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Prime Minister Modi Targets Growth in Maiden Budget: Highlights

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Prime Minister Modi Targets Growth in Maiden Budget: Highlights
New Delhi: 
Prime Minister Narendra Modi's new government on Thursday unveiled a first Budget of structural reforms that seek to revive growth, while spurning the temptation to resort to higher borrowing.
 
Here are the highlights of the Budget presented by Finance Minister Arun Jaitley: 
 
Fiscal deficit
 
  • Accepts fiscal deficit target of 4.1 per cent of GDP for 2014-15
  • Fiscal deficit seen at 3.6 per cent of GDP in 2015-16
  • Finance Minister says, "We cannot spend beyond our means."
  • Tax-to-GDP ratio must be raised
Growth
  • Aims for sustained growth of 7-8 per cent in the next 3-4 years
  • Finance Minister says he is bound to usher in policies for higher growth, lower inflation
Taxation
 
  • Mr Jaitley vows to maintain a stable tax environment but stops short of scrapping rules on retrospective tax
  • All pending cases of retrospective tax for indirect transfers to be examined by committee before action is taken
  • Mr Jaitley says the government will not ordinarily bring any change retrospectively that creates a new liability
  • Aims to approve goods and services tax, or GST, by end of this year
  • Extends 5 per cent withholding tax on corporate bonds until June 30, 2017
  • To provide necessary tax changes to introduce real estate investment trusts and infrastructure investment trusts
  • Extends 10-year tax holiday for power generation companies
Revenue and expenditure
 
  • Estimates that total expenditure will be Rs 17.95 lakh crore in 2014-15
  • Revenue deficit seen at 2.9 per cent of GDP in 2014-15
  • Capital receipts seen at Rs 73,950 crore in 2014-15
  • Retains tax collection targets and makes no major changes to direct tax rates
  • Allocates Rs 2.29 lakh crore for defence spending in 2014-15; capital outlay raised by Rs 5,000 crore over interim budget
  • Earmarks Rs 7,060 crore to create 100 "smart cities"
  • Proposes Rs 5,000 corre for warehousing capacity; Rs 10,000 crore of private capital for start-up companies; and Rs 37,800 crore of investment in national and state highways
  • Rs 4,000 crore for affordable housing proposed through national housing bank; Rs 8,000 crore proposed for rural housing scheme
Foreign direct investment 
 
  • Raises limit on FDI in defence sector from 26 per cent to 49 per cent
  • Raises FDI limit in insurance sector from 26 per cent to 49 per cent
  • Subsidies 
  • Plans to make food and petroleum subsidies more targeted
  • Rural job-guarantee scheme, which provides 100 days of paid employment a year, will become more focused on asset creation
  • Agriculture
  • Will focus on achieving 4 per cent growth per year in agriculture
  • Sets farm credit target at Rs 8 lakh crore for 2014-15
  • Proposes a long-term rural credit fund with an initial corpus of Rs 5,000 crore 
  • Finance Minister Arun Jaitley's comments:
  • "The fiscal deficit target of 4.1 per cent put out by my predecessor is indeed daunting. But I have decided to accept the target."
  • "The task before me is challenging because we need to revive growth in manufacturing and infrastructure. We need to introduce fiscal prudence and cannot spend beyond our means. For this, the tax-GDP ratio must be improved."
  • "A high-level committee will scrutinize retrospective tax cases. We are committed to providing a stable tax regime."
  • "We have no option but to take some bold steps to spurt economy; these are only the first steps and are directional."
  • "(The farming sector) has risen to the challenge of making India largely self-sufficient in providing food for growing population" but there is "an urgent need to set up investment, both public and private."
Copyright @ Thomson Reuters 2013


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