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Union Budget 2014-15: Highlights

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The Finance Minister, Mr.  Arun Jaitley presented the Union Budget, in New Delhi on 10th July 2014.  The following are the highlights of the Union Budget 2014-15:

For individuals

* Tax slab on personal income remains unchanged

* Income tax exemption limit raised by Rs 50,000 to Rs 2.5 lakh and for senior citizens to Rs 3 lakh

* Exemption limit for investment in financial instruments under 80C raised to Rs 1.5 lakh from Rs 1 lakh.

* Investment limit in PPF raised to Rs 1.5 lakh from Rs 1 lakh

* Deduction limit on interest on loan for self-occupied house raised to Rs 2 lakh from Rs 1.5 lakh.

* Kisan Vikas Patra to be reintroduced, National Savings Certificate with insurance cover to be launched

* Long term capial gain tax for mutual funds doubled to 20 pc; lock-in period increased to 3 years

* Mandatory wage ceiling of subscription to EPS (Employee Pension Scheme) raised from Rs 6,500 to Rs 15,000

* Minimum pension increased to Rs 1,000 per month

* LCD, LED TV become cheaper

* Cigarettes, pan masala, tobacco, aerated drinks become costlier

Deduction limit on interest on loan for self-occupied house raised to Rs 2 lakh from Rs 1.5 lakh

New projects

* 5 IIMs to be opened in HP, Punjab, Bihar, Odisha and Rajasthan

* 5 more IITs in Jammu, Chattisgarh, Goa, Andhra Pradesh and Kerala.

* 4 more AIIMS like institutions to come up in Andhra Pradesh, West Bengal, Vidarbha in Maharashtra and Poorvanchal in Uttar Pradesh

* Govt proposes to launch \'Digital India’ programme to ensure broad band connectivity at village level

* Kisan TV for farmers, Arun Prabha TV for northeast.

* National Rural Internet and Technology Mission for services in villages and schools, training in IT skills proposed

* Govt proposes Ultra Modern Super Critical Coal Based Thermal Power Technology

* A project on the river Ganga called ‘Jal Marg Vikas’ for inland waterways between Allahabad and Haldia; Rs 4,200 crore set aside for the purpose.

* EPFO to launch the “Uniform Account Number” Service for contributing members.

* New programme “Neeranchal” to give impetus to watershed development in the country with an initial outlay of Rs. 2142 crores.

* Beti Bachao, Beti Padhao Yojana to generate awareness and help in improving the efficiency of delivery of welfare services meant for women.

* Free Drug Service and Free Diagnosis Service to achieve “ Health For All”

* Two National Institutes of Ageing to be set up at AIIMS, New Delhi and Madras Medical College, Chennai.

5 more IITs in Jammu, Chattisgarh, Goa, Andhra Pradesh and Kerala

Allocations

* Rs 100 crore to support about 600 new and existing Community Radio Stations

* Swachh Bharat Abhiyan to cover every household with sanitation facility by the year 2019

* Rs 100 crore for metro projects in Lucknow and Ahmedabad

* Rs 2,037 crore set aside for Integrated Ganga Conservation Mission called ‘Namami Gange’

* Rs 150 crore allocated for increasing safety of women in large cities

* Rs. 7,060 crore for the project of developing 100 Smart Cities.

* Set aside Rs 11,200 crore for PSU banks capitalisation

* Govt provides Rs 500 crore for rehabilitation of displaced Kashmiri migrants

* 1000 crore provided for “Pradhan Mantri Krishi Sinchayee Yojna” for assured irrigation.

* Rs. 50,548 crore under the SC Plan and Rs. 32,387 crore under TSP

Rs. 7,060 crore for the project of developing 100 Smart Cities

Economic initiatives

* Composite cap of foreign investment to be raised to 49 per cent in Defence and Insurance sectors.

* Requirement of the built up area and capital conditions for FDI reduced to 20,000 square metres and USD 5 million respectively for development of smart cities.

* Manufacturing can sell its products through retail including Ecommerce platforms.

* Requirement to infuse Rs.2,40,000 crore as equity by 2018 in our banks to be in line with Basel-III norms PSUs will invest through capital investment a total sum of Rs. 2,47,941 crores.

* Rs 4,000 cr set aside to increase flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment.

* Govt in favour of consolidation of PSU banks

* Govt considering giving greater autonomy to PSU banks while making them accountable

The numbers

* Government expects Rs 9.77 lakh crore revenue crore from taxes

* Plan expenditure pegged at Rs 5.75 lakh crore and non-plan at Rs 12.19 lakh crore.

* Fiscal deficit target retained at 4.1 pc of GDP for current fiscal and 3.6 pc in FY 16

* Disinvestment target fixed at Rs 58,425 crore

* Gross borrowings pegged at Rs 6 lakh crore

* Contours of GST to be finalised this fiscal; Govt to look into DTC proposal.

Plan expenditure pegged at Rs 5.75 lakh crore and non-plan at Rs 12.19 lakh crore

Administrative reforms

* Committee to look into all fresh tax demands for indirect transfer of assets in wake of retrospective tax amendments of 2012

* Expenditure management commission to be setup; will look into food and fertilizer subsides

* Legislative and administrative changes to sort out pending tax demands of more than Rs. 4 lakh crore under dispute and litigation.

* New Urea Policy would be formulated.

* More productive, asset creating and with linkages to agriculture and allied activities wage employment would to be provided under MGNREGA.

* A committee will to examine and recommend how unclaimed amounts with PPF, Post Office, saving schemes etc. can be used to protect and further financial interests of the senior citizens

* Slum development to be included in the list of Corporate Social Responsibility

* Committee to examine the financial architecture for MSME Sector, remove bottlenecks and create new rules and structures to be set up and give concrete suggestions in three months.

* An institution to provide support to mainstreaming PPPPs called 4PIndia to be set up with a corpus of Rs. 500 crores.

Govt clears six FDI proposals worth Rs. 551 cr

The Finance Ministry has cleared six foreign direct investment (FDI) proposals with estimated investments of Rs. 551 crore. The proposals cleared include Mauritius-based Destimoney Enterprises Limited’s Rs. 489.99 crore proposal for subscribing to 3,76,92,300 partly paid equity shares of PNB Housing Finance Ltd. A number of proposals, including that of Walt Disney, News Laundry, BNP Paribas and Indian Rotorcraft, has been deferred by the Government , an official release said. Others that have been cleared include Amri India Private Limited’s proposal for fresh investment of $10 million from its parent company Albany Molecular Research, Mauritius and Brunswick India Limited’s application for making 99.99 per cent investment in the capital of a Limited Liability Partnership to be incorporated in India . The proposals were all cleared by the FIPB at its meeting last month, following which they have been officially given  the go-ahead by the Finance Ministry.

Source: Business Line

 

RBI eases overseas investment norms for Indian corporates

The Reserve Bank relaxed norms for overseas investment by Indian corporates by raising their borrowing limit. \"It has, however, been decided that any financial commitment exceeding USD 1 billion (or its equivalent) in a financial

year would require prior approval of the Reserve Bank even when the total financial commitment of the Indian Party is within the eligible limit under the automatic route...,\" RBI said in a notification. The financial commitment should be limited within 400 per cent compared to earlier level of 100 per cent of the net worth as per the last audited balance sheet of the company, it said. \"It has been decided to restore the limit of Overseas Direct Investments (ODI) or Financial Commitment (FC) to be undertaken by an Indian Party under the automatic route to the limit prevailing, as per the extant FEMA provisions, prior to August 14, 2013,\" it said. Last year, RBI had reduced the ODI limit to 100 per cent of a company\'s net worth from 400 per cent for all companies. However, the restriction was not applicable on public sector firms like Oil India and ONGC Videsh. The RBI had announced the curbs on ODI in the context of prevailing macro-economic situation. During the last year, there was unprecedented appreciation of dollar against rupee. The rupee touched all time low of  68.80 against a dollar in August last year.

 

India\'s forex reserves up $856 mn

India\'s foreign exchange reserves rose by $856.6 million to $315.77 billion for the week ended June 27, led by a sharp jump in overseas currency assets, Reserve Bank of India (RBI) data showed. The reserves had increased by $1.38 billion to $314.92 billion for the week ended June 20. According to the RBI\'s weekly statistical supplement, foreign currency assets, the biggest component of the forex reserves, jumped by $850.9 million to $288.81 billion. The foreign currency assets had grown by $1.37 billion to $287.96 billion for the week ended June 20. The RBI said that the foreign currency assets, expressed in US dollar terms, include the effect of appreciation or depreciation of non-US currencies  held in reserve such as the pound sterling, euro and yen. India\'s reserve position with the International Monetary Fund (IMF) grew by $1.7 million to $1.71 billion. The value of special drawing rights (SDRs) rose by $4.00 million to $4.45 billion. However, the value of gold reserves remained unchanged at $20.79 billion.

 

Eight core industries grow 2.3 percent in May

Eight core industries such as coal, electricity, crude oil, cement and steel, grew 2.3 percent in May this year, compared to 5.9 percent during the corresponding month of last year, official data showed on June 30. The index of eight core industries having a combined weight of 37.90 percent in the Index of Industrial Production (IIP) with base 2004-05 stood at 168.7 in the month under review, the ministry of commerce and industry said in a statement. Electricity generation, which has 10.32 percent weight in the IIP, grew 6.3 percent in May 2014 as compared to 6.2 percent in the same month of previous year. Cement production grew 8.7 percent, coal production was up 5.5 percent and fertilizer production grew 17.6 percent in the month under review. However, four the eight core industries registered negative growth in May. Natural gas production fell 2.2 percent, crude oil output was down 0.1 percent, petroleum and refinery products declined 2.3 percent. and Steel products was down 2 percent. The IIP, the barometer for measuring industrial output, had increased by 3.4 percent in April due to a sharp rise in electricity and manufacturing production. The IIP data for June has not been released yet.

 

Oil India buys 50 percent stake in Russian oil block

State-run explorer Oil India (OIL) said it has completed the acquisition of 50 percent stake in an oil block in Russia for $85 million. OIL said it has \"completed the acquisition of 50 percent shareholding in WorldAce Investments Ltd (WorldAce), a Cyprus-based wholly-owned subsidiary of PetroNeft Resources Ltd (PTR), which owns License 61 in Tomsk Oblast region in Western Siberia, Russia.\" The acquisition marks OIL’s entry into Russia and is a major addition to the company’s overseas portfolio. “The total commitment from OIL will be $85 million including $45 million for development capex. The effective date of the acquisition is January 1, 2014,” the company said in a statement. License 61, located on the eastern side of the Ob river in Russia \'s oil-bearing Tomsk Oblast region, contains 7 oil fields and over 25 identified prospects and leads. Current daily production from the licence is around 2,100 barrels of oil. OIL had last month signed an MoU with Russia \'s Gazprom for joint pursuit of exploration opportunities across the globe as well as collaborate on liquefied natural gas (LNG).

 

India\'s business confidence at 3-year high

Confidence of India Inc. in the economy has risen to the 14-quarter high ahead of the first budget of Prime Minister  Narendra Modi-led government, according to a survey conducted by industry chambers FICCI. “A clear mandate in elections, followed by a slew of announcements undertaken by the government has lifted the spirits of industry members,” the Federation of Indian Chambers of Commerce and Industry said in a survey report. “However, going ahead, it will be imperative to back these announcements with speedy and timely action,” it said. FICCI\'s latest Business Confidence Survey reflects signs of rebound in the economy. The Overall Business Confidence Index inched up eight notches in the current survey vis-a-vis the previous round. This is the third consecutive improvement in the business confidence in the country. The survey report comes days ahead of the first union budget of the Modi government to be presented July 10. Respondents are clearly more upbeat about the near term prospects and this is true for expected performance at all the three levels - economy, industry and firm level, the survey report said. In fact, a whopping majority of 93 percent participants said that they expect the overall economic situation to be “moderately to substantially better” in the coming six months. The investor sentiment which had taken a sharp hit in the past also seems to be recuperating. According to the current survey results, a plunge was noted in the percentage of participating companies anticipating investments to decline in near term. About 6 percent of the respondents indicated lower investments over the next two quarters. The corresponding figure was 20 percent last time. Also, 40 percent companies said that they foresee higher investments over the next two quarters, vis- -vis 24 percent stating likewise in the last round. Outlook of the participating companies with regard to employment and exports also improved. However, low demands remain a key constraint. Nearly 74 percent of the surveyed companies said demands remained weak. Majority of them expect it to improve over the next six months.

 

Fitch revises India’s economic growth forecast to 5.5%

International rating agency Fitch said India ’s economic growth will accelerate to 5.5 per cent this financial year and 6.5 per cent in FY16 due to the clear mandate received by the pro-reform Narendra Modi government. “The clear electoral mandate of the BJP-led government gives it the ability to pursue far-reaching economic reforms…we have increased our GDP growth forecast for FY16 to 6.5 per cent from 6 per cent and project real GDP growth to pick up to 5.5 per cent in FY15,” it said. The agency said announcements by Narendra Modi and Finance Minister Arun Jaitley after government formation “signal a strong intention to pursue reforms”. It said the budget will give more indications on the government’s policy intentions and implementation of the measures will clarify the level to which growth can be boosted. “Previous periods of high growth illustrate that potential for significantly higher growth rates certainly exists, but that would imply higher savings rates – including through fiscal consolidation, productivity gains through reforms, for instance related to governance, and product and labour markets, and the elimination of infrastructure bottlenecks,” Fitch said.  The agency, along with rival Standard & Poor’s, had said it would downgrade the sovereign ratings to junk about two years ago on concerns over the widening fiscal deficit and low growth. A lack of decision-making by the previous government had also featured prominently in the commentaries. While Fitch did not say anything about the possible impact on the sovereign rating, it said the likely impact from a below-par monsoon has been considered while arriving at the growth estimate of 5.5 per cent for FY15. The agency said there will be significant risks to growth if the monsoon turns out to be much weaker than the Met’s projection of rainfall likely to be 93 per cent of the long-period average due to the high probability of an El-Nino event in the Pacific Ocean . A weak monsoon is likely to hit already-high food inflation even as retail or consumer price inflation was at 8.3 per cent in May, it said. However, it hinted that food inflation will remain contained on recent government announcements on reforms in agriculture produce markets and food distribution fronts, as also the Reserve Bank of India ’s resolve to get CPI down to 6 per cent by January 2016.

 

India to become third largest economy by 2030: PwC

India is set to become the third largest economy in the world by 2030, according to latest estimates by a PricewaterhouseCoopers (PwC) report. The London-headquartered accountancy giant said the rapid rise of the Indian economy with its young workforce would push it up from being the 10th largest economy in 2013 to the third largest by 2030, pushing the UK back into sixth place. “In the longer run, other emerging markets may overtake the UK, but only India looks set to do so before 2030 according to our latest projections,” PwC said in its latest economic outlook. China, the world’s second largest economy, is expected to close the gap with America by 2030, while Mexico is predicted to be the 10th largest economy by 2030, above Canada and Italy, both G7 nations. Only a couple of years ago there were forecasts that Britain would rapidly become a second-class economic power and would need to defer to the BRIC countries of Brazil, Russia, India and China in the near future. China has ranked above Japan for a decade as the world’s second-biggest economy. By some calculations Brazil leapfrogged the UK in 2012, with Russia and India close behind. Russia will close the gap on the top eight, but its reliance on the oil and gas industry for growth and its rapidly ageing population will prevent it jumping up the table as quickly as previously thought. Only India will move ahead of the UK by 2030, though it will be sharing a projected GDP of $ 6.1 trillion among more than 1.5 billion people, only half as much again as the UK’s predicted output of $ 4 trillion, produced by a population less than a 20th the size. PwC urged policymakers in the UK to implement further structural reforms to ensure that it remained ahead of emerging markets.