Madam
Speaker,
INTRODUCTION
I rise to present the
Interim Budget for 2014-15.
The
Current Economic Situation
2. As I prepared to write this
speech, I found that whether it is a regular Budget for the full year or an
interim Budget, some things remain the same. For example, our goals are the
same and the global context is the same.
As I said last year, we are not unaffected by what happens in the rest
of the world. Since September 2008, the
state of the world economy has been the most decisive factor impacting the
fortunes of every developing country. Hence, it is pertinent to say a few words
on the global economy as well as on the global risks.
3. World economic growth was 3.9 percent in 2011,
3.1 percent in 2012 and 3.0 percent in 2013.
Those numbers tell the story.
Among India’s major trading partners, who are also the major sources of
our foreign capital inflows, the United States has just recovered from a long
recession; Japan’s economy is responding to the stimulus; the Eurozone, as a
whole, is reporting a growth of 0.2 percent; and China’s growth has slowed from
9.3 percent in 2011 to 7.7 percent in 2013.
4. The Global Risks 2014 report has mapped
31 global risks. Of highest concern are
ten risks that include fiscal crisis, structurally high unemployment or
underemployment, income disparity, governance failure, food crisis, and
political and social instability. The
challenges that we face are common to all emerging economies. 2012 and 2013 were years of turbulence. Only a handful of countries were able to keep
their head above the water, and among them was India. I shall presently give you an account of how
we navigated the Indian economy through this turbulent period.
Challenges
and Goals
5. Within days of my return to the Ministry of
Finance, I had declared that our objectives were fiscal consolidation, price
stability, self-sufficiency in food, reviving the growth cycle, enhancing
investments, promoting manufacturing, encouraging exports, quickening the pace
of implementation of projects, and finding practical solutions to certain
stressed sectors such as petroleum, power, coal, highways and textiles.
STATE
OF THE ECONOMY
The
Twin Deficits and Inflation
6. Let me begin with the good news. The fiscal deficit for 2013-14 will be
contained at 4.6 percent of GDP, well below the red line that I had drawn last
year. More importantly, the Current
Account Deficit, that threatened to exceed last year’s CAD of USD 88 billion,
will be contained at USD 45 billion, and I am happy to inform the House that we
expect to add about USD 15 billion to the foreign exchange reserves by the end
of the financial year. Analysts and
rating agencies had acknowledged our efforts some months ago and no longer
speak about a downgrade. I hope that
domestic experts will now agree that the UPA Government meant what it said when
it put fiscal stability at the top of the agenda. Going forward, I appeal to all political
parties to join me in the pledge that we shall not – we shall never – do
anything that will affect the stability of the foundations of India’s economy.
7. Last year, when I read the Budget speech, WPI
headline inflation stood at 7.3 percent and core inflation at 4.2 percent. Through the year, inflation saw its ups and
downs. At the end of January 2014, WPI
inflation was 5.05 percent and core inflation 3.0 percent. Both the Government and the RBI have acted in
tandem. While our efforts have not been
in vain, there is still some distance to go.
Food inflation is still the main worry, although it has declined sharply
from a high of 13.6 percent to 6.2 percent.
Agriculture
8. We are proud of the stellar performance of the
agriculture sector. Foodgrain production
in 2012-13 was 255.36 million tonnes and the estimate for the current year is
263 million tonnes. Estimates of
production of sugarcane, cotton, pulses, oilseeds and quality seeds point to
new records. 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. Agricultural GDP growth increased to 3.1
percent in the five year period of
UPA-I and further to 4.0 percent in the first four years of UPA-II. In the current year, agricultural GDP growth is estimated at 4.6 percent.
UPA-I and further to 4.0 percent in the first four years of UPA-II. In the current year, agricultural GDP growth is estimated at 4.6 percent.
Investment
9. Even after the slowdown, the savings rate was
31.3 percent in 2011-12 and 30.1 percent in 2012-13. The corresponding investment rate was 35.5
percent and 34.8 percent, respectively, indicating there was no steep decline
in investment, except in mining and manufacturing. If the incremental capital output ratio
(ICOR) had remained more or less the same, the outcome should have been a
growth rate higher than the 6.7 percent and the 4.5 percent reported so far by
the CSO for the two years, but that did not happen. It was obvious that projects were not
achieving commercial operation date (COD) and there were too many obstacles on
the path of implementation. At a time
when it appeared that a number of projects would fail because of the logjam,
Government took the bold step to set up the Cabinet Committee on Investment and
the Project Monitoring Group. Thanks to
the swift decisions taken by them, by the end of January, 2014, the way was
cleared for completing 296 projects with an estimated project cost of `660,000 crore.
Foreign
Trade
10. Exports have recovered sharply, and the recovery
must be seen in the context of growth of global trade declining from 6.1
percent in 2011 to 2.7 percent in 2013.
India’s merchandise exports reached a level of USD 300.4 billion in
2012-13 registering a negative growth of 1.8 percent over the previous
year. Though 2013-14 began on a
pessimistic note, I am happy to inform the House that the year will end with
estimated merchandise exports of USD 326 billion, indicating a growth rate of
6.3 percent. However, imports are down,
and this does not augur well for either manufacturing or domestic trade. Our aim must be robust growth in both exports
and imports, with trade in balance over a period of time.
Manufacturing
11. Manufacturing is the Achilles’ heel of the Indian
economy. The deceleration in investment
in manufacturing is particularly worrying.
Consequently, there is no uptick yet in 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.
Eight National Investment and Manufacturing Zones (NIMZ) have been
announced along the Delhi-Mumbai Industrial Corridor and nine projects have
been approved by the DMIC Trust. Five
NIMZs outside DMIC have also been given in-principle approval. Three more corridors connecting Chennai and
Bengaluru, Bengaluru and Mumbai, and Amritsar and Kolkata are under different
stages of preparatory work. Additional
capacities are being installed in major manufacturing industries such as steel,
cement, refinery, power and
electronics. Several measures have been
taken to promote micro, small and medium enterprises including notifying a
public procurement policy, establishing technology centres and common facility
centres, and launching the Khadi mark.
Infrastructure
12. We have given a big push to infrastructure and
capacity addition in infrastructure industries.
In 2012-13 and in the nine months of the current financial year, we have
added 29,350 megawatts of power capacity, 3,928 kilometres of national
highways, 39,144 kilometres of rural roads under PMGSY, 3,343 kilometres of new
railway track, and 217.5 million tonnes of capacity per annum in our
ports. Besides, 19 oil and gas blocks
were given out for exploration and 7 new airports are under construction. We have also facilitated Infrastructure Debt
Funds to provide take-out finance for infrastructure projects and ease the
pressure on the banking system.
Exchange
Rate
13. Risks to capital flows were accentuated due to
volatile global conditions and the indication, in May 2013, of a reduction in
asset purchases by the US Federal Reserve. The rupee came under pressure. Government, RBI and SEBI undertook a number
of measures to facilitate capital inflows and stabilise the foreign exchange
market. Among emerging economy
currencies, the rupee was affected least when the actual reduction took place
in December 2013 and January 2014.
GDP
Growth – Decline and Rise
14. Hon’ble Members will recall that the slowdown began
in 2011-12. In nine quarters, the GDP
growth rate declined from 7.5 percent in Q1 of 2011-12 to 4.4 percent in Q1 of
2013-14. Thanks to the numerous measures
that I have narrated, I was confident that the decline will be arrested and the
growth cycle will turn in the second quarter.
I believe I have been vindicated.
Growth in Q2 of 2013-14 has been placed at 4.8 percent and growth for
the whole year has been estimated at 4.9 percent. This means that growth in Q3 and Q4 of
2013-14 will be at least 5.2 percent.
15. I can confidently assert that the economy is more
stable today than what it was two years ago.
The fiscal deficit is declining, the current account deficit has been
contained, inflation has moderated, the quarterly growth rate is on the rise,
the exchange rate is stable, exports have increased, and hundreds of projects
have been unblocked.
16. Madam Speaker, all this is the result of hard
work. I may add, among other mentors, my
mother and Harvard taught me the value of hard work.
UPA’s
Record of Growth
17. Over the last ten years, the UPA Governments have
gently nudged India and Indians into accepting that growth is an imperative;
that it must be made more inclusive and converted into development; and that
the growth model, in order to be sustainable, must address other concerns such
as environment, inter-generational equity, indebtedness, ownership and control
of resources, financing etc.
18. The UPA Governments’ record on growth is
unparalleled.
19. Ten years ago, we produced 213 million tonnes of
food grains; today, we produce 263 million tonnes of food grains. Ten years ago, the installed power capacity
was 112,700 MW; today, it is 234,600 MW.
Ten years ago, coal production was 361 million tonnes per year; today,
we produce 554 million tonnes per year.
Ten years ago, there were 51,511 km of rural roads under PMGSY; today,
we have 389,578 km. Ten years ago, the
Central Government’s expenditure on education was `10,145 crore; this year, we allocated `79,451 crore.
Ten years ago, the Central Government spent `7,248 crore on health; this year, it will spend `36,322 crore.
I could multiply the examples, but what I have given will suffice.
20. Madam Speaker, I reject the argument of policy
paralysis. Just as there are business
cycles, there is a cycle around the trend growth rate of an economy. Over a period of 33 years, the trend growth
rate in India has been 6.2 percent.
Average annual GDP growth during the period 1999-2004 was 5.9 percent,
that is below the trend rate. In the
next five year period 2004-2009, it was 8.4 percent and, in the period
2009-2014, going by the CSO’s estimate, it will be 6.6 percent. UPA-I and UPA-II have delivered above the
trend growth rate.
21. Let history be the judge of the last ten years.
REPORT
CARD OF 2013-14
22. I owe a duty to my colleagues to report on some of
the major achievements in the current financial year that concerns the economy
of the country and the welfare of the people.
We are not simply looking back, we are actually looking forward, and
therefore I shall also report on the initiatives that are being taken by my
colleagues.
Path-breaking
Decisions
23. Government took several notable decisions including
some that were described as courageous and long overdue. Sugar was fully decontrolled. A gradual correction of diesel prices was
started. Railway fares were rationalised
for the first time in a decade.
Applications were invited for issue of new bank licences. DISCOMS, mostly sick, are being restructured
with generous Central assistance.
Historic
Legislations
24. 12.8 lakh land titles covering 18.80 lakh hectare
were distributed under the Scheduled Tribes and Other Traditional Forest
Dwellers Act.
25. The Right to Fair Compensation and Transparency in
Land Acquisition, Rehabilitation and Resettlement Act was notified on 1.1.2014,
finally putting to rest an oppressive colonial law of 1894.
26. The National Food Security Act was passed assuring
foodgrain to 67 percent of the population.
27. The new Companies Act replaced a law of 1956
vintage.
28. The PFRDA Act was passed placing the New Pension
System on a statutory basis and establishing a statutory regulator.
Economic
Initiatives
29. Centrally Sponsored Schemes were restructured into
66 programmes for greater synergy. Funds
under these programmes will be released as Central assistance to State plans,
thus giving States greater authority and responsibility. As a result, Central assistance to plans of
States and Union Territories will rise substantially from `136,254 crore in BE 2013-14 to `338,562 crore in 2014-15.
30. Public sector enterprises will achieve a new record
in capital expenditure of `257,641 crore in 2013-14.
31. About 50,000 MW of thermal and hydel power capacity
is under construction after receiving all clearances and approvals. 78,000 MW of power capacity has been assured
coal supply.
32. The FDI policy was liberalized to attract larger
investments in telecommunication, pharmaceuticals, civil aviation, power
trading exchanges and multi-brand retail.
33. Approval was granted to establish two semi-conductor
wafer fab units that will be the bedrock of the electronics hardware industry.
34. The IT modernisation project of the Department of
Posts, with an outlay of `4,909 crore, will be
operational by 2015 in all 155,000 locations.
35. The Kudankulam Nuclear Power Plant Unit I achieved
criticality and is generating 180 million units of power. The 500 MW prototype fast breeder reactor at
Kalpakkam is nearing completion. 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.
36. After exceeding the target and achieving 1,684 MW
of grid connected solar power, the National Solar Mission entered the second
phase on 1.4.2013. It is proposed to
take up four ultra mega solar power projects each with a capacity of over 500
MW in 2014-15.
37. Ministry of MSME will create the ‘India Inclusive
Innovation Fund’ to promote grassroot innovations with social returns to
support enterprises in the MSME sector.
I propose to make an initial contribution of `100 crore to the corpus of the Fund.
Social
Sector Initiatives
38. In order to promote entrepreneurship among the
scheduled castes and to provide concessional finance to them, IFCI will set up
a Venture Capital Fund for Scheduled Castes.
I propose to provide an initial capital of `200 crore, which can be supplemented every year.
39. The restructured ICDS has been implemented in 400
districts and will be rolled out in the remaining districts from 1.4.2014.
40. Government has approved the National Agro-Forestry
Policy 2014 which has multiple objectives including employment, productivity,
conservation and adaptation.
41. A mechanism for marketing minor forest produce has
been introduced, and the Budget has allocated `444.59 crore to continue the scheme in 2014-15.
42. A new plan scheme with an allocation of `100 crore has been approved to promote community
radio stations.
43. 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.
Additional
Central Assistance to some States
44. The North Eastern States, Himachal Pradesh and
Uttarakhand deserve special attention.
In addition to funds allocated in the current year, I propose to release
a sum of `1,200 crore as Additional
Central Assistance to these States before the end of the year.
Space
45. India joined a handful of countries when it
launched the Mars Orbiter Mission. We
now have the capability in launch vehicle technology, cryogenics, and
navigation, meteorological and communication satellites, and are largely
self-reliant. Several flight tests,
navigational satellites and space missions are planned for 2014-15.
Redeeming
Our Promises
46. Last year, I had made three promises and I had
asked Hon’ble Members to keep before them the faces of the girl child, the
young student, and the poor. To ensure
the dignity and safety of women, I promised the Nirbhaya Fund and put `1000 crore into the Fund. So far, we have approved two proposals that
will receive support from the Fund. In
order to make it clear that the Fund will be a permanent fund, I intend to
declare the grant of `1000 crore as
non-lapsable. And in order to support
more proposals, I propose to contribute to the Fund another sum of `1000 crore next year.
47. Secondly, I had promised an ambitious programme to
skill millions of young men and women and had tasked the National Skill
Development Corporation to implement the programme. The National Skill Certification and Monetary
Reward Scheme was launched in August 2013 and has been widely hailed as a
success. At last count, 24 Sector Skill
Councils, 442 Training Partners and 17 Assessment Agencies had joined the
programme. 204 job roles have been
finalised. 168,043 youth had enrolled
and 77,710 have completed their training.
Hon’ble Members will recall that I had set apart `1,000 crore for the scheme. The whole of that amount will be transferred
to the NSD Trust and I propose to transfer another sum of `1,000 crore next year to enable the Trust to scale up
the programme of NSDC rapidly. I may add
that NSDC actually complements the initiatives of several ministries which
steer skill development programmes such as UDAAN in Jammu and Kashmir.
48. Thirdly, I had promised that the Direct Benefit
Transfer scheme would be rolled out throughout the country. The scheme is barely a year old. Money is being transferred to beneficiaries
under 27 identified schemes, including the National Social Assistance Programme
(NSAP). A total of 54,20,114
transactions have been put through until 31.1.2014 and `628 crore has been transferred. Another sum of `3,370 crore has been transferred to 2.1 crore LPG
beneficiaries. The latter scheme has
been put on hold for the time being pending resolution of some difficulties
that have been pointed out. However, let
me reiterate that the Government remains fully committed to Aadhaar under which
57 crore unique numbers have been issued so far and to opening bank accounts
for all Aadhaar holders in order to promote financial inclusion. Who needs Aadhaar? It is those who are at the bottom of the
pyramid, the poor, the migrant workers, the homeless, and the oppressed who
need Aadhaar, and we will ensure that they get Aadhaar. I have no doubt that in course of time even
critics of Aadhaar will realise that Aadhaar is a tool of empowerment.
OVERVIEW
OF THE INTERIM BUDGET
Plan
and Non-Plan Expenditure
49. I shall now give an overview of the interim
Budget. In some years, we over-provide
in the Budget. In those years savings
are inevitable. Besides, if there is
lower-than-expected-growth there will be lower-than-estimated-revenues as well. 2013-14 has been one such year. I am afraid, we will not be able to spend the
budgeted plan expenditure, but non-plan expenditure will exceed the budget by a
small amount.
50. In order to sustain the pace of plan expenditure, I
have decided to keep plan expenditure in 2014-15 at the same level at which it
was budgeted in 2013-14. I have provided
`555,322 crore for plan expenditure. I am glad to inform the House that all the
ministries/departments that run key flagship programmes of the UPA Government
have been provided adequate funds. In all the following cases, I have provided
in 2014-15 an amount equal to or higher than in the BE of 2013-14 and
irrespective of the revised estimates for the year:
Ministry of Minority
Affairs .. ` 3,711 crore
Ministry of Tribal
Affairs .. ` 4,379 crore
Ministry of Housing
& Poverty Alleviation .. ` 6,000 crore
Ministry of Social
Justice & Empowerment .. ` 6,730 crore
Ministry of Panchayati
Raj .. ` 7,000 crore
Ministry of Drinking
Water & Sanitation .. ` 15,260 crore
Ministry of Women &
Child Development .. ` 21,000 crore
Ministry of Health &
Family Welfare .. ` 33,725 crore
Ministry of Human
Resource Development .. ` 67,398 crore
Ministry of Rural
Development .. ` 82,202 crore
Railways
51. My colleague, the Minister of Railways, presented
the Railway Budget a few days ago.
Budgetary support to Railways has been increased from `26,000 crore in BE 2013-14 to `29,000 crore in 2014-15. Railways need to mobilise huge resources
through market borrowing and private public partnership (PPP) schemes. It is proposed to identify new instruments and
new mechanisms to raise funds for railway projects.
SC
Sub-Plan and Tribal Sub-Plan,
Gender
Budget and Child Budget
52. Hon’ble Members will be happy to know that I
propose to allocate `48,638 crore to the scheduled
caste sub-plan and `30,726 crore to the tribal
sub-plan. They will also be happy to
find that the gender budget has `97,533 crore and the child
budget has `81,024 crore.
53. I am confident that there will be no cause for
complaint. If there are any
shortcomings, they can be addressed when the regular budget is presented. There is enough flexibility in the
expenditure budget to make necessary changes in the allocations within the
overall resource envelope.
54. 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. This is slightly more than the revised
estimate of `245,452 crore in 2013-14. For fuel subsidy, I have provided `65,000 crore.
We have, this year, absorbed the rollover of `45,000 crore from the fourth quarter of 2012-13 and
we will rollover only `35,000 crore from the fourth
quarter of this year into the next year.
`115,000 crore has been
allocated for food subsidy keeping in mind our Government’s firm and
irrevocable commitment to implement the National Food Security Act throughout
the country.
Defence
55. The allocation for defence has been enhanced by 10
percent from `203,672 crore in BE 2013-14 to
`224,000 crore in 2014-15.
One
Rank One Pension
56. Hon’ble Members are aware of the long standing
demand of the Defence Services for One Rank One Pension (OROP). It is an emotive issue, it has legal
implications, and it has to be handled with great sensitivity. During the tenure of the UPA Governments,
changes in the pension rules applicable to the defence services were notified
on three occasions in 2006, 2010 and 2013.
As a result, the gap between pre-2006 retirees and post-2006 retirees
has been closed in four ranks (subject to some anomalies that are being
addressed): Havildar, Naib Subedar, Subedar and Subedar Major. There is still a small gap in the ranks of
Sepoy and Naik and a gap in the ranks of Major and above. We need a young fighting force, we need young
jawans, and we need young officers. We
also need to take care of those who served in the defence forces only for a
limited number of years. Government has
therefore decided to walk the last mile and close the gap for all retirees in
all ranks. I am happy to announce that
Government has accepted the principle of One Rank One Pension for the defence
forces. This decision will be
implemented prospectively from the financial year 2014-15. The requirement for 2014-15 is estimated at `500 crore and, as an earnest of the UPA Government’s
commitment, I propose to transfer a sum of `500
crore to the Defence Pension Account in the current financial year itself.
Central
Armed Police Forces
57. 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. Funds have
been provided in the current financial year and for the next year.
FINANCIAL
SECTOR
Banking
58. Hon’ble Members, the announcements that I made
concerning the financial sector in the Budget speech of February 2013 have
been, or are being, implemented. In 2014-15, I propose to provide `11,200 crore for capital infusion in public sector
banks. They have opened 5,207 branches
so far, against the target of 8,023 branches, and are near the goal of
installing an ATM at every branch. The
Bharatiya Mahila Bank was inaugurated on 19.11.2013. `6,000
crore was provided to the Rural Housing Fund and `2,000 crore to the Urban Housing Fund.
59. Banks are under strain owing to rising
non-performing assets. Bankers have
assured me that as the economy turns they will be able to contain the NPAs,
recover more loans, and build healthier balance sheets.
60. Meanwhile, I cannot fail to acknowledge the yeomen
service rendered by our banks in reaching Government’s policies and programmes
to the people. This year, banks will
exceed the target of `700,000 crore of agricultural
credit. I am therefore encouraged to set a target of `800,000 crore for 2014-15. Hon’ble Members will
recall that an interest subvention scheme was introduced in 2006-07. There is a subvention of 2 percent and an
incentive of 3 percent for prompt payment, thus reducing the effective rate of
interest on farm loans to
4 percent. So far, `23,924 crore has been released under the scheme. I propose to continue the scheme in 2014-15.
4 percent. So far, `23,924 crore has been released under the scheme. I propose to continue the scheme in 2014-15.
Credit
to Minority Communities
61. Ten years ago, the minorities had 14,15,000 bank
accounts in 121 districts of India where there is a concentration of
minorities. At the end of March, 2013,
they had 43,52,000 accounts and the volume of lending had soared from `4,000 crore to `66,500
crore. Loans to minority communities in
the whole country stood at `211,451 crore at the end of
December 2013.
Self
Help Groups
62. Ten years ago, only 9,71,182 women Self-Help Groups
had been credit linked to banks. At the
end of December 2013, 41,16,000 women SHGs had been provided credit and the
outstanding amount of credit was `36,893
crore.
Education
Loans
63. Ten years ago, only a few thousand students –
mostly the well-connected – got education loans. At the end of December 2013, public sector
banks had 25,70,254 student loan accounts and the amount outstanding was `57,700 crore.
64. Hon’ble Members will recall that my predecessor,
Shri Pranab Mukherjee, had, in the Budget of 2009-10, introduced the Central
Scheme for Interest Subsidy (CSIS) in respect of education loans disbursed
after 1.4.2009 under which Government took over the burden of interest for the
duration of the period of study and a little beyond. The scheme brought great cheer to
student-borrowers and their families.
However, I have noticed a sense of discrimination among students who had
borrowed before 31.3.2009, struggled to pay interest during the period of study,
and continued to service the loans afterwards.
I think they deserve some relief.
I therefore propose a moratorium period 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. It is estimated that nearly 9
lakh student borrowers will benefit to the tune of approximately `2,600 crore. I
intend to provide the funds in the current financial year itself. Accordingly, a sum of `2,600 crore will be transferred to the Canara Bank,
the designated CSIS banker. Details of
the scheme will be announced shortly.
Insurance
65. This year, Life Insurance Corporation has opened
1,252 offices and the four public sector general insurance companies have
opened 1,849 offices in towns with a population of 10,000 or more to serve
peri-urban and rural areas. They are
moving steadily to achieve the goals set for them.
Financial
Markets
66. A number of steps have been envisaged to deepen the
Indian financial markets. Among them are
• To comprehensively revamp
the ADR/GDR scheme and enlarge the scope of
Depository Receipts;
• To liberalise the
rupee-denominated corporate bond market;
• To deepen and strengthen
the currency derivatives market to enable Indian companies to fully hedge
against foreign currency risks;
• To create one record for
all financial assets of every individual;
• To enable smoother
clearing and settlement for international investors looking to invest in Indian
bonds.
Commodity
Derivatives Market
67. Hon’ble Members will recall the payment crisis in
the National Spot Exchange Limited (NSEL).
Following the transfer of the subject to the Ministry of Finance, swift
action was taken to sequester NSEL and to ensure there was no spill over of the
crisis to the other regulated segments of the financial market. I propose to
amend the Forward Contracts (Regulation) Act to strengthen the regulatory
framework of the commodity derivatives market.
Key
Pending Bills
68. I regret to record my disappointment that the
Insurance Laws (Amendment) Bill and the Securities Laws (Amendment) Bill have
not been passed by Parliament for reasons that have nothing to do with the
merits of the Bills.
Public
Debt Management Agency
69. Pursuant to the announcement in the Budget speech
of 2011-12, Government is ready with the Public Debt Management Agency
Bill. Following precedent, it is
proposed to establish a non-statutory PDMA that can begin work in 2014-15.
A
VISION FOR THE FUTURE
70. Madam Speaker, I now wish to look forward and
outline a vision for the future.
71. I wonder how many have noted the fact that India’s
economy, in terms of the size of its GDP, is the 11th largest in the
world. There are great things in
store. There is a well-argued view that
in the next three decades India’s nominal GDP will take the country to the
third rank after the US and China. Just
as the fortunes of the developed countries affect the emerging economies today,
the fortunes of China and India will, in the future, have a significant impact
on the rest of the world. We therefore
owe a responsibility not only to ourselves but to the whole world to keep our
economy in robust health.
72. The UPA Government has a clear line of sight to the
goals that we have set for ourselves. I
have broken down the steps toward those goals into tasks that must be
undertaken by the Government of the day.
I crave your leave to identify ten such tasks:
i. Fiscal Consolidation: We must achieve the target of
fiscal deficit of 3 percent of GDP by 2016-17, and remain below that level
always.
ii. Current Account Deficit: Since we will run a Current
Account Deficit every year for some more years, it can be financed only by
foreign investment, whether it is FDI or FII or ECB or any other kind of
foreign inflow. Hence, there is no room
for any aversion to foreign investment.
iii. Price Stability and Growth: In a developing economy we
must accept that when our aim is high growth there will be a moderate level of
inflation. RBI must strike a balance
between price stability and growth while formulating monetary policy.
iv. Financial Sector Reforms: The recommendations of the
Financial Sector Legislative Reforms Commission that require no change in
legislation must be implemented immediately and, for the other recommendations,
we must draw a timetable for passing legislation.
v. Infrastructure: We must rebuild our
infrastructure and add a huge quantity of new infrastructure. Every proven model must be adopted and the
PPP model must be more widely used. New
financing structures must be created for long term funds and pooling of
investments.
vi. Manufacturing: We must focus on
manufacturing and especially on manufacturing for export. I propose that all taxes, Central and State,
that go into an exported product should be waived or rebated. I also propose that there should be a minimum
tariff protection so that there is an incentive to manufacture goods in India
rather than import them into India.
vii. Subsidies: Given the limited resources,
and the many claims on the resources, we must choose the subsidies that are
absolutely necessary and give them only to the absolutely deserving.
viii. Urbanisation: Our cities will become
ungovernable, and perhaps unliveable, if we do not address the decay in our
cities. Cities have wealth, cities also
create wealth. That wealth should be
tapped for resources to rebuild the cities with a new model of governance.
ix. Skill Development: Skill development must rank
alongside secondary education, university education, total sanitation and
universal health care in the priorities of the Government.
x. Sharing responsibility
between States and Centre: States have the fiscal space to bear a reasonable proportion of the
financial costs of implementing flagship programmes and must willingly do so,
so that the Central Government can allocate more resources for subjects such as
defence, railways, national highways and telecommunications that are its
exclusive responsibility.
REVENUES
GST
and DTC
73. Revenues are of paramount importance. The best source of revenue is taxes and for
that we need modern tax laws. I am
disappointed that we have not yet been able to introduce GST. I leave it to you to answer the question, who
blocked the GST when an agreement on the game-changing tax reform was around
the corner? We have also got ready a
Direct Taxes Code that will serve us for at least the next twenty years. I intend to place it on the website for a
public discussion without partisanship or acrimony. I appeal to all political parties to resolve
to pass the GST laws and the DTC in 2014-15.
Funding
Scientific Research
74. Our Government has passionately espoused the cause
of science, promoted scientific research, and supported scientific applications
and inventions. The Income-tax Act
allows deductions for expenditure on scientific research, but it is limited to
direct funding. We have reflected on a
new approach to funding scientific research.
I therefore propose to set up a Research Funding Organisation that will
fund research projects selected through a competitive process. Contributions to that organisation will be
eligible for tax benefits. This will
require legislative changes which can be introduced at the time of the regular
Budget.
Off-shore
Accounts
75. There has been much debate on illegal off-shore
accounts held by Indians. Investigations
into such accounts were launched in 2011.
Despite several hurdles in obtaining evidence from the countries
concerned, the Government has succeeded, through alternative methods and
special efforts, in obtaining information in 67 cases and action is underway to
determine the tax liability as well as impose penalty. Prosecutions for wilful tax evasion have been
launched in 17 other cases. More
enquiries have been initiated into accounts reportedly held by Indian entities
in no tax or low tax jurisdictions.
Changes
in Tax Rates
76. In keeping with the conventions, I do not propose
to make any announcements regarding changes to the tax laws. However, the current economic situation
demands some interventions that cannot wait for the regular Budget. In particular, the manufacturing sector needs
an immediate boost. Hence, I propose the
following changes in some indirect tax rates:
(i) To stimulate growth in the
capital goods and consumer non-durables, I propose 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. The rates can be reviewed at
the time of the regular Budget.
(ii) To give relief to the
automobile industry which is registering unprecedented negative growth, I
propose to reduce the excise duty as follows for the period up to 30.6.2014:
Small
cars, motor cycles, scooters
and
commercial vehicles } from 12% to 8%
SUVs } from
30% to 24%
Large
and mid-segment cars } from 27/24% to 24/20%
Consequently, I propose
to make appropriate reductions in the excise duty on chassis and trailers.
The
rates can be reviewed at the time of the regular Budget.
(iii) To encourage domestic
production of mobile handsets (which has declined) and reduce the dependence on
imports (which have increased), I propose to restructure the excise duties for
all categories of mobile handsets. The
rates will be 6 percent with CENVAT credit or 1 percent without CENVAT credit.
(iv) To encourage domestic
production of soaps and oleo chemicals,
I propose to rationalise the customs duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols at 7.5 percent.
I propose to rationalise the customs duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols at 7.5 percent.
(v) To encourage domestic
production of specified road construction machinery, I propose to withdraw the
exemption from CVD on similar imported machinery.
(vi) To encourage indigenous
production of security paper for printing currency notes, I propose to provide
a concessional customs duty of 5 percent on capital goods imported by the Bank
Note Paper Mill India Private Limited.
77. I also propose to give relief from service tax in
two cases.
(i) By virtue of the definition
of ‘agricultural produce’ in Finance Act 2012, read with the Negative List,
storage or warehousing of paddy was excluded from the levy of service tax. Rice
was not. The distinction is somewhat artificial. Hence, I propose to exempt loading,
unloading, packing, storage and warehousing of rice from service tax.
(ii) Ministry of Health and Family
Welfare has requested that services provided by cord blood banks are also
healthcare services and should be exempt from service tax. I propose to accept the request.
Notifications in respect
of the above changes will be issued today.
BUDGET
ESTIMATES
78. I shall now present the Budget Estimates for
2014-15.
79. The current financial year will end on a
satisfactory note with the fiscal deficit at 4.6 percent (below the red line of
4.8 percent) and the revenue deficit at 3.3 percent.
80. Emboldened by the progress made, I have budgeted
for receipts and expenditure in 2014-15 that will leave a fiscal deficit of 4.1
percent, which will be below the target set by the new fiscal consolidation
path. Revenue deficit is estimated at
3.0 percent.
81. The estimate of plan expenditure is `555,322 crore.
Non-plan expenditure is estimated at `12,07,892
crore.
Conclusion
82. Madam Speaker, Jean Drèze and Amartya Sen have
pointed out that “India was the first non-Western country – and also the first
poor country in the world – to commit itself to a resolutely democratic way of
governance.” Democracy acknowledges
diversity, respects dissent, encourages debate, and decides through a
government of elected representatives.
Neither populism nor majoritarianism nor individualism is an alternative
way of governance.
83. Our way of governance has not come in the way of
lifting 140 million people out of poverty in the last ten years. That is the greatest achievement of the UPA
Governments, and we are proud of the achievement.
84. In the ten years that I have been in the North
Block, I have seen the best of times and difficult times. Never did I lose faith in Jawaharlal Nehru’s
idea of India that, in the words of Sunil Khilnani, “sought to coordinate
within the form of a modern state a variety of values: democracy, religious
tolerance, economic development and cultural pluralism.” It is with that faith that I shall remain on
the bridge until the day when, I am sure, the people of India will entrust the
responsibility to a hand that will hold the “sceptre swayed with equity.” Let me sign off with the couplet from the
sage, Thiruvalluvar:
“Vel
Anru Venri Tharuvathu Mannavan
Kol
Athuvoom Kodaathu Enin.”
(Not
the spear but sceptre swayed with equity
Alone
gives the ruler victory.)
