Budget 2015 -16 & Economic Survey 2014-15 by JagranJosh

8/21/2019 Budget 2015 -16 & Economic Survey 2014-15 by JagranJosh

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Budget 2015 - 16 & Economic Survey 2014 - 15

2015 | www.jagranjosh.com


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PREFACE 4

UNION BUDGET 2015 - 16 5

Introduction 5

Vision 2022 6

Rural Development 7

Weaker Sections 9

New Schemes/Plans 10

Skill India 12

Agriculture 13

Banking and Finance 14

Infrastructure and Investment 15

Tourism & Green India 17

Tracking Black Money 18

Tax Proposals 20

Analysis of Budget 2015 - 16 25

ECONOMIC SURVEY 2014 - 15 26

Introduction 26

State Of The Economy-An Overview 28

Public Finance 35

Prices And Monetary Management 39

Agriculture 42

External Sector 46

Climate Change And Sustainable Development 49

Industrial And Corporate 53

Infrastructure Performance 56

Services Sector 62


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Social Infrastructure, Employment, And Human Development 71

Analysis of Economic Survey 2014 - 15 80

RAILWAY BUDGET 2015 - 16 83

Introduction 83

Railway Budget 2015-16 on Quality of Life in Journeys 84

Major Initiatives in Railway Budget 2015-16 87

Statistical Highlights of Railway Budget 2015-16 91

14TH FINANCE COMMISSION 94

Fourteenth Finance Commission and its implication for Fiscal Federalism 94

STATE BUDGET 2015 - 16 97

Uttar Pradesh Budget 2015-16: Highlights 97

Madhya Pradesh Budget 2015-16: Highlights 98

MULTIPLE CHOICE QUESTIONS 101


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14th Finance Commission Report and State Budget of Uttar Pradesh and Madhya Pradesh.

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PREFACE


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U NION BUDGET 2015 - 16Introduction

Union Finance Minister, Arun Jaitley on 28 February 2015 presented the rst full yearUnion Budget 2015-16 of NDA government in the Lok Sabha. Jaitely presenting his

second budget laid out the roadmap for accelerating growth, which has improved in

recent past, enhancing investment and passing on the benet of the growth process

to the common man, woman, youth and child: those, whose quality of life needs to

be improved.

The Union Budget 2015-16 enumerated four major challenges facing the Indian

economy and that needs to be addressed. These major challenges are:

1. Increasing Agricultural incomes which are under stress


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2. Increasing investment in infrastructure through stepping up public investment

3. Manufacturing has declined from 18% to 17% of GDP as per new GDP data; and

manufacturing exports have remained stagnant at about 10% of GDP

4. Manage scal discipline

In order to grasp the Union Budget 2015-16 comprehensively, we provide the section

wise details of the Union Budget 2015-16.

Vision 2022

Vision 2022 enumerated in the Union Budget aims at achieving certain things by 2022,

the 75th Year of India’s independence, which will be observed as Amrut Mahotsav.

The aim is to make India a prosperous country and responsible global power.

The Vision 2022 will be led by State and guided by the Union Government.

The vision includes following things:

• Housing for All by 2022: A roof for each family in India requiring construction of 2

crore houses in Urban areas and 4 crore houses in rural areas

• 24 × 7 Basic Facilities: Each house of the country will be provided the basic facilities

like 24-hour power supply, clean drinking water, toilet and connection to a road

• Access to means for livelihood and employment: At least one member of each

family will be provided access to means for livelihood and employment or economic

opportunity to improve his or her lot

• Substantial reduction of poverty: Envisions eliminating absolute poverty by shifting

the focus of all schemes to pro-poor

• Electrify remaining 20000 villages by 2020: To be achieved through different

process including off-grid solar power generation

• Connecting 178000 unconnected habitations with all weather roads: This requires


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completion of 1 lakh kilometer of roads, which are under construction and an

additional 1 lakh kilometer road will be sanctioned for construction

• Each village and city to have Medical services: Aims at providing good health to

people, which is necessary for the quality of life as well as person’s productivity

and ability to serve his or her family.

• Employment to every youth: For this purpose, a senior secondary school is

required within 5 kilometer reach of each child, thus 80000 secondary schools will

be upgraded and or 75000 junior or middle schools will be upgraded to the senior

secondary level.

• Welfare of Rural Areas: There is a need to boost agricultural productivity and

ensure reasonable prices for agricultural production. For this purpose, irrigated

area will be increased and efciency of existing irrigation system will be improved.

Apart from this, agro-based industry will be promoted for value addition and farm

incomes will be increased, and reasonable prices for farm produce will be given.

• Ending Rural-Urban Digital Divide: It will be ensured that connectivity to all villages

is provided

• Making Skill India and Make in India complementary to each other: Aims to

provide jobs to two-thirds of India’s population which is below 35 and make India

a manufacturing hub of the world.

• Turning India into job-creator from job-seekers: For this purpose spirit of

entrepreneurship in India will be encouraged and new start-ups will be supported

• Bringing North-eastern states on par with Rest of India

Rural Development

• 79526 crore rupees has been allocated for rural development activities including

MGNREGA

• To develop 4 crore houses in rural areas by 2022, the Amrut Mahotsav, the 75th


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year, of India’s independence, this will be achieved under scheme roof for each

family in India.

• By 2020, remaining 20000 villages in India will be electried; electrication process

will include off-grid solar power generation.

• 178000 unconnected habitations will be connected by all weather roads

• Medical services will be provided in each village

• Agricultural productivity will be increased for the welfare of rural areas, for this

purpose, the irrigated area will be increased through improving the efciency of

existing irrigation systems, promoting agro-based industry for value addition and

increasing farm incomes, and reasonable prices for farm produce

• In terms of communication, the rural and urban divide will be ended and connectivity

to all villages will be ensured

• Effective and hassle-free agriculture credit will be provided to support the agriculture

sector and will have a special focus on small and marginal farmers

• 25000 crore rupees was allocated to the corpus of Rural Infrastructure Development

Fund (RIDF) set up in NABARD

• 15000 crore rupees allocated for Long Term Rural Credit Fund

• 45000 crore rupees allocated for Short Term Cooperative Rural Credit Renance

Fund

• 15000 crore rupees allocated for Short Term RRB Renance Fund

• For the welfare of 10.5 crore senior citizens of rural areas and BPL category, a new

scheme for Physical Aids and Assisted Living Devices for senior citizens has been

proposed

• 1500 crore rupees allocated for Deen Dayal Upadhyay Gramin Kaushal Yojana

to enhance the employability of 70 percent of India’s population living in rural

population

• For rural development activities including MGNREGA, a sum of 79526 crore rupees

was allocated


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Weaker Sections

Being sensitive to the needs of the poor, under-privileged and the disadvantaged,

Union Government made following allocations for the Scheduled Castes (SC),

Scheduled Tribes (rain) and Women and Children

• Scheduled Castes: 30851 crore rupees

• Scheduled Tribes: 19980 crore rupees

• Women: 79258 crore rupees

• Integrated Child Development Scheme (ICDS) by 1500 crore rupees

• Integrated Child Protection Scheme (ICPS) by 500 crore rupees

Besides, an allocation of 68968 crore rupees has been made to the education sector

including mid-day meals, 33152 crore rupees to the health sector and 10351 crore

rupees to women and child development

Women Security: In order to support programmes for women security, advocacy and

awareness, government announced to provide 1000 crore rupees to the Nirbhaya

Fund.

Financial Inclusion: It is proposed to utilize the vast Postal network with nearly 154000

points of presence spread across the villages of the country with an aim to accelerate

the process of nancial inclusion and contribute to Pradhan Mantri Jan Dhan Yojana.

Girl Child & their Education: Union Government also launched the Beti Bachao-Betipadhao campaign nationwide to protect girls and ensure their education.

Senior Citizens: For the welfare of 10.5 crore senior citizens of rural areas and BPL

category, a new scheme for Physical Aids and Assisted Living Devices for senior

citizens has been proposed.

Also, a Senior Citizen Welfare Fund by utilizing the unclaimed deposits of about

3000 crore rupees in the Public Provident Fund (PPF), and approximately 6000 crorerupees in the Employee Provident Fund (EPF) corpus.


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New Schemes/Plans

In the budget speech, the Union Government announced some new schemes for

creating a functional social security system for all Indians, specially the poor and the

under-privileged.

New Schemes in Agriculture Sector

• Soil Health Card Scheme: The scheme was launched on 19 February 2015

nationwide to help farmers to scientically analyse the soil of farms in the country.

• Pradhanmantri Gram Sinchai Yojana: It is aimed at irrigating the eld of every

farmer and improving water use efciency to provide Per Drop More Crop.

• Paramparagat Krishi Vikas Yojana: This is Union Agriculture Ministry’s initiative

and Budget proposes to support it.

Schemes for Social Security

A large proportion of India’s population is without insurance of any kind - health,

accidental or life. For creating a universal social security system for all Indians,

especially the poor and the under-privileged, following schemes will be launched:

• Pradhan Mantri Suraksha Bima Yojna: It will cover accidental death risk of 2 lakh

rupees for a premium of just 12 rupees per year.

• Atal Pension Yojana: It will provide a dened pension depending upon the

contribution and its period. The Union Government will contribute 50 percent of

the beneciaries’ premium limited to 1000 rupees each year for ve years in the

new accounts opened before 31 December 2015.

• Pradhan Mantri Jeevan Jyoti Bima Yojana: It will cover both natural and accidental

death risk of 2 lakh rupees. The premium will be 330 rupees per year or less than

one rupee per day for the age group of 18-50 years.

• Senior Citizen Welfare Fund: There are unclaimed deposits of about 3000 crore


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rupees in the Public Provident Fund (PPF), and approximately 6000 crore rupees

in the Employee Provident Fund (EPF) corpus. This fund will be used to subsidize

the premiums of vulnerable groups such as old age pensioners, BPL card-holders,small and marginal farmers.

• Scheme of Physical Aids and Assisted Living Devices: This new scheme will

be launched for providing Physical Aids and Assisted Living Devices for senior

citizens, living below the poverty line.

Scheme for education and livelihood

• Nai Manzil Scheme: It will be launched this year to enable Minority Youth who do not

have a formal school-leaving certicate to obtain one and nd better employment.

• Self-Employment and Talent Utilisation (SETU): It will be a Techno-Financial,

Incubation and Facilitation Programme, to support all aspects of start-up

businesses, and other self-employment activities, particularly in technology-

driven areas. 1000 crore rupees have been initially earmarked in NITI Aayog for

this purpose.

• Exhibition The Everlasting Flame: To show-case civilization and culture of the

Parsis community

• National Skills Mission: The Mission will consolidate skill initiatives spread across

several Ministries and allow us to standardize procedures and outcomes across

our 31 Sector Skill Councils.

• Pradhan Mantri Vidya Lakshmi Karyakram: Fully IT based Student Financial

Aid Authority to administer and monitor Scholarship as well Educational Loan

Schemes

Other Schemes

• Gold Monetisation Scheme: It will replace both the present Gold Deposit and

Gold metal Loan Schemes. The new scheme will allow the depositors of gold toearn interest in their metal accounts and the jewelers to obtain loans in their metal


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account.

• Sovereign Gold Bond: To be developed as an alternative to purchasing metal

gold. The Bonds will carry a xed rate of interest, and also be redeemable in cash

in terms of the face value of the gold, at the time of redemption by the holder of

the Bond

• Scheme for Faster Adoption and manufacturing of Electric Vehicles (FAME): An

initial outlay of 75 crore rupees has been proposed for this Scheme in 2015-16

Skill India

• Proposed to set up a fully IT based Student Financial Aid Authority to administer

and monitor Scholarship as well Educational Loan Schemes, through the Pradhan

Mantri Vidya Lakshmi Karyakram.

• Proposed to launch a National Skills Mission through the Skill Development and

Entrepreneurship Ministry. The Mission will consolidate skill initiatives spread

across several Ministries and allow us to standardize procedures and outcomes

across our 31 Sector Skill Councils.

• To set up a fully IT based Student Financial Aid Authority to administer and monitor

Scholarship as well Educational Loan Schemes, through the Pradhan Mantri Vidya

Lakshmi Karyakram.

• In the scal year 2015-16, it is proposed to set up All India Institutes of MedicalSciences in Jammu & Kashmir (J&K), Punjab, Tamil Nadu, Himachal Pradesh and

Assam.

• Proposed to set up an Indian Institute of Technology (IIT) in Karnataka, and upgrade

Indian School of Mines, Dhanbad into a full-edged IIT.

• It also propose to set up a Post Graduate Institute of Horticulture Research and

Education in Amritsar.

• Indian Institute of Managements (IIMs) will be setup in J&K and Andhra Pradesh.


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• In Kerala, the existing National Institute of Speech and Hearing will be upgraded

to a University of Disability Studies and Rehabilitation.

• Three new National Institutes of Pharmaceutical Education and Research: in

Maharashtra, Rajasthan, and Chattisgarh proposed

• An Institute of Science and Education Research in Nagaland and Odisha is

proposed.

• Propose to set up a Centre for Film Production, Animation and Gaming in Arunachal

Pradesh, for the North-Eastern States; and Apprenticeship Training Institute for

Women in Haryana and Uttrakhand

Agriculture

• An ambitious Soil Health Card Scheme has been launched to improve soil fertility

on a sustainable basis.

• Proposed to support Union Agriculture Ministry’s organic farming scheme –

Paramparagat Krishi Vikas Yojana.

• Proposed the Pradhanmantri Gram Sinchai Yojana which is aimed at irrigating the

eld of every farmer and improving water use efciency to provide Per Drop More

Crop.

• 5300 crore rupeeswas allocated to support micro-irrigation, watershed development

and the Pradhan Mantri Krishi Sinchai Yojana

• 25000 crore rupees in 2015-16 to the corpus of Rural Infrastructure Development

Fund (RIDF) set up in NABARD

• 15000 crore rupees for Long Term Rural Credit Fund

• 45000 crore rupees for Short Term Cooperative Rural Credit Renance Fund

• 15000 crore rupees for Short Term Regional Rural Bank (RRB) Renance Fund

• 34699 crore rupees for quality and effectiveness of activities under Mahatma


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Gandhi National Rural Employment Guarantee Act (MGNREGA)

• An ambitious target of 8.5 lakh crore rupees of credit during the year 2015-16

• To increase the incomes of farmers, Union Government has proposed to create

Unied National Agricultural Market, which will have the incidental benet of

moderating price rises.

Banking and Finance

• Proposed to create a Micro Units Development Renance Agency (MUDRA) Bank

with a corpus of 20000 crore rupees, and credit guarantee corpus of 3000 crore

rupees. MUDRA Bank will renance Micro-Finance Institutions through a Pradhan

Mantri Mudra Yojana. In lending, priority will be given to SC/ST enterprises.

• Establishing an electronic Trade Receivables Discounting System (TReDS) nancing

of trade receivables of MSMEs, from corporate and other buyers, through multiple

nanciers

• Proposed Comprehensive Bankruptcy Code to meet global standards and provide

necessary judicial capacity.

• Bankruptcy law reform that brings about legal certainty and speed has been

identied as a key priority for improving the ease of doing business. SICA

(Sick Industrial Companies Act) and BIFR (Bureau for Industrial and Financial

Reconstruction) have failed in achieving these objectives.

• Also, it is proposed to utilize the vast Postal network with nearly 154000 points of

presence spread across the villages of the country with an aim to accelerate the

process of nancial inclusion and contribute to Pradhan Mantri Jan Dhan Yojana.

• To bring parity in regulation of Non-Banking Financial Companies (NBFCs) with

other nancial institutions in matters relating to recovery, it is proposed that NBFCs

registered with RBI and having asset size of 500 crore rupees and above will beconsidered for notications as ‘Financial Institution’ in terms of the SARFAESI Act,

2002.


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• Setting up a Public Debt Management Agency (PDMA) which will bring both India’s

external borrowings and domestic debt under one roof.

• Proposed to merge the Forwards Markets Commission with SEBI to strengthen

regulation of commodity forward markets and reduce wild speculation. Enabling

legislation, amending the Government Securities Act and the RBI Act is proposed

in the Finance Bill, 2015.

• Proposed to create a Task Force to establish a sector-neutral Financial Redressal

Agency that will address grievances against all nancial service providers.

• Introduced a Gold Monetisation Scheme, which will replace both the present Gold

Deposit and Gold metal Loan Schemes. The new scheme will allow the depositors

of gold to earn interest in their metal accounts and the jewelers to obtain loans in

their metal account.

• Proposed to develop a Sovereign Gold Bond as an alternative to purchasing metal

gold. The Bonds will carry a xed rate of interest, and also be redeemable in cash

in terms of the face value of the gold, at the time of redemption by the holder of

the Bond.

• Proposed to commence work on developing an Indian Gold Coin, which will carry

the Ashok Chakra on its face. Such an Indian Gold Coin would help reduce the

demand for coins minted outside India and also help to recycle the gold available

in the country.

• In order to improve the Governance of Public Sector banks, the Government

intends to set up an autonomous bank Board Bureau. The Bureau will search and

select heads of Public Sector banks and help them in developing differentiated

strategies and capital raising plans through innovative nancial methods and

instruments.

Infrastructure and Investment

• Increased outlays on both the roads and the gross budgetary support to the


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railways, by 14031 crore rupees and 10050 crore rupees respectively

• Proposed to establish a National Investment and Infrastructure Fund (NIIF), and

nd money to ensure an annual ow of 20000 crore rupees to it.

• Proposed to permit tax free infrastructure bonds for the projects in the rail, road

and irrigation sectors

• To revisit and revitalised the PPP mode of infrastructure development. The major

issue involved is rebalancing of risk.

• Proposed to establish the Atal Innovation Mission (AIM) in NITI Aayog. AIM will

be an Innovation Promotion Platform involving academics, entrepreneurs and

researchers and draw upon national and international experiences to foster a

culture of innovation, R&D and scientic research in India. The platform will also

promote a network of world-class innovation hubs and Grand Challenges for India.

Initially, a sum of 150 crore rupees will be earmarked for this purpose.

• Budget also proposed to set up 5 new Ultra Mega Power Projects, each of 4000

MWs in the plug-and-play mode.

• Ports in public sector will be encouraged, to corporatize, and become companies

under the Companies Act.

• Proposed to appoint an Expert Committee for examining the possibility and

prepare a draft legislation where the need for multiple prior permissions can be

replaced with a pre-existing regulatory mechanism. This will help in improving

Ease of Doing Business.• To do away with the distinction between different types of foreign investments,

especially between foreign portfolio investments and foreign direct investments,

and replace them with composite caps

• In order to catalyze investments from the Indian private sector in this region, a

Project Development Company will, through separate Special Purpose Vehicles

(SPVs), set up manufacturing hubs in CMLV countries, namely, Cambodia,

Myanmar, Laos and Vietnam.

• Earmarked an initial sum of 1200 crore rupees for accelerating the completion of


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Delhi Mumbai Industrial Corridor (DMIC)

Tourism & Green India

• To boost tourism, the Budget proposed to upgrade the facilities and restoration

work for 9 Cultural World Heritage Sites. These are:

I. Churches & Convents of Old Goa

II. Hampi, Karnataka

III. Elephanta Caves, Mumbai

IV. Kumbalgarh and other Hill Forts of Rajasthan

V. Rani ki Vav, Patan, Gujarat

VI. Leh Palace, Ladakh, Jammu & Kashmir

VII. Varanasi Temple town, Uttar Pradesh

VIII. Jalianwala bagh, Amritsar, Punjab

IX. Qutub Shahi Tombs, Hyderabad, Telengana

• Besides, it is proposed to increase the VISAS on Arrival Scheme to 150 countries

in stages.

• The Union Ministry of New Renewable Energy has revised its target of renewable

energy capacity to 175000 MW till 2022, comprising 100000 MW Solar, 60000

MW Wind, 10000 MW Biomass and 5000 MW Small Hydro

• It has been proposed to launch Scheme for Faster Adoption and manufacturing of

Electric Vehicles (FAME) with an initial outlay of 75 crore rupees in 2015-16.

• 4173 crore rupees has been allocated for Water Resources and Namami Gange


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Tracking Black Money

To track down and bring back the black money, the Union Budget 2015-16 proposed

to introduce a new law in the Budget Session of the Parliament.

Key features of the proposed law on black money

I. Concealment of income and assets and evasion of tax in relation to foreign

assets will be prosecutable with punishment of rigorous imprisonment up to 10

years. Further,

• this offence will be made non-compoundable;

• the offenders will not be permitted to approach the Settlement Commission; and

• penalty for such concealment of income and assets at the rate of 300% of tax

shall be levied.

II. Non ling of return or ling of return with inadequate disclosure of foreign assetswill be liable for prosecution with punishment of rigorous imprisonment up to 7

years.

III. Income in relation to any undisclosed foreign asset or undisclosed income from

any foreign asset will be taxable at the maximum marginal rate. Exemptions

or deductions which may otherwise be applicable in such cases, shall not be

allowed.

IV. Benecial owner or beneciary of foreign assets will be mandatorily required to

le return, even if there is no taxable income.

V. Abettors of the above offences, whether individuals, entities, banks or nancial

institutions will be liable for prosecution and penalty.

VI. Date of Opening of foreign account would be mandatorily required to be specied

by the assessee in the return of income.

VII. The offence of concealment of income or evasion of tax in relation to a foreign

asset will be made a predicate offence under the Prevention of Money-laundering


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Act, 2002 (PMLA). This provision would enable the enforcement agencies to

attach and conscate unaccounted assets held abroad and launch prosecution

against persons indulging in laundering of black money.

VIII. The denition of ‘proceeds of crime’ under PMLA is being amended to enable

attachment and conscation of equivalent asset in India where the asset located

abroad cannot be forfeited.

IX. The Foreign Exchange Management Act, 1999 (FEMA) is also being amended

to the effect that if any foreign exchange, foreign security or any immovable

property situated outside India is held in contravention of the provisions of this Act, then action may be taken for seizure and eventual conscation of assets of

equivalent value situated in India. These contraventions are also being made

liable for levy of penalty and prosecution with punishment of imprisonment up

to ve years.

As regards curbing domestic black money, a new and more comprehensive Benami

Transactions (Prohibition) Bill will be introduced in the budget session of the Parliament.

This law will enable conscation of benami property and provide for prosecution,thus blocking a major avenue for generation and holding of black money in the form

of benami property, especially in real estate.

Besides, it is proposed to amend the Income-Tax Act, 1961 to prohibit acceptance or

payment of an advance of 20000 rupees or more in cash for purchase of immovable

property.

Quoting of PAN is being made mandatory for any purchase or sale exceeding thevalue of 1 lakh rupees.

The third party reporting entities would be required to furnish information about

foreign currency sales and cross border transactions.

Provision is also being made to tackle splitting of reportable transactions.

To improve enforcement, Central Board of Direct Taxes (CBDT) and Central Board of

Excise and Customs (CBEC) will leverage technology and have access to informationin each other’s database.


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Tax Proposals

The proposed direct and indirect taxes proposed in Union Budget 2015-16 will result

in the revenue loss of 8315 crore rupees and 23383 crore rupees, respectively. The

net impact of all tax proposals would be revenue gain of 15068 crore rupees.

These tax proposals were nalised on the basis of certain broad themes and

they are:

• Measures to curb black money

• Job creation through revival of growth and investment and promotion of domestic

manufacturing and ‘Make in India’

• Minimum government and maximum governance to improve the ease of doing

business;

• Benets to middle class taxpayers;• Improving the quality of life and public health through Swachch Bharat initiatives;

and

• Stand alone proposals to maximise benets to the economy.

Direct Tax Proposals

• Reduction of the rate of Corporate Tax from 30 percent to 25 percent over the next4 years

• Exemptions have been given to individual taxpayers as the step will facilitate

savings which will get transferred to investment and economic growth

• Tax pass through was proposed for both Category-I and Category-II Alternative

Investment Funds, so that tax is levied on the investors in these Funds and not on

the Funds per se• Proposal to rationalise capital gains regime for the sponsors exiting at the time of


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listing of the units of REITs and InvITs, subject to payment of Securities Transaction

Tax (STT). The rental income of REITs from their own assets will have pass through

facility.

• Permanent Establishment (PE) norms will be modied to the effect that mere

presence of a fund manager in India would not constitute PE of the offshore funds,

which would result in adverse tax consequences

• It has been decided that GAAR before implementation would apply prospectively

to investments made on or after 1 April 2017

• Rate of income tax on royalty and fees for technical services was reduced to 10

percent from previous 25 percent

• Benet of deduction for employment of new regular workmen to all business

entities has been extended. Thus, the eligibility threshold of minimum 100 regular

workmen is being reduced to fty

• Wealth tax has been abolished and replaced with an additional surcharge of 2

percent on the super-rich with a taxable income of over 1 crore rupees.

• To reduce the associated hassles to smaller taxpayers and the compliance costs

in domestic transfer pricing, the threshold limit increased from 5 crore rupees to

20 crore rupees.

• Minimum Alternate Tax (MAT) provisions for FIIs was rationalised and the prots

corresponding to their income from capital gains on transactions in securities

which are liable to tax at a lower rate, shall not be subject to MAT• To improve the administration in the Tax Departments, number of recommendations

was given for Tax Administration Reform Commission (TARC). These

recommendations are in advanced stage of examination and will be appropriately

implemented during the course of 2015-16.

• 100 percent deduction was granted for contributions other than by way of CSR

contributions, to the Swachh Bharat Kosh. This was proposed as cleanliness of

households and clean environment are very important social causes.

• Tax treatment is also proposed for the Clean Ganga Fund. The taxation proposals


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which relates to initiatives for the Swachh Bharat Abhiyan were termed as the

fourth pillar of taxation proposals.

• Yoga was included within the ambit of charitable purpose under Section 2(15) of

the Income-tax Act.

Benets to middle class tax payers

The extension of benets for the middle class tax payers were termed as the fth

pillar of taxation proposals. The proposals in regard the fth pillar includes

a) Increase in the limit of deduction in respect of health insurance premium from

15000 to 25000 rupees

• For senior citizens the limit will stand increased to 30000 rupees from the existing

20000 rupees

• For very senior citizens of the age of 80 years or more, who are not covered by

health insurance, deduction of 30000 rupees towards expenditure incurred on

their treatment will be allowed

b) The deduction limit of 60000 rupees towards expenditure on account of specied

diseases of serious nature is proposed to be enhanced to 80000 rupees in case

of very senior citizens

c) Additional deduction of 25000 rupees will be allowed for differently-able persons

under Section 80DD and Section 80U of the Income-tax Act.

d) The limit on deduction on account of contribution to a Pension Fund and the

New Pension Scheme is proposed to be increased from 1 lakh rupees to 1.5 lakh

rupees.

e) To provide social safety net and the facility of pension to individuals, an additional

deduction of 50000 rupees is proposed to be provided for contribution to the

New Pension Scheme under Section 80CCD. This will enable India to become

a pensioned society instead of a pensionless society.

f) Investments in Sukanya Samriddhi Scheme are already eligible for deduction


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under Section 80C. All payments to the beneciaries including interest payment

on deposit will also be fully exempt.

g) Transport allowance exemption is being increased from 800 rupees to 1600

rupees per month.

h) For the benet of senior citizens, service tax exemption will be provided on

Varishta Bima Yojana.

The individual tax payer will get tax benet of 444200 rupees

Indirect Taxes Proposals

The role of indirect taxes is also very important in the context of promotion of domestic

manufacturing and Make in India. The proposals in indirect taxes are expected to

yield 23383 crore rupees.

In indirect taxes, the government proposed following modications:

• Clean Energy Cess to be increased from 100 rupees to 200 rupees per metric

tonne of coal to nance clean environment initiatives.

• Excise duty on sacks and bags of polymers of ethylene other than for industrial

use was increased from 12 percent to 15 percent.

• It was also proposed to have an enabling provision to levy Swachh Bharat Cess at

a rate of 2 percent or less on all or certain services if need arises. This Cess will

be effective from a date to be notied.

• It was also proposed to exempt services by common afuent treatment plants

from service tax.

• The concessions from customs and excise duties on specied parts for manufacture

of electrically operated vehicles and hybrid vehicles were extended by one more

year up to 2016.

• Increase in basic custom duty on Metallergical coke from 2.5 percent to 5 percent.

• Tariff rate on iron and steel and articles of iron and steel increased from 10 percent


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to 15 percent.

• Tariff rate on commercial vehicle increased from 10 percent to 40 percent.

• Basic custom duty on digital still image video camera with certain specication

reduced to nil.

• Articial heart exempted from basic custom duty of 5 percent.

Proposals on Service Tax

• Service-tax to be levied on service provided by way of access to amusementfacility, entertainment events or concerts, pageants, non recognized sporting

events etc.

• Service-tax exempted on services of ripening of fruits and vegetables; Life

insurance services provided by way of Varishtha Pension Bima Yojana; ambulance

services; admission to museum, zoo and national park; transport of goods for

export by road from factory to land customs station.

• Service-tax exemption to construction, erection, commissioning or installation of

original works pertaining to an airport or port withdrawn.

Goods and Services Tax (GST)

• Budget proposed to implement Goods and Services Tax (GST) in 2016. GST is

expected to play a transformative role, it will add buoyancy to the economy by

developing a common Indian market and reducing the cascading effect on the

cost of goods and services.

• As part of the GST, the Education Cess and the Secondary and Higher Education

Cess in Central Excise duty will be subsumed. In effect, the general rate of Central

Excise Duty of 12.36 percent including the cesses is being rounded off to 12.5

percent.

• GST is proposed to increase the present rate of service tax plus education cesses

from 12.36 percent to a consolidated rate of 14 percent.


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Analysis of Budget 2015 - 16

The Union Budget 2015-16 sends some positive signals to revive the economic

growth and rein in scal decit as structural reforms are implicit in the budget.

Firstly, the outlay for infrastructure has gone up by 70000 crore rupees which is a

37 percent jump over what was spent by the Union government in 2014-15. If one

adds a 34 percent increase in the internal and extra budgetary resources of public

sector undertakings, the total increase in the Central Plan Outlay goes up by 35 per

cent. Compare this with a 30 percent drop seen in 2014-15, and one sees how moremoney hopefully in investment projects is likely to spur economic activity.

Secondly, there is a nine percent cut proposed in the overall subsidies bill for 2015-

16. The cut seems to have come largely from savings on fuel subsidies, more on

account of lower international crude oil prices, and perhaps less due to the impact of

direct benet transfer schemes in operation for cooking gas. Also, there is no benet

to be seen on the food subsidy front.

So, what could have been a year of major savings on the subsidies front, the actual

cut proposed is quite small at only 8.6 percent. But still the subsidies spend as

percentage of India’s gross domestic product should come down to 1.7 percent,

compared to 2.1 per cent in the 2014-15. The gain on this front should be noted.

Thirdly, there are some signs of improved tax administration - an attempt at

rationalising some of the problematic tax laws that had cast an adverse impact on

foreign investment, in particular, plus a promise to postpone the implementation ofthe General Anti-Avoidance Rules (GAAR) for taxation by two years.

Besides, budget also intends to move towards implementing several tax administration-

related procedural changes improve the ease of paying taxes, as recommended by

the Tax Administration Reforms Commission (TARC) headed by P Shome.

Moreover, the tax-GDP ratio, after declining to a single digit for the last couple of

years at least, has now moved up once against to double digits - or a little over tenpercent of GDP.


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ECONOMIC SURVEY 2014 - 15Introduction

Union Finance Minister Arun Jaitely on 27 February 2015 presented Economic Survey

of India 2014-15 in the Parliament.

The Economic Surveya reviews the developments in the Indian economy over the

previous 12 months, summarises the performance on major development programmes

and highlights the policy initiatives of the government and the prospects of the

economy in the short to medium term.

Three pronged strategy suggested in Economic Survey 2014-15

To improve the investment climate and reduce the backlog of stalled projects,

Economic Survey 2014-15 suggested a three-pronged strategy, namely

• Revival of public investment in short term, to act as an engine of growth in

infrastructure sector. It argues that public investment cannot be a substitute for

private investment; but is required as a complement and to crowd it in.

• Need of creative solutions to strengthen institutions relating to bankruptcy.This will ensure that exit options are available. This will also ameliorate over-

indebtedness that lowers the capacity to generate new investments. Towards this

end, it contemplates setting up of a high-powered Independent Renegotiation

Committee.

• Economic Survey highlights the need for reorientation and restructuring of the

PPP model. This is expected to make them more viable in future.


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Medium-Term Strategy to create scal space

The Survey advocates a medium-term scal strategy to create scal space. The

space, it says, is necessary to insure against future shocks. The recommended

strategy would also take India closer in scal performance, to that of its emerging

market peers.


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Two pillars of this medium-term strategy

1. Reduce decits

a. Reduce scal decit over the medium term to the established target of 3% of

GDP

b. Move towards the golden rule of eliminating the revenue decit

c. Ensure thereby that borrowing over the cycle is only for capital formation

2. Expenditure Control and Expenditure Switching

a. Maintain a rm control on expenditures, in order to achieve the above targets

b. Improve quality of public expenditure; shift away from public consumption (by

reducing subsidies) towards investment

The medium-term scal strategy is based on fundamental principles of scal policy,

as well as on the need to maintain scal credibility.

Implementing the medium-term scal strategy outlined above would lead to a

comfortable attainment of the medium-term targets. India can thus balance the short-

term imperative of boosting public investment to revitalize growth with the need to

maintain scal discipline.

State Of The Economy-An Overview

• Using the new estimate for 2014-15 as the base, GDP growth at constant market

prices is expected to accelerate to between 8.1 and 8.5 percent in 2015-16.

• Ination declined by over 6 percentage points since late 2013 which is likely to

remain in the 5-5.5 percent range in 2015-16, creating space for easing of monetary

conditions.

• The current account decit declined from a peak of 6.7 percent of GDP in Quarter

3 of 2012-13 to an estimated 1.0 percent in the scal year 2015-16.


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• After a nearly 12-quarter phase of deceleration, real GDP has been growing at

7.2 percent on average since 2013-14, based on the new growth estimates of the

Central Statistics Ofce.

• Foodgrains production for 2014-15 is estimated at 257.07 million tonnes, which

will exceed average food grain production of last ve years by 8.5 million tones

• Foreign portfolio ows have stabilized the rupee, exerting downward pressure

on long-term interest rates which is reected in yields on 10-year government

securities and surge in equity prices.

• From a cross-country perspective, a Rational Investor Ratings Index (RIRI) which

combines indicators of macro-stability with growth illustrates that India ranks

amongst the most attractive investment destinations.

• It ranks well above the mean for its investment grade category (BBB), and also

above the mean for the investment category above it (on the basis of the new

growth estimates).

• In the short run, growth will receive a boost from the cumulative impact of reforms,lower oil prices, likely monetary policy easing facilitated by lower ination and

improved inationary expectations, and forecasts of a normal monsoon in 2015-

16.

• Growth in medium-term prospects will be conditioned the “balance sheet syndrome

with Indian characteristics” that has the potential to hold back rapid increases in

private sector investment.

• In the long-run, private investments will be the engine of growth. However, there is

a case for reviving targeted public investment as an engine of growth in the short

run to complement and crowd-in private investment.

• Expenditure control and expenditure switching from consumption to investment

will be the key to growth in the short-run

• It calls for complementing Make in India initiative with Skill India initiative to enable

a larger section of the population to benet from the structural transformation that

such sectors will facilitate.


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• The Survey emphasizes on creation of a National Market for Agricultural

Commodities in place of thousands of agricultural markets.

• The Model APMC Act, 2003 should

be amended along the lines of

the Karnataka Model that has

successfully introduced an

integrated single licensing

system.

• The latest indicators emergingfrom the recently revised

estimates of national income

brought out by the Central

Statistics Ofce, point to the fact

that the revival of growth had

started in 2013-14 and attained

further vigour in 2014-15.• Factors like the steep decline in oil prices, plentiful ow of funds from the rest of

the world, and potential impact of the reform initiatives of the new government

at the centre along with its commitment to calibrated scal management and

consolidation bode well for the growth prospects and the overall macroeconomic

situation

• Brighter prospects in India owe mainly to the fact that the economy stands largely

relieved of the vulnerabilities associated with an economic slowdown, persistent

ination, elevated scal decit, slackening domestic demand, external account

imbalances, and oscillating value of the rupee in 2011-12 and 2012-13.

• Encouraged by the greater macro-economic stability and the reformist intent and

actions of the government, coupled with improved business sentiments in the

country, institutions like the IMF and the World Bank have presented an optimistic

growth outlook for India for the year 2015 and beyond.

• The possible headwinds to such promising prospects, however, emanate from


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factors like inadequate support from the global economy saddled with subdued

demand conditions, particularly in Europe and Japan, recent slowdown in China,

and, on the domestic front, from possible spill-overs of below normal agriculturalgrowth and challenges relating to the massive requirements of skill creation and

infrastructural upgradation.

Revision of Base Year to 2011-12

The current base year revision follows the revision undertaken in January 2010.

The following are the major changes incorporated in the just-concluded base-yearrevision:

(i) Headline growth rate will now be measured by GDP at constant market prices,

which will henceforth be referred to as ‘GDP’, as is the practice internationally.

Earlier, growth was measured in terms of growth rate in GDP at factor cost at

constant prices.

(ii) Sector-wise estimates of gross value added (GVA) will now be given at basic

prices instead of factor cost.

(iii) Comprehensive coverage of the corporate sector both in manufacturing and

services by incorporation of annual accounts of companies as led with the

Ministry of Corporate Affairs (MCA) under their e-governance initiative, MCA21.

Use of MCA21 database for manufacturing companies has helped account for

activities other than manufacturing undertaken by these companies.

(iv) Comprehensive coverage of the nancial sector by inclusion of information fromthe accounts of stock brokers, stock exchanges, asset management companies,


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mutual funds and pension funds, and the regulatory bodies including the Securities

and Exchange Board of India (SEBI), Pension Fund Regulatory and Development

Authority (PFRDA) and Insurance Regulatory and Development Authority (IRDA).

(v) Improved coverage of activities of local bodies and autonomous institutions,

covering around 60 percent of the grants/transfers provided to these institutions.

Effect of these changes

Owing to these changes, estimates of GVA both at aggregate and sectoral levels

have undergone changes. The sector-wise shares in aggregate GVA have undergone

signicant revision especially in the case of manufacturing and services (Figure 1).

Changes have also been observed in the growth rates in GVAs of individual sectors

and contribution of each sector to overall GVA due to use of sales tax and service tax

data for estimation in the years 2012-13 and 2013-14.

Relationship between GVA at factor cost, GVA, at basic prices, and GDP at

market price

The relationship between GVA at factor cost, GVA, at basic prices, and GDP (at

market prices) is given below:


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GVA at basic prices = CE + OS/MI + CFC + production taxes less production subsidies

GVA at factor cost = GVA at basic prices - production taxes less production subsidies

GDP = ∑ GVA at basic prices + product taxes - product subsidies

(where, CE : compensation of employees; OS: operating surplus; MI: mixed income;

and, CFC: consumption of xed capital. Production taxes or production subsidies

are paid or received with relation to production and are independent of the volume

of actual production. Some examples of production taxes are land revenues, stamps

and registration fees and tax on profession. Some production subsidies are subsidies

to Railways, input subsidies to farmers, subsidies to village and small industries,

administrative subsidies to corporations or cooperatives, etc. Product taxes or

subsidies are paid or received on per unit of product. Some examples of product

taxes are excise tax, sales tax, service tax and import and export duties. Product

subsidies include food, petroleum and fertilizer subsidies, interest subsidies given to

farmers, households, etc. through banks, and subsidies for providing insurance to

households at lower rates).


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Outlook for 2015-16

• The macroeconomic situation in India has improved signicantly during the current

year. The release of the new series of national accounts revealed that the economy

has been performing much better than what was being depicted earlier. The steady

acceleration in services and manufacturing growth in the face of subdued global

demand conditions point to the strengthening of domestic demand. Most of the

buoyancy in domestic demand can be traced to consumption. Investment activity,

which is slowly picking up, needs to be grounded on a stronger footing.

• The savings-investment dynamics will be crucial for the growth to strengthen furtherin the coming years, in addition to reversal of the subdued export performance

being currently witnessed. The key will be the response of savings to improved

price and nancial market stability, and of investment, particularly in the crucial

infrastructure sector, to reform efforts of the Government that are underway.

• On the supply side, there are concerns about tentative growth patterns in

construction and mining activities that need to be addressed to. This is particularly

important in view of the strong inter sectoral linkages that these sectors have. Thefarm sector suffered from a relatively poor monsoon, but there are no indications

of its spillover to be next year. The improving rate of value addition in the economy,

represented by the ratio of value added to output, and the falling incremental

capital output ratio indicate better resource use in production.

• In the light of the Government’s

commitment to reforms, along with the

improvements in the price and external

sector scenarios including the

possibility of international oil prices

remaining generally benign, the outlook

for domestic macroeconomic

parameters is generally optimistic,

notwithstanding the uncertainties that

could also arise from an increase in the

interest rates in the United States and situation prevailing in Greece within Euro-


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zone. Given the above, and assuming normal monsoons better prospects in the

world economy that could provide impetus to higher exports for Indian products

and services, a growth of around 8.5 per cent is in the realm of possibility in 2015-16

Public Finance

• In 2013-14, proactive policy decisions

of the government with rmcommitment to the policy of scal

rectitude improved the year-end

performance of the scal decit

target set for theyear

• As per provisional accounts, the

scal decit for 2013-14 worked out

at 4.5 per cent of GDP as opposed

to the Budget Estimate (BE) of 4.8

per cent. Fiscal decit and revenue

decit were budgeted at 531177

crore rupees (4.1 per cent of GDP)

and 378348 crore rupees (2.9

percent of GDP) respectively in 2014-15.

• The Budget Estimate for 2014-15 aimed at achieving tax to GDP and non-debt

receipt to GDP ratios of 10.6 per cent and 9.8 per cent respectively as against a

13.9 per cent total expenditure to GDP ratio.

• The envisaged growth for gross tax revenue was 17.7 per cent over the Revised

Estimates (RE) for 2013-14 and 19.8 per cent over the Provisional Actuals (PA)

2013-14.

• On the expenditure side of Union Government accounts, the notable trends

during April-December 2014 include a shortfall in growth in Plan and non-Plan


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expenditure vis-à-vis the corresponding period of the previous year.

• Major subsidies during April-December 2014 have increased by 12.5 per cent

compared to April-December 2013 due to increase in food subsidy (21807 crore

rupees) and fertilizer subsidy ( 6620 crore rupees). A signicant positive outcome

in 2014-15 so far is a decline in petroleum subsidy by 4908 crore rupees compared

to the corresponding period in 2013-14 due to fuel pricing reforms and fall in the

global prices of petroleum products. Total expenditure was estimated to increase

by 12.9 per cent and 14.8 per cent in BE 2014-15 over RE 2013-14 and PA 2013-

14 respectively.

• An Expenditure Management Commission has been constituted to look into

various aspects of expenditure reforms to achieve the goal of scal consolidation.

It will review the allocative and operational efciencies of government expenditure

to achieve maximum output.

• Fiscal decit at 100.2 per cent of BE in 2014-15 (April-December) is much higher

than the ve-year -average of 77.7 per cent. The revenue decit for April-December

2014 is estimated at 106.2 per cent of BE and is signicantly higher than the ve-

year -average of 81.4 per cent.

Goods and Services Tax (GST)

The introduction of the GST would be a signicant step in the eld of indirect tax


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reforms in India. The broad features of the proposed GST model are as follows:

(i) GST would be applicable on supply of goods or services as against the present

concept of tax on the manufacture or on sale of goods or on provision of services.

(ii) GST would be a destination-based tax as against the present concept of origin-

based tax.

(iii) It would be a dual GST with the

centre and the states simultaneously

levying it on a common base. The

GST to be levied by the centre

would be called central GST (CGST)

and that to be levied by the states

would be called state GST (SGST).

(iv) An integrated GST (IGST) would

be levied on inter-state supply

(including stock transfers) of goods

or services. This would be collected

by the centre so that the credit chain

is not disrupted.

(v) Import of goods or services would be treated as inter-state supplies and would

be subject to IGST in addition to the applicable customs duties.

(vi) A non-vatable additional tax, not exceeding 1 percent on inter-state supply of

goods would be levied by the centre and retained by the originating state at

least for a period of two years.

(vii) CGST, SGST, and IGST would be levied at rates to be recommended by the

Goods and Services Tax Council (GSTC) which will be chaired by the Union

Finance Minister and will have Finance Ministers of states as its members.

(viii) GST would apply to all goods and services except alcohol for human

consumption.

(ix) GST on petroleum products would be applicable from a date to be recommended


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by the GST Council.

(x) Tobacco and tobacco products would be subject to the GST. In addition, the

centre could continue to levy central excise duty.

(xi) A common threshold exemption would apply to both CGST and SGST. Taxpayers

with a turnover below it would be exempt from GST. A compounding option

(i.e.to pay tax at a at rate on turnover without credits) would be available to

small taxpayers below a certain threshold. However, a taxable person falling

within the limit of threshold or compounding could opt to pay tax at the normal

rate in order to be part of the input tax credit chain.

(xii) The list of exempted goods and services would be kept to a minimum and it

would be harmonized for the centre and states as far as possible.

(xiii) Exports would be zero-rated.

(xiv) Credit of CGST paid on inputs may be used only for paying CGST on the output

and the credit of SGST paid on inputs may be used only for paying SGST. In

other words, the two streams of input tax credit (ITC) cannot be cross utilized,except in specied circumstances of inter-state supplies, for payment of IGST.


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Advantages of introducing GST

Over the past four decades, the value added tax (VAT) has been an important

instrument of indirect taxation, with 130 countries having adopted it, resulting in one-

fth of the world’s tax revenue.

i. By subsuming a large number of central and state taxes into a single tax, it would

mitigate cascading or double taxation in a major way and pave the way for a

common national market.

ii. From the consumer’s point of view, the biggest advantage would be in terms ofa reduction in the overall tax burden on goods, which is currently estimated at 25

percent-30 percent.

iii. Introduction of the GST is also expected to make Indian products competitive in

domestic and international markets.

iv. Studies show that this would instantly spur economic growth.

v. Because of its transparent character, it is expected that the GST would be easierto administer.

vi. Implementation of a comprehensive GST in India is expected, ceteris paribus, to

lead to efcient allocation of factors of production thus bringing about gains in

GDP and exports

The successful implementation would translate into enhanced economic welfare and

higher returns to the factors of production, viz. land, labour, and capital. However, inthe near term, as GST replaces a number of state-level and central taxes, revenue

gains may not be signicant.

Prices And Monetary Management

• Headline ination measured in terms of the Wholesale Price Index (WPI) (base year2004- 05=100) which remained persistently high at around 6-9 per cent during


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2011-13 moderated to an average of 3.4 per cent in 2014-15 (April-December) on

the back of lower food and fuel prices.

• As fuel has larger weight in the WPI, the decline in fuel prices led to a sharper

reduction in the WPI as compared to the Consumer Price Index (CPI). Ination in

manufactured products has remained within a narrow range since 2013-14.

• Retail ination as measured by the CPI (combined) (base year 2010=100) had

remained stubbornly sticky around 9-10 per cent during 2012-13 and 2013-14.

Reasons for decline in Ination:

The decline in ination during the year turned out to be much faster than was

anticipated in the initial months of the year. Global factors, namely persistent decline

in crude prices, soft global prices of tradables, particularly edible oils and even coal,

helped moderate headline ination. The tight monetary policy was helpful in keeping

the demand pressures contained, creating a buffer against any external shock, and

keeping volatility in the value of the rupee under check.

During the last one year, the rupee remained relatively stable vis-à-vis the major

currencies, which too had sobering inuence on ination. Moderation in wage

rate growth reduced demand pressures on protein based items. Base effect also

contributed to the decline in headline ination.

Monetary Developments

The RBI kept policy rates unchanged during the year till January 2015. With the easing

of inationary conditions, the RBI has signalled softening of the monetary policy

stance by cutting policy repo rates by 25 basis points to 7.75 percent in January

2015. Subsequently, the RBI also reduced the statutory liquidity ratio (SLR) by 50

basis points from 22.0 per cent of net demand and time liabilities (NDTL) to 21.5

per cent. The RBI adopted the new CPI (combined) as the measure of the nominal

anchor - for policy communication from April 2014.


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Major Initiatives in the Banking Sector in 2014-15

a) The RBI issued guidelines for licensing of new banks in the private sector on 22

February 2013, and in April 2014 two applicants have been granted ‘in principle’

approval to setup new banks in the private sector within a period of eighteen

months.

b) Pursuant to the Budget 2014-2015 announcement for setting up of differentiated

banks serving niche interests such as local area banks and payment banks, the

RBI has formulated and released guidelines in November 2014 for licensing of

payments banks and small nance banks in the private sector. Subsequently the

RBI has invited applications for setting up of small banks and payments banks.

c) Payment and Settlement Systems (Amendment) Bill 2014: The Payment and

Settlement Systems Act 2007 (PSS Act) was enacted with a view to providing

sound legal basis for the regulation and supervision of payment systems in India

by the RBI. For establishing a legal framework for regulation of trade repositories

and legal entity identier issuer, amendments have been considered necessary tomake the PSS Act more effective. The proposed amendments will provide nality

to the determination of the payment obligations and settlement instructions

between a central counter party (the system provider) and system participants

in the event of insolvency, dissolution, or winding up of a central counter party.

The Bill has been passed by the Lok Sabha in the winter Session of 2014 and is

currently pending in the Rajya Sabha.

d) Capital requirement of PSBs: The Union Cabinet, on 10 December 2014 has

approved a proposal allowing PSBs to raise capital from public markets through

FPO (follow on public offer) or QIP (qualied institutional placement) by diluting

Government of India holding up to 52 percent in a phased manner based on their

capital requirement, stock performance, liquidity, market appetite and subject to

certain conditions.


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Agriculture

During the Tenth Plan, the contribution of agriculture and allied sectors to the GDP (at

2004- 05 prices) of the country was 19 per cent and it declined to 15.2 per cent during

the Eleventh Plan. This is in accordance with the typical past pattern of structural

transformation of the economies in transition. Agriculture and allied sectors registered

a growth of 2.5 per cent in the Ninth Plan, 2.4 per cent in Tenth Plan, and 4.1 per cent

in the Eleventh Plan.

For the year 2013-14, total food grain production has been estimated at 265.6 milliontonnes, which is higher by 8.5 million tonnes than the previous year’s production and

22.1 million tonnes than the average production of food grains during the last ve

years.

As per the second AE released by the Ministry of Agriculture on 18 February 2015,

total production of food grains during 2014-15 is estimated at 257.1 million tones

The following are some of the challenges and policy recommendations forIndian agriculture:

• Agriculture and food sectors need huge investment in research, education,

extension, irrigation, fertilizers, and laboratories to test soil, water, and commodities,

and warehousing and cold storage. Rationalization of subsidies and better targeting

of subsidies would generate part of the resources for public investment.

• There are wide differences in yields between states. Even the best of states havemuch lower yield in different crops when compared to the best in the world. This

provides ample opportunity to increase production by bridging the yield gap to the

extent feasible within the climatic zone.

• Providing irrigation can improve yield substantially, as vast cropped area is still

unirrigated. For a shift in production function, investment in basic research would

be necessary.

• Recommendations of the Shanta Kumar Committee provide useful suggestions

for the future road-map of food policy. Every effort should be made to bring states


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on board for creating a national common market for agricultural commodities.

• Distortions emerging from various policies, including exempting user charges for

electricity and water should be removed.

• For providing efcient advance price discovery to farmers and enabling them to

hedge price risk, the Forward Markets Commission should be strengthened and

empowered to regulate the market more effectively.

Recommendations of High Level Committee on restructuring Food Corpora-

tion of India (FCI)

On procurement related issues:

• The FCI should hand over all procurement operations of wheat, paddy, and rice

to states that have gained sufcient experience in this regard and have created

reasonable infrastructure for procurement. The FCI will accept only the surplus (after

deducting the needs of the states under the NFSA) from these state governments

(not millers) to be moved to decit states. The FCI should move on helping those

states where farmers suffer from distress sales at prices much below MSP and

which are dominated by small holdings.

• Centre should make it clear to states that in case of any bonus being given by

them on top of MSP, it will not accept grains under the central pool beyond the

quantity needed by the state for its own PDS and OWS.

• The statutory levies including commissions need to be brought down uniformly to3 percent, or at most 4 percent of MSP, and this should be included in the MSP

itself (states losing revenue due to this rationalization of levies can be compensated

through a diversication package for the next three-ve years);

• The Government of India must provide better price support operations for pulses

and oilseeds and dovetail their MSP policy with trade policy so that their landed

costs are not below their MSP.

• Cash transfers in PDS should be gradually introduced, starting with large cities


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with more than 1 million population; extending it to grain surplus states; and then

giving decit states for the option of cash or physical grain distribution.

On PDS- and NFSA-related issues:

• Given that leakages in the PDS range from 40 to 50 percent, the GoI should defer

implementation of the NFSA in states that have not done end to end computerization;

have not put the list of beneciaries online for anyone to verify; and have not set

up vigilance committees to check pilferage from PDS.

• Coverage of population should be brought down to around 40 percent.

• BPL families and some even above that they be given 7kg/person.

• On central issue prices, while Antyodya households can be given grains at Rs.

3/2/1/kg for the time being, but pricing for priority households must be linked to

MSP.

On stocking and movement related issues:

• FCI should outsource its stocking operations to various agencies.

• Covered and plinth (CAP) storage should be gradually phased out with no grain

stocks remaining in CAP for more than 3 months. Silo bag technology and

conventional storages wherever possible should replace CAP.

On Buffer Stocking Operations and Liquidation Policy:

• DFPD/FCI have to work in tandem to liquidate stocks in OMSS or in export markets,

whenever stocks go beyond the buffer stock norms. A transparent liquidation

policy is the need of hour, which should automatically kick-in when FCI is faced

with surplus stocks than buffer norms.

• Greater exibility to FCI with business orientation to operate in OMSS and export

markets is needed.

On direct subsidy to farmers:

• Farmers be given direct cash subsidy (of about Rs 7000/ha) and fertilizer sector


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can then be deregulated.

On end to end computerization:

• The HLC recommends total end-to-end computerization of the entire food

management system, starting from procurement from farmers, to stocking,

movement, and nally distribution through the TPDS.

On the new face of the FCI:

• The new face of the FCI will be akin to an agency for innovations in the food

management system with the primary focus of creating competition in everysegment of the foodgrain supply chain, from procurement to stocking to movement

and nally distribution under the TPDS, so that overall costs of the system are

substantially reduced and leakages plugged and it serves a larger number of

farmers and consumers.

Recent Initiatives in Agricultural Marketing

(i) The Department of Agriculture (DAC) has issued a comprehensive advisory to

states to go beyond the provisions of the Model Act and declare the entire state

a single market with one licence valid across the entire state and removing all

restrictions on movement of agricultural produce within the state.

(ii) In order to promote development of a common national market for agricultural

commodities through e-platforms, the department has approved 200 crore

rupees for a central-sector scheme for Promotion of National Agricultural Marketthrough Agri-Tech Infrastructure Fund (ATIF) to be implemented during 2014-15

to 2016-17. Under the scheme, it is proposed to utilize the ATIF for migrating

towards a national market through implementation of a common e- platform for

agri-marketing across all states.

(iii) On the request of the central government, a number of state governments

have exempted the marketing of fruits and vegetables from the purview of the

APMC Act. The NCT of Delhi has taken the initiative in this direction by issuing anotication on 2 September2014 , ending the regulation of fruits and vegetables


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outside redened market yard/ sub-yard area of the APMC, MNI, Azadpur, APMC,

Keshopur, and APMC Shahdara.

(iv) The Small Farmers Agribusiness Consortium (SFAC) has taken the initiative for

developing a kisan mandi in Delhi with a view to providing a platform to FPOs for

direct sale of their produce to prospective buyers totally obviating or reducing

unnecessary layers of intermediation in the process .They plan to scale their

activities in other states based on the outcome of the experience of the Delhi

kisan mandi.

External Sector

• Following the global crisis of 2008, the global economy came under a cloud

of uncertainty and the prolonged weakness in the euro area, particularly since

2011, led to the International Monetary Fund (IMF) often revising global growth

downwards in its World Economic Outlook (WEO).

• On 20 January 2015, the IMF projected the global economy to grow from 3.3 per

cent in 2014 to 3.5 per cent in 2015 and further to 3.7 per cent in 2016.

• The United States is the only major economy for which growth projections have

been raised by 0.5 percentage point to 3.6 per cent for 2015.

• The WEO Update projects India’s GDP growth at market prices to be 6.3 per cent

in 2015 and for the year 2016, projected growth is 6.5 per cent surpassing the

projection of 6.3 per cent for China.

• As per the IMF WEO Update, January 2015, world trade volume growth projections

have been placed at 3.8 per cent and 5.3 per cent, respectively for 2015 and

2016—lower by 1.1 percentage points and 0.2 percentage point respectively.

• As per the World Trade Organization (WTO), India’s share in global exports and

imports increased from 0.8 per cent and 1.0 per cent respectively in 2004 to 1.7

per cent and 2.5 per cent in 2013.

• On the Issue of India’s Merchandise Trade, over the last ten years, India’s


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Merchandise Trade increased manifold from US 195.1 billion dollar in 2004-05

to US 764.6 billion dollar in 2013-14 helping in improving India’s share in global

exports and imports from 0.8% to 1.0% respectively in 2004 to 1.7% and 2.5%in 2013.

• The Economic Survey says the overall trade performance signals an opportune

time for withdrawal of restrictions on gold.

• The nancial inows in excess of the nancial requirements helped shore up

foreign exchange reserves (US 328.7 billion dollar at the end of January 2015).

• These have helped lessen the vulnerability concern that led to serious stress last

year. Reconciling the benets of the nancial inows with their impact on exports

and the current account remains an important challenge going forward.

• In 2013-14, India’s trade decit declined to US 135.8 billion dollar from a high level

of 190.3 billion in 2012-13 mainly on account of a decline in the growth of imports

even though growth in exports was sluggish at 4.7%.

• The decline in imports owed to lower growth in oil imports (0.4%) and negativegrowth in gold and silver imports.

Balance of payments

• The CAD was placed at 17.9 billion US dollars in 2014-15 (April-September 2014)

as against 26.9 billion US dollars in the same period of 2013-14. As a proportion

of GDP, the CAD declined from 3.1 percent in the rst half of 2013-14 to 1.9 per

cent in the rst half of 2014-15.

• Net nancial ow was at 36.0 billion US dollars in the rst half of 2014-15 compared

to 16.3 billion US dollars in the rst half of 2013-14. Net foreign investment surged

from 7.8 billion US dollars in 2013-14 (April-September 2014) to 38.4 billion US

dollars in 2014-15 (April-September 2014)

• With net capital ows remaining higher than the CAD, there was net accretion of

18.1 billion US dollars to India’s foreign exchange reserves (on BoP basis) in H1 of

2014- 15 as against a drawdown of 10.7 billion US dollars in H1 of 2013-14.


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• India’s foreign exchange reserves at 330.2 billion US dollars as on 6 February

2015 mainly comprised foreign currency assets amounting to 305.0 billion US

dollars, accounting for about 92.5 per cent of the total.

• The rupee has depreciated by 3.3 per cent from the level of 60.10 per US dollar on

28 March 2014 to ` 61.76 per US dollar on 13 February 2015.

• Some of the Trade Policy Measures Taken by the Government as per the Economic

Survey

• To promote domestic manufacturing capabilities different schemes namely FPS,

FMS, VKGUY, MLFPS, Served from India Scheme, Agriculture Infrastructure

Incentive Scheme (AIIS) for import of goods can be utilized for payment of excise

duty for domestic procurement.

• Similarly scrips issued under the FPS, FMS, Vishesh Krishi and Gram Udyog

Yojana(VKGUY) schemes can be utilized for payment of service tax.

• To diversify India’s export, seven new markets (Algeria, Aruba, Austria, Cambodia,

Myanmar, Netherlands, Antilles and Ukraine) have been added to FMS and 7 newmarkets(Belize, Chile, El Salvador, Guatemala, Honduras, Morocco and Uruguay)

to Special FMS, 46 items to MLFPS and 12 new markets for rst time and 100 new

products to FPS list.

• Indian trade portal (www.indiantradeportal.in) was launched on 8th December,

2014.

• Even though 2013-14 witnessed a sharp depreciation of the rupee in the initial partof the year with signicant reserve drawdown, steps taken by the government and

the Reserve Bank of India (RBI) resulted in a rise in the stock of foreign exchange

reserves which was placed at US 304.2 billion dollar at end-March 2014 as against

US 292 billion dollar at end-March 2014.

• In the rst half of 2014-15, India’s foreign exchange reserves increased by 18.1

billion US dollar on BoP basis.

• Economic Survey says among the major economies with current account decit,

India is the second largest foreign exchange reserve holder after Brazil.


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• Post 1991 BoP crisis India’s prudent external debt policy and management with a

focus on sustainability, solvency and liquidity have helped contain the increase in

size of external debt to moderate l

Documents

Budget 2015 -16 & Economic Survey 2014-15 by JagranJosh