India: Budget Highlights 2014-15

Finance Minister Mr. P Chidambaram has announced the Interim Budget 2014 on 17th February, 2014. The key Highlights of the budget are as follows:

Excise Duty

  • In order to encourage the growth in capital goods and consumer non-durables, it has been proposed to reduce the excise duty from 12 percent to 10 percent on all goods falling under chapter 84 and chapter 85 of the Schedule to the Central Excise Tariff Act for the period up to 30.6.2014.
  • Excise duty on small cars, motorcycles and commercial vehicles have been proposed to cut from 12% to 8%; appropriate cut to be done on chassis, trailers.
  • Excise duty on SUVs has been reduced from 30% to 24%, in large and mid-segment cars from 27-24% to 24-20%
  • To encourage domestic production of mobile handsets and reduce the dependence on imports, excise duty on mobile handsets will be 6% with CENVAT credit or 1 percent without CENVAT credit.

Customs Duty/ CVD

  • With a view to encourage domestic production of soaps and oleo chemicals, it has been proposed to rationalise the customs duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols at 7.5 percent.
  • In order to encourage the domestic production of specified road construction machinery, it has been proposed to withdraw the exemption from Countervailing Duty (CVD) on similar imported machinery

Service tax

  • It has been proposed to exempt loading, unloading, packing, storage and warehousing of rice from the ambit of service tax.
  • The services provided by cord blood banks being the healthcare services have been proposed to be exempted from the levy of service tax.

Financial Sector

  • It has been proposed to provide 11,200 crore for capital infusion in public sector banks.
  • An amount of 6,000 crore provided to the Rural Housing Fund and 2,000 crore to the Urban Housing Fund.
  • A target of 8,00,000 crore has been set up for 2014-15 towards the agreicultural credit being provided by the banks.

Agriculture

  • Foodgrain production in 2012-13 was 255.36 million tonnes and the estimate for the current year is 263 million tonnes.
  • Agriculture exports in 2012-13 stood at USD 41 billion versus imports of USD 20 billion.
  • In 2013-14, agriculture exports are likely to cross USD 45 billion. Agricultural credit is likely to touch 735,000 crore, exceeding the target of 700,000 crore.

Manufacturing

  • The National Manufacturing Policy has set the goal of increasing the share of manufacturing in GDP to 25 percent and to create 100 million jobs over a decade.
  • Additional capacities are being installed in major manufacturing industries such as steel, cement, refinery, power and electronics.

Economic Initiatives

  • The Foreign Direct Investment (FDI) policy was liberalized with a view to attract larger investments in telecommunication, pharmaceuticals, civil aviation, power trading exchanges and multi-brand retail.
  • About 50,000 MW of thermal and hydel power capacity is under construction after receiving all clearances and approvals and 78,000 MW of power capacity has been assured coal supply.
  • Seven nuclear power reactors are under construction with the aim of achieving an installed capacity of 10,080 MW by the end of the Twelfth Plan
  • It is proposed to take up four ultra mega solar power projects each with a capacity of over 500 MW in 2014-15.

Social Sector Initiatives

  • In order to promote entrepreneurship among the scheduled castes and to provide them concessional finance, IFCI will set up a Venture Capital Fund for Scheduled Castes. Consequently, it has been proposed to provide an initial capital of 200 crore, which can be supplemented every year.
  • The restructured Integrated Child Development Services (ICDS) has been implemented in 400 districts and will be rolled out in the remaining districts from 1.4.2014.
  • National Agro-Forestry Policy 2014 having multiple objectives including employment, productivity, conservation and adaptation has been approved by the Government.
  • An amount of 444.59 crore towards marketing of minor forest produce has been allocated in the Budget.
  • To promote community radio stations, a new plan scheme with an allocation of 100 crore has been approved.
  • Ministry of Health and Family Welfare has delivered new technologies to the people: the JE vaccine, a diagnostic test for Thalassaemia, and a Magnivisualizer for detection of cervical cancer.
  • In order to ensure the dignity and safety of women, it has been proposed to set up the Nirbhaya Fund and propose 1000 crore for the same. Accordingly, an initial non-lapsable grant of 1000crore has been declared. This will be followed by a further sum of 1000 crore next year.

Interim Budget Overview

  • Plan expenditure for the coming fiscal has been fixed at Rs 555,322 crore, unchanged from current year, and non-Plan expenditure at Rs 12,07,892 crore, marginally higher than 2013-14. The following are the individual estimates:
  • Budgetary support to Railways has been increased from 26,000 crore in 2013-14 to 29,000 crore in 2014-15.
  • Non-plan expenditure in 2014-15 is estimated at 12,07,892 crore. Of this, the expenditure on subsidies for food, fertilizer and fuel will be 246,397 crore.
  • The allocation for defence has been enhanced by 10 percent from `203,672 crore in 2013-14 to 224,000 crore in 2014-15.
  • The principle of One Rank One Pension for the defence forces has been accepted and will be implemented prospectively from the financial year 2014-15. Further, it has been proposed to transfer a sum of INR 500 crore to the Defence Pension Account in the current financial year.
  • A modernisation plan at a cost of 11,009 crore has been approved to strengthen the capacity of Central Armed Police Forces and to provide them state-of-the-art equipment and technology.
  • It has been proposed to infuse capital amounting to 11,200 crore in public sector banks for 2014-15.
  • Further, a target of 800,000 crore for agricultural credit by banks has been set up for 2014-15
  • With respect to Education Loans, a moratorium period has been proposed for all education loans taken up to 31.3.2009 and outstanding on 31.12.2013. Government will take over the liability for outstanding interest as on 31.12.2013, but the borrower would have to pay interest for the period after 1.1.2014. Accordingly, a sum of 2,600 crore will be transferred to the Canara Bank, the designated CSIS banker.

Budget Estimates

  • The current financial year will end with the fiscal deficit at 4.6 percent (below the red line of 4.8 percent) and the revenue deficit at 3.3 percent.
  • The budget for receipts and expenditure in 2014-15 have been so prepared so as to leave a fiscal deficit of 4.1 percent, which will be below the target set by the new fiscal consolidation path. The revenue deficit is estimated at 3.0 percent.

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