Current Affairs

FM unveils Budget FY15: Revival of Economic Growth Aim

Union Minister for Finance Arun Jaitley unveiled a budget that it said can revive growth even while curbing borrowing, after the country’s longest slowdown in a quarter of a century.

The Modi’s government, in office for less than two months, said it would raise caps on foreign investment in the defence and insurance sectors, and launch a tax reform to unify India’s 29 federal states into a common market.

Here are the highlights of the budget presented by Finance Minister Arun Jaitley.

FISCAL DEFICIT

* Accepts fiscal deficit target of 4.1 percent of GDP for 2014/15

* Fiscal deficit seen at 3.6 percent of GDP in 2015/16

* Finance Minister says: “We cannot spend beyond our means”

* Tax-to-GDP ratio must be raised

GROWTH

* Aims for sustained growth of 7-8 percent in the next 3-4 years

* Finance minister says he is bound to usher in policies for higher growth, lower inflation

TAXATION

* Aims to approve goods and services tax by end of this year

* Will not change rules on retrospective tax. All pending cases of retrospective tax for indirect transfers to be examined by a high-level committee before action is taken

* Proposes changes in transfer pricing mechanism

* Extends 5 percent withholding tax on corporate bonds until June 30 2017

* Will provide the necessary tax changes to introduce real estate investment trusts and infrastructure investment trusts

FOREIGN DIRECT INVESTMENT

* Raises limit on foreign direct investment in defence sector from 26 percent to 49 percent

* Raises FDI limit in insurance sector from 26 percent to 49 percent

SPENDING

* Capital outlay for defence raised by 50 billion rupees over interim budget

* Earmarks 70.6 billion rupees to create 100 “smart cities”

* Proposes 50 billion rupees for warehousing capacity; 100 billion rupees of private capital for start-up companies; and 378 billion rupees of investment in national and state highways

* 40 billion rupees for affordable housing proposed through national housing bank and extends tax incentives for housing loans

* Proposes 80 billion rupees for rural housing scheme

SUBSIDIES

* Plans to make food and petroleum subsidies more targeted

* Rural job-guarantee scheme, which provides 100 days of paid employment a year, will become more focused on asset creation

AGRICULTURE

* Will focus on achieving 4 percent growth per year in agriculture

* Sets farm credit target at 8 trillion rupees for 2014/15

* Proposes a long-term rural credit fund with an initial corpus of 50 billion rupees

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