Highlights: Budget 2015/16 goes for

growth, delays cut in fiscal deficit

Sat Feb 28, 2015 5:22pm IST

Finance Minister Arun Jaitley (C) poses as he leaves his office to present the 2015/16 budget in New Delhi February 28,
2015.
CREDIT: REUTERS/VIJAY MATHUR

REUTERS - Finance Minister Arun Jaitley on Saturday announced a budget aimed at high
growth, saying the pace of cutting the fiscal deficit would slow as he seeks to boost
investment and ensure that ordinary people benefit.
Here are the highlights of Jaitley's budget for the fiscal year that begins on April 1.
FISCAL DEFICIT
* Fiscal deficit seen at 3.9 percent of GDP in 2015/16
* Will meet the challenging fiscal target of 4.1 percent of GDP

* Remain committed to meeting medium term fiscal deficit target of 3 percent of GDP
* Current account deficit below 1.3 percent of GDP
* Jaitley says have to keep fiscal discipline in mind despite need for higher investment
GROWTH
* GDP growth seen at between 8 percent and 8.5 percent y/y
* Nominal economic growth seen between 11 and 12 percent
* Aiming double digit growth rate, achievable soon
INFLATION
* Expects consumer inflation to remain close to 5 percent by March, opening room for more
monetary policy easing
* Monetary policy framework agreement with the RBI clearly states objective of keeping
inflation below 6 percent
* "One of the achievements of my government has been to conquer inflation. This decline in
my view represents a structural shift."
REVENUES
* Revenue deficit seen at 2.8 percent of GDP
* Non tax revenue seen at 2.21 trillion rupees
* Agricultural incomes are under stress
* Net receipts under market stabilisation scheme estimated at 200 billion rupees
DISINVESTMENT
* Government targets 410 billion rupees ($6.7 billion) from stake sales in companies in
2015/16

* Total stake sale in 2015/16 seen at 695 billion rupees

* Sets stake sale target for 2016/17 at 550 billion rupees
* Revises down stake sale target for 2014/15 to 313.5 billion rupees
MARKET REFORMS
* Propose to merge commodities regulator with SEBI
* To bring a new bankruptcy code
* Jaitley says will move to amend the RBI act this year, and provide for a monetary policy
committee
* To set up public debt management agency
* Proposes to introduce a public contract resolution of disputes bill
* To establish an autonomous bank board bureau to improve management of public sector
banks
POLICY REFORMS
* To enact a comprehensive new law on black money
* Propose to create a universal social security system for all Indians
* To launch a national skills mission soon to enhance employability of rural youth
* To raise visa-on-arrival facility to 150 countries from 43
* Allocates 346.99 billion rupees for rural employment guarantee scheme
* Raises threshold for application of transfer pricing rules to 200 million rupees from
current 50 million rupees
BORROWING

* Gross market borrowing seen at 6 trillion rupees

* Net market borrowing seen at 4.56 trillion rupees
GENERAL ANTI-AVOIDANCE RULES (GAAR)
* Government defers rollout of anti-tax avoidance rules GAAR by two years
* GAAR to apply prospectively from April 1, 2017
* Retrospective tax provisions will be avoided
TAXATION
* To abolish wealth tax
* Replaces wealth tax with additional 2 pct surcharge on super rich
* Proposes to cut to 25 percent corporate tax over next four years
* Corporate tax of 30 percent is uncompetitive
* Net gain from tax proposals seen at 150.68 billion rupees
* Jaitley proposes modification of permanent establishment norms so that the mere
presence of a fund manager in India would not constitute a permanent establishment of the
offshore fund, resulting in adverse tax consequences.
* Proposes to rationalise capital gains tax regime for real estate investment trusts
* Extends withholding tax concession on foreign debt purchases by two years
* Expects to implement goods and services tax by April 2016
* To reduce custom duty on 22 items
* Basic custom duty on commercial vehicle doubled to 20 percent
* Proposes to increase service tax rate and education cess to 14 percent from 12.36 percent

* Plans to introduce direct tax regime that is internationally competitive on rates without
exemptions
* Exemptions for individual tax payers to continue
* To enact tough penalties for tax evasion in new bill
* Tax dept to clarify indirect transfer of assets and dividend paid by foreign firms
PERSONAL INCOME TAX
* No revision of income tax brackets
* Limit of deduction of health insurance premium increased to 25,000 rupees from 15,000
rupees; limit increased to 30,000 rupees from 20,000 rupees for the elderly
* People aged above 80 and not covered by health insurance to be allowed deduction of
30,000 rupees for medical expenses
* Additional deduction of 25,000 rupees for the disabled
* Limit on deduction for contributions to pension fund and new pension scheme increased
to 150,000 rupees from 100,000 rupees
* Additional deduction of 50,000 rupees for contribution to new pension scheme under
section 80CCD
* Monthly transport allowance exemption doubled to 1,600 rupees
IMPORT TAX
* Import tax on iron and steel increased to 15 percent from 10 percent
* Import tax on metallurgical coke increased to 5 percent from 2.5 percent
INFRASTRUCTURE
* Investment in infrastructure will go up by 700 bln rupees in 2015/16 over last year

* Plans to set up national investment infrastructure fund

* Proposes tax-free infrastructure bonds for projects in roads, rail and irrigation projects
* Proposes 5 "ultra mega" power projects for 4,000 MW each
* Second unit of Kudankulam nuclear power station to be commissioned
* Will need to build additional 100,000 km of road
* Ports in public sector will be encouraged to corporatise under Companies Act
EXPENDITURE
* Plan expenditure estimated at about 4.65 trillion rupees
* Non-plan expenditure seen at about 13.12 trillion rupees
* Allocates 2.46 trillion rupees for defence spending
* Allocates 331.5 billion rupees for health sector
* If revenue improves, hope to raise budgeted allocations for rural job scheme by 50 billion
rupees
INVESTMENT
* Government to provide 79.4 billion rupees capital infusion to state-run banks
* Propose to do away with different types of foreign investment caps and replace them with
composite caps
* To allow foreign investment in alternative investment funds
* Public investment needed to catalyse investment
GOLD
* To launch gold deposit accounts and sovereign bond

* Import duty stays at 10 percent; disappoints jewellers

* To work on Indian-made gold coin to cut imports
CIGARETTES
* Raises excise duty on cigarettes by 25 percent for cigarettes of length not exceeding 65 mm
* Raises excise duty by 15 percent for cigarettes of other lengths
SUBSIDIES
* Food subsidy seen at 1.24 trillion rupees
* Fertiliser subsidy seen at 729.69 billion rupees
* Fuel subsidy seen at 300 billion rupees
* Major subsidies estimated at 2.27 trillion rupees
* We are committed to subsidy rationalisation based on cutting leakages
FINANCE MINISTER'S COMMENTS
* "We inherited a sentiment of doom and gloom. The investment community had almost
written us off. We have come a long way since then."
* "We have turned around the economy, dramatically restoring macroeconomic stability and
creating the conditions for sustainable poverty elimination, job creation, durable double
digit economic growth."
* "While being mindful of the challenges ... this gives us reason to feel optimistic."
* "Domestic and international investors are seeing us with renewed interest and hope."
MODI ON TWITTER
* 2015 Budget will further reignite our growth engine, signalling the dawn of a prosperous
future.

* Budget is investment friendly & removes all doubts on tax issues. It assures investors that
we have a stable, predictable & fair tax system.
MARKET REACTION
* BSE index gains 0.48 percent; NSE index up 0.65 percent
* ITC slumps after budget hikes excise duty on cigarettes
($1 = 61.6489 rupees)
(Compiled by Tony Tharakan and Rupam Jain Nair in NEW DELHI)