The new government’s maiden Budget is in the nature of a corrective plan for the macroeconomic framework, albeit with some path-breaking measures.
Focusing on returning the economy to a 7-8 % growth trajectory, the Budget stresses on stabilising macroeconomic fundamentals by relying on sound economic logic rather than any window-dressing measures.
While taking note of the tough economic backdrop—a sub-par growth of below-5% over the last two fiscals, coupled with unsustainable levels of double-digit inflation—the finance minister (FM) voiced confidence over meeting the difficult fiscal deficit target of 4.1% of the GDP.
High on intent, the Budget prescribes measures to revive both savings/investment and consumption. While the FM emphasised the need for industrial revival, he stressed on the need for inclusive development as well.
The FM has budgeted for a 17% growth in tax revenue and a 10% growth in non-tax revenue over the FY14 revised estimates while market borrowings have been maintained at the previous level, of around R6 lakh crore. Disinvestment proceeds, atR63,425 crore, have perhaps been budgeted lower than what is possible. The FM has attempted to find funds for PSUs and banks from outside the budget. Funding needs of PSUs would be met through their cash reserves—of about R2.47 lakh crore—and the recapitalisation of banks, to the extent of R2.4 lakh crore, via the FPO route.
The Budget prioritises infrastructure development, stressing on the correction of the anomalies in the existing PPP framework. Introducing REITs and infra investment trusts which have a pass-through mechanism of taxation would encourage funds flow in these instruments. In terms of plan-funding, the finance minister has proposed a higher allocation to transport infrastructure—of R1.16 lakh crore, a growth of 7% over FY 14. Within this, the allocation to Railways is R63, 949 crore, to civil aviation, R9,474 crore and to roads and bridges, R38, 214 crore. For developing 100 smart cities, the finance minister has allocated R7,060 crore in FY15.
Though industry and manufacturing were mentioned frequently in the Budget, there were no specific announcements in terms of tax proposals. However, the FDI limits in defence manufacturing and insurance were raised from 26% to 49% subject to full Indian management and control through the FIPB route, a positive for Indian manufacturers in this space.
In terms of specific tax measures, the finance minister talked of a stable and predictable tax regime. Addressing the vexed issue of retrospective taxation, he said future demands