Mainstream, VOL LIII, No 12, March 14, 2015
Union Budget 2015-16: In Pursuit of the PM’s ’Make in India’ Vision
Saturday 14 March 2015
by S.S. Sangwan
The Central Budget 2015-16 appears to be focused on the Make-in-India and Skill-India vision of the Prime Minister rather than a balanced approach to appease all sections of the society.
The make-in-India initiative was launched by the Prime Minister on September 25, 2014 at a workshop of the Department of Industrial Policy and Promotion. It focuses on creation of employment and skill enhancement through 25 manufacturing sectors like automobiles, IT, pharmaceuticals, textiles, ports, leather, tourism railways, renewable energy, mining, electronic, etc.. To achieve these long-term objectives, the Budget provides a number of incentives to induce investment for overall growth of the economy, especially 25 sectors identified under the make in India initiative. At the outset, the government will keep itself under fiscal discipline to instil confidence of the investors in the economy. The fiscal deficit will be brought to three per cent in the next three years. A Micro Units Development Refinance Agency (MUDRA) Bank will be established with a corpus of Rs 20,000 crores and a credit guarantee corpus of Rs 3000 crores to meet the credit requirement of 5.77 crore small business, manufacturing and service units. These units have been specifically focused in view of their employment potential. The overall infrastructure will be improved for better working of the manufacturing sector. In this regard, the capital expenditure (CAPEX) of Public Sector units is to be increased to Rs 3,17,869 crores with an increase of Rs 80,844 crores over the revised estimates of 2014-15. A National Investment and Infrastructural Fund (NIIF) will be established to finance and equity partici-pation in infrastructure projects. Tax free infrastructural bonds will be allowed in the projects of railways, roads and irrigation. The Public Private Partici-pation mode of infrastructural development will be revived. A Gold Monetisation Scheme will be introduced to bring the vast reservoir of India’s gold in trade and business.
To help doing business by new entrepreneurs, the Budget has proposed a mechanism to be known as SETU (Self-Employment and Talent Utilisation). It will be a techno-financial, incubation and facilitation programme to support all aspects of starting business, especially in technology-driven areas. It will enable the ideas and initiatives to be converted into scalable enterprises and business. A sum of Rs 10,00 crores has been provided to NITI Aayog for this programme. Besides, an Atal Innovation Mission (AIM) will also be set up in NITI Aayog as an innovation promotion platform involving academicians, entrepreneurs and researchers. This will help in fostering the culture of innovation and research. A sum of Rs 150 crores has been earmarked for this purpose in NITI Aayog. Further, to ease doing business in India, an e-biz portal has already been launched for 14 regulatory permissions at one source. An expert committee will be set up to examine the need to replace multiple prior permissions with pre-existing regulatory mechanism.
To assist in cutting delays in implementation, the Central Government will set up five new ultra mega power projects of 4000 MWs each in the plug and play mode. These projects will be auctioned in a transparent manner after getting all clearances and linkages. To give a boost to foreign investment in Indian companies, Foreign Institutional Investment (FII) and Foreign Direct Investment (FDI) will be a combined subject for the ultimate cap of foreign investment in the sector concerned. Some private banks will be the immediate beneficiaries of this provision. Above all, the Corporate Tax will be reduced from 30 per cent to 25 per cent in a phased manner over four years for compe-titiveness of the Indian companies with other Asian countries. It has been argued that effectively, the existing 30 per cent corporate tax also works out to 23 per cent after various exemptions. In the new tax rate of 25 per cent, there will be no exemptions. Moreover, removal of exemptions will avoid pressures, corrupt practices and litigations.
Further, access to technology and new inputs will be encouraged for the profitability and quality products. To facilitate technology inflow at low cost, the rate of income tax on royalty and fees for technical services will be reduced from 25 per cent to 10 per cent. The rate of basic customs duty on certain relevant inputs and raw materials is being reduced to bring down the manufacturing cost. To facilitate doing business, the registration for Central tax and Service tax will be made online and registered within two working days.
All these measures undoubtedly focus on attracting investment from domestic as well as foreign investors. The higher investment, especially in small manufacturing units, will generate employment. To make available a suitable labour force, a National Skill Mission will be implemented through 31 sector skill councils. A Deendayal Upadhyay Gramin Kaushal Yojana has been provided Rs 1500 crores for enhancing the employability of rural youth. However, the impact of this growth approach will depend upon the success of the trickledown theory which is the basis of this Budget edifice
Along with focus on increasing investment, a slew of provisions have been made for the benefit of the poor. The Prime Minister Jan Dhan Yojana (PMJDY) will be taken to its logical end by enhancing the banking outreach. In this regard, the Department of Postal Services will be directed to act as the payment bank. The vast outreach of 1,55,015 post offices will enable cost-free access to banks especially in rural areas. An Accidental Death Insurance of Rs 2.0 lakhs will be provided with a premium Rs 12 per annum under the Prime Minister Suraksha Bima Yojana (to below poverty families). Another Insurance scheme for both natural and accidental death with a premium of Rs 330 per year for the age-group 18-50 years will be provided under the Prime Minister Jyoti Jagran Bima Yojana. An Atal Pension Yojana will be implemented with matching grant of 50 per cent, subject to the maximum of Rs 1000 for five years in accounts to be opened before December 31, 2015. Senior citizens of weaker sections will be provided facilities from the unclaimed balance of the PPF and EPF.
In this way, on the one hand, the Budget has focused on growth through investment and technology while, on the other hand, some measures have been taken for inclusiveness of the poor. Even Financial Market reforms in Budget are aimed at making more funds available for investment through equity and bonds. There is no change in the direct income tax slabs except a few benefits like increase in deduction of transport allowance from Rs 800 to Rs 1600 and increase in contribution towards medical insurance schemes. The Budget has indubitably avoided the middle-path approach and even the middle class has been largely left out to fend for itself.
Dr S.S. Sangwan is the SBI Chair Professor, Centre for Research in Rural and Industrial Development (CRRID), Chandigarh. He can be contacted at e-mail: email@example.com