New Delhi: The Modi Sarkar’s maiden Budget on Thursday pushed for the revival of growth by opening up India’s economy to more foreign investment and offered a slew of sops for manufacturing, trying to reward its prime constituency of “aspirational India”.
Giving goodies to the middle class hit by high inflation in the past three years, “Santa Claus” finance minister Arun Jaitley raised the personal income-tax exemption limit to Rs 2.5 lakh and hiked the investment limit for tax savings by Rs 50,000 to Rs 1.5 lakh, which will enable individuals to save up to Rs 40,000 in taxes.
The deduction limit on bank loan interest for self-occupied homes was also increased from Rs 1.5 lakh to Rs 2 lakh, which will benefit the middle class that largely backed Mr Modi in the election.
The I-T exemption limit for senior citizens has also been raised from Rs 2.5 lakh to Rs 3 lakh. The salaried class can now invest up to Rs 1.5 lakh in Public Provident Fund (PPF).
To pep up investments, Mr Jaitley hiked FDI in defence and insurance from 26 per cent to 49 per cent. Mr Jaitley also relaxed the FDI norms for housing to encourage development of “smart cities” for the “neo-middle class”.
Mr Jaitley hiked taxes on cigarettes, other tobacco products, pan masala and aerated drinks in a bid to deter people from some unhealthy habits, and also to increase revenue for the government.
What surprised the financial markets is that despite the low growth in taxes, Mr Jaitley retained the fiscal deficit target for 2014-15 at 4.1 per cent of GDP, and to reduce it further to three per cent by 2016-17. “My predecessor (P. Chidambaram) set up a very difficult task of reducing the fiscal deficit to 4.1 per cent of GDP in the current year.
The target in indeed daunting. Difficult as it may appear, I have decide to accept this target as a challenge,” he said.
Union finance minister Mr Arun Jaitley is banking on net tax revenue growth of 16.9 per cent. Banking on a revival of the stock market, he raised the disinvestment target for the current fiscal to Rs 58,425 crores.
Mr Jaitley hinted that the government will go for massive disinvestment of public sector banks, while retaining its majority stake. In the past, governments set ambitious disinvestment targets, which were seldom met. The subsidy bill was marginally up by 2.47 per cent to over Rs 2.51 lakh crores for 2014-15. However, Mr Jaitley has promised to overhaul the grants for food, fuel and fertiliser to “make it more targeted”.
Manufacturing companies with foreign investment have been allowed to sell their products through e-commerce.
Though it was widely believed that the finance minister would give an assurance that he would not impose any retrospective amendments to tax laws, investors were, however, only assured that these powers would be used judiciously.
All fresh cases arising out of the 2012 amendment of the Income-Tax Act will be looked into by a high-level committee of the Central Board of Direct Taxes.
To push electronic manufacturing in the country, the finance minister imposed an education cess on imported electronic products, that will make them costlier. But soaps, personal computers, cathode ray TV, LCD and LED TVs below 19 inches manufactured in the country will become cheaper as customs duties on various components were slashed.
To push growth, PSUs will also invest Rs 2.50 lakh crores in the current fiscal year.
To boost entrepreneurship, Mr Jaitley announced a fund of Rs 10,000 crores to act as a catalyst to attract private capital by providing equity, soft loans and other risk capital for startup companies. He provided Rs 7,000 crores to set up “smart cities” across the country, a key promise made by the BJP in its poll manifesto.
Mr Jaitley also announced an allocation of Rs 500 crores for the “Digital India” initiative to set up broadband hubs and networks in villages.
