Indian Finance Minister Arun Jaitley on Saturday presented the 2015-16 general budget in the Indian parliament, an event eagerly awaited by investors who have poured money into the country. He, however, warned that the Ministry has to keep fiscal discipline in mind despite need for higher investment.
The plan expenditure estimated at about 4.65 trillion rupees in 2015-16 while non-plan expenditure seen at about 13.12 trln rupees.
India’s 2014/15 current account deficit is below 1.3 per cent of GDP while the fiscal deficit seen at 3.9 per cent of GDP in 2015-16.
“GDP growth for 2015-16 is seen at between 8 – 8.5 per cent. Aiming for double digit growth rate, achievable soon,” said Jaitley.
The Finance Ministry forecast growth of 8.1 per cent to 8.5 percent growth for the fiscal year starting April 1 after the Statistics Ministry revised the way it calculates gross domestic product last month.
An Economic Survey released by the government on Friday advised caution against reading too much into the new numbers.
“The balance of evidence,” the report prepared by a team headed by the Chief Economic Advisor Arvind Subramaniam said, is “in favor of viewing India as a recovering rather than surging economy.”
The Finance Minister on Saturday said he is confident of meeting “the challenging fiscal target of 4.1 per cent of GDP”.
In stark contrast, however, the budget allocated 2.46 trillion rupees for defence spending in 2015-16 while earmarking 331.5 billion rupees for its much-neglected health sector.
The government expects to implement a comprehensive goods and services tax, or GST, by April 2016, the Finance Minister said in his budget speech on Saturday.
“GST will put in place state of art indirect tax system by April 1st 2016,” said Jaitley.
A single comprehensive, value-added tax on goods and services (the revenues from which will be shared between the central government and the states) will replace a slew of taxes currently in place in India.
Jaitley also told Indian lawmakers on Saturday that the government expects consumer inflation to remain close to 5 per cent by March, opening room for more monetary policy easing. This is lower than the central bank’s 6 per cent target.
The Minister also said India needs to build additional 100,000 kilometers of road while announcing a National Investment Infrastructure Fund.
“Investment in infrastructure will go up by 700 billion rupees in 2015-16 over last year. The government proposes tax-free infrastructure bonds for projects in roads, rail and irrigation projects,” said the Finance Minister.
The government also proposes 5 ultra mega power projects for 4,000 MW each.
The Finance Minister also announced that the second unit of the joint Indo-Russian Kudankulam nuclear power station to be commissioned in 2015/16.
Apart from new social welfare schemes, the government announced the allocation of 346.99 billion rupees in 2015-16 for NREGA, a rural employment guarantee scheme launched by the previous government.
The Finance Minister also unveiled new entitlement schemes, promising an inclusive social safety net for the poorer sections of society.
“The government proposes to create a universal social security system for all Indians,” said Jaitley.
The government will also introduce a gold monetisation scheme to allow depositors to earn interest. It will also introduce Indian made gold coins to reduce demand for foreign gold coins.
India will now allow foreign investment in alternative investment funds, the Minister announced.
The government also proposed to increase service tax rate and education cess to 14 per cent from 12.36 per cent while abolishing wealth tax.
The government also proposes to cut to 25 per cent corporate tax over next 4 years.
India’s benchmark equity gauge, Nifty, turned negative, down 0.04 pct after Jaitley said the government will meet the medium fiscal deficit target in three years, not two.