Major highlights of India’s budget for FY2016

Facts about Nepal Earthquake

A strong (7.8) earthquake hit Nepal in the area near Barpak, a mountain village between capital Kathmandu and tourist town Pokhara. The earthquake was followed by many powerful aftershocks and a very powerful one (6.7) hit Nepal on Sunday April 26.

The earthquakes caused extensive damage to buildings and thousands of deaths and injuries and was even felt in Pakistan, India and Bangladesh.

Many (historic) buildings collapsed, temples have been ruined, roads destroyed. Nearly 8000 deaths in Nepal and tens of deaths in India & Tibet. The quake was followed by more than 430 aftershocks and another huge earthquake (6.8) on May 12.

Indian Finance Minister Arun Jaitley presented the budget for 2015-16 (FY2016 starts 1 April 2015 and ends 30 March 2016) today to the parliament. It is the first full budget by PM Modi’s government following the landslide election victory last year. Indian PM Narendra Modi termed it a “pro-growth budget” and a “pro-poor budget”. Essentially, the budget has a medium-term narrative with a strong focus on sustainable fiscal finance and accelerated economic growth.

Here are the major highlights of the budget:

GDP growth target of between 8% and 8.5%.
Inflation target of below 6% (as per RBI’s strategy)
Revenue target (includes net tax revenue to center, non-tax revenue, recoveries of loans, and other receipts) of 8.7% of GDP
Expenditure target of 12.6% of GDP
- Capital expenditure target of 3.4% of GDP
As a share of GDP, both revenue and expenditure targets appear lower than the provisional figure for FY2014
- Capital expenditure allocation is nevertheless increased
Fiscal deficit target of 3.9% of GDP
- Fiscal deficit target of 3.0% of GDP over three years
- Additional fiscal space will go into funding infrastructure investment
Primary fiscal deficit (fiscal deficit minus interest payments) target of 0.7% of GDP

Revenue reforms:
- Reduce corporate tax from 30% to 25% over the next four years
- Rationalization of various tax exemption and incentives
- Efforts to implement GST from next year
- No change in rate of personal income tax
- Basic custom duty for some imported goods increased
  - Metallurgical coke from 2.5% to 5%
  - Tariff rate on iron and steel and articles of iron and steel increased from 10% to 15%
  - Tariff rate on commercial vehicle increased from 10% to 40%
Divestment in loss-making units as well as some strategic divestment
Stress on cutting subsidy leakages, not subsidies themselves. Rationalization of subsidies on cards
NITI Ayog and States to work for the creation of a Unified National Agriculture Market
Micro Units Development Refinance Agency (MUDRA) Bank to be created for refinancing all micro-finance institutions that lend to small businesses through Pradhan Mantri Mudra Yojana
A sharp increase in outlays for roads and railways
- National Investment and Infrastructure Fund (NIIF) to be established
- Tax free infrastructure bonds for rail, road and irrigation projects
- PPP mode of infrastructure development to be revisited & revitalized
- 5 new ultra mega power projects, each of 4,000 MW
- NITI Ayog to have units for innovation promotion platform and self-employment and talent utilization incubation
Public Debt Management Agency to be set up in FY2016 by bringing both external and internal borrowings under one roof
Sovereign Gold Bond as an alternative to purchasing metal gold scheme to be developed

Gold import duty remains at 10%

Main priorities: agriculture, education, health, MGNREGA, rural infrastructure including roads, manufacturing through Make in India program, catalyze private investment
To make India the manufacturing hub of the world through Make in India and Skill India programs