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India’s Union Budget focuses on growth, fiscal prudence

July 10: Amid concerns over a two-year long economic slowdown, India’s finance minister Arun Jaitley on July 10 presented the first Annual Budget of the NDA government, primarily targeting revival of growth and fiscal consolidation.

“We shall leave no stone unturned in creating a vibrant and strong India,” Jaitley told Parliament, as he set a target of raising the economic growth to 7-8% in three to four years from less than 5% in the last fiscal.

He further said the fiscal deficit target for this year (2014-15) would be kept intact at 4.1% as set by the previous government and be brought down to 3.6% for 2015-16.

However, there was lack of clarity on how this will be achieved.

It was widely expected that the government, which has come with the strongest election mandate in 30 years, would push for “bitter pills” rather than going for populist measures. Jaitley announced an 8% rise in spending and said that the government will seek to raise a record $13 billion through disinvestments.

On the growth front, the finance minister sought to rejuvenate agriculture by setting up Farmer Markets, raising agricultural credit at lower interest, setting up agri-universities and strengthening NABARD for re-financing the support measures.

In order to revitalise the industry and manufacturing sector, Jaitley provided a slew of incentives by reducing the limit of investment to Rs 25 crore for 15% investment allowance, reviving investor interest in SEZ, increasing investment on national highways etc. He further announced raising ceilings on foreign investment in defence and insurance sectors to 49%.

On the tax front, there were sops for income tax payers in the form of raised exemption levels and other benefits.

There was a mixed response from the market to the Budget announcements. The BSE Sensex remained volatile throughout the day and finally ended 72 points down at nearly two-week low of 25,372.75.