Union Budget 2014-15: A Step In The Right Direction But Short On Radical Reforms

Union Budget 2014-15: A Step In The Right Direction But Short On Radical Reforms

India’s Finance Minister Arun Jaitley announced the Union Budget 2014-15 on July 10, 2014 amidst high expectations. In his budget speech, finance minister made it clear that bold initiatives must be undertaken in order to ensure higher economic growth and meet current economic challenges in an effective manner. He pointed out that the government is committed to work on providing better infrastructure, create higher employment and drive growth in various sectors which have faced stagnation due to inefficiency in policies in the past. It was pointed out that the current administration is committed to bring in a policy regime with the intent to deal effectively with macro-economic issues to bring down inflation levels, lower fiscal deficit and have a current account deficit which is largely manageable.

However, on the whole budget elicited a mixed response from the experts as some strong reform measures comparable to 1991 market reforms were expected in this budget which could accelerate the economy further. On the positive side, a number of proposals were made for reforming manufacturing sector, improving medical facilities, education and for attracting investments despite it being a cautious budget. For common man also, it had some positives like a raise in tax exemption and removal of duties on certain domestic goods.

Some of the salient features of this union Budget were:

  1. Target to ensure sustained economic growth of 7-8 percent in the next 3-4 years. Stress would be laid on enhancing non-tax revenues and improving tax to GDP ratio. Fiscal deficit to be brought down to 4.1 percent of GDP in the current financial year with a target of 3.6 percent of fiscal deficit for FY 2015-16 and only 3 percent for FY 2016-17.
  2. Proposal for setting up of an Expenditure Management Commission to review expenditure reforms. A viable solution can be worked out for introduction of Goods and Services Tax (GST) to help streamline tax administration.
  3. Foreign Direct Investment (FDI):
    FDI is being introduced in certain specific sectors with a view to promote growth in domestic manufacturing and better job creation.
    • A raise in FDI cap in Defence sector from 26 percent to 49 percent with full Indian Management.
    • FDI cap in insurance sector also raised from 26 percent to 49 percent.
  4. Rs 7,060 crore allocated for development of “100 smart cities”
  5. Rs 1,000 crore allocated for “Pradhan Mantri Krishi Sinchayee Yojna” to improve irrigation.
  6. Rs 1000 crore allocated for enhancing rail connectivity in the northeastern region
  7. Rs 100 crore set aside for river linking projects.
  8. Rs 150 crore allocated for implementation of measures to ensure women’s safety in large cities
  9. Rs 100 crore allocated for metro projects in Lucknow and Ahmedabad
  10. Rs 200 crore allocated for building up the “Statue of Unity”
  11. Rs 500 crore allocated for Ultra Mega Solar Power Projects in Gujarat, Rajasthan, Andhra Pradesh, Tamil Nadu and Ladakh.
  12. Rs 2,037 crore allocated for “Namami Gange,” an Integrated Ganga Conservation Mission for conservation of River Ganga
  13. Proposal for opening 5 IIMs in Himachal Pradesh, Punjab, Bihar, Odisha and Rajasthan.
  14. Proposal for 5 more IITs in Jammu, Goa, Chattisgarh, Kerala and Andhra Pradesh
  15. Proposal for 4 more AIIMS like medical institutions in Andhra Pradesh, Poorvanchal in UP, Vidarbha in Maharashtra and West Bengal
  16. Disinvestment target revised to Rs 58,425 crore
  17. Proposal for PSU banks capitalization with an allocation of Rs 11,200 crore for the same
  18. Proposal for giving greater autonomy to PSU banks
  19. Collection of revenues from tax expected to be around Rs 9.77 lakh crore
  20. Gross borrowings estimated at Rs 6 lakh crore
  21. Proposal for developing Ultra Modern Super Critical Coal Based Thermal Power Technology
  22. Rs 4,000 crore allocated to help provide cheaper credit options for economical housing

Proposals in the budget which directly impact the common man of this country are:

  1. To bring some relief to the common taxpayer, Income tax exemption limit was hiked from Rs 2 lakh to 2.5 lakh per annum.
  2. No income tax would be levied on senior citizens with an income of upto Rs 3 lakh per annum.
  3. No changes in current tax rates
  4. Proposal for EPFO to launch a “Uniform Account Number” to allow for easy portability of Provident Fund
  5. Proposal for raising the wage ceiling on EPS (Employee Pension Scheme) from Rs 6,500 to Rs 15,000
  6. To encourage household savings, FM introduced the proposal to increase investment limit under Section 80C from Rs 1 lakh to Rs 1.5 lakh
  7. PPF limit to be raised to Rs 1.5 lakh
  8. Proposal to increase investment limit under Section 80C from Rs 1 lakh to 1.5 lakh
  9. Housing loan rebate to be raised from Rs 1.5 lakh to Rs 2 lakh.
  10. LCD, LED (below 19 inches size) to be cheaper, footwear in the price range of Rs 500 to Rs 1,000 to be cheaper
  11. Tobacco products including Cigarettes, pan masala, aerated drinks to be costlier