India has seen a number of Union budgets since the turn of the millennium presented by some of the country’s most influential finance ministers under different political affiliations from Pranab Mukherjee, P Chidambaram to Arun Jaitley. Their ideological moorings (Congress and BJP) are different and their policies to promote the Indian economy too are significantly different. Many influential lobbies are at work too to get the budget to reflect their pressiing needs. That the FMs have to look after their own political foundations/interest groups means their planning has to be flexible enough to reflect that too. Plus, since the last few governments at the Center have been coalitions, allies too look for and, they get to influense the final form that the budget eventually reflects. That all of these political goings-on are finally designed to win elections is a given. However, as the AB Vajpayee and Manmohan Singh dispensations found out to their cost, getting the economy right is the most important task for every party in power to ensure they retain their position at the top. Getting caught in an economic morass can cost them the Lok Sabha elections. So, here we take a look at the major budgets presented by FMs Pranab Mukherjee, P Chidambaram and Arun Jaitley from 2011-15.
FM Arun Jaitley presented the Budget on February 28, 2015 and sought to give an all-round boost to capital investment at a time of slow revenue growth in his first full Budget for the NDA govt. Arun Jaitely had little option but to compress the overall central government expenditure in FY15 by Rs 1.13 lakh crore and budget for a modest 5.7% increase in FY16. That meant the size of the FY16 Budget was Rs 17.77 lakh crore – less than originally planned figure of Rs 17.95 lakh crore for FY15. This was achieved by expenditure squeeze, especially reduction in the subsidy on petroleum products that allowed a 10.5% cut in the combined annual outgo on the three major explicit subsidies (petroleum, food and fertilisers) to Rs 2.27 lakh crore for the next financial year. Jaitley stressed that the JAM Trinity (Jan Dhan Yojana, Aadhaar and Mobile numbers) will help target subsidies better, but he shied away from reducing fertiliser and food subsidies. Centre’s overall subsidy bill was slated to decline 8.6% to Rs 2.44 lakh crore in FY16, and the minister said the savings would only be used for infrastructure funding. Budget made several heartening announcements for corporate India, foreign investors, small-scale units, the agricultural sector, rural India and players in the infrastructure space, assumed a tax buoyancy of 15.8% in FY16, reckoning a nominal GDP growth of 11.5%. Given that service tax collections fell 22% in FY15 and the need to raise it to conform to the goods and services tax (which was then slated to be launched on April 1, 2016), the rate was hiked from 12.36% (including cess and surcharge) to a flat 14% and the negative list pruned to widen the net. Excise duty was increased marginally to 12.5% from 12.36%.
FM Jaitley’s Budget was nowhere close to the dream Budget the taxpayer had hoped for, but careful tinkering to ensure everyone goes home happy. For individual taxpayers or the salaried class, the finance minister has neither tinkered with the tax slab nor increased the section 80C deduction cap. However, he increased the deduction on health insurance premium from Rs 15,000 to Rs 25,000 and from Rs 20,000 to Rs 30,000 in case of senior citizens, given an additional tax benefit of Rs 50,000 for contribution to the National Pension Scheme (NPS) and even increased monthly transport allowance from Rs 800 to Rs 1,600. Following these changes, an individual can save up to Rs 6,180 in the lowest tax bracket of 10.3%, Rs 12,360 in the 20.6% bracket and Rs 18,540 in the highest tax bracket of 30.9%. The total deduction that will now be available to an individual is Rs 4,44,200 a year, which works out like this: Deduction under 80C Rs 1,50,000; deduction under 80CCD Rs 50,000, deduction on account of interest paid for a self-occupied property Rs 2,00,000, deduction under 80D Rs 25,000 and exemption of transport allowance Rs 19,200.
Financial Express’ Sunil Jain explains Budget 2015:
Budget 2014 – July
With Bharatiya Janata Party (BJP) drubbing the Congress-led UPA in the Lok Sabha elections and Narendra Modi taking over the reigns of the Government of India as the Prime Minister, the new Finance Minister, Arun Jaitley, spelled out the NDA coalition priorities in the Union Budget on July 10, 2014. He elucidated the road map that would lead to the ‘achche din’ BJP promised in the run-up to the Lok Sabha elections.
Jaitley, in his laden-with-crores-speech, indicated that infrastructure would be his govt’s top priority in terms of spending. Expenditure on roads, both for NHAI and rural ones, have been more than doubled. He announced 5 more IITs, 5 IIMs, 4 AIIMS and 100 smart cities project along with an investment of Rs 500 crore for uninterrupted power supply to rural areas.
He also announced plans to raise the FDI cap in insurance and defence production from 26% to 49%, Rs 500-crore price stabilisation fund to curb fluctuation in commodity prices and to control food inflation and Rs 10,000-crore fund to boost availability of start-up capital in the MSME sector.
In the months thereafter, PM Narendra Modi has issued a number of ordinances from insurance to coal, with which he looked to bypass the Opposition blockade in Parliament, which torpedoed government’s ambitious economic reforms plan there – some of them were on policies which the BJP itself had stopped UPA from pursuing.
Finance ministers Pranab Mukherjee, P Chidambaram and Arun Jaitley budgets decoded:
Budget 2014- Feb
In this interim budget, Then FM P Chidambaram ensured that the ‘red-line’ of fiscal deficit, 4.8% as he once described, wouldn’t be crossed by restricting the fiscal deficit to 4.6% of GDP. With sharp excise duty cuts for small cars, scooters, motorcycles and commercial vehicles, a formal agreement to ‘one rank, one pension’ for defence personnel and an interest waiver of Rs 2,600 crore for 9 lakh student loans, he managed to keep the middle-class happy.
Though the interim budget couldn’t announce much in terms of new policies (due to upcoming Lok Sabha elections) or direct tax changes, Chidambaram pointed out that the annual lending to minority communities increased to 16 times in the last one decade, from Rs 4,000 crore a decade ago to Rs 66,500 crore in FY13.
While the drop in tax collections was along expected lines, what took everyone by surprise was the complete collapse in disinvestment receipts from the sale of the government’s residual stake in Hindustan Zinc and Balco. For some reason, the budget did not reflect the results of the telecom auctions either.
What was termed as “lacklustre” and “unimaginative” by the Opposition, and tagged as the roadmap for investment by then PM Manmohan Singh, was designed to raise government expenditure. FM P Chidambaram, while declaring economic growth to be the highest goal, proposed 2012-14 budget size at Rs 16.65 lakh crore, 16.3% higher than the revised estimate.
The budget pegged the fiscal deficit at 5.2% for 2012-13 and 4.8% in 2013-14, despite the higher than expected hike in allocations for most flagship schemes. Chidambaram promised to support the Food Security Bill, which was UPA’s chief poll plank in 2014 Lok Sabha elections and announced India’s first women’s bank with an initial capital of Rs 1,000 crore to address the safety concern of women, which had gained momentum throughout the country lately.
Chidambaram, who described high current account deficit as his biggest worry, also promised to spur investments through pricing and regulatory reforms in coal, road and oil & gas sectors, and signalled a shale gas policy.
Short on new investment ideas for India Inc, Pranab Mukherjee’s budget speech in 2012-13 had shockingly, plans to reopen already settled tax cases like that of Vodafone, sending negative signals to global investors about tax laws’ stability in India. Instead of giving clearance for Direct Taxes Code and GST, Mukherjee chose to make retrospective amendments in tax laws that reopened cases dated back to as far as 1962.
The only positive in Pranab Mukherjee’s speech was the government’s intention to reduce fiscal deficit for 2012-13 to 5.1% of GDP from 5.9% in previous year.
Pranab Mukherjee’s 2011 budget speech was high on hopes. While the budget had no pain for the corporate sector, it had promises for food security bill and Bharat Nirman. Mukherjee promised that the food security bill would be introduced in the next fiscal, hiked allocation for rural infrastructure under Bharat Nirman Rs 58,000 crore from Rs 10,000 crore, proposed to boost credit flows to farmers by a full Rs 1 lakh crore to Rs 4.75 lakh crore and kept NREGA allocation static at Rs 40,000 crore. But proposed to do virtually nothing to fight inflation and left it for RBI to tackle it with its tight monetary stance.
While expenditure management was the big story of Budget 2011-12, Mukherjee was short on other reform ideas that will push growth to above 8%, including avoiding a firm date for introduction of Goods and Services Tax.