General awareness Updates - August 2014

Persons in News

1.Union Petroleum Minister Dharmendra Pradhan has approved appointment of B. Ashok as the head of India’s largest oil firm, Indian Oil Corporation (IOC). He succeeds R. S. Butola who retired from service on May 31 on attaining superannuation age of 60 years. Since a full-time chairman was not appointed in time, R. K. Malhotra, Director (R&D) and senior most director on IOC board, has been given additional charge for the time-being. 

2. Telangana came into existence as the 29th state of India and Telangana Rashtra Samiti (TRS) supremo K. Chandrasekhar Rao (KCR) was sworn in as its first Chief Minister, capping the decades-old struggle in the region for carving out a separate state from Andhra Pradesh.

3. Prime Minister Narendra Modi has accepted the resignation of National Disaster Management Authority Vice Chairman Marri Shashidhar Reddy, who had resigned on 17th June. The Prime Minister is the ex-officio Chairman of NDMA. 

4.Syrian President Bashar al-Assad has won a landslide victory in presidential poll securing 88.7 per cent of the vote. The two other candidates, Hassan al-Nouri and Maher Hajjar, won 4.3 percent and 3.2 percent respectively.

5. International hockey suffered a big setback as the Sultan of Perak, Sultan Azlan Shah who is regarded as the ‘Father of Malaysian Hockey’, passed away here at the age of 86.

6. E. S. L. Narasimhan was sworn in as the common Governor of Telangana and Andhra Pradesh.

7. Uttrakhand Governor Aziz Qureshi has been given the additional charge as the Governor of Uttar Pradesh, following the resignation of B. L. Joshi. 

Awards & Honours

1. Juan Gabriel Vasquez has won the world’s most lucrative book prize for his novel, ‘The Sound of Things Falling’. The Colombian writer will take home €100,000 euro after beating off competition from 152 titles entered in the International Impac Dublin Literary Award.

2. GoI’s Mobile Seva wins UN award

An initiative conceptualised by the Government of India’s Department of Electronics and Information Technology to enable delivery of public services electronically through the mobile platform has been awarded a United Nations public service award.

Sports

1. After winning three medals in the ISSF World Cups in Munich and Slovenia recently, in-form Indian shooter Jitu Rai achieved the world number one ranking in air pistol event.  The 27-year-old armyman from Lucknow is the seventh Indian shooter to have achieved this feat. Anjali Bhagwat, Rajyavardhan Rathore, Gagan Narang, Manavjit Singh Sandhu, Ronjon Sodhi and Heena Sidhu are the others to have claimed the numero uno position in their respective events.

2. MOTORRACING

Canada Grand Prix|

Winner: Daniel Ricciardo (Australia/Red Bull Racing)

Second: Nico Rosberg (Germany/Mercedes)

Third: Sebastian Vettel (Germany/Red Bull Racing)

Austria Grand Prix

Winner: Nico Rosberg (Germany/Mercedes)

Second: Lewis Hamilton (Britain/Mercedes)

Third: Valtteri Bottas (Finland/Williams-Mercedes)

3.TENNIS

2014 French Open, Roland Garros

Men’s Singles

Winner: Rafael Nadal (Spain)

Runner-up: Novak Djokovic (Serbia)

Women’s Singles

Winner: Maria Sharapova (Russia)

Runner-up: Simona Halep (Romania)

Men’s Doubles

Winners: Julien Benneteau / Edouard Roger-Vasselin (France)

Runners-up: Marcel Granollers / Marc Lopez (Spain)

Women’s Doubles

Winners: Hsieh Su-wei (Taiwan) / Peng Shuai (China)

Runners-up: Sara Errani / Roberto Vinci (Italy)

Mixed Doubles

Winners: Anna-Lena Gronefeld (Germany) / Jean-Julien Rojer (Netherlands)

Runners-up: Julia Gorges (Germany) / Nenad Zimonjic (Serbia)

Economy & Business

1. Donald Levine, the Hasbro toy company executive credited as the father of GI Joe for developing the world’s first action figure, has died.  He was 86.

2.The Central Government decided to give additional three months to state governments to implement the National Food Security Act, which gives two-thirds of the country’s population the right to subsidised foodgrains.  The Union Food Minister is Ram Vilas Paswan. 

3. The Comptroller and Auditor General of India (CAG) has pulled up Reliance Industries for charging a rate in excess of the government approved price for its KG-D6 gas field and not including the marketing margin for calculating royalties and the government’s share. The government had in October 2007 set a sale price of U.S.$4.20 per million British thermal uni based on the price discovered by RIL from key customers. 

4. In the biggest ever deal in the Indian media sector, Reliance Industries will take control of popular television news channels CNN-IBN, IBN7, CNBC-TV18 and Lokmat, and an entire clutch of ETV channels with a massive infusion of `4,000 crore into Network 18 Media and TV18 Broadcast Ltd. News websites such as firstpost.com and ibnlive.com and the Colors entertainment channel will also be acquired.

Miscellaneous

1. Asserting that the goal of ending preventable child and maternal deaths by 2035 is well within reach, India has outlined six key actions, including gender equality, to accelerate efforts to achieve this goal.

Speaking at the meeting on ‘Acting on the Call: Ending Preventable Child and Maternal Deaths’, Union Health Minister Dr Harsh Vardhan said the other actions include the power of belief, partnership, evidence, communication and untapped power in health financing and organisation.

In his keynote address, he called upon the global leaders on the urgent need to invest in girl child education to realise the goal of ending child and maternal deaths. He asserted that it is collective responsibility to ensure that the investments and the benefits of development reach every mother and child, for creating a better future for the generations to come. ”It is now evident that with the sustained efforts across the globe with a focus on equity, the goal of ending preventable child and maternal deaths by 2035 seems well within our reach,” Dr Vardhan said. 

The day-long event was organised by the USAID, India and Ethiopia in association with the Melinda and Gates Foundation. ”By now, we are also certain about the investments which countries need to make to save the lives of 15 million children and almost 600,000 mothers by 2020,” he added. 

2.India moves up on Swiss black money ladder

India has moved up to 58th rank in terms of foreign money lying with Swiss banks, but it accounts for a meagre 0.15 per cent of an estimated U.S.$1.6 trillion total global wealth held in Switzerland’s banking system.

The UK has retained its top position with highest share of close to 20 per cent of global wealth in Swiss banking system, followed by the U.S., West Indies, Germany and Guernsey in the top-five in terms of exposure to banks in Switzerland. 

Amid much hue and cry over huge amounts of illicit wealth stashed by Indians in Swiss banks, the latest official data released by Switzerland’s central banking authority SNB shows that Indian money in Swiss banks rose by 43 per cent during 2013 to close to 14,000 crore (2.03 billion Swiss Francs), pushing its global ranking up from 70th at the end of 2012. 

The rankings are based on the direct client exposure as also the funds held through ‘fiduciaries’ or wealth managers with a total of 283 banks in Switzerland. 

3.Global economic growth forecast lowered by World Bank

The global economy got off to a bumpy start this year buffeted by poor weather in the United States, financial market turbulence and the conflict in the Ukraine. As a result, global growth projections for 2014 as a whole have been marked down from 3.2 per cent in January to 2.8 per cent now. Despite the early weakness, growth is expected to pick up speed as the year progresses and world GDP is projected to expand by 3.4 per cent in 2015 and 3.5 per cent in 2016 – broadly in line with earlier forecasts. When expressed in 2010 Purchasing Power Parity terms, global growth is projected to accelerate from 3.1 per cent in 2013 to 3.4, 4.0, and 4.2 per cent in each of 2014, 2015 and 2016.

High-income country recovery is underway

The bulk of the acceleration will come from high-income countries (notably the U.S. and the Euro Area). A reduced drag on growth from fiscal consolidation, improving labour market conditions and a steady release of pent-up demand in these countries are projected to overcome first quarter softness and lift high-income GDP growth to 1.9 per cent in 2014, from 1.3 per cent in 2013, and to 2.4 and 2.5 per cent in 2015 and 2016.

Flat growth for developing countries

The outlook for developing countries is for flat growth in 2014. This marks the third year in a row of sub-5 per cent growth and reflects a more challenging post-crisis global economic environment. The flat yearly profile masks an expected firming of activity during the course of 2014, with developing country growth reaching 5.4 and 5.5 per cent in 2015 and 2016 — broadly in line with potential.

4. Modi Govt clears 21k crore projects

The Narendra Modi government has cleared seven big-ticket investment projects worth 21,000 crore, some of which have been held up for decades, because of hurdles ranging from environmental issues to financing problems.

The oldest among them, which has been on the drawing board for over 30 years, is a 235 kilometre railway line that is critical to tap Chhattisgarh’s second largest iron ore reserves and ensure the survival of the Bhilai Steel Plant whose current iron ore sources are expected to run out in a few years.

The Steel Authority of India (SAIL), which is partly funding the rail project along with NMDC, had first proposed tapping the iron ore riches in Chhattisgarh’s Rowghat area in 1983. A vital second stage forest clearance for the 1,105-crore railway line between Dallirajhra and Jagdalpur in the Naxal-affected Bastar district has now been signed off by new environment and forest minister Prakash Javadekar.

5. Defence production deregulation will boost private sector

The government’s decision on deregulation will give private companies the right to manufacture a number of defence goods. Till 1991 when economic reforms were initiated, the government licensed a bulk of industrial products, including automobiles and white goods. Over the years, the list has been pruned, and now only a handful of industries such as defence, cigarettes, explosives, distillation and brewing of alcoholic drinks and hazardous chemicals require licences. In all other sectors, companies can freely enter and manufacture whatever they want without any restriction on quantity.

So far, all defence items required licences, which were tough to come by. The ministry has for long been accused of sitting on applications for years. Often it took up to five years to get a licence. But those days are over as 55% of the items have been removed from the list. Now, companies won’t need a licence to manufacture components, castings and sub-assembly.

6. Highlights of Rail Budget 2014-15

Major Challenges facing the Railway System

v      Vast tracts of hinterland waiting for rail connectivity.

v      Railways expected to earn like a commercial enterprise but serve like a welfare organization.

v      Railways carry Social Service Obligation of more than `20,000 cr by carrying services below cost. This is nearly 16.6% of Gross Traffic Receipts (GTR) and is almost half of Railways’ Plan Outlay under budgetary sources.

v      Surplus revenues declining; Hardly any adequate resources for its development works.

v      Tariff policy adopted lacked rational approach; passenger fares kept lower than costs; loss per passenger kilometer increased from 10 paise per km in 2000-01 to 23 paise in 2012-13.

v      ‘Decade of Golden Dilemma’ – choosing between commercial and social viability.

v      Share of Railways in freight traffic coming down consistently.

v      `5 lakh crore required for ongoing projects alone.

v      Focus so far in sanctioning more and more projects with inadequate prioritization rather than completing them; Of the 674 projects worth `1,57,883 cr sanctioned in the last 30 years, only 317 could be completed. Completing the balance requires `1,82,000 cr.

v      Most of Gross Traffic Receipts (GTR) is spent on fuel, salary and pension, track & coach maintenance and on safety works . In the year 2013-14, Gross Traffic Receipts were `1,39,558 crore and total Working Expenses were `1,30,321 crore,

v      The surplus, after paying obligatory dividend and lease charges, was `11,754 crore in 2007-08 and is estimated to be `602 crore in the current financial year.

Course Correction and Initiatives

v      Works to be re-prioritized with more focus on doubling and tripling to decongest the over-utilized network.

v      Recent fare and tariff hike to mop up additional revenue of about `8,000 cr.

v      Alternate resource mobilization need to be explored as enlisted.

·         Leveraging railway PSU resources by bringing in their investible surplus funds in infrastructure projects of Railways.

·         Domestic investments and FDI in rail infrastructure.

·         Pursuing Public Private Partnership.

v      Near plan-holiday approach.

v      Prioritizing and setting timelines for completion of the ongoing projects.

v      Decision Support System for project implementation.

v      Strategic partnerships and transparency in procurements.

v      Aggressive indigenization of imported products.

v      Developing locomotives, coaches and wagon leasing market.

Passenger Amenities/Services & Station Management - including Cleanliness & Catering

v      Provision of foot-over bridges, escalators, lifts, etc., at all major stations, including through PPP route.

v      Provision of sufficient water supply, platform shelters and toilets at railway stations.

v      Battery operated cars for differently-abled and senior citizens at platforms of all major stations.

v      Involvement of individuals, NGOs, trusts, charitable institutions, corporates to provide passenger amenities at stations.

v      Provision of workstations in select trains on payment basis.

v      Expanding scope of online booking of train, coaches, berth & chair car.

v      Introduction of parking cum platform combo tickets.

v      E-booking of railway retiring rooms.

v      Introduction of ready-to-eat meals of reputed brands in a phased manner.

v      Introduction of Quality Assurance Mechanism through third party audit by NABCB certified agencies.

v      Launching feedback service through IVRS on the quality of food.

v      Setting up of Food Courts at major stations for providing regional cuisine while onboard through email, SMS and smartphones, etc., pilot project between New Delhi-Amritsar and New Delhi-Jammu Tawi sections.

v      Substantial increase of 40% in budget allocation for cleanliness.

v      Outsourcing of cleaning activities at 50 major stations to professional agencies.

v      Setting up of separate housekeeping wing for maintaining cleanliness and sanitation at stations.

v      Setting up of Corpus Fund for stations’ upkeep.

v      Extending use of CCTVs at stations to monitor cleanliness activities.

v      Printing of all India level complaint/helpline number on PRS tickets and introduction of system of third party inspections.

v      Extension of onboard housekeeping services to all important trains.

v      Increasing mechanized laundries for quality bedrolls in AC coaches.

v      Introduction of RO drinking water units at stations and in trains on experimental basis.

v      Encouraging reputed and willing NGOs, charitable institutions and corporate houses for adopting and maintaining stations.

Measures for improving Safety & Security

v      Provision of `1,785 crore for road-over-bridges and road-underbridges; speedy clearances, online design standardization and decentralised sanctioning powers.

v      Multi-pronged approach to eliminating Unmanned Level Crossings.

v      Advanced technology for rail-flaw detection - Vehicle Borne Ultrasonic Flaw Detection System to detect rail and weld fractures and pilot trials on Ultrasonic Broken Rail Detection System (UBRD) at two locations.

v      Safety standards to match international practices. Simulation Center to study causes of accidents.

v      Pilot project on automatic door closing in mainline and sub-urban coaches.

v      4000 women RPF constables to be recruited in addition to 7000 RPF constables.

v      RPF escorting teams in trains to be provided mobile phones helping passengers in contacting them in distress. Coaches for ladies will be escorted. Care to be taken for ladies travelling alone.

v      Building boundary walls around stations through PPP route to be explored.

Rail Tourism

v      Eco-Tourism and Education Tourism in northeastern states.

v      Special packaged trains on identified pilgrim circuits like Devi Circuit, Jyotirling Circuit, Jain Circuit, Christian Circuit, Muslim/Sufi Circuit, Sikh Circuit, Buddhist Circuit, Famous Temple Circuit, etc.

v      Tourist train from Gadag to Pandarpur via Bagalkot, Bijapur and Solapur covering the pilgrim and tourist places of Karnataka and Maharashtra.

v      Tourist train from Rameshwaram covering pilgrim and tourist places like Bengaluru, Chennai, Ayodhya, Varanasi and Haridwar.

v      Special train featuring life and work of Swami Vivekananda.

IT Initiatives including revamping reservation system

v      Revamping Railway Reservation System into Next Generation e-Ticketing System.

v      E-ticketing to support 7200 tickets per minutes to allow 1,20,000 simultaneous users.

v      Augmentation of coin-operated automatic ticket vending machines.

v      Provision of platform tickets and unreserved tickets over internet.

v      Shift towards large scale integrated computerization of major functions of Indian Railways to take place.

·         Paperless offices in Indian Railways in 5 years.

·         Wi-fi services in A1 and A category stations and in select trains.

·         Real-time tracking of trains and rolling stock.

·         Mobile based Wakeup Call System for passengers.

·         Mobile based Destination Arrival Alert.

·         Station Navigation Information System.

·         Extension of Dual Display Fare Repeaters at all the ticket counters through PPP.

·         Digital reservation charts at stations (Bengaluru model).

·         Extension of Computerized Parcel Management System.

·         Extension of logistics support to various e-commerce companies by providing designated pick-up centres at identified stations.

·         Providing education to children of railway staff at remote locations through Railtel OFC (optical fibre cable) network.

v      GIS mapping and digitisation of Railway land.

Speed of Trains

v      Bullet train proposed on identified Mumbai-Ahemdabad sector.

v      Setting up of Diamond Quadrilateral Network of High Speed Rail connecting major metros and growth centers of the country; `100 cr provided for initiating the project.

v      Increasing of speed of trains to 160-200 kmph in select 9 sectors.

v      All experimental stoppages to lapse after 30.09.2014.

v      Only operational feasibility and commercial justifications for new stoppages; alternate train connectivity to meet genuine demands.

Resource Augmentation

v      PPP through BOT and annuity route and identification of 8 to 10 capacity augmentation projects on congested routes; Zonal Railways to be suitably empowered to finalize and execute such projects.

v      Facilitating connectivity to new and upcoming ports through PPP.

v      Speedy work on critical coal connectivity lines to bring nearly 100 MT of incremental traffic to Railways and facilitating faster transportation of coal to power houses.

v      Developing identified stations to international standards with modern facilities on lines of newly developed airports through PPP mode.

v      Setting up of Logistic Parks to modernize logistics operations; top priority to mechanization of loading and unloading.

v      Provision of special milk tanker trains in association with National Dairy Development Board and Amul to facilitate transportation of milk through rail.

Metropolitan/Suburban Services

v      Passenger centric focus to urban transport infrastructure by coordinating with other transport ministries and urban bodies.

v      864 additional state-of-the-art EMUs for Mumbai in two years.

v      Study to explore possibility of enhancing existing IR network of Bengaluru for meeting better connectivity needs of Bengaluru city with its suburban areas and hinterland.

v      Byyappanahalli in Bengaluru area to be developed as a coaching terminal.

Financial Performance 2013-14

v      Traffic growth declined and expenditure registered excess in 2013-14 as compared to Revised Estimates (RE).

v      Originating passengers achieved less by 46 million; and passenger earnings short by `968 cr over Revised Estimates.

v      Gross Traffic Receipts at `1,39,558 cr, though short of RE by `942 cr, grew by 12.8% over the previous year.

v      Ordinary Working Expenses and Pension outgo are higher than the Revised Estimates.

v      The year ended with a surplus of `3,783 cr by registering a shortfall of `4,160 cr over the revised target.

v      Dividend liability of `8,010 cr to government fully discharged.

v      Railways generated internal resources of `11,710 cr in 2013-14 for plan finance.

v      Operating Ratio at 93.5% deteriorated by 2.7% over RE.

Budget Estimates 2014-15

v      Freight loading of 1101 MT, 51 MT more than in 2013-14.

v      Growth in passenger traffic - 2%.

v      Freight earnings – `1,05,770 cr.

v      Passenger earnings – `44,645 cr, after revenue foregone of `610 cr on account of rollback in monthly season ticket fares.

v      Total Receipts - `1,64,374 cr; Total Expenditure - `1,49,176 cr;

v      Pension estimated at `28,850 cr.

v      Dividend payment estimated at `9,135 cr.

v      Operating Ratio to be 92.5%, an improvement of 1% over 2013-14.

Annual Plan 2014-15

v      Highest ever plan outlay of `65,445 cr.

v  Gross Budgetary Support - `30,100 cr

v  Railway Safety Fund - `2,200 cr

v  Internal Resources - `15,350 cr.

v  EBR - Market Borrowing - `11,790 cr;

v  EBR - PPP - `6,005 cr.

v      Plan Outlay under budgetary sources placed at `47,650 cr, which is higher by `9,383 cr over 2013-14 – higher plan outlay goes to safety-related works.

v      Full financial outlays to projects targeted for completion during the year.

v      Adequate allocations made for 30 priority works for timely completion.

Projects for Remote Areas, North-East, Andhra Pradesh and Telangana

v      Higher funds for onging 23 projects in northeast including 11 National Projects; `5,116 cr outlay earmarked for projects of northeast, i.e., 54% higher than previous year.

v      Udhampur-Katra Rail link dedicated to the nation; tie-up with Government of J&K for bridging Udhampur-Banihal portion by bus to help passengers reach Srinagar with single ticket from origin to destination.

v      Focus on completion of missing link of Banihal to Katra.

v      29 projects, costing `20,680 cr, currently running in Andhra Pradesh & Telangana.

v      Setting up of Committee of Railways and officials from Andhra Pradesh and Telangana on coordination, requirement and issues.

New Surveys

v      18 new line surveys.

v      10 surveys for doubling, 3rd and 4th lines and gauge conversion.

Trains

v      5 new Jansadharan trains to be introduced.

v      5 Premium and 6 AC trains to be introduced.

v      27 new Express trains to be introduced.

v      8 new passenger services, 5 DEMU services and 2 MEMU services to be introduced and run of 11 trains to be extended.

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Key Features of Economic Survey 2013-14

The State of the Economy

In 2014-15, the Indian economy is poised to overcome the sub-5 per cent growth of gross domestic product (GDP) witnessed over the last two years. The growth slowdown in the last two years was broad based, affecting in particular the industry sector. Inflation too declined during this period, but continued to be above the comfort zone, owing primarily to the elevated level of food inflation. Yet, the developments on the macro stabilization front, particularly the dramatic improvement in the external economic situation with the current account deficit (CAD) declining to manageable levels after two years of worryingly high levels was the redeeming feature of 2013-14. The fiscal deficit of the Centre as a proportion of GDP also declined for the second year in a row as per the announced medium term policy stance. Reflecting the above and the expectations of a change for the better, the financial markets have surged. Moderation in inflation would help ease the monetary policy stance and revive the confidence of investors, and with the global economy expected to recover moderately, particularly on account of performance in some advanced economies, the economy can look forward to better growth prospects in 2014-15 and beyond.

After achieving unprecedented growth of over 9 per cent for three successive years between 2005-06 and 2007-08 and recovering swiftly from the global financial crisis of 2008-09, the Indian economy has been going through challenging times that culminated in lower than 5 per cent growth of GDP at factor cost at constant prices for two consecutive years, i.e., 2012-13 and 2013- 14. Sub-5 per cent GDP growth for two years in succession was last witnessed a quarter of a century ago in 1986-87 and 1987-88. Persistent uncertainty in the global outlook, caused by the crisis in the Euro area and general slowdown in the global economy, compounded by domestic structural constraints and inflationary pressures, resulted in a protracted slowdown. The slowdown is broadly in sync with trends in other emerging economies, but relatively deeper. India’s growth declined from an average of 8.3 per cent per annum during 2004-05 to 2011-12 to an average of 4.6 per cent in 2012-13 and 2013-14. Average growth in the emerging markets and developing economies, including China, declined from 6.8 per cent to 4.9 per cent in this period (calendar-year basis). What is particularly worrisome is the slowdown in manufacturing growth that averaged 0.2 per cent per annum in 2012-13 and 2013-14.

In addition to the growth slowdown, inflation continued to pose significant challenges. Although average wholesale price index (WPI) inflation declined in 2013-14 to 6.0 per cent vis-a-vis 8.9 per cent in 2011-12 and 7.4 per cent in 2012-13, it is still above comfort levels. Moreover, WPI inflation in food articles that averaged 12.2 per cent annually in the five years ending 2013-14, was significantly higher than non-food inflation. Fortunately, the upward trend of inflation that played a part in slowdown in growth, savings, investment, and consumption, appears to have subsided.

What is the Economic Survey?

·       The Finance Minister's Budget Speech contains two major components: Part A and Part B.

·       Part A of the Speech contains the Economic Survey while Part B comprises the Union Budget Speech.

·       The Economic Survey is tabled by the Ministry of Finance in the Parliament along with the Union Budget.

·       The Economic Survey is an assessment of the performance of the Indian economy in the fiscal year going by. For example, the Economic Survey 2013-14 presents an assessment of the performance of the Indian economy in that fiscal year (i.e., 2013-14).

·       So while the Economic Survey is an assessment of the performance of the Indian economy in the fiscal year gone by (i.e., the one that ended on March 31 this year), the Union Budget is a statement of revenues and expenditures for the new fiscal year, i.e., the one that started on April 1 of this year.

The external sector witnessed a remarkable turnaround after the first quarter of 2013-14, and the year ended with a CAD of 1.7 per cent of GDP as against 4.7 per cent in 2012-13. After plummeting to `68.36 to a U.S. dollar on 28 August 2013, triggered by the expected taper of quantitative easing in the United States, the rupee gradually strengthened and the year ended with the exchange rate averaging `61 per U.S. dollar in March 2014, owing to measures taken by the government and the Reserve Bank of India (RBI). Foreign exchange reserves increased by nearly U.S.$40 billion from U.S.$275 billion in early September 2013 to U.S.$314.9 billion on 20 June 2014. These developments on external account have generated some optimism that the Indian economy is better prepared to confront the challenges of global policy reversals, including tapering of quantitative easing in the U.S. Improvement is also observed on the fiscal front, with the fiscal deficit declining from 5.7 per cent of GDP in 2011-12 to 4.9 per cent in 2012-13 and 4.5 per cent in 2013-14. Much of this improvement has been achieved by reduction in expenditure rather than from increased revenue. Nevertheless, the corrections in fiscal and current account deficits augur well for macroeconomic stabilization.

The improvements in the twin deficits would, no doubt, feed into a higher growth in 2014-15, but the pace of recovery may be gradual. After reaching a low of 4.4 per cent during the last two quarters (Q3 and Q4) of 2012-13, growth inched up to 4.7 per cent in Q1 of 2013-14 and further to 5.2 per cent in Q2 of 2013-14, only to decline to 4.6 per cent in the next two quarters. The fact that this happened despite a gradual recovery in the global economy indicates the importance of addressing the domestic structural constraints that have engendered an undulating and gradual recovery.

Aided by a favourable monsoon, the agriculture and allied  sectors achieved a growth of 4.7 per cent in 2013-14, compared to its long-run average of around 3 per cent (between 1999-2000 and 2012-13). However, in some other sectors, slowdown has been more pronounced and protracted. Mining and quarrying activities have decelerated since 2011-12. Two prominent components of mining, coal and crude petroleum, have stagnated in the last three-four years. Subsequent to an average growth of 7.1 per cent in coal production during the four-year period 2006-07 to 2009-10, its growth declined to an average of 1.6 per cent during the next four years ending 2013-14. The slowdown in coal production partly owes to regulatory issues. The compound annual growth rate (CAGR) of crude petroleum was 1.2 per cent during 2004-05 to 2013-14. As coal and petroleum are universal intermediates, the slack in their production impacted the economy adversely.

The last two years were particularly disappointing for the manufacturing sector, with growth averaging 0.2 per cent per annum. The decline has been quite broad based, as per data from the index of industrial production (IIP). Decline in the growth rate for basic goods continued for the third year in succession in 2013-14. Output of capital goods declined for the third year in a row starting 2011-12. Contraction of 12.2 per cent in the consumer durables segment was observed in 2013-14. Only intermediate and non-durable consumer goods registered higher growth rate in 2013-14 vis-à-vis 2012-13. Following close to double-digit growth between 2004-05 and 2011-12, the construction sector (that was the major source of employment in this period) lost momentum in the last two years. Taken together with the trends in capital goods, the slowdown in construction activity reflects subdued business sentiments.

The data on manufacturing growth during the last two years  need to be interpreted with care, given the possibility of revisions by the CSO. The initial estimates of value added in manufacturing sector are based on the IIP, while the second and third revised estimates are based on more detailed data from the Annual Survey of Industries (ASI). For example, as per the National Accounts Statistics, the growth rate of manufacturing for 2011-12 was revised to 7.4 per cent in the  second revised estimates (released in January 2014) from 2.7 per cent estimated earlier as ASI data for 2011-12 became available only in the second half of 2013.

The slowdown in services, in particular the internal trade, transport, and storage sectors, could be attributed to the loss of momentum in commodity-producing sectors. The moderate revival in the global economy may have helped the growth in business services. Bank credit grew by 14.3 per cent in 2013-14, indicating buoyant activity in financial services.

The disaggregated sectoral trends may be better understood in terms of movement in sectoral shares in GDP. The share of the agriculture and allied sectors in GDP has been consistently declining. During the eight years between 1999-2000 and 2007-08, the share of agriculture and allied sectors in GDP declined by 6.4 percentage points, while that of industry and services increased by 1.9 and 4.4 percentage points respectively.

The mining and quarrying sector witnessed continuous decline in GDP share for several years, indicating its inability to cater to requirements of high growth, in the absence of comprehensive reforms.

In the case of manufacturing, most of the gain in share occurred during 2004-05 to 2007-08, when the sector was growing at an annual average rate exceeding 10 per cent, along with robust growth in corporate profits, savings, and investment. Activity was buoyant in registered manufacturing, while the share of unregistered manufacturing remained unchanged during the four years ending 2007-08. During 2008-09 to 2012-13, the share of manufacturing remained roughly constant despite an increase in share of the registered segment, as unregistered manufacturing recorded an average annual growth of only 3.4 per cent.

The share of services has been consistently rising; more so since 2004-05. However, the pace of expansion was not balanced. The biggest drivers of the service sector expansion since 2004-05 were communications and banking and insurance. Robust growth in these sectors primarily drove the expansion of the services sector even after 2010-11. Real estate and business services also gained share. The services that witnessed stagnation/decline in share after 2010-11include domestic trade, hotels, and storage. The inability of some of these employment-intensive sectors to attain sustained momentum is one of the reasons for the less-than commensurate growth in employment in services.

In the absence of sufficiently high growth in agriculture and industry, services would be seriously constrained to sustain growth acceleration on auto-pilot mode since many of the services are dependent on buoyancy in the commodity-producing sectors, especially industry.

Public Finance

In the aftermath of the adoption of the Fiscal Responsibility and Budget Management (FRBM) Act, the fiscal deficit of the centre was brought down to 2.5 per cent of GDP in 2007-08 that was below the threshold target of 3 per cent of GDP. Fiscal balances were deliberately expanded in the aftermath of the global financial crisis in 2008-09 to shore up aggregate demand and raise the growth rate. The gradual fiscal consolidation process was resumed in 2010-11. The government unveiled a revised fiscal consolidation roadmap in October 2012. It targeted a fiscal deficit of 4.8 per cent of GDP for 2013-14 and through a correction of 0.6 percentage point each year thereafter, a fiscal deficit of 3.0 per cent of GDP by 2016-17.

The fiscal deficit of 4.5 per cent of GDP in 2013-14 as compared to the budgeted target of 4.8 per cent of GDP is indicative of continued focus on fiscal consolidation. With a shortfall in tax revenues and disinvestment receipts along with higher-than budgeted subsidies and interest and pension payments, fiscal consolidation was mainly achieved through reduction in expenditure from the budgeted levels.

The outcome in terms of fiscal deficit of the Centre broadly indicates that despite the macroeconomic uncertainties and elevated global crude oil prices, fiscal targets were achieved. Raising the tax-GDP ratio above the currently prevailing levels is critical for sustaining the process of fiscal consolidation in the long run as compression of expenditure beyond a certain minimum can be counter-productive.

One of the major factors that has resulted in an increase in the Centre’s fiscal deficit after 2008-09 has been the build-up in subsidies. As per the provisional actual figures of the Controller General of Accounts (CGA), major subsidies amounted to `2,47,596 crore in 2013-14. There has been a sharp increase in total subsidies from 1.42 per cent of GDP in 2007-08 to 2.56 per cent of GDP in 2012-13, and 2.26 per cent of GDP in 2013-14 (RE). Food subsidy has been increasing due to the widening gap between the economic cost of procurement by the Food Corporation of India and the central issue prices fixed for cereals under the public distribution system (PDS). While there has been partial decontrol of fertilizer subsidy, prices of urea are still sticky; similarly petrol prices have been decontrolled and diesel prices are subjected to monthly increases of `0.50 per litre. The cap set on the number of subsidized LPG cylinders per annum per family was increased from 9 to 12 from April 2014. In addition, leakages contribute substantially to the overall increase in subsidy burden. In the case of food subsidy, the Performance Evaluation Report of the Planning Commission on Targeted PDS (2005) states that for every kilogram of grains delivered to the poor, the GOI released 2.4 kg from the central pool. This has implications for the delivery cost of PDS food grains through the existing delivery mechanism.

Higher fiscal deficits usually lead to rising public debt. India’s central government liabilities-GDP ratio declined  from 61.6 per cent in 2002-03 to 49.4 per cent in 2013-14 (RE). The reduction in this ratio owes to higher nominal GDP growth rate vis-à-vis nominal interest rates. Of the total public debt, internal debt constitutes 95.5 per cent, whereas external debt (at book value) constitutes the remaining.

The trends in macroeconomic variables discussed above have implications for other variables too, viz. inflation, balance of payments, etc. These are discussed below.

PRICES AND MONETARY MANAGEMENT

Inflation

The average headline WPI inflation moderated to a four year low of around 6 per cent in 2013-14 after averaging 8.6 per cent in the previous three years, with the contribution of the nonfood segment moderating significantly on the back of the fall in global commodity prices. However, the pressure from domestic food items remained elevated. WPI inflation remained below 5 per cent in the first quarter of 2013-14. However, higher inflation in vegetables and cereals led to a spike, with headline inflation reaching 6.6 per cent and 7.1 per cent respectively in the second and third quarters. With some moderation in cereals inflation and correction in vegetable prices, headline inflation declined to 5.4 per cent in the last quarter of 2013-14. Inflation in non-food manufactured products (core inflation) remained benign throughout the year and moderated to a four-year low of 2.9 per cent in 2013-14. This indicates that the underlying pressures of broad-based inflation may have somewhat eased.

Inflation in terms of the new series of consumer price index (CPI) (combined) remained fairly sticky at around 9-10 per cent owing to higher food inflation in the last couple of years. However, the headline CPI inflation started moderating after December 2013 and declined to a 25-month low of 8.0 per cent in February 2014, following moderation in inflation for vegetables and egg, meat, and fish. On the other hand, CPI inflation excluding food and fuel, remained sticky due to higher inflation in services-led components such as medical, education, and household requisites.

Major contributors to headline WPI inflation

The level of inflation and its movement across major subgroupsvvaried significantly over the eight quarters up to Q4 of 2013-14. In 2013-14 inflation was chiefly confined to food and fuel, which contributed nearly two-thirds of overall inflation. High inflation in the last few years, particularly food inflation, has been the result of structural and seasonal factors. While inflation in food articles remained persistent, its drivers have been changing over time. For example, cereals and protein items were the main contributors to food inflation in Q1 of 2013-14, while vegetables, especially onions, pushed up food inflation in Q2 and Q3. Within the food group, the contribution of the commodity sub-groups, fruits and vegetables and egg, meat and fish has been high. Inflation in these protein-based items is on account of increase in share of consumption of these items arising from growing income levels.

Food inflation partly owes to large wastage of food articles in the supply chain owing to inefficiencies in distribution channels. The provisions of the State Agricultural Produce Marketing Committee (APMC) Acts have prevented creation of competitive conditions in the distribution of commodities and creation of a national market for agricultural commodities. Multiple layers of intermediation in the distribution of food articles have also pushed up prices for consumers. It is therefore necessary to focus on distribution channels and on reducing food wastage in the supply chain. Significant investment in marketing infrastructure, including modern warehouses, cold storages, reefer vans, scientific packaging, and handling would help strengthen distribution channels. State governments will have to play a vital role in removing restrictive provisions in the APMC Act and proactively promoting alternative trading options for farmers.

Fuel inflation remained in double digits in the last three quarters. A major reason for high inflation in fuel and power items was the rationalization of tariff for electricity in many states, in addition to the policy of allowing greater pass-through in diesel prices and depreciation of the Indian rupee against the U.S. dollar.

INTERNATIONAL TRADE, BALANCE OF PAYMENTS, AND EXTERNAL DEBT

International Trade

India’s share in world exports and imports increased from 0.7 per cent and 0.8 per cent respectively in 2000 to 1.7 per cent and 2.5 per cent respectively in 2013. There has also been marked improvement in India’s total merchandise trade to GDP ratio from 21.8 per cent in 2000-01 to 44.1 per cent in 2013-14.

India’s merchandise exports reached U.S.$312.6 billion (on customs basis) in 2013-14, registering a growth of 4.1 per cent as compared to a contraction of 1.8 per cent during the previous year. In April-May 2014, exports registered a growth of 8.9 per cent over the corresponding period of 2013. Exports of petroleum products, engineering goods, chemicals and related products accounted for more than half of total exports in 2013-14. The value of imports declined by 8.3 per cent in 2013-14 as compared to 2012-13, owing to a 12.8 per cent fall in non-oil imports. The value of imports of petroleum, oil, and lubricants (POL) increased by 0.7 per cent in 2013-14. Imports of gold declined from 1078 tonnes in 2011-12 to 1037 tonnes in 2012-13 and further to 664 tonnes in 2013-14, on account of several measures taken by the government. In value terms, gold and silver imports fell by 40.1 per cent to U.S.$33.4 billion in 2013-14. The sharp decline in imports and a moderate growth in exports in 2013-14 resulted in a decline in India’s trade deficit to U.S.$137.5 billion from U.S.$190.3 billion during 2012-13, contributing to a lower CAD.

Services Trade

Services exports registered a growth of 4 per cent in 2013-14 as against 2.4 per cent in 2012-13. Surplus in services trade (net services) has been a major source of financing India’s growing merchandise trade deficit in recent years. During 2006-07 to 2012- 13, this surplus on an average financed around 38 per cent of merchandise trade deficit. While in 2012-13, net services financed 33.2 per cent of the merchandise trade deficit, during 2013-14, with moderate growth in services exports and fall in their imports, net services financed nearly half of merchandise trade deficit.

Balance of Payments

India’s Balance of Payments (BoP) position improved significantly in 2013-14, particularly in the last three quarters. The stress on BoP observed during 2011-12 as a fallout of the crisis in the Euro area and inelastic domestic demand for certain key imports continued through 2012-13 and the first quarter of 2013-14. The CAD rose sharply to a high of U.S.$88.2 billion (4.7 per cent of GDP) in 2012-13, surpassing the 2011-12 level of U.S.$78.2 billion. After being at perilously unsustainable levels in 2011-12 and 2012-13, the improvement in BoP position in 2013-14 is a relief. However, the outcome in 2013-14 was mixed: high levels of CAD in the first quarter followed by gradual correction thereafter; broadly adequate financing through capital flows till May 2013; a sharp correction in June-August 2013 followed by a surge in September-November 2013. The correction in June-August 2013 was on account of market fears of an imminent tapering of asset purchases by the US Fed. The subsequent surge in flows owed to the special swap windows incentivized by the RBI for non-resident deposits and the overseas borrowing programme of banks.

Widening of the CAD in 2012-13 could largely be attributed to rise in trade deficit arising from weaker exports and relatively stable imports. The latter owed to India’s dependence on crude petroleum imports and elevated level of gold imports since the onset of the global financial crisis. While the financing of the high CAD was adequate and in line with the general trend prior to the 2008 crisis, the inadequacy during 2011-12 and since May 2013 indicated that beyond the threshold level of CAD, financing could be a problem. This is because the post-2008 crisis period is characterized by excessive risk aversion, that has implications for capital flows and the exchange rate of the rupee.

The government moved swiftly to correct the situation through restrictions in non-essential imports like gold; custom duty hike in gold and silver to a peak of 10 per cent; and measures to augment capital flows through quasi-sovereign bonds and liberalization of external commercial borrowings. The RBI also put in place a special swap window for foreign currency non-resident deposit (banks) and banks’ overseas borrowings, through which U.S.$34 billion was mobilized. These measures led to a turnaround in the BoP position in the latter three quarters and for the full fiscal 2013-14. With higher exports and lower imports, there was a reduction in trade deficit to 7.9 per cent of GDP in 2013-14 from 10.5 per cent in 2012-13.

External Debt

The one-off mobilization of deposits by the RBI had implications for India’s external debt. India’s external debt stock at end March 2013 stood at U.S.$ 404.9 billion as against U.S.$360.8 billion at end March 2012. This increased further to U.S.$426.0 billion at end December 2013. India’s external debt consists predominantly of long-term borrowings and has remained within manageable limits owing to prudential restrictions on debt varieties of capital inflows given large interest differentials.

PRIORITIES FOR REVIVING GROWTH

With the twin deficits reasonably under check, the macroeconomic outcomes of slow growth and inflationary pressures require immediate attention. Short-term stabilization apart, the focus of policy should be on wide-ranging structural reforms to ease supply-side constraints and sector-specific incentives to boost demand. Some specific priorities, with the objective of restoring growth, are outlined.

v      Revival of investment is crucial for raising the growth rate. This requires acceleration in project clearances and streamlining of implementation procedures, apart from sector-specific investment policies.

v      Over the medium term, structural reforms that boost productivity are crucial for sustaining higher growth.

v      Linked to efforts at investment revival are policies needed for rejuvenating growth in manufacturing, which has significant backward and forward linkages. Simplification of tax policy and administration, repeal of archaic laws that govern market access, expansion and entry/exit of  firms, revamp of the dispute resolution mechanism for commercial disputes, etc., would lend greater predictability to policy. An environment of policy certainty, continuity, and transparency, will help boost business sentiments further.

v      Strengthening macroeconomic stability, a non-negotiable instrument for stable and faster growth, is predicated on fiscal discipline, manageable current account balance, and price stability. Policy challenges include:

v      keeping fiscal deficit in check without compromising on capital expenditure;

v      maintaining the CAD in the range of 2-2.5 per cent of GDP. This may turn out to be challenging if non-oil imports revive upon growth revival and oil prices harden. Therefore, policies that help in sustained export growth remain relevant.

v      stepping up efforts to further reduce inflation not only to counter the direct macroeconomic consequences but to provide leeway to the RBI for monetary easing and to counter external challenges more effectively.

v      To harness the demographic dividend, the non-agrarian sector must generate employment. With the agrarian sector still employing the bulk of the workforce, policy attention needs to be focused on the rural non-farm sector, manufacturing sector, and labour-intensive segments of services.

v      Physical and social infrastructure, both urban and rural, that can accommodate and fuel robust growth, is central to regaining and sustaining economic momentum.

v      Sustained and high overall economic growth is possible with the farming sector growing at around 4 per cent per annum. This requires a boost to investment and productivity in the sector, crop protection and insurance, and a fresh look at policies towards procurement, marketing, transport, storage, and processing.

OUTLOOK for 2014-15

The descent into the present phase of sub-5 per cent growth has been rather sharp. The interplay of structural constraints alongside delays in project implementation, subdued domestic sentiments, and an uncertain global milieu led to general growth slowdown while rendering macroeconomic stabilization particularly challenging. Inflation also remained at elevated levels. These factors triggered risk-aversion and injected considerable uncertainty in investment activity. The current macroeconomic situation precludes fiscal stimulus to kick-start activity. Similarly, the task of monetary policy calibration for growth revival has been made difficult by persistent inflation and further complicated by uncertainty in international financial conditions and, until recently, by rupee depreciation. Targeted measures by the government and RBI have improved the external economic situation significantly, even as India remains exposed to risk on/off sentiments of investors and to policy shifts in advanced economies. Regaining growth momentum requires restoration of domestic macroeconomic balance and enhancing efficiency. To this end, the emphasis of policy would have to remain on fiscal consolidation and removal of structural constraints. Though some measures have been initiated to this end, reversion to a growth rate of around 7-8 per cent can only occur beyond the ongoing and the next fiscal.

Global economic activity is expected to strengthen in 2014- 15 on the back of some recovery in advanced economies. The Euro area is also expected to register a growth rate of above 1 per cent as against contraction witnessed in 2012 and 2013 (IMF, WEO, April 2014). The European Central Bank’s monetary policy measures, most significantly introduction of the negative deposit facility interest rate are expected to boost economic activity in Europe. In addition, the performance of the real sector in the U.S. (that is likely affect the pace of taper) is a major factor that would impact the global economic situation in 2014-15. The growth outlook for emerging Asian economies is generally benign with some grappling with inflation, structural bottlenecks, and external imbalances. The slowdown in emerging economies comes at an inopportune juncture.

Downward movement along with heightened volatility, witnessed, for example, in fixed investment post 2008-09 in India, often tends to magnify the impact and transmission channels of shocks (e.g. below-normal monsoons and/or upshot in oil prices) and hampers build-up of positive expectations. Under such circumstances, the Indian economy can recover only gradually with the GDP at factor cost at constant prices expected to grow in the range of 5.4–5.9 per cent in 2014-15. This assumes the revival of growth in the industrial sector witnessed in April 2014 to continue for the rest of the year, the generally benign outlook on oil prices (notwithstanding the uncertainty on account of recent developments in the Middle East), and the absence of pronounced destabilizing shocks (including below-normal monsoons). Growth in the above range implies a pick-up, aided by an improved external economic situation characterized by a stable current account and steady capital inflows, improved fiscal situation and, on the supply side, robust electricity generation and some recovery in manufacturing and non-government services.

Growth in 2014-15 is expected to remain more on the lower side of the range given above, for the following reasons: (i) steps undertaken to restart the investment cycle (including project clearances and incentives given to industry) are perceived to be playing out only gradually; (ii) the benign growth outlook in some Asian economies, particularly China; (iii) still elevated levels of inflation that limit the scope of the RBI to reduce policy rates; and (iv) expectation of below-normal monsoons. Downside risk also emerges from prolonging of the geo-political tensions. On the upside, such factors as institutional reform to quicken implementation of large projects and a stronger-than-expected recovery in major advanced economies would help the Indian economy clock a higher rate of growth.

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Highlights of Union Budget 2014-15

THE CURRENT ECONOMIC SITUATION AND THE CHALLENGES

*        Decisive vote for change represents the desire of the people to grow, free themselves from the curse of poverty and use the opportunity provided by the society. Country in no mood to suffer unemployment, inadequate basic amenities, lack of infrastructure and apathetic governance.

*        Challenging situation due to sub-five per cent growth and double digit inflation.

*        Continued slow-down in many emerging economies a threat to sustained global recovery.

*        Recovery seen with the growth rate of world economy projected at 3.6 per cent in 2014 vis-à-vis in 2013.

*        First budget of this NDA government to lay down a broad policy indicator of the direction in which we wish to take this country.

*        Steps announced are only the beginning of the journey towards a sustained growth of 7-8 per cent or above within the next 3-4 years along with macro-economic stabilization.

*        Growing aspirations of people will be reflected in the development strategy of the Government led by the Prime minister Shri Narendra Modi and its mandate of “Sab ka Saath Sab ka Vikas”.

*        Need to revive growth in manufacturing and infrastructure sectors.

*        Tax to GDP ratio must be improved and non-tax revenues increased.

Deficit and Inflation

*        Decline in fiscal deficit from 5.7% in 2011-12 to 4.5% in 2013-14 mainly achieved by reduction in expenditure rather than by way of realization of higher revenue.

*        Improvement in current account deficit (CAD) from 4.7% in 2012-13 to year end level of 1.7% mainly achieved through restriction on non-essential import and slow-down in overall aggregate demand. Need to keep watch on CAD.

*        4.1 per cent fiscal deficit a daunting task in the backdrop of two years of low GDP growth, static industrial growth, moderate increase in indirect taxes, subsidy burden and not so encouraging tax buoyancy.

*        The government is committed to achieve this target. Road map for fiscal consolidation outlines fiscal deficit of 3.6% for 2015-16 and 3% for 2016-17.

*        Inflation has remain at elevated level with gradual moderation in WPI recently.

*        The problem of black money must be fully addressed.

*        Bold steps required to enhance economic activities and spur growth in the economy.

Administrative Initiatives

*        Sovereign right of the Government to undertake retrospective legislation to be exercised with extreme caution and judiciousness keeping in mind the impact of each such measure on the economy and the overall investment climate.

*        A stable and predictable taxation regime which will be investor friendly and spur growth.

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

*        Resident tax payers enabled to obtain an advance ruling in respect of their income-tax liability above a defined threshold.

*        Measures for strengthening the Authority for Advance Rulings.

*        Income-tax Settlement Commission scope to be enlarged.

*        National Academy for Customs & Excise at Hindupur in Andhra Pradesh.

*        The subsidy regime to be made more targeted for full protection to the marginalized, poor and SC/ST.

*        New Urea Policy would be formulated.

*        Introduction of GST to be given thrust.

*        High level committee to interact with trade and industry on regular basis to ascertain areas requiring clarity in tax laws to be set up. Convergence with International Financial Reporting Standard (IFRS) by adoption of the new Indian Accounting Standards (2nd AS) by Indian companies.

*        Setting up of Expenditure Management Commission to look into expenditure reforms.

*        Employment exchanges to be transformed into career centres. A sum of `100 crore provided .

ECONOMIC INITIATIVES

Foreign Direct Investment (FDI)

*        Government to promote FDI selectively in sectors.

*        The composite cap of foreign investment in the Defence sector to be raised to 49 per cent with full Indian management and control through the FIPB route.

*        The composite cap in the insurance sector to be increased up to 49 per cent from 26 per cent with full Indian management and control through the FIPB route.

*        Requirement of the built up area and capital conditions for FDI to be reduced from 50,000 square metres to 20,000 square metres and from U.S.$10 million to U.S.$5 million respectively for development of smart cities.

*        Manufacturing units to be allowed to sell its products through retail, including e-commerce platforms.

Bank Capitalization

*        Requirement to infuse `2,40,000 crore as equity by 2018 in our banks to be in line with Basel-III norms.

*        Capital of banks to be raised by increasing the shareholding of the people in a phased manner.

PSU Capital Expenditure

*        PSUs will invest through capital investment a total sum of `2,47,941 crore in the current financial year.

Smart Cities

*        A sum of `7060 crore is provided in the current fiscal for the project of developing ‘one hundred Smart Cities’.

Real Estate

*        Incentives for Real Estate Investment Trusts (REITS). Complete pass through for the purpose of taxation.

*        A modified REITS type structure for infrastructure projects as the Infrastructure Investment Trusts (INVITS).

*        These two instruments to attract long term finance from foreign and domestic sources, including NRIs .

Irrigation

*        `1000 crore provided for ‘Pradhan Mantri Krishi Sinchayee Yojana’ for assured irrigation.

Rural Development

*        ‘Shyama Prasad Mukherji Rurban Mission’ for integrated project based infrastructure in the rural areas.

*        `500 crore for ‘Deen Dayal Upadhyaya Gram Jyoti Yojana’ for feeder separation to augment power supply to the rural areas.

*        `14,389 crore provided for Pradhan Mantri Gram Sadak Yojna (PMGSY) .

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

*        Under ‘Ajeevika’, the provision of bank loan for women SHGs at 4% to be extended to another 100 districts.

*        Initial sum of `100 crore for ‘Start Up Village Entrepreneurship Programme’ for encouraging rural youth to take up local entrepreneurship programmes .

*        Allocation for National Housing Bank increased to `8000 crore to support rural housing.

*        New programme ‘Neeranchal’ to give impetus to watershed development in the country with an initial outlay of `2142 crore.

*        Backward Region Grant Fund (BRGF) to be restructured to address intra-district inequalities.

Scheduled Caste/Scheduled Tribe

*        An amount of `50,548 crore is proposed under the SC Plan and `32,387 crore under TSP.

*        For the welfare of the tribals ‘Van Bandhu Kalyan Yojana’ launched with an initial allocation of `100 crore.

Senior Citizen & Differently-Abled Persons

*        ‘Varishtha Pension Bima Yojana’ (VPBY) to be revived for a limited period from 15 August, 2014, to 14 August, 2015, for the benefit of citizens aged 60 years and above.

*        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 senior citizens.

*        Government notified a minimum pension of `1000 per month to all subscriber members of EP Scheme. Initial provision of `250 crore.

*        Increase in mandatory wage ceiling of subscription to `15000. A provision of `250 crore in the current budget.

*        EPFO to launch the ‘Uniform Account Number’ Service for contributing members .

*        Scheme for Assistance to Disabled Persons for purchase/fitting of Aids and Appliances (ADIP) extended to include contemporary aids and assistive devices.

*        National level institutes for Universal Inclusive Design, Mental Health Rehabilitation and a Centre for Disability Sports to be established.

*        Assistance to state governments to establish fifteen new Braille presses and modernize ten existing Braille presses.

*        Government to print currency notes with Braille like signs for visibly challenged persons.

Women & Child Development

*        Outlay of `50 crore for pilot testing a scheme on ‘Safety for Women on Public Road Transport’.

*        Sum of `150 crore on a scheme to increase the safety of women in large cities.

*        ‘Crisis Management Centres’ in all the government and private hospitals in Delhi.

*        A sum of `100 crore is provided for ‘Beti Bachao, Beti Padhao Yojana’, a focused scheme to generate awareness and help in improving the efficiency of delivery of welfare services meant for women.

*        School curriculum to have a separate chapter on gender mainstreaming.

Drinking Water & Sanitation

*        20,000 habitations affected with arsenic, fluoride, heavy/toxic elements, pesticides/fertilizers to be provided safe drinking water through community water purification plants in next three years

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

Health and Family Welfare

*        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.

*        A national level research and referral Institute for higher dental studies to be set up.

*        AIIMS like institutions in Andhra Pradesh, West Bengal, Vidarbha in Maharashtra and Poorvanchal in UP. A provision of `500 crore made.

*        12 new government medical colleges to be set up.

*        States’ Drug Regulatory and Food Regulatory Systems to be strengthened by creating new drug testing laboratories and strengthening the 31 existing state laboratories.

*        15 Model Rural Health Research Centres to be set up for research on local health issues concerning rural population.

*        A national programme in mission mode to halt the deteriorating malnutrition situation in India to be put in place within six months.

EDUCATION

School Education

*        Government would strive to provide toilets and drinking water in all girls schools in first phase. An amount of 28,635 crore is being funded for ‘Sarva Siksha Abhiyan (SSA) and 4966 crore for ‘Rashtriya Madhyamic Shiksha Abhiyan’ (RMSA).

*        A School Assessment Programme is being initiated at a cost of 30 crore.

*        `500 crore provided for ‘Pandit Madan Mohan Malviya New Teachers Training Programme’ to infuse new training tools and motivate teachers.

*        `100 crore provided for setting up virtual classrooms as Communication Linked Interface for Cultivating Knowledge (CLICK) and online courses.

Higher Education

*        Jai Prakash Narayan National Centre for Excellence in Humanities to be set up in MP.

*        `500 crore provided for setting up 5 more IITs in Jammu and Kashmir, Chhattisgarh, Goa, Andhra Pradesh, and Kerala.

*        5 IIMs in the states of HP, Punjab, Bihar, Odisha, and Rajasthan.

*        Simplification of norms to facilitate education loans for higher studies.

Information Technology

*        Pan India programme ‘Digital India’ with an outlay of `500 crore, to be launched.

*        Programme for promoting ‘Good Governance’ to be launched. A sum of `100 crore provided.

Information and Broadcasting

*        `100 crore allocated for 600 new and existing Community Radio Stations.

*        Film & Television Institute, Pune, and Satyajit Ray Film & Television institute, Kolkata, are proposed to be accorded status of institutes of national importance and a ‘National Centre for Excellence in Animation, Gaming and Special Effects’ to be set up.

*        `100 crore is provided for Kisan TV, to disseminate real time information to farmers on issues such as new farming, techniques, water conservation, organic farming, etc.

Urban Development

*        Vision of the government is that 500 urban habitations to be provided support for renewal of infrastructure and services in next 10 years through PPPs.

*        Present corpus of Pooled Municipal Debt Obligation Facility facility to be enlarged to `50,000 crore from `5,000 crore.

*        `100 crore provided for metro projects in Lucknow and Ahmedabad.

Housing

*        Extended additional tax incentive on home loans shall be provided to encourage people, especially the young, to own houses.

*        Mission on Low Cost Affordable Housing anchored in the National Housing Bank to be set up.

*        A sum of `4000 crore for NHB from the priority sector lending shortfall with a view to increase the flow of cheaper credit for affordable housing to the urban poor/EWS/ LIG segment is provided.

*        Slum development to be included in the list of Corporate Social Responsibility (CSR) activities to encourage the private sector to contribute more.

Minorities

*        A programme for the upgradation of skills and training in ancestral arts for development for the minorities-‘Upgradation of Traditional Skills in Arts, Resources and Goods’ to be launched.

*        An additional amount of `100 crore for modernization of madrasas.

AGRICULTURE

*        Government to establish two more Agricultural Research Institutes of Excellence in Assam and Jharkhand with an initial sum of `100 crore.

*        An amount of `100 crore set aside for ‘Agri-tech Infrastructure Fund’.

*        `200 crore provided to open agriculture universities in Andhra Pradesh and Rajasthan and horticulture universities in Telangana and Haryana.

*        A scheme to provide every farmer a soil health card in a mission mode will be launched. `100 crore has been provided for this purpose and additional `l 56 crore to set up 100 Mobile Soil Testing Laboratories across the country.

*        To meet the vagaries of climate change, a ‘National Adaptation Fund’ with an initial sum an amount of `100 crore will be set up.

*        A sustainable growth of 4% in agriculture will be achieved.

*        Technology-driven second Green Revolution with focus on higher productivity and including ‘Protein revolution’ will be area of major focus.

*        To mitigate the risk of price volatility in the agriculture produce, a sum of `500 crore is provided for establishing a ‘Price Stabilization Fund’.

*        Central Government to work closely with state governments to re-orient their respective APMC Acts.

*        Sum of `50 crore provided for the development of indigenous cattle breeds and an equal amount for starting a Blue Revolution in inland fisheries.

*        Transformation plan to invigorate the warehousing sector and significantly improve post-harvest lending to farmers.

Agriculture Credit

*        To provide institutional finance to landless farmers, it is proposed to provide finance to 5 lakh joint farming groups of ‘Bhoomi Heen Kisan’ through NABARD .

*        A target of `8 lakh crore has been set for agriculture credit during 2014-15.

*        Corpus of Rural Infrastructure Development Fund (RIDF) raised by an additional `5000 crore from the target given in the Interim Budget to`25,000 crore .

*        Allocation of `5,000 crore provided for the Warehouse Infrastructure Fund.

*        ‘Long Term Rural Credit Fund’ to set up for the purpose of providing refinance support to Cooperative Banks and Regional Rural Banks with an initial corpus of `5,000 crore.

*       Amount of `50,000 crore allocated for Short Term Cooperative Rural Credit.

*        Sum of `200 crore for NABARD’s Producers Development and Upliftment Corpus (PRODUCE) for building 2,000 producers organizations over the next two years.

Food Security

*        Restructuring FCI, reducing transportation and distribution losses and efficacy of PDS to be taken up on priority.

*        Government committed to provide wheat and rice at reasonable prices to the weaker sections of the society.

*        Government when required will undertake open market sales to keep prices under control.

INDUSTRY

*        Central Government Departments and Ministries to integrate their services with e-Biz–a single window IT platform–for services on priority by 31 December this year.

*        `100 crore provided for setting up a National Industrial Corridor Authority.

*        Amritsar–Kolkata Industrial corridor master planning to be completed expeditiously.

*        Master planning of 3 new smart cities in the Chennai-Bengaluru Industrial Corridor region, viz., Ponneri in Tamil Nadu, Krishnapatnam in Andhra Pradesh and Tumkur in Karnataka to be completed.

*        Perspective plan for the Bengaluru–Mumbai Economic Corridor (BMEC) and Vizag-Chennai Corridor to be completed with the provision for 20 new industrial clusters.

*        Development of industrial corridors with emphasis on Smart Cities linked to transport connectivity to spur growth in manufacturing and urbanization will be accelerated.

*        Proposed to establish an ‘Export Promotion Mission’ to bring all stakeholders under one umbrella.

*        Apprenticeship Act to be suitably amended to make it more responsive to industry and youth.

Micro Small and Medium Enterprises (MSME) Sector

*        Skill India to be launched to skill the youth with an emphasis on employability and entrepreneur skills.

*        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.

*        Fund of Funds with a corpus of `10,000 crore for providing equity through venture capital funds, quasi equity, soft loans and other risk capital specially to encourage new startups by youth to be set up.

*        Corpus of `200 crore to be set up to establish Technology Centre Network.

*        Definition of MSME to be reviewed to provide for a higher capital ceiling.

*        Programme to facilitate forward and backward linkages with multiple value chain of manufacturing and service delivery to be put in place.

*        Entrepreneur friendly legal bankruptcy framework will be developed for SMEs to enable easy exit.

*        A nationwide ‘District-level Incubation and Accelerator Programme’ to be taken up for incubation of new ideas and necessary support for accelerating entrepreneurship.

Textiles

*        `50 crore is provided to set up a Trade Facilitation Centre and a Crafts Museum to develop and promote handloom products and carry forward the rich tradition of handlooms of Varanasi.

*        Sum of `500 crore for developing a textile mega-cluster at Varanasi and six more at Bareilly, Lucknow, Surat, Kutch, Bhagalpur, and Mysore.

*        `20 crore to set up a Hastkala Academy for the preservation, revival, and documentation of the handloom/handicraft sector in PPP mode in Delhi.

*        `50 crore is provided to start a Pashmina Promotion Programme (P-3) and development of other crafts of Jammu & Kashmir.

INFRASTRUCTURE

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

Shipping

*        `11635 crore will be allocated for the development of Outer Harbour Project in Tuticorin for phase I.

*        SEZs will be developed in Kandla and JNPT.

*        Comprehensive policy to be announced to promote Indian ship building industry.

Inland Navigation

*        Project on Ganges called ‘Jal Marg Vikas’ to be developed between Allahabad and Haldia.

New Airports

*        Scheme for development of new airports in Tier I and Tier II cities to be launched.

Roads sector

*        Sector needs huge amount of investment along with debottlenecking from maze of clearances.

*        An investment of an amount of `37,880 crore in NHAI and State Roads is proposed, which includes 3000 crore for the North East.

*        Target of NH construction of 8500 km will be achieved in current financial year.

*        Work on select expressways in parallel to the development of the industrial corridors will be initiated. For project preparation NHAI shall set aside a sum of `500 crore.

Energy

*        `100 crore is allocated for a new scheme ‘ultra-Modern Super Critical Coal Based Thermal Power Technology.’

*        Comprehensive measures for enhancing domestic coal production are being put in place.

*        Adequate quantity of coal will be provided to power plants which are already commissioned or would be commissioned by March 2015.

*        An exercise to rationalize coal linkages to optimize transport of coal and reduce cost of power is underway.

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New & Renewable Energy

*        `500 crore provided for Ultra Mega Solar Power Projects in Rajasthan, Gujarat, Tamil Nadu, Andhra Pradesh and Ladakh in Jammu & Kashmir.

*        `400 crore provided for a scheme for solar power driven agricultural pump sets and water pumping stations.

*        `100 crore provided for the development of 1 MW Solar Parks on the banks of canals.

*        A Green Energy Corridor Project is being implemented to facilitate evacuation of renewable energy across the country.

Petroleum & Natural Gas

*        Production and exploitation of Coal Bed Methane reserves will be accelerated.

*        Possibility of using modern technology to revive old or closed wells to be explored.

*        Usage of PNG to be rapidly scaled up in a mission mode.

*        Proposal to develop pipelines using appropriate PPP models.

Mining

*        Changes, if necessary, in the MMDR Act, 1957, to be introduced to encourage investment in mining sector and promote sustainable mining practices.

FINANCIAL SECTOR

Capital Market

*        Ongoing process of consultations with all the stakeholders on the enactment of the Indian Financial Code and reports of the Financial Sector Legislative Reforms Commission (FSLRC) to be completed.

*        Government in close consultation with the RBI to put in place a modern monetary policy framework.

*        Following measures will be taken to energize Capital markets:

·          Introduction of uniform Know Your Customer (KYC) norms and inter-usability of the KYC records across the entire financial sector.

·          Introduce one single operating demat account.

·          Uniform tax treatment for pension fund and mutual fund linked retirement plan.

BANKING AND INSURANCE SECTOR

Banking

*        Time bound programme as ‘Financial Inclusion Mission’ to be launched on 15 August this year with focus on the weaker sections of the society.

*        Banks to be encouraged to extend long term loans to infrastructure sector with flexible structuring.

*       Banks to be permitted to raise long term funds for lending to infrastructure sector with minimum regulatory pre-emption such as CRR, SLR and Priority Sector Lending (PSL).

*       RBI to create a framework for licensing small banks and other differentiated banks.

*       Differentiated banks serving niche interests, local area banks, payment banks, etc., are contemplated to meet credit and remittance needs of small businesses, unorganized sector, low income households, farmers and migrant work force.

*       Six new Debt Recovery Tribunals to be set up.

*       For venture capital in the MSME sector, a `10,000 crore fund to act as a catalyst to attract private capital by way of providing equity, quasi equity, soft loans and other risk capital for start-up companies with suitable tax incentives to participating private funds to be established.

Insurance Sector

*       The pending Insurance Laws (Amendment) Bill to be immediately brought for consideration of the Parliament.

*       The regulatory gap under the Prize Chits and Money Circulation Scheme (Banking) Act, 1978, will be bridged.

Small Savings

*        Kisan Vikas Patra (KVP) to be reintroduced.

*        A special small savings instrument to cater to the requirements of educating and marriage of the Girl Child to be introduced.

*        A National Savings Certificate with insurance cover to provide additional benefits for the small saver.

*        In the PPF Scheme, annual ceiling will be enhanced to `1.5 lakh p.a. from `1 lakh at present.

DEFENCE & INTERNAL SECURITY

*        A further sum of 1000 crore to meet requirement for ‘One Rank One Pension’.

*        Capital outlay for Defence increased by 5,000 crore including a sum of 1,000 crore for accelerating the development of the railway system in the border areas.

*        Urgent steps would also be taken to streamline the procurement process to make it speedy and more efficient.

*        `100 crore is provided for construction of a war memorial in the Princes Park, which will be supplemented by a War Museum.

*        `100 crore is provided to set up a Technology Development Fund for Defence.

Internal Security

*        `3,000 crore is provided in the current financial year for modernization of state police forces.

*        Adequate allocation for Additional Central Assistance for Left Wing Extremist Affected districts..

*        `2,250 crore provided to strengthen and modernize border infrastructure.

*        `990 crore allocated for the socio-economic development of the villages along the borders.

*        A sum of `150 crore ear-marked for the construction of Marine police stations, jetties and for the purchase of boats etc.

*        `50 crore provided for construction of National Police Memorial.

CULTURE & TOURISM

*        `200 crore provided to build the Statue of Unity (National project).- a statement of Sardar Vallabhbhai Patel.

*        Facility of Electronic Travel Authorization (e-Visa) to be introduced in phased manner at nine airports in India.

*        Countries to which the electronic travel authorisation facility would be extended would be identified in a phased manner.

*        `500 crore provided for developing 5 tourist circuits around specific themes.

*        `100 crore provided for National Mission on Pilgrimage Rejuvenation and Spiritual Augmentation Drive (PRASAD).

*        `200 crore provided for National Heritage City Development and Augmentation Yojana (HRIDAY).

*        `100 crore provided for archaeological sites preservation.

*        Sarnath-Gaya-Varanasi Buddhist circuit to be developed with world class tourist amenities to attract tourists from all over the world.

Water Resources and cleaning of Ganga

*        `100 crore provided for detailed Project Reports for linking of rivers.

*        `2,037 crore provided for Integrated Ganga Conservation Mission ‘NamamiGange’.

*        `100 crore provided for ghat development and beautification at Kedarnath, Haridwar, Kanpur, Varanasi, Allahabad, Patna, and Delhi.

*        NRI Fund for Ganga will be set up.

Science and Technology

*        Government to strengthen at least five institutions as Technical Research Centres.

*        Development of Biotech clusters in Faridabad and Bengaluru.

*        Nascent agri-biotech cluster in Mohali to be scaled up. In addition, two new clusters, in Pune and Kolkata to be established.

*        Global partnerships will be developed under India’s leadership to transform the Delhi component of the International Centre for Genetic Engineering and Biotechnology (ICGEB) into a world leader in life sciences and biotechnology.

*        Several major space missions planned for 2014-15.

Sports and Youth Affairs

*        `200 crore provided for upgrading the indoor and outdoor sports stadiums in Jammu and Kashmir Valley to international standards.

*        `100 crore provided for sports University in Manipur.

*        India to start an annual event to promote unique sports traditions in the Himalayan region games.

*        `100 crore provided for the training of sportswomen and  sportsmen for forthcoming Asian Games.

*        A ‘Young Leaders Programme’ with an initial allocation of `100 crore to be set up.

North Eastern States

*        `100 crore provided for development of organic farming in north eastern states.

*        `1000 crore provided for development of rail connectivity in the north eastern region.

*        To provide a strong platform to rich cultural and linguistic identity of the north-east, a new 24x7 channel called ‘Arun Prabha’ will be launched.

Andhra Pradesh and Telangana

*        Government committed to addressing the issues relating to development of Andhra Pradesh and Telangana in the AP Re-organization Act, 2014. Provision made by various Ministries/Departments to fulfill the obligation of Union Government.

NCT of Delhi

*        `200 crore for power reforms and `500 crore for water reforms to make Delhi a truly World Class City.

*        `50 crore provided to solve the long term water supply issues in the capital region. Construction of long pending Renuka Dam to be taken up on priority.

Andaman and Nicobar Islands and Puducherry

*        `150 crore provided to tide over communication related problems of the islands.

*        `188 crore to Puducherry for meeting commitments for disaster preparedness.

Displaced Kashmiri Migrants

*        `500 crore provided to support displaced Kashmiri migrants for rebuilding their lives.

Himalayan Studies

*        `100 crore provided to set up a National Centre for Himalayan Studies in Uttarakhand.

BUDGET ESTIMATES

*        Mandate to be fulfilled without compromising fiscal consolidation.

*        Non-plan Expenditure of `12,19,892 crore with additional provision for fertilizer subsidy and Capital expenditure for armed forces.

*        `5,75,000 crore Plan expenditure – increase of 26.9 per cent over actuals of 2013-14.

*        Plan increase targeted towards agriculture, capacity creation in health and education, rural roads and national highways infrastructure, railways network expansion, clean energy initiatives, development of water resources and river conservation plans.

*        Total expenditure of `17,94,892 crore estimated.

*        Gross tax receipts of `13,64,524 crore estimated.

*        Net to centre of `9,77,258 crore estimated.

*        Fiscal deficit of 4.1% of GDP and revenue deficit of 2.9% estimated.

*        New statement to separately show plan allocation made for north eastern region. Allocation of `53,706 crore for north east region.

*        Allocation of `50,548 crore under SCSP and `32,387 under TSP.

*        Allocation for women at `98,030 crore and for children at `81,075 crore.

TAX PROPOSALS

*        Ambitious Revenue Collection Targets in Interim Budget. Proposed tax changes factored in the Budget Estimates 2014-15.

*        Measures to revive the economy, promote investment in manufacturing, rationalize tax provisions to reduce litigation, address the problem of inverted duty structure in certain areas. Tax reliefs to individual tax payers.

DIRECT TAXES PROPOSALS

*        Personal Income tax exemption limit raised by `50,000/- that is, from `2 lakh to `2.5 lakh in the case of individual taxpayers, below the age of 60 years. Exemption limit raised from `2.5 lakh to`3 lakh in the case of senior citizens.

*        No change in the rate of surcharge either for the corporates or the individuals, HUFs, firms, etc.

*        Education cess to continue at 3 per cent.

*        Investment limit under Section 80C of the Income Tax Act raised from `1 lakh to `1.5 lakh.

*        Deduction limit on account of interest on loan in respect of self-occupied house property raised from `1.5 lakh to `2 lakh.

*        Conducive tax regime to Infrastructure Investment Trusts and Real Estate Investment Trusts to be set up in accordance with regulations of the Securities and Exchange Board of India.

*        Investment allowance at the rate of 15 per cent to a manufacturing company that invests more than `25 crore in any year in new plant and machinery. The benefit to be available for three years, i.e., for investments upto 31.03.2017.

*        Investment linked deduction extended to two new sectors, namely, slurry pipelines for the transportation of iron ore, and semi-conductor wafer fabrication manufacturing units.

*        10 year tax holiday extended to the undertakings which begin generation, distribution and transmission of power by 31.03.2017.

*        Income arising to foreign portfolio investors from transaction in securities to be treated as capital gains.

*        Concessional rate of 15 per cent on foreign dividends without any sunset date to be continued.

*        The eligible date of borrowing in foreign currency extended from 30.06.2015 to 30.06.2017 for a concessional tax rate of 5 per cent on interest payments. Tax incentive extended to all types of bonds instead of only infrastructure bonds.

*        Introduction of a ‘Roll Back’ provision in the Advanced Pricing Agreement (APA) scheme so that an APA entered into for future transactions is also applicable to international transactions undertaken in previous four years in specified circumstances.

*        Introduction of range concept for determination of arm’s length price in transfer pricing regulations.

*        To allow use of multiple year data for comparability analysis under transfer pricing regulations.

*        To remove tax arbitrage, rate of tax on long term capital gains increased from 10 percent to 20 percent on transfer of units of Mutual Funds, other than equity oriented funds.

*        Income and dividend distribution tax to be levied on gross amount instead of amount paid net of taxes.

*        In case of non-deduction of tax on payments, 30% of such payments will be disallowed instead of 100 per cent.

*        Government to review the DTC in its present shape and take a view in the whole matter.

*        60 more Ayakar Seva Kendras to be opened during the current financial year to promote excellence in service delivery.

*        Net effect of the direct tax proposals to result in revenue loss of 22,200 crore.

INDIRECT TAXES PROPOSALS

*        To boost domestic manufacture and to address the issue of inverted duties, basic customs duty (BCD) reduced on certain items.

*        To encourage new investment and capacity addition in the chemicals and petrochemicals sector, basic customs duty reduced on certain items.

*        Steps taken to boost domestic production of electronic items and reduce our dependence on imports. These include imposition of basic customs duty on certain items falling outside the purview of IT Agreement, exemption from SAD on inputs/components for PC manufacturing, imposition of education cess on imported electronic products for parity, etc.

*        Colour picture tubes exempted from basic customs duty to make cathode ray TVs cheaper and more affordable to weaker sections.

*        To encourage production of LCD and LED TVs below 19 inches in India, basic customs duty on LCD and LED TV panels of below 19 inches reduced from 10 per cent to Nil.

*        To give an impetus to the stainless steel industry, increase in basic customs duty on imported flat-rolled products of stainless steel from 5 per cent to 7.5 percent.

*        Concessional basic customs duty of 5 per cent extended to machinery and equipment required for setting up of a project for solar energy production.

*        Specified inputs for use in the manufacture of EVA sheets and back sheets and flat copper wire for the manufacture of PV ribbons exempted from basic customs duty.

*        Reduction in basic customs duty from 10 per cent to 5 per cent on forged steel rings used in the manufacture of bearings of wind operated electricity generators. Exemption from SAD of 4 per cent on parts and raw materials required for the manufacture of wind operated generators.

*        Concessional basic customs duty of 5 percent on machinery and equipment required for setting up of compressed biogas plants (Bio-CNG).

*        Anthracite coal, bituminous coal, coking coal, steam coal and other coal to attract 2.5 per cent basic customs duty and 2 per cent CVD to eliminate all assessment disputes and transaction costs associated with testing of various parameters of coal.

*        Basic customs duty on metallurgical coke increased from Nil to 2.5 per cent in line with the duty on coking coal.

*        Duty on ship breaking scrap and melting scrap of iron or steel rationalized by reducing the basic customs duty on ships imported for breaking up from 5 per cent to 2.5 per cent.

*        To prevent mis-use and avoid assessment disputes, basic customs duty on semiprocessed, half cut or broken diamonds, cut and polished diamonds and coloured gemstones rationalized at 2.5 per cent.

*        To encourage exports, pre-forms of precious and semi-precious stones exempted from basic customs duty.

*        Duty free entitlement for import of trimmings, embellishments and other specified items increased from 3 per cent to 5 per cent of the value of their export, for readymade garments.

*        Export duty on bauxite increased from 10 per cent to 20 per cent.

*        For passenger facilitation, free baggage allowance increased from `35,000 to `45,000.

*        To incentivize expansion of processing capacity, reduction in excise duty on specified food processing and packaging machinery from 10 per cent to 6 per cent.

*        Reduction in the excise duty from 12 per cent to 6 per cent on footwear of retail price exceeding `500 per pair but not exceeding `1,000 per pair.

*        Withdraw concessional excise duty (2 per cent without Cenvat benefit and 6 per cent with Cenvat benefit) on smart cards and a uniform excise duty at 12 per cent.

*        To develop renewable energy, various items exempted from excise duty.

*        Exemption to PSF and PFY manufactured from plastic waste and scrap including PET bottles from excise duty with effect from 29th June, 2010 to 7th May, 2012.

*        Prospective levy of a nominal duty of 2 per cent without Cenvat benefit and 6 per cent with Cenvat benefit on such PSF and PFY.

*        Concessional excise duty of 2 percent without Cenvat benefit and 6 per cent with Cenvat benefit on sports gloves.

*        Specific rates of excise duty increased on cigarettes in the range of 11 per cent to 72 per cent.

*        Excise duty increased from 12 per cent to 16 per cent on pan masala, from 50 per cent to 55 per cent on unmanufactured tobacco and from 60 per cent to 70 percent on gutkha and chewing tobacco.

*        Levy of an additional duty of excise at 5 per cent on aerated waters containing added sugar.

*        To finance clean environment initiatives, Clean Energy Cess increased from `50 per tonne to `100 per tonne.

Service Tax

*        To broaden the tax base in Service Tax, sale of space or time for advertisements in broadcast media, extended to cover such sales on other segments like online and mobile advertising. Sale of space for advertisements in print media however would remain excluded from service tax. Service provided by radio-taxis brought under service tax.

*        Services by air-conditioned contract carriages and technical testing of newly developed drugs on human participants brought under service tax.

*        Provision of services rules to be amended and tax incidence to be reduced on transport of goods through coastal vessels to promote Indian Shipping industry.

*        Services provided by Indian tour operators to foreign tourists in relation to a tour wholly conducted outside India to be taken out of the tax net and Cenvat credit for services of rent-a-cab and tour operators to be allowed to promote tourism.

*        Service tax exempted on loading, unloading, storage, warehousing and transportation of cotton, whether ginned or baled.

*        Services provided by the Employees’ State Insurance Corporation for the period prior to 1st July 2012 exempted, from service tax.

*        Exemption available for specified micro-insurance schemes expanded to cover all life micro-insurance schemes where the sum assured does not exceed `50,000 per life insured.

*        For safe disposal of medical and clinical wastes, services provided by common biomedical waste treatment facilities exempted.

*        Tax proposals on the indirect taxes side are estimated to yield `7525 crore.

*        24x7 customs clearance facility extended to 13 more airports in respect of all export goods and to 14 more sea ports in respect of specified import and export goods to facilitate cargo clearance.

*        ‘Indian Customs Single Window Project’ to facilitate trade, to be implemented.

*        The scheme of Advance Ruling in indirect taxes to be expanded to cover resident private limited companies. The scope of Settlement Commission to be enlarged to facilitate quick dispute resolution.

*        Customs and Central Excise Acts to be amended to expedite the process of disposal of appeals.

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