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The union budget presented by Finance Minister Arun Jaitly on 10th July,2014.
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TAME HIGH INFLATION
• 9.33 % India’s average monthly retail inflation in the last 12 months.
• Sharply rising food prices have hit family budgets.
• For the same money fever goods are available.
• Most services have also turned dearer.
ACTION TAKEN
• ₹ 500 crore price stabilization fund to subsidize retail food prices in times of high volatility.
• Food corporation of India will be broken up for more efficient food grain management.
• Plans announced to stitch together a National Agricultural Market for easier movement of staples from surplus to deficit areas.
INTENDED IMPACT
• Break the cabal of middlemen to ensure greater profits over the cost of production for farmers.
• Narrow down the difference between retail prices and prices that farmer get.
• Cushion the impact of costly raw material, high borrowing rates & falling rupee.
• Signal to RBI to cut loan rates after inflation start falling on budgets proposals.
ECONOMY
ANNUAL GROWTH RATE (%)
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
2
4
6
8
10
12
8.1
7
9.5 9.69.3
6.7
8.68.9
6.7
4.5 4.7
FINANCIAL YEAR
AN
NU
AL R
ATE
ACTION TAKEN
• Form expenditure management commission.
• ₹6,500 crore from shares held by SUUTI.
• Revamp FCI, make PDS more efficient.
• ₹5,000 crore from RBI from government’s SDR holding.
• Minimum ₹1 k/m pension to subscribers & increase in PF wage ceiling to ₹15,000.
• New Indian accounting standards.
• Government to move to e-biz portal by Dec 31.
• Set up National Industrial Corridor Authority.
INTENDED IMPACT
• Shift from government non-productive spending to create space for development spending.
• Investors will have one more opportunity to pick up equity in this blue chip.
• It will make entire food procurement and distribution more efficient.
• Through this swap of the government holdings of IMF’S SDRs, the country entire reserves will be housed with RBI.
• Ensure a minimum pension for subscribers and PF savings will rise.
• Converge India’s accounting with International Financial Reporting Standards.
CREATE JOBS, IMPART SKILLS
• 33% proportion of unemployed persons who are graduates or above, compared to the total, as of 2012-13.
• Of the total population of 1.2 billion, 60% are in the working age group.
• Of the 12 million individuals who join the pipeline of job seekers. Only 3% undergo vocational training.
• In villages the unemployment rate among graduates and above for the age group 15-29 years is estimated to be 36.6%, it is 26.5% in cities.
ACTION TAKEN
• Launch “National Multi-skill Mission”.
• The mission would impart training and support to traditional professional such as welders, carpenters, cobblers, masons, blacksmiths, weavers etc.
• Specific schemes announces on developing labour-intensive sectors such as textiles, infrastructure, housing & tourism.
INTENDED IMPACT
• Leverage India’s demographic dividend & shift the focus to employability.
•Encourage small enterprise through tax breaks to add capacities & hire more people.
• Remove people from unproductive farm work in villages to skill-based jobs in semi-urban areas.
BUILDING INFRASTRUCTURE
• ₹762,451 cr estimated investments in about 100 major infrastructure projects as of Dec,12 that are behind running schedule.
• Around 11 km per day of highways were constructed during 2013-14 against the government target of 20 km – the worst ever performance since 2008-09.
• Restrictive land condition hurting expansion.
14
Railways
10
Road transport & highways
33
Power
18
Petroleum
3
Shipping & ports
5
Steel
3
Atomic Energy
3
Coal
NUMBER OF DELAYED PROJECTS
ACTION TAKEN
• A target to build an additional 23 km a day of highways has been set.
• Building 100 new cities, priority development of 100 most backward districts.
• Rules to be changed to make it easier to hasten infrastructure and industrial projects such as Special Economic Zones.
INTENDED IMPACT
• Reduce time & cost run that have been the major bane of India’s infrastructure projects.
• Construction in highways, railways, airports, power and other projects help create additional jobs.
• Easier land acquisition rules will enable companies to set up factories, new capacity lines, create jobs and hire more people.
REVIVE INDUSTRY
• 28.3% of GDP, India’s gross fixed capital formation (GFCF) in 2013-14, a proxy for investment activity the lowest in five years.
• Higher prices and need to find additional money for EMIs have forced cuts on purchase of televisions & cars.
• The resultant fall in demand have hit companies.
• High loan rates have also hit investment.
2010 2011 2012 2013 2014
-2
0
2
4
6
8
10
12
14
7.7
11
12.3
0.8
-0.1
Financial Year
GROSS FIXED CAPITAL FORMATION (%)
ACTION TAKEN
• The government has clarified its position on retrospective tax provisions.
•FDI in Insurance and Defense sector raised to 49% from 26%.
• A venture capital fund for micro small and medium enterprises will be established with corpus of ₹10,000 crore to act as a catalyst to attract private capital.
INTENDED IMPACT
• Clarifications on retrospective tax will soothe frayed nerves of anxious investors.
• Electronic goods manufacturing hubs to boost hiring, investment and eventually, reduce dependents on imports.
• Mega industry zones such as the DMIC will add jobs and boost sectors such as steel and cement.
BOOSTING SPENDIND
• 57.1% the proportion of GDP that India’s house holds spent in 13-14, the same as previous year.
• Raising people’s spending ability on goods is critical to push demand & investment.
• In a year of flat income, it becomes difficult to raise spending without tax breaks.
• High loan rates have also prompted people to defer purchases.
ACTION TAKEN
• Tax breaks on income and saving to raise people’s disposable income.
• Tax cuts will bring down prices of a host of consumer products like footwear and LED TV panels prompting people to spend more.
• The excise duty cuts announced in the interim budget will continue till December.
INTENDED IMPACT
• Greater disposable income will goad people to save and spend more.
• More spending will increase sales of goods such as cars.
• Greater purchases means goods will move out of shop-selves faster prompting companies to produce more to meet the additional demand.
SOCIAL SECTOR
ACTION TAKEN
• Free drugs, free diagnosis for everyone under HEALTH FOR ALL.
• Interest subvention to women self-help groups.
• Price stabilization fund for farmers.
• Minimum pension of ₹1,000 and mandatory wage ceiling for EPF raised to ₹15,000.
• A house for everyone, a toilet for every house.
• Slew of measures to clean up and conserve Ganga.
INTENDED IMPACT
• It will reduce out-of-pocket expenditure on healthcare in the country.
• More women in additional 100 districts will get bank loan at 4% on prompt repayment as against the rate of 7%.
• Will insulate farmers from fluctuation in prices.
• About 20 lakh people, including five lakh widows, will benefit from the higher minimum pension while 50 lakh people will come under the EPF.
• It will help 78 million homeless people and 600 million people who practice open defecation.
• The river’s ghats would be beautiful.
CLOSING THE DEFICIT
• 4.1% of GDP – India’s budgeted fiscal deficit for 2014-15, down from previous year’s 4.5 %.
• Fiscal deficit – the amount of money that the government borrows - in the first two months of the 2014-15 financial year touched ₹2.40 lakh crore or 45.6% of the full year target.
• Low income level limits tax revenue collections.
ACTION TAKEN
• Petroleum subsidy bill to brought down to ₹ 64,426.95 crore from ₹ 84,480 crore last year.
• Total subsidy bill kept at ₹ 260,657.62 crore, marginally up from ₹ 255,516.25 crore in 2013-14.
• Budget for MNREGA raised by ₹ 100 crore to ₹ 34,100 crore.
INTENDED IMPACT
• Manageable fiscal deficit will lower the threat of a sovereign downgrade.
• A lower fiscal deficit this year will give the government elbow room to introduce tax breaks next year.
• Consistently lower deficit will enable early adoption of direct & indirect tax reforms.