EconomicSurvey2014 15

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Economic Survey 2014-15
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Finance Minister Arun Jaitley tabled the Economic

Survey 2014-15 in Lok Sabha on 27 Feb. The survey was
prepared by the finance ministrys chief economic adviser
Arvind Subramanian on the state of Asias third-largest
economy and released ahead of the federal budget
announcement for 2015-16 fiscal year that begins on Apr 1.
Economic Outlook, Prospects, and Policy

Challenges
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India has reached a sweet spot rare in the history of

nations in which it could be launched on a doubledigit medium-term growth trajectory which would allow
the country to attain the fundamental objectives of
wiping every tear from every eye.
The macro-economy has been rendered more stable,
reforms have been launched, deceleration in growth has
ended, and the economy appears to be recovering.
In 2015-16, the real GDP growth at market prices is
estimated to be about 0.61.1 percentage points higher
vis-a-vis 2014-15.
Using the new estimate for 2014-15 as the base, growth
at market prices is expected at 8.1-8.5 per cent
in 2015-16.
The budget should continue the process of fiscal
consolidation. Overall revenue-to-GDP ratio for 2014 as
estimated at 19.5 per cent by the IMF, needs to move
toward levels in comparator countries estimated at 25
per cent for emerging Asian economies and 29 per cent
for the emerging market countries in the G-20.
To provide legal certainty and confidence to investors,
the ordinances on coal, insurance, and land need to be
translated into legislation.
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The constitutional amendment bill to implement the goods

and services tax (GST) needs to be enshrined in
legislation.
The govt and the RBI need to conclude the monetary
policy framework agreement to consolidate the recent
gains in inflation control and codify into an institutional
arrangement.
Reforms of labour and land laws and reducing the costs
of doing business will need to be a joint endeavour of
the states and the Centre.
The economy is likely to over-perform on the RBIs
inflation target by about 0.5-1.0 per cent, opening up
the space for further monetary policy easing.
The outlook is favourable for the current account and
its financing. However, there are risks from a shift in US
monetary policy and turmoil in the Eurozone.
Successful implementation of the far-reaching changes
for sharing of revenues between the Centre and the States
as recommended by the Fourteenth Finance Commission
will advance the cause of cooperative federalism.
The time is ripe for a more broad-based response to the
challenges in agriculture and to ensure that agriculture
grows at about 4 per cent on a sustained basis.
To ensure fiscal credibility, and consistency with the
medium-term goals, the upcoming budget should initiate
the process of expenditure control to reduce both the
fiscal and revenue deficits.
Cash-based transfers based on the JAM number trinity
Jan Dhan, Aadhaar, Mobile offer exciting
possibilities to effectively target public resources to
those who need it most.
Fiscal Framework
Wiping every tear from every eye: the JAM

Number Trinity Solution
The Investment Climate: Stalled Projects, Debt

Overhang and the Equity Puzzle
India must meet its medium-term fiscal deficit target of

3 per cent of GDP. This will provide the fiscal space to
insure against future shocks.
India must also reverse the trajectory of recent years
and move towards the golden rule of eliminating the
revenue deficit and ensuring that, over the cycle,
borrowing is only for capital formation.
The way to achieve this objective should be based on
firm control over expenditures, most notably by
eliminating leakages in subsidies and social expenditures.
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support to poor households in a targeted and less

distortive way.
Two alternative financial delivery mechanisms are
suggested: (i) Mobile Money with over 900 mn cell
phone users, it offers tremendous opportunities to direct
Aadhaar based transfers; (ii) Post Offices the large
Postal Network in India can seamlessly fit into the
Aadhaar-linked benefits-transfer architecture.
The stalling rate of projects has been increasing at an

alarmingly high rate in the last five years, and rate is
much higher in the private sector.
The good news is that the rate of stalling seems to have
plateaued in the last three quarters.
The stock of stalled projects has come down to about 7
per cent of the GDP at the end of the third quarter of
2014-15 from 8.3 per cent the previous year.
The stalling of projects is severely affecting the balance
sheets of the corporate sector and public sector banks,
which in turn is constraining future private investment.
Despite high rates of stalling, and weak balance sheets,
the equity market seems to be performing quite well.
Expectation that the private sector will drive investment
needs to be moderated. In this light, public investment may
need to step in to recreate an environment to crowd in
private sector investment in the short term.
Efforts must be made to revitalise the public-private
partnership model of investment, albeit in a different
manner.
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Private investment must remain the main engine of longrun growth. But in the short to medium term, public
investment, especially by the railways, will have to play
a catalytic role.
Banking is hobbled by policy, which creates double
financial repression, and by structural factors, which
impede competition. The solution lies in the 4 Ds of
deregulation (addressing the statutory liquidity ratio and
priority sector lending), differentiation (within the public
sector banks in relation to recapitalisation, shrinking
balance sheets and ownership), diversification (of source
of funding within and outside banking), and disinterring
(by improving exit mechanisms).
The Prime Ministers Skill India objective should be
accorded high priority along with, and indeed in order to
realise, Make in India.
India has taken a number of green actions. It can make a
positive contribution to the forthcoming Paris
negotiations on climate change.
Improving the status and treatment of women is a major
development challenge. Family planning targets and the
provision of incentives are leading to an undesirable
focus on female sterilisation. Family planning programme
should align with reproductive health rights of women.
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Price subsidies are often regressive as a rich household

benefits more than a poor household.
Leakages in subsidies are large and can be reduced
without compromising household welfare.
Cash transfers can augment the effectiveness of existing
anti-poverty programmes.
The JAM Number Trinity Jan Dhan Yojana, Aadhaar
and Mobile numbers allows the state to offer this
Credit, Structure and Double Financial

Repression: A Diagnosis of the Banking Sector
The Indian banking system is affected by what might be

called double financial repression.
Financial repression on the asset side of the balance
sheet is created by the statutory liquidity ratio (SLR)
requirement that forces banks to hold govt securities,
and priority sector lending (PSL).
Financial repression on the liability side has arisen from
high inflation since 2007, leading to negative real interest
rates, and a sharp reduction in households financial
savings.
There appears to be a lack of competition, reflected in
the private sector banks inability to increase their
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Putting Public Investment on Track: The Rail

Route to Higher Growth
What to Make in India? Manufacturing or

Services?
It is registered manufacturing, not manufacturing in

general, which has the potential for structural
transformation. It is characterised by unconditional
domestic convergence.
States and firms within India are converging to the Indian
frontier but that could mean little unless they are also
converging to the international manufacturing frontier.
The talk on the transformational potential of
manufacturing in India must focus on unskilled registered
manufacturing.
Sustaining a skill-intensive pattern would require a greater
focus on education and skills development.
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A National Market for Agricultural Commodities:

Some Issues and the Way Forward
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The decline in public as well as private corporate

investment has been associated with the growth decline
in recent years.
The two biggest challenges facing increased public
investment in India are financial resources and
implementation capacity.
The present govt can now do for the neglected railways
sector what the previous NDA govt did for rural roads.
This impetus has the potential to crowd in greater private
investment and do so without jeopardising Indias public
debt dynamics.
Greater public investment in the railways would boost
aggregate growth and the competitiveness of Indian
manufacturing substantially.
In the long run, the railways must be commercially viable.
From Carbon Subsidy to Carbon Tax: Indias

Green Actions
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national or even state-level common market for

agricultural commodities.
The 2014 budget recognises the need for setting up a
national market and states that the Central Govt will work
closely with the state govts to reorient their respective
APMC Acts to provide for the establishment of private
market yards/private markets.
More steps may have to be taken and incremental moves
may need to be considered to get the states on board.
For example, first it may be possible to get all the states
to drop fruits and vegetables from the APMC schedule
of regulated commodities, followed by cereals, pulse and
oil seeds, and then all remaining commodities.
State govts should also be specifically persuaded to
provide policy support for setting up infrastructure,
making available land etc for alternative or special markets
in private sector.
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presence. Even within the public sector banks there is

sufficient variation in performance.
The four key policy recommendations are the 4Ds deregulate, differentiate, diversify and disinter.
The provisions of the Model Agricultural Produce

Market Committee Act do not go far enough to create a
The recent steep decline in international oil prices is

seen by many as an opportunity to rationalise the energy
prices by getting rid of the distorting subsidies whilst
shifting taxes towards carbon use.
India has cut subsidies and increased taxes on fossil
fuels turning a carbon subsidy regime into one of carbon
taxation.
The move to substantial carbon taxation combined with
Indias ambitious solar power programme suggests that
India can make substantial contributions to the
forthcoming Paris negotiations on climate change.
The Fourteenth Finance Commission (FFC):

Implications for Fiscal Federalism in India
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The FFC has radically enhanced the share of the states

in the Central divisible pool from the current 32 per cent
to 42 per cent.
The FFC has also proposed a new horizontal formula
for the distribution of the states share in divisible pool
among the states.
The recommendations will move the country towards
greater fiscal federalism, conferring more fiscal autonomy
on the states.
Eco Survey 2014-15 at a glance

Taking into consideration the change of base year by
the Central Statistics Office (CSO) of the National
Accounts series from 2004-05 to 2011-12, the Economic
Survey states that growth at market prices for 2015-16
is expected to be 8.1-to 8.5 per cent.
India must adhere to medium-term fiscal deficit target

of 3 per cent of the countrys gross domestic product
(GDP).
The decline in inflation by over 6 percentage points
since late 2013 and also reduction of current account
deficit from a peak of 6.7 per cent of GDP in the third
quarter of 2012-13 to about one per cent in the coming
fiscal year has made India an attractive investment
destination well above most other countries.
The year witnessed hyper-growth in the technology

start-up and software product landscape with India
ranking as the fourth largest start-up hub in the world
with over 3,100 start-ups in the country.
Software products and services revenues for 2015-16

are projected to grow at 1214 per cent.
Increase in growth on both foreign tourist arrivals at

7.1 per cent and foreign exchange earnings at 6.6 per
cent in the year 2014.
Migration from traditional stores to modern retail

continues, though the latter still accounts for only 8
per cent of the total market.
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With 100 per cent FDI permitted in the Film Sector, India
is emerging as the new favourite of international studios.
The direct fiscal cost of all the subsidies is roughly

`378,000 cr or 4.2 per cent of 2011-12 GDP.
41 per cent of PDS kerosene is lost as leakage and only

46 per cent of the remaining 59 per cent is consumed by
poor.
Govt will discontinue support to eight centrallysponsored schemes, bringing their number down to 58.
The stock of stalled projects stands at about 7 per cent

of GDP.
Food grain production for 2014-15 estimated at 257.07

mn tonnes; to exceed that of last 5 years by 8.5 mn
tonnes.
Indian banking balance sheet is suffering from double

financial repression.
Govt will adhere to fiscal deficit target of 4.1 per cent of

GDP in 2014-15.
Consumer Price Index (CPI) inflation in 2015-16 is likely

to be in the range of 5-5.5 per cent.
IT and ITeS sector, including Business Process

Management (BPM), continues to be one of the largest
employers in the country.
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Five key takeaways from the economic survey for 201415:

Growth rate of over 8 per cent expected for the
coming year
A double-digit economic growth trajectory is now a
possibility
Such growth could help in wiping every tear from
every eye and realising aspiration of Indias youth
Political mandate for reform and benign external
environment
Scope for big-bang reforms
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There are 1219 sections on the high-density network,

which can be roughly equated with tracks connecting
the metros.
A novel by Shubhada Gogate titled Khandalyachya
Ghatasaathi is a fictionalised account of Indias first
railway line being constructed crossing the Sahyadri.
To deliver a sustained and measurable improvement in

customer experience.
To make rail a safer means of travel.
To expand capacity substantially and to modernise
infrastructure. Daily passenger carrying capacity will be
increased from 21 mn to 30 mn. Track length will increase
from 1,14,000 km to 1,38,000 km, and annual freight
carrying capacity from 1 bn to 1.5 bn tonnes.
To make Bhartiya Rail financially self-sustainable.
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Five drivers for execution strategy
(a) Adopting a medium-term perspective: This Railway

Budget is part of a trilogy of documents White Paper,
Budget 2015-16 and Vision 2030 document that chart
out our vision for the future.
(b) Building partnerships: With States, with PSUs, with
multilateral and bilateral organisations and other govts,
and with the private sector.
(c) Leveraging additional resources: An investment of `8.5
lakh cr has been envisaged. Multilateral development
banks and pension funds will be tapped.
(d) Revamping management practices, systems, processes,
and re-tooling of human resources: The operating ratio
for 2015-16 has been proposed at 88.5% as against a
targeted operating ratio of 91.8% in 2014-15 and 93.6% in
2013-14.
(e) Setting standards for governance and transparency
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New toilets will be built covering 650 additional stations

compared to 120 stations last year. Bio-toilets are being
fitted in coaches.
The quality of Indian Railways On-board Housekeeping
Service (OBHS), presently available in 500 pairs of trains,
is being re-looked.
NIFT, Delhi approached for designing bed linen
An all-India 24X7 helpline number, 138, to attend to the
problems of passengers on a real-time basis.
A toll-free number, 182, has been dedicated for receiving
security-related complaints.
Operation Five Minutes to ensure that unreserved
tickets can be purchased within five minutes.
A Defence Travel System for elimination of Warrants to
make travel easier for soldiers.
Hand-held terminals will now be provided to Travelling
Ticket Examiners (TTEs), which can be used for
verification of passengers and downloading charts.
A centrally managed Railway Display Network to be
introduced in over 2,000 stations over 2 years.
So far, 1052 stations have been identified for upgradation
of Passenger Amenities at Station under Adarsh station
scheme. It is proposed to include 200 more stations under
this scheme.
Capacity in identified trains will be augmented to run
with 26 coaches from the existing 24 coaches.
The National Institute of Design has been approached
to replace the present uncomfortable ladders used for
climbing upper berths with user-friendly ones.
A very modern train system called train sets will be
introduced. These are similar to bullet trains and can run
on existing tracks without an engine to haul them.
The funds allotment for passenger amenities has been
increased by 67%.
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Four goals for the next five years
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Railway Budget 2015-16
Eleven major thrust areas
A. Quality of life in journeys

No increase in passenger fares.
Rail tickets can now be booked 120 days in advance, as
against present 60 days.
B. Station Redevelopment
Satellite Railway terminals will be developed in major
cities for decongesting the city as well as providing
service to passengers residing in suburbs.
C. Capacity Augmentation
While last-mile connectivity projects continue to be
accorded the highest priority, Govt intends to fast-track
the sanctioned works on 7,000 km of double/third/
fourth lines and commission 1200 km in 2015-16 at an
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D. Safety
All pending recommendations made by High Level Safety
Review Committee headed by Dr Kakodkar will be
examined by Apr 2015.
RDSO has been asked to develop a suitable device with
reliable power supply system based on theft-proof
panels/batteries in consultation with Indian Space
Research Organization, using geo-spatial technology
for providing audio-visual warning to road users at
unmanned level crossings.
A radio-based signal design project taken up with IIT
Kanpur for warnings at unmanned level crossing.
In 2015-16, 970 road overbridges/underbridges (ROB/
RUBs) and other safety-related works to eliminate 3,438
level crossings at a total Railway expense of `6,581 cr.
E. Technology upgradation
An innovation council called Kayakalp will be set up
for the purpose of business re-engineering and
introducing a spirit of innovation in Railways.
To mark the centenary celebrations of Banaras Hindu
University, Govt proposes to set up Malaviya Chair
for Railway Technology at IIT (BHU), Varanasi. This
Chair will help in development of new materials to be
used in all assets of Railways.
F. Partnerships for development
Foreign Rail Technology Cooperation scheme will be
launched in order to achieve the higher quality service
for our nation.
G.. Improvements to management processes and systems
Obtaining Rail Transport Clearance abolished.
EPC system of contracting all over Indian Railways.
Vendor Interface Management System .
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investment of `8,686 cr. This budgetary allotment under

Capital is 84% higher than 2014-15.
Govt also intends commissioning 800 km of gauge
conversion.
Additionally, 77 projects covering 9,400 km of doubling/
tripling/quadrupling works have been sanctioned along
with their electrification at a total cost of `96,182 cr.
Meghalaya has been brought on the Railway map of
India and direct connectivity to Delhi has been provided
to Arunachal Pradesh. Further, the Barak Valley will be
brought on broad gauge by Mar 2015.
The rail connectivity between Jammu region and the
Kashmir valley through the Banihal tunnel provides allweather connectivity with the rest of the country.
Udhampur-Katra was a blessing for pilgrims.
As against a sanction of 462 route km in 2014-15, a length
of 6,608 route km has been sanctioned for electrification
for 2015-16.
Transport Logistics Corporation of India (TRANSLOC)
will be set up to develop common user facilities with
handling and value-added services to provide end-toend logistics solution at select Railway terminals through
Public Private Partnerships.
A state-of-the-art Perishable Cargo Centre is under
completion at the Azadpur Mandi with a scientific bananaripening Centre.
The speed of 9 railway corridors will be increased from
the existing 110 and 130 kmph to 160 and 200 kmph.
A policy of attaining speeds of 100 kmph for empty
freight trains and 75 kmph for loaded trains
The loading density on all major freight-bearing routes
will be upgraded to 22.82 tonne axle loads.
H. Resource mobilisation
The size of the Plan Budget has gone up by 52% from
`65,798 cr in 2014-15 to `1,00,011 cr in 2015-16. Support
from the Central Govt constitutes 41.6% of the total Plan
Budget and internal generation 17.8%.
A Financing Cell in the Railway Board, which would
seek the benefit of advice from experts in this field.
Govt is launching a Coastal Connectivity Program.
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I. Human Resources
J. Energy and sustainability
The annual consumption of fuel by the Railways is just
about 7% of the annual fuel consumption by the road
sector. The energy consumption is about 75%-90%
less and CO2 emission is about 80% less.
K. Transparency and governance initiatives
Financial Performance 2014-15
Passenger Earnings were budgeted to increase by

22.2%. This has been scaled down to 17.7% .
There is a net reduction in Gross Traffic Receipts by
`917 cr in Revised Estimates (RE) compared to the
Budget Estimates (BE) of `1,60,165 cr.
The budgeted Other Working Expenses (OWE) of
`1,12,649 cr have been decreased in the RE 2014-15 to
`1,08,970 cr, ie by `3,679 cr.
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Ministry of Finance has communicated a Gross

Budgetary Support of `40,000 cr for the Railways
annual Plan. Besides, `1,645.60 cr has also been provided
as Railways share of diesel cess from the Central Road
Fund. Market borrowing under EBR is projected at
`17,655 cr, an increase of about 46.5% (`5,609 cr) over
RE 2014-15. Balance Plan outlay includes `17,793 cr from
Internal Resources and `5781 cr from PPP.
Railways proposes a Plan Outlay of `1,00,011 cr, an
increase of 52% over RE 2014-15.
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Passenger earnings growth has been pegged at 16.7%

and earnings target has accordingly been budgeted at
`50,175 cr.
The freight traffic is pegged at an all-time high
incremental traffic of 85 mn tonnes. Goods earnings is
accordingly proposed at `1,21,423 cr. Other coaching
and sundries are projected at `4,612 cr and `7,318 cr.
Freight rate hike, mostly on foodgrains and urea, to raise
`4,000 cr.
Gross Traffic Receipts are estimated at `1,83,578 cr,

which is a growth of 15.3%.
Plan Outlay 2015-16
Budget Estimates 2015-16
Appropriation to the Pension Fund has been increased

to `29,540 cr in RE from `28,865 cr (BE).
Plan size for 2014-15 has increased from `65,445 cr in the
BE to `65,798 cr in RE.
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The actions have not been confined to the core or macroeconomic areas alone. Action has been taken with regard
to allocation of natural resources; financial inclusion;
health and hygiene of the common man; girls and their
education; employment for the youth; improved and
non-adversarial tax administration; effective delivery of
benefits; investment and job creation; welfare of labour;
agricultural productivity and increasing farm incomes;
power; digital connectivity; skilling our youth; efficient
and better work culture in Govt; ease of doing business;
mainstreaming North Eastern States; and, reviving our
pride in the nation and culture.
Three achievements demonstrate the quality and
conviction of the Govt. One is the success of the Jan
Dhan Yojana. Financial inclusion has been talked about
for decades now. Who would have thought that in a
short period of 100 days, over 12.5 cr families could
have been brought into the financial mainstream? The
other is coal auctions. Earlier, the States only got benefits
of royalty. Now, by the transparent auction process, the
coal-bearing States will be getting several lakh of crores
of rupees which they can use for creation of long-awaited
community assets and for welfare of their people.
The third is Swachh Bharat, which has transformed into
a movement to regenerate India. For example, 50 lakh
toilets have already been constructed in 2014-15. Govt
will indeed attain the target of building six cr toilets. But,
Swachh Bharat is not only a programme of hygiene and
cleanliness but, at a deeper level, a programme for
preventive health care, and building awareness.
We are now embarked on two more game-changing
reforms. GST (Goods and Services Tax) and what the
Economic Survey has called the JAM Trinity Jan Dhan,
Aadhar and Mobile to implement direct transfer of
benefits. GST will put in place a state-of-the-art indirect
tax system by 1 Apr, 2016. The JAM Trinity will allow us
to transfer benefits in a leakage-proof, well-targeted and
cashless manner.
One of the major achievements of this Govt has been to
conquer inflation. This decline represents a structural
shift. Going forward, CPI inflation is expected to remain
at close to 5% by the end of the year. This will allow for
further easing of monetary policy.
To ensure that the victory over inflation is
institutionalised and hence continues, a Monetary Policy
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The economic environment is far more positive than in

the recent past. When other economies are facing serious
challenges, India is about to take off on a faster growth
trajectory once again. The International Monetary Fund
(IMF) has downgraded its earlier forecast of global
economic growth by 0.3%, and the World Trade
Organization has revised its forecast of world trade
growth from 5.3% to 4%. Forecasts for India, however,
have either been upgraded, or remained the same, without
downgrades. The States have been embraced as equal
partners in the process of economic growth. States have
been economically empowered more than ever before
and every rupee of public expenditure, whether
undertaken by the Centre or the States, will contribute to
the betterment of peoples lives through job creation,
poverty elimination and economic growth.
In the last nine months, the NDA Govt has undertaken
several significant steps to energise the economy. The
credibility of the Indian economy has been re-established.
The world is predicting that it is Indias chance to fly.
Though the Union Budget is essentially a Statement of
Account of public finances, it has historically become a
significant opportunity to indicate the direction and the
pace of Indias economic policy. The proposals, therefore,
lay out the roadmap for accelerating growth, enhancing
investment and passing on the benefit of the growth
process to the common man, woman, youth and child:
those, whose quality of life needs to be improved.
In Nov 2012, CPI inflation stood at 11.2%, the current
account deficit by the first quarter of 2013-14 had reached
4.6% of GDP, and normal foreign inflows until Mar 2014
were $15 bn. There was a sentiment of doom and gloom,
and the investor community had almost written India
off.
The latest CPI inflation rate is 5.1%, and the wholesale
price inflation is negative; the current account deficit for
this year is expected to be below 1.3% of GDP; based
on the new series, real GDP growth is expected to
accelerate to 7.4%, making India the fastest-growing
large economy in the world; foreign inflows since Apr
2014 have been about $55 bn, so that our foreign
exchange reserves have increased to a record $340 bn;
the rupee has become stronger by 6.4% against a broad
basket of currencies; and ours was the second-best
performing stock market amongst the major economies.
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Union Budget 2015-16
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essential for the welfare of rural areas.

(x) In terms of communication, the rural and urban
divide should no longer be acceptable to us. We
have to ensure connectivity to all the villages without
it.
(xi) Two-thirds of our population is below 35. To ensure
that our young get proper jobs, we have to aim to
make India the manufacturing hub of the world. The
Skill India and the Make in India programmes are
aimed at doing this.
(xii) We also have to encourage and grow the spirit of
entrepreneurship in India and support new startups. Thus can our youth turn from being job-seekers
to job-creators.
(xiii) The Eastern and North Eastern regions of our
country are lagging behind in development on many
fronts. We need to ensure that they are on par with
the rest of the country.
By the time of the 75th year of Indian independence,
Amrut Mahotsav of our independence is reached, we
have to achieve all of the above.
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Framework Agreement has been concluded with the RBI.

This Framework clearly states the objective of keeping
inflation below 6%. Govt will move to amend the RBI
Act this year, to provide for a Monetary Policy
Committee.
The Central Statistics Office (CSO) has recently released
a new series for GDP, which involves a number of
changes relative to the old series. Based on the new
series, estimated GDP growth for 2014-15 is 7.4%. Growth
in 2015-16 is expected to be 8 to 8.5%. Aiming for a
double-digit rate seems feasible very soon.
The year 2022 will be the Amrut Mahotsav, the 75th year
of Indias independence. The vision of what the Prime
Minister has called Team India, led by the States and
guided by the Central Govt, should include:
(i) A roof for each family in India. The call given for
Housing for all by 2022 would require Team India
to complete 2 cr houses in urban areas and 4 cr
houses in rural areas.
(ii) Each house in the country should have basic
facilities of 24-hour power supply, clean drinking
water, a toilet, and be connected to a road.
(iii) At least one member from each family should have
access to the means for livelihood and, employment
or economic opportunity, to improve his or her lot.
(iv) Substantial reduction of poverty. All our schemes
should focus on and centre around the poor. Each
of us has to commit ourselves to this task of
eliminating absolute poverty.
(v) Electrification, by 2020, of the remaining 20,000
villages in the country, including by off-grid solar
power generation.
(vi) Connecting each of the 1,78,000 unconnected
habitations by all-weather roads. This will require
completing 1,00,000 km of roads currently under
construction plus sanctioning and building another
1,00,000 km of roads.
(vii) Good health is a necessity for both quality of life,
and a persons productivity and ability to support
his or her family. Providing medical services in each
village and city is absolutely essential.
(viii) Educating and skilling our youth to enable them to
get employment. To ensure that there is a senior
secondary school within 5 km reach of each child,
we need to upgrade over 80,000 secondary schools
and add or upgrade 75,000 junior/middle, to the
senior secondary level.
(ix) Increase in agricultural productivity and realisation
of reasonable prices for agricultural production is
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There are five major challenges Govt has to reckon with.

Firstly, agricultural incomes are under stress. Our
second challenge is increasing investment in
infrastructure. With private investment in infrastructure
via the public private partnership (PPP) model still weak,
public investment needs to step in to catalyse investment.
Our third major challenge is that manufacturing has
declined from 18% to 17% of GDP as per new GDP data;
and manufacturing exports have remained stagnant at
about 10% of GDP. The Make in India programme is
aimed at meeting this challenge, thus creating jobs.
Fourth, we need to be mindful of the need for fiscal
discipline in spite of rising demands for public
investment. In keeping with the true spirit of co-operative
federalism, we have devolved a 42% share of the
divisible pool of taxes to States. This is an unprecedented
increase which would empower states with more
resources. The devolution to the States would be of the
order of `5.24 lakh cr in 2015-16 as against the
devolution of `3.38 lakh cr as per revised estimates of
2014-15. Another `3.04 lakh cr would be transferred by
way of grants and plan transfers. Thus, total transfer to
the States will be about 62% of the total tax receipts of
the country.
In spite of the consequential reduced fiscal space for the
9
Fiscal Roadmap
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Govt still remains firm on achieving the medium-term

target for fiscal deficit of 3% of GDP. But that journey
has to take account of the need to increase public
investment. The total additional public investment over
and above the RE is planned to be `1.25 lakh cr, out of
which `70,000 cr would be capital expenditure from
budgetary outlays. We also have to take into account
the drastically reduced fiscal space; uncertainties that
implementation of GST will create; and the likely burden
from the report of the 7th Pay Commission. Rushing into,
or insisting on, a pre-set time-table for fiscal consolidation
pro-cyclically would not be pro-growth. With the
economy improving, the pressure for accelerated fiscal
consolidation too has decreased. In these circumstances,
Govt will complete the journey to a fiscal deficit of 3% in
three years, rather than the two years envisaged
previously. Thus, for the next three years, targets are:
3.9% for 2015-16; 3.5% for 2016-17; and, 3.0% for 201718. The additional fiscal space will go towards funding
infrastructure investment.
While there is a compositional shift, the aggregate
envelope for job creation, poverty elimination and
building infrastructure is not disturbed; in fact it goes
up this year, and every subsequent year, in the same
proportion as the tax revenues of the Union, and the
State Govts increase. From this national perspective of
public finances, not only is the path to fiscal
consolidation on track, aggregate annual capital
expenditure of the Govts, as a whole, can be expected to
rise significantly, by more than 0.5% of GDP.
Agriculture
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Good Governance
with inefficiency. The same is true of subsidies. Subsidies

are needed for the poor and those less well off. What we
need is a well-targeted system of subsidy delivery. We
need to cut subsidy leakages, not subsidies themselves.
Govt is committed to the process of rationalising
subsidies based on this approach.
The direct transfer of benefits, started mostly in
scholarship schemes, will be further expanded with a
view to increasing the number of beneficiaries from the
present 1 cr to 10.3 cr. Similarly, `6,335 cr has so far been
transferred directly as LPG subsidy to 11.5 cr LPG
consumers. Persons who are better-off, such as those in
the top tax bracket, and those genuinely concerned for
the welfare of the poor, will give up their LPG subsidy
voluntarily.
Centre, the Govt has decided to continue supporting

important national priorities such as agriculture,
education, health, MGNREGA, and rural infrastructure,
including roads. Programmes targeted for the poor and
the underprivileged will be continued.
With fiscal space not just reduced but squeezed, Govt
has to meet the fifth challenge of maintaining fiscal
discipline. Economic growth this year, at 11.5%, was
lower in nominal terms by about 2%, due to lower
inflation. Consequently, tax buoyancy was also
significantly lower. Despite this, Govt will meet the
challenging fiscal deficit target of 4.1% of GDP.
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Well-intentioned schemes introduced in the past, have

often been ill-targeted, riddled with leakages and delivered
Govt has already taken major steps to address the two

major factors critical to agricultural production: soil and
water. An ambitious Soil Health Card Scheme has been
launched to improve soil fertility on a sustainable basis.
In order to improve soil health, Govt also proposes to
support Agriculture Ministrys organic farming scheme
Paramparagat Krishi Vikas Yojana. The
Pradhanmantri Gram Sinchai Yojana is aimed at
irrigating the field of every farmer and improving water
use efficiency to provide Per Drop More Crop. Govt is
allocating `5,300 cr to support micro-irrigation,
watershed development and the Pradhan Mantri Krishi
Sinchai Yojana.
To support the agriculture sector with the help of effective
and hassle-free agriculture credit, with a special focus
on small and marginal farmers, Govt proposes to allocate
`25,000 cr in 2015-16 to the corpus of Rural
Infrastructure Development Fund (RIDF) set up in
NABARD; `15,000 cr for Long Term Rural Credit Fund;
`45,000 cr for Short Term Cooperative Rural Credit
Refinance Fund; and `15,000 cr for Short Term RRB
Refinance Fund.
Farm credit underpins the efforts of our hardworking
farmers. Govt has, therefore, set up an ambitious target
of `8.5 lakh cr of credit during the year 2015-16.
Govt is committed to supporting employment through
MGNREGA. An initial allocation of `34,699 cr has been
made for the programme.
While the farmer is no longer in the clutches of the local
trader, his produce still does not command the best
national price. To increase the incomes of farmers, it is
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Funding the Unfunded

Govt firmly believes that development has to generate
inclusive growth. While large corporate and business
entities have a role to play, this has to be complemented
by informal sector enterprises which generate maximum
employment. There are some 5.77 cr small business units,
mostly individual proprietorship, which run small
manufacturing, trading or service businesses. 62% of
these are owned by SC/ST/OBC. These bottom-of-thepyramid, hard-working entrepreneurs find it difficult, if
not impossible, to access formal systems of credit. Govt,
therefore, proposes to create a Micro Units Development
Refinance Agency (MUDRA) Bank, with a corpus of
`20,000 cr, and credit guarantee corpus of `3,000 cr.
MUDRA Bank will refinance Micro-Finance Institutions
through a Pradhan Mantri Mudra Yojana. In lending,
priority will be given to SC/ST enterprises. These
measures will greatly increase the confidence of young,
educated or skilled workers who would now be able to
aspire to become first-generation entrepreneurs; existing
small businesses, too, will be able to expand their
activities.
A significant part of the working capital requirement of
an MSME arises due to long receivables realisation
cycles. Govt is in the process of establishing an electronic
Trade Receivables Discounting System (TReDS)
financing of trade receivables of MSMEs, from corporate
and other buyers, through multiple financiers. This
should improve the liquidity in the MSME sector
significantly.
Bankruptcy law reform, which brings about legal certainty
and speed, has been identified as a key priority for
improving the ease of doing business. SICA (Sick
Industrial Companies Act) and BIFR (Bureau for
Industrial and Financial Reconstruction) have failed in
achieving these objectives. Govt will bring a
comprehensive Bankruptcy Code in fiscal 2015-16 that
will meet global standards and provide necessary judicial
capacity.
The Govt is committed to increasing access of the people
to the formal financial system. In this context, Govt
proposes to utilise the vast Postal network with nearly
From Jan Dhan to Jan Suraksha
A large proportion of Indias population is without

insurance of any kind health, accidental or life.
Worryingly, as our young population ages, it is also
going to be pension-less. Govt proposes to work towards
creating a universal social security system for all Indians,
especially the poor and the under-privileged.
The soon-to-be-launched Pradhan Mantri Suraksha
Bima Yojna will cover accidental death risk of `2 lakh for
a premium of just `12 per year. Similarly, Govt will also
launch the Atal Pension Yojana, which will provide a
defined pension, depending on the contribution, and its
period. To encourage people to join this scheme, the
Govt will contribute 50% of the beneficiaries premium
limited to `1,000 each year, for five years, in the new
accounts opened before 31 Dec 2015.
The third Social Security Scheme will be the Pradhan
Mantri Jeevan Jyoti Bima Yojana, which covers both
natural and accidental death risk of `2 lakhs. The premium
will be `330 per year, or less than one rupee per day, for
the age group 18-50.
There are unclaimed deposits of about `3,000 cr in the
PPF, and approximately `6,000 cr in the EPF corpus. Govt
has proposed the creation of a Senior Citizen Welfare
Fund, in the Finance Bill, for appropriation of these
amounts to a corpus which will be used to subsidise the
premiums of vulnerable groups such as old-age
pensioners, BPL card-holders, small and marginal farmers
and others. A detailed scheme would be issued in Mar.
Special regard needs to be paid to the population of
senior citizens in the country, which is now approximately
10.5 cr, out of which over 1 cr are above the age of 80
years. 70% live in rural areas and a large number are in
the BPL category. A sizeable percentage of them also
suffer from age-related disabilities. Ours is a society that
venerates its elders. Govt, therefore, proposes a new
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1,54,000 points of presence spread across the villages

of the country. The Postal Department will make its
proposed Payments Bank venture successful so that it
contributes further to the Pradhan Mantri Jan Dhan
Yojana.
To bring parity in regulation of Non-Banking Financial
Companies (NBFCs) with other financial institutions in
matters relating to recovery, it is proposed that NBFCs
registered with RBI and having asset size of `500 cr and
above will be considered for notifications as Financial
Institution in terms of the SARFAESI Act, 2002.
imperative that we create a National agricultural market,

which will have the incidental benefit of moderating price
rises. Govt intends this year to work with the States, in
NITI, for the creation of a Unified National Agriculture
Market.
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The major slippage in the last decade has been on the

infrastructure front. Our infrastructure does not match
our growth ambitions. There is a pressing need to
increase public investment. Govt has, therefore, increased
outlays on both the roads and the gross budgetary
support to the railways, by `14,031 cr, and `10,050 cr
respectively. The CAPEX of the public sector units is
expected to be `3,17,889 cr, an increase of approximately
`80,844 cr over RE 2014-15. In fact, investment in
infrastructure will go up by `70,000 cr in the year 201516, over the year 2014-15 from the Centres Funds and
resources of CPSEs.
Secondly, Govt intends to establish a National
Investment and Infrastructure Fund (NIIF), and find
monies to ensure an annual flow of `20,000 cr to it. This
will enable the Trust to raise debt, and in turn, invest as
equity, in infrastructure finance companies such as the
IRFC and NHB. The infrastructure finance companies
can then leverage this extra equity, many fold. Thirdly,
Govt also intends to permit tax-free infrastructure bonds
for the projects in the rail, road and irrigation sectors.
Fourth, the PPP mode of infrastructure development has
to be revisited, and revitalised. The major issue involved
is rebalancing of risk. In infrastructure projects, the
sovereign will have to bear a major part of the risk
without, of course, absorbing it entirely.
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Fifth, Govt also intends to establish, in NITI, the Atal

Innovation Mission (AIM). AIM will be an innovation
promotion platform involving academics, entrepreneurs,
and researchers and draw upon national and international
experiences to foster a culture of innovation, R&D and
scientific research in India. The platform will also promote
a network of world-class innovation hubs and grand
challenges for India. Initially, a sum of `150 cr will be
earmarked for this purpose.
India has a well regarded and world-class IT industry
with revenues of about US$ 150 bn, over US$ 100 bn of
exports, employing nearly 40 lakh people directly. We
are now seeing a growing interest in start-ups.
Experimenting in cutting-edge technologies, creating
value out of ideas and initiatives and converting them
into scalable enterprises and businesses is at the core of
our strategy for engaging our youth and for inclusive
and sustainable growth of the country. Concerns such
as a more liberal system of raising global capital,
incubation facilities in our Centres of Excellence, funding
for seed capital and growth, and ease of Doing Business
etc need to be addressed to create lakh of jobs and
hundreds of billions of dollars in value.
Govt is establishing a mechanism to be known as SETU
(Self-Employment and Talent Utilisation). SETU will be
a techno-financial, incubation and facilitation programme
to support all aspects of start-up businesses, and other
self-employment activities, particularly in technologydriven areas. Govt is setting aside `1,000 cr initially in
NITI Aayog for this purpose.
Ports can be an attractive investment possibility for the
private sector. Ports in the public sector need to both
attract such investment as well as leverage the huge
land resources lying unused with them. To enable us to
do so, ports in public sector will be encouraged to
corporatise and become companies under the Companies
Act.
Govt aims towards ease of doing in India. It has launched
the e-Biz Portal, which integrates 14 regulatory
permissions at one source. Good States are embracing
and joining this platform.
However, if we really want to create jobs, we have to
make India an investment destination which permits the
start of a business in accordance with publicly stated
guidelines and criteria. Govt intends to appoint an Expert
Committee for this purpose to examine the possibility
and prepare a draft legislation where the need for multiple
prior permissions can be replaced with a pre-existing
regulatory mechanism.
scheme for providing Physical Aids and Assisted Living

Devices for senior citizens living below the poverty line.
In sum, these social security schemes reflect our
commitment to utilise the Jan Dhan platform, to ensure
that no Indian citizen will have to worry about illness,
accidents, or penury in old age. Govt also remains
committed to the ongoing welfare schemes for the SCs,
STs and Women. Despite serious constraints on Union
finances, allocations made this year are as follows:
SC
`30,851 cr
ST
`19,980 cr
Women
`79,258 cr
An integrated education and livelihood scheme called
Nai Manzil will be launched this year to enable Minority
Youth who do not have a formal school-leaving certificate
to obtain one and find better employment. Further, to
showcase civilisation and culture of the Parsis, the Govt
will support, in2015-16, an exhibition, The Everlasting
Flame. The allocation for the Ministry of Minority
Affairs is being protected. The BE for the year 2015-16 is
`3,738 cr.
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Financial Markets
One vital factor in promoting investment in India,

including in the infrastructure sector, is the deepening
of the Indian Bond market. Govt will set up a Public Debt
Management Agency (PDMA) which will bring both
Indias external borrowings and domestic debt under one
roof.
Govt will merge the Forwards Markets Commission with
SEBI to strengthen regulation of commodity forward
markets and reduce wild speculation.
Capital Account Controls is a policy, rather than a
regulatory, matter. Govt, therefore, proposes to amend,
through the Finance Bill, Section-6 of FEMA to clearly
provide that control on capital flows as equity will be
exercised by the Govt in consultation with the RBI.
A properly functioning capital market also requires proper
consumer protection. Govt, therefore, proposes to create
a Task Force to establish a sector-neutral Financial
Redressal Agency that will address grievances against
all financial service providers. Govt also received a large
number of suggestions regarding the Indian Financial
Code (IFC), which are currently being reviewed by the
Justice Srikrishna Committee.
Govt has a vision of putting in place a direct tax regime
which is internationally competitive on rates, is without
exemptions, incentivises savings, and does not realise
tax from intermediaries.
With respect to the Employees Provident Fund (EPF),
the employee needs to be provided two options. Firstly,
the employee may opt for EPF or the New Pension
Scheme (NPS). Secondly, for employees below a certain
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threshold of monthly income, contribution to EPF should

be optional, without affecting or reducing the employers
contribution. With respect to ESI, the employee should
have the option of choosing either ESI or a Health
Insurance product recognised by the Insurance
Regulatory Development Authority (IRDA).
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The Govt also proposes to set up five new Ultra Mega

Power Projects, each of 4000 MW in the plug-and-play
mode. All clearances and linkages will be in place before
the project is awarded by a transparent auction system.
This should unlock investments to the extent of `1 lakh
cr. The Govt would also consider similar plug-and-play
projects in other infrastructure projects such as roads,
ports, rail lines, airports etc. The second unit of
Kudankulam Nuclear Power Station will be commissioned
in 2015-16.
Govt will endeavour to enhance allocations to MGNREGA
by `5,000 cr; Integrated Child Development Scheme
(ICDS) by `1,500 cr; Integrated Child Protection Scheme
(ICPS) by `500 cr; and the Prdhan Mantri Krishi Sinchai
Yojana by `3,000 cr; and the initial inflow of `5,000 cr
into the NIIF.
India is one of the largest consumers of gold in the world

and imports as much as 800-1000 tonnes of gold each
year. Though stocks of gold in India are estimated to be
over 20,000 tonnes, mostly this gold is neither traded,
nor monetised. Govt proposes to:
(i) Introduce a Gold Monetisation Scheme, which will
replace both the present Gold Deposit and Gold
Metal Loan Schemes. The new scheme will allow
the depositors of gold to earn interest in their metal
accounts and the jewellers to obtain loans in their
metal account. Banks/other dealers would also be
able to monetise this gold.
(ii) Also develop an alternate financial asset, a
Sovereign Gold Bond, as an alternative to
purchasing metal gold.
(iii) Commence work on developing an Indian Gold Coin,
which will carry the Ashok Chakra on its face. Such
an Indian Gold Coin would help reduce the demand
for coins minted outside India and also help recycle
the gold available in the country.
One way to curb the flow of black money is to discourage
transactions in cash. Now that a majority of Indians has
or can have, a RUPAY debit card, Govt proposes to
introduce soon several measures that will incentivise
credit or debit card transactions, and disincentivise cash
transactions.
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Investment
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Alternate Investment Funds Regulations have been

notified by SEBI. Such alternate investment funds
provide another vehicle for facilitating domestic
investments. Keeping in view the need to increase
investments from all sources, Govt proposes to also
allow foreign investments in Alternate Investment Funds.
To further simplify the procedures for Indian Companies
to attract foreign investments, Govt proposes to do away
with the distinction between different types of foreign
investments, especially between foreign portfolio
investments and foreign direct investments, and replace
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them with composite caps. The sectors which are already

on a 100% automatic route would not be affected.
The Act East policy of the Govt of India endeavours to
cultivate extensive economic and strategic relations in
South-East Asia. In order to catalyse investments from
the Indian private sector in this region, a Project
Development Company will, through separate Special
Purpose Vehicles (SPVs), set up manufacturing hubs in
CMLV countries, namely, Cambodia, Myanmar, Laos and
Vietnam.
India has 25 Cultural World Heritage Sites. But the

facilities are still deficient. Govt proposes to provide
resources to start work for the following Heritage Sites:
(i) Churches & Convents of Old Goa; (ii) Hampi,
Karnataka; (iii) Elephanta Caves, Mumbai; (iv)
Kumbalgarh and other Hill Forts of Rajasthan; (v) Rani
ki Vav, Patan, Gujarat; (vi) Leh Palace, Ladakh, J&K; (vii)
Varanasi Temple town, UP; (viii) Jalianwala bagh,
Amritsar, Punjab; and (ix) Qutub Shahi Tombs,
Hyderabad, Telengana.
After the success of Visas on arrival issued to travellers
of 43 countries, Govt proposes to increase the countries
covered to 150, in stages.
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Green India
Govt is launching a Scheme for Faster Adoption and
Manufacturing of Electric Vehicles (FAME). It is
proposing an initial outlay of `75 cr for this Scheme in
2015-16. The Ministry of New Renewable Energy has
revised its target of renewable energy capacity to
1,75,000 MW till 2022, comprising 100,000 MW Solar,
60,000 MW Wind, 10,000 MW Biomass and 5000 MW
Small Hydro.
Malfeasance in public procurement can perhaps be
contained by having a procurement law and an
institutional structure consistent with the UNCITRAL
model.
On the other hand, disputes arising in public contracts
take long to resolve, and the process is very costly too.
Govt proposes to introduce a Public Contracts
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India is one of the youngest nations in the world with

more than 54% of the total population below 25 years
of age. Today less than 5% of our potential workforce
gets formal skill training to be employable and stay
employable.
Govt will soon be launching a National Skills Mission
through the Skill Development and Entrepreneurship
Ministry. The Mission will consolidate skill initiatives
spread across several Ministries and allow us to
standardise procedures and outcomes across the 31
Sector Skill Councils.
With rural population still forming close to 70% of Indias
population, enhancing the employability of rural youth
is the key to unlocking Indias demographic dividend.
With this in mind, Govt had launched the Deen Dayal
Upadhyay Gramin Kaushal Yojana. `1,500 cr has been
set apart for this scheme. Disbursement will be through
a digital voucher directly into qualified students bank
account.
This is the year when we will be entering the 100th birth
anniversary of Shri Deen Dayal Upadhyay. A 100th
Birthday Celebration Committee will be announced soon,
and adequate resources provided for the celebration.
With a view to enabling all poor and middle-class
students to pursue higher education of their choice
without any constraint of funds, Govt proposes to set
up a fully IT-based Student Financial Aid Authority to
administer and monitor Scholarship as well Educational
Loan Schemes, through the Pradhan Mantri Vidya
Lakshmi Karyakram.
In the fiscal year 2015-16, Govt proposes to set up All
India Institutes of Medical Sciences in J&K, Punjab,
Tamil Nadu, Himachal Pradesh and Assam. Keeping in
view the need to augment Medical Sciences in Bihar,
Govt proposes to set up another AIIMS-like institution.
Govt proposes to set up an IIT in Karnataka, and
upgrade Indian School of Mines, Dhanbad into a fullfledged IIT. It proposes to set up a Post Graduate Institute
of Horticulture Research and Education in Amritsar. IIMs
will be set up in J&K and Andhra Pradesh. In Kerala,
Govt proposes to upgrade the existing National Institute
of Speech and Hearing to a University of Disability
Studies and Rehabilitation. Govt proposes three new
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In order to support programmes for women security,

advocacy and awareness, Govt has decided to provide
another `1,000 cr to the Nirbhaya Fund.
Tourism
Skill India
Safe India
(Resolution of Disputes) Bill to streamline the

institutional arrangements for resolution of such
disputes.
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Digital India
The National Optical Fibre Network Programme

(NOFNP) of 7.5 lakh km, networking 2.5 lakh villages, is
being further speeded up by allowing willing States to
undertake its execution, on reimbursement of cost as
determined by Department of Telecommunications.
Andhra Pradesh is the first State to have opted for this
manner of implementation.
Govt proposes to give similar special assistance to Bihar
and West Bengal as has been provided by the Govt of
India in the case of Govt of Andhra Pradesh. As regards
Andhra Pradesh and Telengana, the Govt is committed
to comply with all the legal commitments made to these
States at the time of reorganisation.
Others
In spite of the large increase in devolution to states,

which implies reduced fiscal space for the Centre in the
same proportion, Govt is committed to the welfare of the
poor and the neo-middle class. Keeping this in mind,
adequate provision is being made for the schemes for
the poor and the disadvantaged. Govt has allocated
`68,968 cr to the education sector, including mid-day
meals, `33,152 cr to the health sector and `79,526 cr for
rural development activities including MGNREGA,
`22,407 cr for housing and urban development, `10,351
cr for women and child development, `4,173 cr for Water
Resources and Namami Gange. The significant sums that
will be spent by the States on these programmes will
ensure a quantum leap in expenditures in these areas.
The AhmedabadDhaulera Investment Region in Gujarat
and the ShendraBidkin Industrial Park near
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Aurangabad, in Maharashtra are now in a position to

start work on basic infrastructure. In the current year,
Govt has earmarked an initial sum of `1,200 cr. However,
as the pace of expenditure picks up, Govt will provide
them additional funds.
Govt has been both transparent and quick in making
defence equipment-related purchase decisions, thus
keeping defence forces ready for any eventuality. This
year too, Govt has provided adequately for the needs of
the armed forces. As against likely expenditure of this
year of `2,22,370 cr, the budget allocation for 2015-16 is
`2,46,727 cr.
GIFT in Gujarat was envisaged as International Finance
Centre that would actually become as good an
International Finance Centre as Singapore or Dubai,
which, incidentally, are largely manned by Indians. The
proposal has languished for years. The first phase of
GIFT will soon become a reality. Appropriate regulations
will be issued in Mar.
For the quick resolution of commercial disputes, the Govt
proposes to set up exclusive commercial divisions in
various courts in India based on the recommendations
of the 253rd Report of the Law Commission. The Govt
proposes to introduce a Bill in the parliament after
consulting stakeholders in this regard.
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National Institutes of Pharmaceutical Education and

Research in Maharashtra, Rajasthan, and Chattisgarh;
and Institutes of Science and Education Research in
Nagaland and Odisha. Govt also proposes to set up a
Centre for Film Production, Animation and Gaming in
Arunachal Pradesh and Apprenticeship Training
Institute for Women in Haryana and Uttarakhand.
In order to improve the Governance of Public Sector
banks, the Govt intends to set up an autonomous Bank
Board Bureau. The Bureau will search and select heads
of Public Sector banks and help them in developing
differentiated strategies and capital-raising plans
through innovative financial methods and instruments.
This would be an interim step towards establishing a
holding and investment Company for Banks.
Budget Estimates
Non-plan expenditure estimates for the Financial Year

are estimated at `13,12,200 cr. Plan expenditure is
estimated to be `4,65,277 cr, which is very near to the
RE of 2014-15. Total expenditure has accordingly been
estimated at `17,77,477 cr.
Gross tax receipts are estimated to be `14,49,490 cr.
Devolution to the States is estimated to be `5,23,958 cr.
Share of Central Govt will be `9,19,842 cr. Non-tax
revenues for the next fiscal are estimated to be `2,21,733
cr.
With the above estimates, fiscal deficit will be 3.9 per
cent of GDP and revenue deficit will be 2.8 per cent of
GDP.
Tax Proposals
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Govt has already introduced the Bill to amend the

Constitution of India for Goods and Services Tax (GST)
in the last Session. GST is expected to play a
transformative role in the way our economy functions. It
will add buoyancy to our economy by developing a
common Indian market and reducing the cascading effect
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between the two countries at the earliest. Investigation

into cases of undisclosed foreign assets has been
accorded the highest priority, resulting in detection of
substantial amounts of unreported income. For
strengthening collection of information from various
sources domestically, a new structure is being put in
place which includes electronic filing of statements by
reporting entities. This will ensure seamless integration
of data and more effective enforcement.
Govt has taken a considered decision to enact a
comprehensive new law on black money to specifically
deal with such money stashed away abroad. Some of the
key features of the proposed new law:
(1) Concealment of income and assets and evasion of
tax in relation to foreign assets will be prosecutable
with punishment of rigorous imprisonment upto 10
years. Further,
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the offenders will not be permitted to approach
the Settlement Commission; and
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penalty for such concealment of income and
assets at the rate of 300% of tax shall be levied.
(2) Non-filing of return or filing of return with
inadequate disclosure of foreign assets will be liable
for prosecution with punishment of rigorous
imprisonment up to 7 years.
(3) Income in relation to any undisclosed foreign asset
or undisclosed income from any foreign asset will
be taxable at the maximum marginal rate. Exemptions
or deductions which may otherwise be applicable in
such cases, shall not be allowed.
(4) Beneficial owner or beneficiary of foreign assets
will be mandatorily required to file return, even if
there is no taxable income.
(5) Abettors of the above offences, whether individuals,
entities, banks or financial institutions will be liable
for prosecution and penalty.
(6) Date of opening of foreign account would be
mandatorily required to be specified by the assessee
in the return of income.
(7) The offence of concealment of income or evasion of
tax in relation to a foreign asset will be made a
predicate offence under the Prevention of Moneylaundering Act, 2002 (PMLA). This provision
would enable the enforcement agencies to attach
and confiscate unaccounted assets held abroad and
launch prosecution against persons indulging in
laundering of black money.
(8) The definition of proceeds of crime under PMLA
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on the cost of goods and services. We are moving in

various fronts to implement GST from the next year.
The basic rate of Corporate Tax in India at 30% is higher
than the rates prevalent in the other major Asian
economies, making our domestic industry uncompetitive.
Moreover, the effective collection of Corporate Tax is
about 23%. We lose out on both counts, ie we are
considered as having a high Corporate Tax regime but
we do not get that tax due to excessive exemptions. A
regime of exemptions has led to pressure groups,
litigation and loss of revenue. It also gives room for
avoidable discretion. Govt, therefore, proposes to reduce
the rate of Corporate Tax from 30% to 25% over the
next 4 years. This will lead to higher level of investment,
higher growth and more jobs. This process of reduction
has to be necessarily accompanied by rationalisation
and removal of various kinds of tax exemptions and
incentives for corporate taxpayers, which incidentally
account for a large number of tax disputes.
Phased reduction of corporate tax rate and phased
elimination of exemptions will start from the next financial
year. Exemptions to individual taxpayers will, however,
continue since they facilitate savings which get
transferred to investment and economic growth.
While finalising tax proposals, Govt has adopted certain
broad themes, which include:
A. Measures to curb black money;
B. Job creation through revival of growth and
investment and promotion of domestic
manufacturing and Make in India;
C. Minimum govt and maximum governance to improve
the ease of doing business;
D. Benefits to middle-class taxpayers;
E. Improving the quality of life and public health
through Swachh Bharat initiatives; and
F. Stand-alone proposals to maximise benefits to the
economy.
The first and foremost pillar of Govts tax proposals is to
effectively deal with the problem of black money.
In the last nine months several measures have been
initiated in this direction. A major breakthrough was
achieved in Oct 2014 when a delegation from the Revenue
Department visited Switzerland and the Swiss authorities
agreed to (a) provide information in respect of cases
independently investigated by the Income-tax
Department; (b) confirm genuineness of bank accounts
and provide non-banking information; (c) provide such
information in a time-bound manner; and (d) commence
talks with India for Automatic Exchange of Information
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facility.
The present taxation structure has an inbuilt incentive
for fund managers to operate from offshore locations.
To encourage such offshore fund managers to relocate
to India, Govt proposes to modify the Permanent
Establishment (PE) norms to the effect that mere
presence of a fund manager in India would not constitute
PE of the offshore funds resulting in adverse tax
consequences.
Implementation of the General Anti Avoidance Rule
(GAAR) has been a matter of public debate. It has
therefore been decided to defer the applicability of GAAR
by two years. Further, it has also been decided that when
implemented, GAAR would apply prospectively to
investments made on or after 01.04.2017.
To facilitate technology inflow to small businesses at
low costs, Govt proposes to reduce the rate of income
tax on royalty and fees for technical services from 25%
to 10%.
To generate greater employment opportunities, it is
proposed to extend the benefit of deduction for
employment of new regular workmen to all business
entities. The eligibility threshold of minimum 100 regular
workmen is being reduced to fifty.
In indirect taxes, Govt proposes to reduce the rates of
basic customs duty on certain inputs, raw materials,
intermediates and components (in all 22 items) so as to
minimise the impact of duty inversion and reduce the
manufacturing cost in several sectors. Some other
changes address the problem of CENVAT credit
accumulation due to the levy of SAD. Govt proposes to
fully exempt all goods, except populated printed circuit
boards for use in manufacture of ITA-bound items from
SAD and reduce the SAD on imports of certain other
inputs and raw materials subject to actual user condition.
The total wealth tax collection in the country was `1,008
cr in 2013-14. Should a tax which leads to high cost of
collection and a low yield be continued or should it be
replaced with a low-cost and higher-yield tax? The rich
and wealthy must pay more tax than the less affluent
ones. Govt has therefore decided to abolish the wealth
tax and replace it with an additional surcharge of 2%
on the super-rich with a taxable income of over `1 cr.
This will lead to tax simplification and enable the
Department to focus more on ensuring tax compliance
and widening the tax base. As against a tax sacrifice of
`1,008 cr, through these measures the Department would
be collecting about `9,000 cr from the 2% additional
surcharge.
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is being amended to enable attachment and

confiscation of equivalent asset in India where the
asset located abroad cannot be forfeited.
(9) The Foreign Exchange Management Act, 1999
(FEMA) is also being amended to the effect that if
any foreign exchange, foreign security or any
immovable property situated outside India is held
in contravention of the provisions of this Act, then
action may be taken for seizure and eventual
confiscation of assets of equivalent value situated
in India. These contraventions are also being made
liable for levy of penalty and prosecution with
punishment of imprisonment up to five years.
A new and more comprehensive Benami Transactions
(Prohibition) Bill will be introduced in the current
session of the Parliament. This law will enable
confiscation of benami property and provide for
prosecution, thus blocking a major avenue for generation
and holding of black money in the form of benami
property, especially in real estate.
The Finance Bill includes a proposal to amend the
Income-tax Act to prohibit acceptance or payment of an
advance of `20,000 or more in cash for purchase of
immovable property. Quoting of PAN is being made
mandatory for any purchase or sale exceeding the value
of `1 lakh. The third party reporting entities would be
required to furnish information about foreign currency
sales and cross-border transactions. Provision is also
being made to tackle splitting of reportable transactions.
To improve enforcement, CBDT and CBEC will leverage
technology and have access to information in each
others database.
The second pillar of Govts taxation proposals this year
is job creation through revival of growth and investment
and promotion of domestic manufacturing and Make in
India. Tax pass through is proposed to be allowed to
both Category-I and Category-II Alternative Investment
Funds, so that tax is levied on the investors in these
Funds and not on the Funds per se. This will step up the
ability of these Funds to mobilise higher resources and
make higher investments.
A step was taken in the last Budget to encourage Real
Estate Investment Trusts (REITs) and Infrastructure
Investment Trusts (InvITs) by providing partial pass
through to them. Govt proposes to rationalise the capital
gains regime for the sponsors exiting at the time of listing
of the units of REITs and InvITs, subject to payment of
Securities Transaction Tax (STT). The rental income of
REITs from their own assets will have pass-through
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17
`100 to `200 per metric tonne of coal, etc to finance

clean-environment initiatives. Excise duty on sacks and
bags of polymers of ethylene other than for industrial
use is being increased from 12% to 15%. It is also
proposed to have an enabling provision to levy Swachh
Bharat Cess at a rate of 2% or less on all or certain services
if need arises. This Cess will be effective from a date to
be notified. Resources generated from this cess will be
utilised for financing and promoting initiatives towards
Swachh Bharat.
It is also proposed to exempt services by common affluent
treatment plants from service tax. The concessions from
customs and excise duties currently available on specified
parts for manufacture of electrically operated vehicles
and hybrid vehicles are being extended by one more
year, ie up to 31.3.2016.
The fifth pillar of Govts taxation proposals this year is
extension of benefits to middle-class tax payers. The
proposals in this regard are as follows:
Increase in the limit of deduction in respect of health
insurance premium from `15,000 to `25,000.
For senior citizens the limit will stand increased
to `30,000 from the existing `20,000.
For very senior citizens of the age of 80 years or
more, who are not covered by health insurance,
deduction of `30,000 towards expenditure
incurred on their treatment will be allowed.
The deduction limit of `60,000 towards expenditure
on account of specified diseases of serious nature
is proposed to be enhanced to `80,000 in case of
very senior citizens.
Additional deduction of `25,000 will be allowed
for differently abled persons under Section 80DD
and Section 80U of the Income-tax Act.
The limit on deduction on account of contribution
to a Pension Fund and the New Pension Scheme is
proposed to be increased from `1 lakh to `1.5 lakh.
To provide social-safety net and the facility of
pension to individuals, an additional deduction of
`50,000 is proposed to be provided for contribution
to the New Pension Scheme under Section 80CCD.
Investments in Sukanya Samriddhi Scheme are
already eligible for deduction under Section 80C.
All payments to the beneficiaries including interest
payment on deposit will also be fully exempt.
Transport allowance exemption is being increased
from `800 to `1,600 per month.
For the benefit of senior citizens, service tax
exemption will be provided on Varishtha Bima Yojana.
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To reduce the associated hassles to smaller taxpayers

and the compliance costs in domestic transfer pricing,
Govt proposes to increase the threshold limit from `5 cr
to `20 cr.
In order to rationalise the MAT provisions for FIIs, profits
corresponding to their income from capital gains on
transactions in securities which are liable to tax at a lower
rate, shall not be subject to MAT.
As part of the movement towards GST, Govt proposes
to subsume the Education Cess and the Secondary and
Higher Education Cess in Central Excise duty. In effect,
the general rate of Central Excise Duty of 12.36%,
including the cesses, is being rounded off to 12.5%.
Govt also proposes to revise the specific rates of Central
Excise duty in certain other commodities. However, in
the case of petrol and diesel, such specific rates are
being revised only to the extent of subsuming the
quantum of education cess presently levied on them,
keeping the total incidence of excise duties unchanged.
The ad valorem rates of excise duty lower than 12%
and those higher than 12% with a few exceptions are
not being increased. Some changes are also being made
to excise levy on cigarettes and the compounded levy
scheme applicable to pan masala, gutkha and certain
other tobacco products.
The excise duty on footwear with leather uppers and
having retail price of more than `1000 per pair is being
reduced to 6%.
To further facilitate the ease of doing business, online
central excise and service tax registration will be done in
two working days. The assessees under these taxes will
be allowed to issue digitally signed invoices and maintain
electronic records. These measures will cut down lot of
paper work and red tape. Time limit for taking CENVAT
credit on inputs and input services is being increased
from six months to one year as a measure of business
facilitation.
It is proposed to increase the present rate of service tax
plus education cesses from 12.36% to a consolidated
rate of 14%.
Cleanliness of households and clean environment are
very important social causes. The fourth pillar of Govts
taxation proposals this year therefore relates to initiatives
for the Swachh Bharat Abhiyan. In direct tax proposals,
Govt has proposed 100% deduction for contributions,
other than by way of CSR contributions, to the Swachh
Bharat Kosh. A similar tax treatment is also proposed for
the Clean Ganga Fund.
Govt proposes to increase the Clean Energy Cess from
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Further, to mitigate the problem being faced by many

genuine charitable institutions, it is proposed to modify
the ceiling on receipts from activities in the nature of
trade, commerce or business to 20% of the total receipts
from the existing ceiling of `25 lakh. A national database
of non-profit organisations is also being developed.
Most of the provisions of the Direct Tax Code (DTC)
have already been included in the Income-tax Act. Among
the very few aspects of DTC which were left out, Govt
has addressed some of the issues in the present Budget.
Further, the jurisprudence under the Income-tax Act is
well evolved. Considering all these aspects, there is no
great merit in going ahead with the Direct Tax Code as it
exists today.
Direct tax proposals would result in revenue loss of `8,315
cr, whereas the proposals in indirect taxes are expected
to yield `23,383 cr. Thus, the net impact of all tax proposals
would be revenue gain of `15,068 cr.
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After taking into account the tax concession given to

middle-class tax payers in the last Budget and this
Budget, today an individual tax payer will get tax benefit
of `4,44,200.
There are several stand-alone proposals relating to
taxation. These include conversion of existing excise
duty on petrol and diesel to the extent of `4 per litre
into Road Cess to fund investment in roads and other
infrastructure. An additional sum of `40,000 cr will be
made available through this measure for these sectors.
In service tax, exemption is being extended to certain
pre-cold storage services in relation to fruits and
vegetables so as to incentivise value addition in this
crucial sector. The Negative List under service tax is
being slightly pruned and certain other exemptions are
being withdrawn to widen the tax base.
Yoga is Indias well acknowledged gift to the world. It is
proposed to include yoga within the ambit of charitable
purpose under Section 2(15) of the Income-tax Act.
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Budget at a glance
Taxation
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Defence
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To support agricultural sector, allocation of `25,000 cr

proposed in 2015 to rural development fund.
`5,300 cr to support Micro Irrigation Programme.
Farmers credit target of `8.5 lakh cr.
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Education
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`70,000 cr to Infrastructure sector.

Tax-free bonds for projects in rail, road and irrigation.
PPP model for infrastructure development to be
revitalised and govt to bear majority of the risk.
`150 cr allocated for Research & Development.
Govt proposes to set up 5 ultra mega power projects,
each of 4000 MW.
Food subsidy seen at `1.24 tn.

Fertiliser subsidy seen at `729.69 bn.
Fuel subsidy seen at `300 bn.
Welfare and other Schemes
Infrastructure
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`2,46,726 cr for Defence.

Focus on Make in India for quick manufacturing of
defence equipment.
Subsidies
Agriculture
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PG institute of Horticulture in Amritsar.

Kerala to have University of Disability Studies
Centre of Film Production, Animation and Gaming to
come up in Arunachal Pradesh.
IIMs for Jammu and Kashmir and Andhra Pradesh.
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Wealth tax abolished. To be replaced by surcharge of 2

per cent on income of `1 cr and above. Move to fetch
govt `9,000 cr against `1,008 cr currently mobilised under
wealth tax.
Rate of corporate tax to be reduced to 25 per cent from
30 per cent over next four years.
No change in tax slabs.
Total exemption of up to `4,44,200 can be achieved.
100 per cent exemption for contribution to Swachch
Bharat, apart from CSR.
Service tax increased to 14 per cent from 12.36 per cent.
To implement Goods and Services Tax by Apr 2016.
To reduce custom duty on 22 items.
Basic custom duty on commercial vehicle doubled to 20
per cent.
Import tax on iron and steel increased to 15 per cent
from 10 per cent.
Excise duty raised on cigarettes by 25 per cent for
cigarettes of length not exceeding 65 mm; by 15 per cent
for cigarettes of other lengths.
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50,000 toilets constructed under Swachh Bharath

Abhiyan.
GST will be implemented by Apr 2016.
Housing for all by 2020.
Upgradation of 80,000 secondary schools.
Micro Units Development Refinance Agency (MUDRA)
Bank to refinance micro finance institutions.
Pradhan Mantra Suraksha Bima Yojana to cover
accidental death risk of `2 lakh for just `12 per year
premium.
Atal Pension Yojana for defined pension, govt to
contribute 50 per cent of the premium.
Pradhan Mantri Jeevan Jyoti Bima Yojana to cover both
natural and accidental death risk.
Setu (self-employment and talent utilisation) mechanism
to support start-up businesses.
Another `1,000 cr for Nirbhaya Fund.
Nayi Manzil Scheme proposed for the youth of the
minorities.
Renewable Energy
AIIMS in Jammu and Kashmir, Punjab, Tamil Nadu,

Himachal Pradesh, Bihar and Assam.
IIT in Karnataka; Indian Institute of Mines in Dhanbad
to be upgraded to IIT.
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`75 cr for electric-cars production.

Renewable energy target for 2022: 100K MW in solar;
60K MW in wind; 10K MW in biomass and 5K MW in
small hydro
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Banking
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Autonomous bank board bureau to determine PSU bank

heads.
To amend RBI Act this year for monetary policy
committee.
To incentivise credit/debit card transactions.
Govt to provide `79.4 bn capital infusion to state-run
banks.
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Budget 2015-16 marks the beginning of co-operative

federalism and empowerment of the states.
Will bring a bankruptcy code in the year 2015-16 that will
meet global standards and provide for judicial capacity.
Fiscal Deficit targets: FY15-16 3.9 per cent, FY16-17 3.5
per cent, FY 17-18 3 per cent.
Disinvestment target set at `41,000 cr for 2015-16.
Exemption on health insurance premium hiked from
`15,000 to `25,000. For senior citizens it is hiked to
`30,000.
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Revenue receipts `11,41,575 cr (Tax revenue `9,19,842

cr, Non-tax revenue `2,21,733 cr)
Capital receipts `6,35,902 cr
Non-plan expenditure `13,12,200 cr
Plan expenditure `4,65,277 cr
Revenue deficit `3,94,472 cr (2.8 per cent of GDP)
Fiscal Deficit `5,55,649 cr (3.9 per cent of GDP)
Primary deficit `99,504 cr (0.7 per cent of GDP)
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Other details for 2015-16
Others
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Develpoment schemes for churches and convents in old

Goa, Hampi, Elephanta caves, Forests of Rajasthan, Leh
Palace, Varanasi, Jallianwala Bagh and Qutb Shahi tombs
at Hyderabad.
Visa on arrival for 150 countries.
GAAR deferred by two years would apply prospectively

from Apr 1, 2017.
A new benami transaction bill to be introduced to tackle
domestic black money; enforcement agencies empowered
to attach assets held abroad illegally; undisclosed
income to be taxed at maximum marginal rate; deductions
and exemptions for such income wont be allowed; 7
years rigorous imprisonment for concealing foreign
assets.
Proposal to merge commodities regulator with SEBI.
`346.99 bn for rural employment guarantee scheme.
Raises threshold for application of transfer pricing rules
to `200 mn from current `50 mn.
Second unit of Kudankulam nuclear power station to be
commissioned.
Current account deficit below 1.3 per cent of GDP.
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SINCE 1993
TYPES OF BUDGET
Balanced Budget
2. Revenue Deficit
Revenue deficit is related to revenue expenditure and

revenue receipts of the government. This does not include
items of capital receipts and capital expenditure. Thus,
revenue deficit is the excess of revenue expenditure over
revenue receipts.
RD = RE- RR, when RE > RR
Here,
RD = Revenue Deficit
RE = Revenue Expenditure
RR = Revenue Receipts.
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A balanced budget is that budget in which government

receipts are equal to government expenditure.
Balanced Budget: Government Receipts = Government
Expenditure
of the government are greater than the budget receipts. Or,

it is the excess of total expenditure (revenue expenditure
and capital expenditure) over and above the total receipts
(revenue receipts and capital receipts) of the government.
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The Budget is a statement of expected receipts and

expected expenditures of the government for the financial
year April 1 to March 31. It also includes government report
on its financial performance over the past one year. However,
this part of the budget as a description of what has
happened is often overlooked. Importance is given largely
to the other part of the budget describing what is going to
happen in terms of the expected receipts and expenditures
of the government in the year to come.
Budget
Unbalanced Budget
An unbalanced budget is that budget in which receipts and

expenditures of the government are not equal. This may be:
Fiscal deficit is estimated, accounting for both the revenue

as well capital receipts and expenditures of the government.
Fiscal deficit is the excess of total expenditure (revenue +
capital) over total receipts (revenue + capital other than
borrowings). It is estimated as under:
Fiscal Deficit = Total or Budget Expenditure (revenue
expenditure + capital expenditure) - Total or Budget
Receipts other than borrowings (revenue receipts + capital
receipts other than borrowings).
FD = BE - BR other than borrowings, when BE > BR
other than borrowings.
Here,
FD = Fiscal Deficit
BE = Budget or Total Expenditure
BR = Budget or Total Receipts
Fiscal deficit is, in fact, equal to the total borrowings and
other liabilities of the government.
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(a) Surplus Budget

This is a budget in which government receipts are greater
than government expenditures.
Surplus Budget: Estimated Govt Receipts > Estimated Govt
Expenditures
3. Fiscal Deficit
(b) Deficit Budget

This is a budget in which government expenditures are
greater than government receipts.
Deficit Budget: Estimated Govt Expenditures > Estimated
Govt Receipts
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TYPES OF DEFICIT
1. Budget Deficit
Budget deficit refers to a situation when budget expenditures
22
For details read
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