Union Budget 2015 – Analysis & Discussion

Panel Discussion Members-

Mr. Krishnan Madhabushi – Co-founder Kwench Library Solution (Ex-McKinsey & Sundaram Clayton.

Mr Suresh – Practice Head Capital Markets at HCL (Ex Fund Manager at UTI)

Mr Rajiv – Founder MyCareerAllies (Ex GE, HP & Wealth Advisors)

The Union Budget of India, referred to as the Annual Financial Statement in Article 112 of the Constitution of India, is the annual budget of the Republic of India, presented each year on the last working day of February by the Finance Minister of India in Parliament. The budget, which is presented by means of the Financial Bill and the Appropriation bill, has to be passed by the House before it can come into effect on April 1, the start of India’s financial year

Union budget for financial year-16 was presented by the finance minister Mr Arun Jaitley on 28th of Feb’15 at the back drop of falling global oil prices and a strong government in the form of a single party rule after nearly 2 decades. With the Prime Minister Narendra Modi at the helm, there have been talks about reforms / measures taken to boost the infrastructure spending and also to boost PM Modi’s pet projects like “Make in India” and ”Swachh Bharat Abhiyan” etc.

Budget Numbers

  • Revenue & Expenditure – The revenue receipts were expected to grow by 1.4% over the revised estimates of FY (financial year) 15. The overall receipts are pegged at 17.77 lakh crores which includes nearly 5.6 lakh crores in market borrowings also. The non-plan expenditure is expected to expand by a little over 8.2%. The plan expenditure is expected to stay nearly unchanged given the potential reduction in the central assistance to states on account of higher devolution (as recommended in the fourteenth finance commission)
  • Fiscal Deficit & Govt Borrowings – The Finance Minister has pegged fiscal deficit for 2015-16 at 3.9% of GDP (Rs 5, 55,649 cr) and proposed to lower it to 3% by 2017-18. The reason for not bringing it down to 3% in the current fiscal year itself, as recommended by the Fiscal Responsibility and Budget Management Act is to push for much needed improvement in infrastructure by increasing investment to Rs 70,000 cr. The net borrowing for the central government is pegged at INR 4,56,405 cr and the gross supply of dated securities is pegged at INR 6,00,000 cr

Budget Announcements

  • Introduction of Goods and Services Tax (GST) – The GST is an indirect tax that would replace existing levies such as excise duty, service tax, and value-added tax (VAT). It is a tax on goods and services with comprehensive and continuous chain of set-off benefits from the producer’s point and service provider’s point up to the retailer’s level. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages
  • Introduction of gold monetisation scheme to allow the depositors of gold to earn interest in their metal accounts and the jewellers to obtain loans in their metal account. A sovereign gold bond was also introduced, as an alternative to purchasing metal gold. Government has also introduced developing an Indian gold coin, which will carry the Ashok Chakra on its face
  • Targets for Renewable energy capacity addition for the year 2022 was announced at 1,25,000MW (1,00,000MW solar, 60,000MW wind, 10,000MW biomass and 5000MW small hydro power)
  • Divestments – The proceeds from public sector undertaking disinvestment for FY16 is estimated at INR 41,000 cr & disinvestment of government stake in nongovernment companies at INR 28,500 cr
  • Corporate Taxation – Rate of tax for domestic companies has been reduced to 25% from the current 30%, in a phased manner over next four years. Surcharge has however been increased to 7% for domestic companies with revenues below 10 cr, while it has been increased to 12% for companies with revenues above 10 cr. Also, the GAAR has been deferred for 2 years with no retrospective taxation
  • Individual Taxation – Personal income tax exemption limit has been left unchanged for all categories. However, the wealth tax has been abolished. The additional exemption of INR 50,000 is made available for investments into the National Pension Scheme under section 80 CCD
  • Entrepreneurship – FM has allocated Rs1000 crores for setting up a mechanism called Self-Employment and Talent Utilization (SETU) which is to be a techno-financial, incubation programme that will support all aspects of nurturing a start-up, particularly in technology driven areas. Also on the books is a Rs150 crore programme called the Atal Innovation Mission for Grand Challenges in India which will provide grants to innovators. The focus of this budget is on effective and timely disbursal of funds and implementation of the activities rather than just allocating funds
  • Another focus of the current budget is on building financial infrastructure for supporting SMEs through creation of Mudra Banks. Its aim is to refinance loans of Micro finance companies at lower rates thereby encouraging entrepreneurship among SC/STs and OBCs. The Mudra Bank will refinance institutions through the newly-announced Pradhan Mantri Mudra Yojana

Budget Analysis –

The budget has announced a number of administrative measures to cater to the infra requirements of the country and also improve ease of doing business. It also addresses measures to increase financial savings, facilitate funding for companies, simplify tax structures and pave the way for a sustainable recovery process. The proposal to reduce corporate tax from 30% to 25% over the next four years, the postponement of GAAR taxation for the next two years and its applicability to investments only made thereafter e.t.c augurs well for the indian economy

Overall the budget announcements though not “big bang” as many expected or wanted it to be, the focus on facilitating growth while keeping fiscal prudence intact is directionally positive for the over-all economic conditions.

Source from:

My Career Allies

Complied by:

Fatima Vijayarani.B

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