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HIGHLIGHTS-Budget 2015/16 goes for growth, delays cut in fiscal deficit

Source : REUTERS
Last Updated: Sat, Feb 28, 2015 13:00 hrs

Feb 28 (Reuters) - India's Finance Minister Arun Jaitley on Saturday announced a budget aimed at high growth, saying the pace of cutting the fiscal deficit would slow as he seeks to boost investment and ensure that ordinary people benefit. Here are the highlights of Jaitley's budget for the fiscal year that begins on April 1. FISCAL DEFICIT * Fiscal deficit seen at 3.9 percent of GDP in 2015/16 * Will meet the challenging fiscal target of 4.1 percent of GDP * Remain committed to meeting medium term fiscal deficit target of 3 percent of GDP * Current account deficit below 1.3 percent of GDP * Jaitley says have to keep fiscal discipline in mind despite need for higher investment GROWTH * GDP growth seen at between 8 percent and 8.5 percent y/y * Aiming double digit growth rate, achievable soon INFLATION * Expects consumer inflation to remain close to 5 percent by March, opening room for more monetary policy easing * Monetary policy framework agreement with the RBI clearly states objective of keeping inflation below 6 percent * "One of the achievements of my government has been to conquer inflation. This decline in my view represents a structural shift." REVENUES * Revenue deficit seen at 2.8 percent of GDP * Non tax revenue seen at 2.21 trillion rupees * Agricultural incomes are under stress DISINVESTMENT * Government targets 410 billion rupees from stake sales in companies * Total stake sale in 2015/16 seen at 695 billion rupees MARKET REFORMS * Propose to merge commodities regulator with SEBI * To bring a new bankruptcy code * Jaitley says will move to amend the RBI act this year, and provide for a monetary policy committee * To set up public debt management agency * Proposes to introduce a public contract resolution of disputes bill * To establish an autonomous bank board bureau to improve management of public sector banks POLICY REFORMS * To enact a comprehensive new law on black money * Propose to create a universal social security system for all Indians * To launch a national skills mission soon to enhance employability of rural youth * To raise visa-on-arrival facility to 150 countries from 43 * Allocates 346.99 billion rupees for rural employment guarantee scheme BORROWING * Gross market borrowing seen at 6 trillion rupees * Net market borrowing seen at 4.56 trillion rupees GENERAL ANTI-AVOIDANCE RULES (GAAR) * Government defers rollout of anti-tax avoidance rules GAAR by two years * GAAR to apply prospectively from April 1, 2017 * Retrospective tax provisions will be avoided TAXATION * To abolish wealth tax * Replaces wealth tax with additional 2 pct surcharge on super rich * Proposes to cut to 25 percent corporate tax over next four years * Corporate tax of 30 percent is uncompetitive * Net gain from tax proposals seen at 150.68 billion rupees * Jaitley proposes modification of permanent establishment norms so that the mere presence of a fund manager in India would not constitute a permanent establishment of the offshore fund, resulting in adverse tax consequences. * Proposes to rationalise capital gains tax regime for real estate investment trusts * Expects to implement goods and services tax by April 2016 * To reduce custom duty on 22 items * Basic custom duty on commercial vehicle doubled to 20 percent * Proposes to increase service tax rate and education cess to 14 percent from 12.36 percent * Plans to introduce direct tax regime that is internationally competitive on rates without exemptions * Exemptions for individual tax payers to continue * To enact tough penalties for tax evasion in new bill * Tax dept to clarify indirect transfer of assets and dividend paid by foreign firms INFRASTRUCTURE * Investment in infrastructure will go up by 700 bln rupees in 2015/16 over last year * Plans to set up national investment infrastructure fund * Proposes tax-free infrastructure bonds for projects in roads, rail and irrigation projects * Proposes 5 "ultra mega" power projects for 4,000 MW each * Second unit of Kudankulam nuclear power station to be commissioned * Will need to build additional 100,000 km of road * Ports in public sector will be encouraged to corporatise under Companies Act EXPENDITURE * Plan expenditure estimated at about 4.65 trillion rupees * Non-plan expenditure seen at about 13.12 trillion rupees * Allocates 2.46 trillion rupees for defence spending * Allocates 331.5 billion rupees for health sector * If revenue improves, hope to raise budgeted allocations for rural job scheme by 50 billion rupees INVESTMENT * Propose to do away with different types of foreign investment caps and replace them with composite caps * To allow foreign investment in alternative investment funds * Public investment needed to catalyse investment GOLD * To develop a sovereign gold bond * To introduce gold monetisation scheme to allow depositors to earn interest * To introduce Indian-made gold coin to reduce demand for foreign gold coins SUBSIDIES * Food subsidy seen at 1.24 trillion rupees * Fertiliser subsidy seen at 729.69 billion rupees * Fuel subsidy seen at 300 billion rupees * We are committed to subsidy rationalisation based on cutting leakages FINANCE MINISTER'S COMMENTS * "We inherited a sentiment of doom and gloom. The investment community had almost written us off. We have come a long way since then." * "We have turned around the economy, dramatically restoring macroeconomic stability and creating the conditions for sustainable poverty elimination, job creation, durable double digit economic growth." * "While being mindful of the challenges ... this gives us reason to feel optimistic." * "Domestic and international investors are seeing us with renewed interest and hope." ($1 = 61.6489 Indian rupees) (Compiled by Tony Tharakan and Rupam Jain Nair in NEW DELHI)




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