdly, I had promised that the Direct Benefit Transfer scheme would be rolled out throughout the country. The scheme is barely a year old. Money is being transferred to beneficiaries under 27 identified schemes, including the National Social Assistance Programme (NSAP). A total of 54,20,114 transactions have been put through until 31.1.2014 and Rs. 628 crore has been transferred. Another sum of Rs. 3,370 crore has been transferred to 2.1 crore LPG beneficiaries. The latter scheme has been put on hold for the time being pending resolution of some difficulties that have been pointed out. However, let me reiterate that the Government remains fully committed to Aadhaar under which 57 crore unique numbers have been issued so far and to opening bank accounts for all Aadhaar holders in order to promote financial inclusion. Who needs Aadhaar? It is those who are at the bottom of the pyramid, the poor, the migrant workers, the homeless, and the oppressed who need Aadhaar, and we will ensure that they get Aadhaar. I have no doubt, that in course of time even critics of Aadhaar will realise that Aadhaar is a tool of empowerment.
Overview of the Interim Budget
Plan and Non-Plan Expenditure
49. I shall now give an overview of the interim Budget. In some years, we over-provide in the Budget. In those years, savings are inevitable. Besides, if there is lower-than-expected-growth there will be lower-than-estimated-revenues as well. 2013-14 has been one such year. I am afraid, we will not be able to spend the budgeted plan expenditure, but non-plan expenditure will exceed the budget by a small amount.
50. In order to sustain the pace of plan expenditure, I have decided to keep plan expenditure in 2014-15 at the same level at which it was budgeted in 2013-14. I have provided Rs. 555,322 crore for plan expenditure. I am glad to inform the House that all the ministries/departments that run key flagship programmes of the UPA Government have been provided adequate funds. In all the following cases, I have provided in 2014-15 an amount equal to or higher than in the BE of 2013-14 and irrespective of the revised estimates for the year:
– Ministry of Minority Affairs: Rs. 3,711 crore
– Ministry of Tribal Affairs: Rs. 4,379 crore
– Ministry of Housing & Poverty Alleviation: Rs. 6,000 crore
– Ministry of Social Justice & Empowerment: Rs. 6,730 crore
– Ministry of Panchayati Raj: Rs. 7,000 crore
– Ministry of Drinking Water & Sanitation: Rs. 15,260 crore
– Ministry of Women & Child Development: Rs. 21,000 crore
– Ministry of Health & Family Welfare: Rs. 33,725 crore
– Ministry of Human Resource Development: Rs. 67,398 crore
– Ministry of Rural Development: Rs. 82,202 crore
Railways
51. My colleague, the Minister of Railways, presented the Railway Budget a few days ago. Budgetary support to Railways has been increased from Rs. 26,000 crore in BE 2013-14 to Rs. 29,000 crore in 2014-15. Railways need to mobilise huge resources through market borrowing and private public partnership (PPP) schemes. It is proposed to identify new instruments and new mechanisms to raise funds for railway projects.
SC Sub-Plan and Tribal Sub-Plan, Gender Budget and Child Budget
52. Hon’ble Members will be happy to know that I propose to allocate Rs. 48,638 crore to the scheduled caste sub-plan and Rs. 30,726 crore to the tribal sub-plan. They will also be happy to find that the gender budget has Rs. 97,533 crore and the child budget has Rs. 81,024 crore.
53. I am confident that there will be no cause for complaint. If there are any shortcomings, they can be addressed when the regular budget is presented. There is enough flexibility in the expenditure budget to make necessary changes in the allocations within the overall resource envelope.
54. Non-plan expenditure in 2014-15 is estimated at Rs. 12,07,892 crore. Of this, the expenditure on subsidies for food, fertilizer and fuel will be Rs. 246,397 crore. This is slightly more than the revised estimate of Rs. 245,452 crore in 2013-14. For fuel subsidy, I have provided Rs. 65,000 crore. We have, this year, absorbed the rollover of Rs. 45,000 crore from the fourth quarter of 2012-13 and we will rollover only Rs. 35,000 crore from the fourth quarter of this year into the next year. Rs. 115,000 crore has been allocated for food subsidy keeping in mind our Government’s firm and irrevocable commitment to implement the National Food Security Act throughout the country.
Defence
55. The allocation for defence has been enhanced by 10 percent from Rs. 203,672 crore in BE 2013-14 to Rs. 224,000 crore in 2014-15.
One Rank One Pension
56. Hon’ble Members are aware of the long standing demand of the Defence Services for One Rank One Pension (OROP). It is an emotive issue, it has legal implications, and it has to be handled with great sensitivity. During the tenure of the UPA Governments, changes in the pension rules applicable to the defence services were notified on three occasions in 2006, 2010 and 2013. As a result, the gap between pre-2006 retirees and post-2006 retirees has been closed in four ranks (subject to some anomalies that are being addressed): Havildar, Naib Subedar, Subedar and Subedar Major. There is still a small gap in the ranks of Sepoy and Naik and a gap in the ranks of Major and above. We need a young fighting force, we need young jawans, and we need young officers. We also need to take care of those who served in the defence forces only for a limited number of years. Government has therefore decided to walk the last mile and close the gap for all retirees in all ranks. I am happy to announce that Government has accepted the principle of One Rank One Pension for the defence forces. This decision will be implemented prospectively from the financial year 2014-15. The requirement for 2014-15 is estimated at Rs. 500 crore and, as an earnest of the UPA Government’s commitment, I propose to transfer a sum of Rs. 500 crore to the Defence Pension Account in the current financial year itself.
Central Armed Police Forces
57. A modernisation plan at a cost of Rs. 11,009 crore has been approved to strengthen the capacity of Central Armed Police Forces and to provide them state-of-the-art equipment and technology. Funds have been provided in the current financial year and for the next year.
Financial Sector
Banking
58. Hon’ble Members, the announcements that I made concerning the financial sector in the Budget speech of February 2013 have been, or are being, implemented. In 2014-15, I propose to provide Rs. 11,200 crore for capital infusion in public sector banks. They have opened 5,207 branches so far, against the target of 8,023 branches, and are near the goal of installing an ATM at every branch. The Bharatiya Mahila Bank was inaugurated on 19.11.2013. Rs. 6,000 crore was provided to the Rural Housing Fund and Rs. 2,000 crore to the Urban Housing Fund.
59. Banks are under strain owing to rising non-performing assets. Bankers have assured me that as the economy turns they will be able to contain the NPAs, recover more loans, and build healthier balance sheets.
60. Meanwhile, I cannot fail to acknowledge the yeomen service rendered by our banks in reaching Government’s policies and programmes to the people. This year, banks will exceed the target of Rs. 700,000 crore of agricultural credit. I am therefore encouraged to set a target of Rs. 800,000 crore for 2014-15. Hon’ble Members will recall that an interest subvention scheme was introduced in 2006-07. There is a subvention of 2 percent and an incentive of 3 percent for prompt payment, thus reducing the effective rate of interest on farm loans to 4 percent. So far, Rs. 23,924 crore has been released under the scheme. I propose to continue the scheme in 2014-15.
Credit to Minority Communities
61. Ten years ago, the minorities had 14,15,000 bank accounts in 121 districts of India where there is a concentration of minorities. At the end of March, 2013, they had 43,52,000 accounts and the volume of lending had soared from Rs. 4,000 crore to Rs. 66,500 crore. Loans to minority communities in the whole country stood at Rs. 211,451 crore at the end of December 2013.
Self-Help Groups
62. Ten years ago, only 9,71,182 women Self-Help Groups had been credit linked to banks. At the end of December 2013, 41,16,000 women SHGs had been provided credit and the outstanding amount of credit was Rs. 36,893 crore.
Education Loans
63. Ten years ago, only a few thousand students – mostly the well-connected – got education loans. At the end of December 2013, public sector banks had 25,70,254 student loan accounts and the amount outstanding was Rs. 57,700 crore.
64. Hon’ble Members will recall that my predecessor, Shri Pranab Mukherjee, had, in the Budget of 2009-10, introduced the Central Scheme for Interest Subsidy (CSIS) in respect of education loans disbursed after 1.4.2009 under which Government took over the burden of interest for the duration of the period of study and a little beyond. The scheme brought great cheer to student-borrowers and their families. However, I have noticed a sense of discrimination among students who had borrowed before 31.3.2009, struggled to pay interest during the period of study, and continued to service the loans afterwards. I think they deserve some relief. I therefore propose a moratorium period for all education loans taken up to 31.3.2009 and outstanding on 31.12.2013. Government will take over the liability for outstanding interest as on 31.12.2013, but the borrower would have to pay interest for the period after 1.1.2014. It is estimated that nearly 9 lakh student borrowers will benefit to the tune of approximately Rs. 2,600 crore. I intend to provide the funds in the current financial year itself. Accordingly, a sum of Rs. 2,600 crore will be transferred to the Canara Bank, the designated CSIS banker. Details of the scheme will be announced shortly.
Insurance
65. This year, Life Insurance Corporation has opened 1,252 offices and the four public sector general insurance companies have opened 1,849 offices in towns with a population of 10,000 or more to serve peri-urban and rural areas. They are moving steadily to achieve the goals set for them.
Financial Markets
66. A number of steps have been envisaged to deepen the Indian financial markets. Among them are
– To comprehensively revamp the ADR/GDR scheme and enlarge the scope of Depository Receipts;
– To liberalise the rupee-denominated corporate bond market;
– To deepen and strengthen the currency derivatives market to enable Indian companies to fully hedge against foreign currency risks;
– To create one record for all financial assets of every individual;
– To enable smoother clearing and settlement for international investors looking to invest in Indian bonds.
Commodity Derivatives Market
67. Hon’ble Members will recall the payment crisis in the National Spot Exchange Limited (NSEL). Following the transfer of the subject to the Ministry of Finance, swift action was taken to sequester NSEL and to ensure there was no spill over of the crisis to the other regulated segments of the financial market. I propose to amend the Forward Contracts (Regulation) Act to strengthen the regulatory framework of the commodity derivatives market.
Key Pending Bills
68. I regret to record my disappointment that the Insurance Laws (Amendment) Bill and the Securities Laws (Amendment) Bill have not been passed by Parliament for reasons that have nothing to do with the merits of the Bills.
Public Debt Management Agency
69. Pursuant to the announcement in the Budget speech of 2011-12, Government is ready with the Public Debt Management Agency Bill. Following precedent, it is proposed to establish a non-statutory PDMA that can begin work in 2014-15.
A Vision for the Future
70. Madam Speaker, I now wish to look forward and outline a vision for the future.
71. I wonder how many have noted the fact that India’s economy, in terms of the size of its GDP, is the 11th largest in the world. There are great things in store. There is a well-argued view that in the next three decades India’s nominal GDP will take the country to the third rank after the US and China. Just as the fortunes of the developed countries affect the emerging economies today, the fortunes of China and India will, in the future, have a significant impact on the rest of the world. We therefore owe a responsibility not only to ourselves but to the whole world to keep our economy in robust health.
72. The UPA Government has a clear line of sight to the goals that we have set for ourselves. I have broken down the steps toward those goals into tasks that must be undertaken by the Government of the day. I crave your leave to identify ten such tasks:
i. Fiscal Consolidation: We must achieve the target of fiscal deficit of 3 percent of GDP by 2016-17, and remain below that level always.
ii. Current Account Deficit: Since we will run a Current Account Deficit every year for some more years, it can be financed only by foreign investment, whether it is FDI or FII or ECB or any other kind of foreign inflow. Hence, there is no room for any aversion to foreign investment.
iii. Price Stability and Growth: In a developing economy we must accept that when our aim is high growth there will be a moderate level of inflation. RBI must strike a balance between price stability and growth while formulating monetary policy.
iv. Financial Sector Reforms: The recommendations of the Financial Sector Legislative Reforms Commission that require no change in legislation must be implemented immediately and, for the other recommendations, we must draw a timetable for passing legislation.
v. Infrastructure: We must rebuild our infrastructure and add a huge quantity of new infrastructure. Every proven model must be adopted and the PPP model must be more widely used. New financing structures must be created for long-term funds and pooling of investments.
vi. Manufacturing: We must focus on manufacturing and especially on manufacturing for export. I propose that all taxes, Central and State, that go into an exported product should be waived or rebated. I also propose that there should be a minimum tariff protection so that there is an incentive to manufacture goods in India rather than import them into India.
vii. Subsidies: Given the limited resources, and the many claims on the resources, we must choose the subsidies that are absolutely necessary and give them only to the absolutely deserving.
viii. Urbanisation: Our cities will become ungovernable, and perhaps unliveable, if we do not address the decay in our cities. Cities have wealth, cities also create wealth. That wealth should be tapped for resources to rebuild the cities with a new model of governance.
ix. Skill Development: Skill development must rank alongside secondary education, university education, total sanitation and universal health care in the priorities of the Government.
x. Sharing responsibility between States and Centre: States have the fiscal space to bear a reasonable proportion of the financial costs of implementing flagship programmes and must willingly do so, so that the Central Government can allocate more resources for subjects such as defence, railways, national highways and telecommunications that are its exclusive responsibility.
Revenues
GST and DTC
73. Revenues are of paramount importance. The best source of revenue is taxes and for that, we need modern tax laws. I am disappointed that we have not yet been able to introduce GST. I leave it to you to answer the question, who blocked the GST when an agreement on the game-changing tax reform was around the corner? We have also got ready a Direct Taxes Code that will serve us for at least the next twenty years. I intend to place it on the website for a public discussion without partisanship or acrimony. I appeal to all political parties to resolve to pass the GST laws and the DTC in 2014-15.
Funding Scientific Research
74. Our Government has passionately espoused the cause of science, promoted scientific research, and supported scientific applications and inventions. The Income-tax Act allows deductions for expenditure on scientific research, but it is limited to direct funding. We have reflected on a new approach to funding scientific research. I therefore propose to set up a Research Funding Organisation that will fund research projects selected through a competitive process. Contributions to that organisation will be eligible for tax benefits. This will require legislative changes, which can be introduced at the time of the regular Budget.
Off-Shore Accounts
75. There has been much debate on illegal off-shore accounts held by Indians. Investigations into such accounts were launched in 2011. Despite several hurdles in obtaining evidence from the countries concerned, the Government has succeeded, through alternative methods and special efforts, in obtaining information in 67 cases and action is underway to determine the tax liability as well as impose penalty. Prosecutions for wilful tax evasion have been launched in 17 other cases. More enquiries have been initiated into accounts reportedly held by Indian entities in no tax or low tax jurisdictions.
Changes in Tax Rates
76. In keeping with the conventions, I do not propose to make any announcements regarding changes to the tax laws. However, the current economic situation demands some interventions that cannot wait for the regular Budget. In particular, the manufacturing sector needs an immediate boost. Hence, I propose the following changes in some indirect tax rates:
(i) To stimulate growth in the capital goods and consumer non-durables, I propose to reduce the excise duty from 12 percent to 10 percent on all goods falling under chapter 84 and chapter 85 of the Schedule to the Central Excise Tariff Act for the period up to 30.6.2014. The rates can be reviewed at the time of the regular Budget.
(ii) To give relief to the automobile industry, which is registering unprecedented negative growth, I propose to reduce the excise duty as follows for the period up to 30.6.2014:
Small Cars, Motor Cycles, Scooters and Commercial Vehicles: from 12% to 8%
SUVs: from 30% to 24%
Large and Mid-Segment Cars: from 27/24% to 24/20%
Consequently, I propose to make appropriate reductions in the excise duty on chassis and trailers.
The rates can be reviewed at the time of the regular Budget.
(iii) To encourage domestic production of mobile handsets (which has declined) and reduce the dependence on imports (which have increased), I propose to restructure the excise duties for all categories of mobile handsets. The rates will be 6 percent with CENVAT credit or 1 percent without CENVAT credit.
(iv) To encourage domestic production of soaps and oleo chemicals, I propose to rationalise the customs duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols at 7.5 percent.
(v) To encourage domestic production of specified road construction machinery, I propose to withdraw the exemption from CVD on similar imported machinery.
(vi) To encourage indigenous production of security paper for printing currency notes, I propose to provide a concessional customs duty of 5 percent on capital goods imported by the Bank Note Paper Mill India Private Limited.
77. I also propose to give relief from service tax in two cases.
(i) By virtue of the definition of ‘agricultural produce’ in Finance Act 2012, read with the Negative List, storage or warehousing of paddy was excluded from the levy of service tax. Rice was not. The distinction is somewhat artificial. Hence, I propose to exempt loading, unloading, packing, storage and warehousing of rice from service tax.
(ii) Ministry of Health and Family Welfare has requested that services provided by cord blood banks are also healthcare services and should be exempt from service tax. I propose to accept the request.
Notifications in respect of the above changes will be issued today.
Budget Estimates
78. I shall now present the Budget Estimates for 2014-15.
79. The current financial year will end on a satisfactory note with the fiscal deficit at 4.6 percent (below the red line of 4.8 percent) and the revenue deficit at 3.3 percent.
80. Emboldened by the progress made, I have budgeted for receipts and expenditure in 2014-15 that will leave a fiscal deficit of 4.1 percent, which will be below the target set by the new fiscal consolidation path. Revenue deficit is estimated at 3.0 percent.
81. The estimate of plan expenditure is Rs. 555,322 crore. Non-plan expenditure is estimated at Rs. 12,07,892 crore.
Conclusion
82. Madam Speaker, Jean Drèze and Amartya Sen have pointed out that “India was the first non-Western country – and also the first poor country in the world – to commit itself to a resolutely democratic way of governance.” Democracy acknowledges diversity, respects dissent, encourages debate, and decides through a government of elected representatives. Neither populism nor majoritarianism nor individualism is an alternative way of governance.
83. Our way of governance has not come in the way of lifting 140 million people out of poverty in the last ten years. That is the greatest achievement of the UPA Governments, and we are proud of the achievement.
84. In the ten years that I have been in the North Block, I have seen the best of times and difficult times. Never did I lose faith in Jawaharlal Nehru’s idea of India that, in the words of Sunil Khilnani, “sought to coordinate within the form of a modern state a variety of values: democracy, religious tolerance, economic development and cultural pluralism.” It is with that faith that I shall remain on the bridge until the day when, I am sure, the people of India will entrust the responsibility to a hand that will hold the “sceptre swayed with equity.” Let me sign off with the couplet from the sage, Thiruvalluvar:
“Vel Anru Venri Tharuvathu Mannavan
Kol Athuvoom Kodaathu Enin.”
(Not the spear but sceptre swayed with equity alone gives the ruler victory.)
85. Madam Speaker, with these words I commend the Interim Budget to the House.
Government of India – Income Tax Slab Rates for AY 2015-2016
Personal Income Tax Rates in India for the Financial Year 2014-2015 and Assessment Year 2015-2016
