Long on aspirations and short on action - A monograph on the Union Budget 2015-16 - B. Yerram Raju

Budget 2015 special issue 3 Business Advisor
Long on aspirations and short on action:
A monograph on Union Budget 2015-16
Dr B. Yerram Raju
Budgets elsewhere in the world do not attract as much
attention as in India for the reasons that India has for
long adopted centralised planning that involved
devolution of resources from the Union Government to
the States, and that there are announcements of a
number of centrally sponsored schemes that impact the
livelihoods of the poor and several personal tax saving
instruments in the fiscal policy annually.
This Budget attracted more attention than the rest
because of the very effective nine-month Modi rule that has put India on the
global investor radar. The fact that President Obama and other global rulers
and global investors as also all the industry associations welcomed the
Budget with aplomb, rather than just a cheer, and the fact that the youth
were watching the Budget proceedings in preference to the World Cup
Cricket match highlights measured by TV viewers‟ rankings on that day, are
enough evidence of the market interest in this Budget.
Budget is an estimate of future revenues and expenditure over a specific
period. Budgets are usually prepared on annual basis for governments –
both Centre and State – and annual and monthly basis for business
enterprises. In other words, it is an annual statement of income and
expenditure of the Government to be placed before Parliament as
constitutional responsibility. Estimates are estimates and they can either be
exceeded or fall short. It is invariably the case that all the budgets reflect
only shortfall in achievements.
The epochal budget of Manmohan Singh that spearheaded the economic
reforms of P. V. Narasimha Rao government has been archived successfully,
after the touch and go budget of NDA government of Narendra Modi in 14-
15. Budget 15-16 eroded the trust deficit, reduced the primary deficit,
budget deficit, revenue deficit and contained fiscal deficit.
The pancha sutra (the five cardinal principles) of Modi Government that
have reasonable space in the Budget initiatives are:
1. Skill India; 2. Digital India; 3. Make in India; 4. Clean India (Swatch
Bharat); and 5. Smart Cities.

Budget 15-16 is a vision document, though long on aspirations and short
on actions that have put at rest the legacy of the UPA government with the
bundling of the centrally sponsored schemes to a double digit from triple
digit with a well thought-out strategy to get India moving once again with a
solid road map. However, the jobless growth and the fiscal mess of the UPA
government were left untouched. While a slew of measures have been
announced to improve the ease of doing business under the overarching
framework of “Make in India,” not much could be noticed in terms of
enhancing employment on a sustainable basis.
Economic Survey (Ref: Chart) reveals that the economy grew in 13-14 by
6.9% that has put India in the league of high growth nations in the world
during that year, thanks to the CSO revising the base year from 2005 to
2012. This has at once put on backburner the pre-poll campaign by the
BJP, the main constituent of NDA government, that the UPA government
faulted on growth with a declining growth rate of just 4.7% in 2013-14 from
the average of 8% growth during the first decade of this century. The
fundamentals of the economy are still to improve: the investment rate
showed a decline from 38.2% of GDP in 2012 to 32.3% in FY 2014 and the
savings rate declined from 33.9% to 30.6% correspondingly. The two other
indicators, the forex reserves and current account deficit that were causes
of great worry in the preceding years showed considerable improvement with
the former increasing from $294 bn to $328.7 bn by January 2015 and the
current account deficit declining from 4.7% of GDP in 2013-14 to around

1.9% by December 2014 contingent on declining oil prices and increasing
flows of forex reserves.1 Buoyancy of Indian exports declined with respect to
world growth and negotiation of mega regional trading excluded India. It is
important to recognise that the growth recorded is due to growth in the farm
and services sector. India‟s high growth rates whenever occurred were due
to growth in agriculture and services sector. In future, however, if all the
strategies of “Make in India‟ succeeded, manufacturing sector is expected to
be at the steering wheel of growth.
Declining price levels: WPI moderated at 3.496 while CPI moderated at 6.2%
up to December 2014 due to lower oil prices, low stagnation in trade
outcome. While this is the official version, at the field level, inflation is
unabated and this led to cautious approach by the RBI in responding to the
call for substantial reduction in interest rates in its monetary policy
following the Budget presentation. Fiscal deficit is expected to be contained
at 4.1% of GDP.
The Economic Survey 2014-15 recommends the following:
• Revive public investment in short term to complement private investment
as the key driver of growth;
• Enact bankruptcy Law;
• Set up high powered Independent Negotiation Committee;
• Reorientation and restructuring of PPP model to improve viability;
• Stalled projects stock at Rs 8.8 lakh crore or 7% of GDP to be brought
down with effective monitoring;
• Private sector suffered due to credit issues;
• Public sector suffered due to regulatory delays.
India is still a part of world’s fastest growing economies.
Key takeaways:
• Cooperative federalism: States have a greater share in resources. In
line with the recommendations of the 14th Finance Commission the
Budget announced decentralisation of resources under two important
measures: allocation of 42% of resources from the central pool with a
message to the States to devolve the resources down to the nagar palikas
and panchayats in the true spirit of 73rd and 74th Amendments to the
Constitution and reducing the centrally sponsored programmes to just
62.
1
For further detailed analysis the author in ites referen e to his ook India s Gro th ‘esurgen e 5
coauthored with M.S. R. Murty and Singala Subbaiah, BS Publications, Hyderabad.

• Rationalisation of subsidies: Rationalisation is euphemism for
reduction of subsidies. There can be no argument against the reduction
of subsidies for the rich and the affordable sections of the population. It
would have been a wiser move had the Finance Minister announced
reduction of all subsidies for all the Parliamentarians, legislators, those
who pay income tax beyond the threshold level of Rs 5 lakh. Instead, his
brush with the farm sector is the most unwelcome move. Fertiliser
subsidies currently enjoyed by the manufacturers should be moved to
the farmer by way of input subsidy after announcing and putting in place
the urea policy that was promised in 2014-15 Budget. When the share of
agriculture in GDP was 25-30 per cent, 10 per cent subsidy for the sector
could be a worry. With 3% share of agriculture in GDP of the US or
Europe, these countries are unwilling to slash their 50-60% subsidies to
the sector. But when the share of agriculture in India‟s GDP has come
down to 13 per cent, reordering the ten per cent subsidy to enhance the
capability of the farmer and to provide greater access to markets would
be the right thing to do. Input subsidies should directly reach the farmer
with JAM and extension effort should be intensified through the mobile
technology. Technology should drive agriculture market yards to enable
the farmers through the right price discovery mechanism.
• The subsidy regime to be made more targeted for full protection to the
marginalised, poor and SC/ ST.
• Direct benefit transfer scheme: JAM - Jandhan, Aadhar, Mobile DBT is a
very welcome step and we should hope that the implementation
mechanism would not put the scheme in a jam.
• Investment oriented: There is a saying, „Do a few things efficiently instead
of doing many things with a view to disperse the benefits to many
inefficiently.‟ From this perspective, this Budget has a singular focus of
increasing investments for infrastructure. This approach is worthy of
appreciation and rightly the stock markets and investors in India and
abroad gave thumbs up to the Budget on this score. The rating agencies
responded positively putting India on a higher rank.
• Public debt management moves to GOI: This is not a sagacious move.
Hitherto, the RBI has been managing public debt very efficiently. If the
empire and player become one, the game would be one-sided.
Government of India does not have expertise in managing public debt as
much as raising public debt. It has to borrow managerial expertise from
the RBI. This measure is regressive and needs a relook.
• Financial sector reforms: Gold monetization, constituting monetary
policy authority, insurance sector reforms etc. Comments have been
incorporated separately.

Budget aims
• Housing for all;
• With 24-hr power, drinking water, good sanitation and road connectivity;
• 2 crore urban and 4 crore rural houses to fulfill target by 2022;
• One earning member in each family by 2022;
• 20000 un-electrified villages will get connected by 2020;
• Health for all;
• Employment for youth as part of Make in India programme;
• Education for all;
• Broadband network to 2.50 Gram Panchayats;
• Upper primary school within 5 km;
• Start-up entrepreneurs to get adequate funding;
• East and North East to develop on same lines as developed regions.
Farm sector: 15-16 Budget announces
• Paramparagat Krishi Vikas Yojana;
• Pradhanmantri Gram Sinchai Yojana;
• Per drop-More Crop – Micro irrigation gets a slice of allocation - Rs 5,300
crore to support micro irrigation programme;
• Setting up National Agricultural Market Federation.
But Accelerated Irrigation Benefit Scheme has been axed.
The following announcements of 14-15 Budget have no reported
achievements:
• Agri-tech Infrastructure Fund of Rs 100 cr.
• Rs 200 crore provided to open Agriculture Universities in AP and
Rajasthan and Horticulture Universities in Telangana and Haryana.
• Two more Agricultural Research Institutes of excellence in Assam and
Jharkhand with an initial sum of Rs 100 crore.
• Farmer Soil health Cards on mission mode with Rs 100 crore and mobile
soil testing labs with Rs 56 crore additionally across the country.
• National Adaptation Fund of Rs 100 crore to combat climate change with
an initial sum an amount of Rs 100 crore will be set up. There is no
continuity for this initiative in the Budget 15-16.

• Technology driven second green revolution with focus on higher
productivity and including “Protein revolution” will be area of major
focus. The focused programme has no implementation agenda.
• “Price Stabilisation Fund” of Rs 500 crore - Farmers are yet to find any
reprieve on this count. In fact the Ministry of Agriculture and
Cooperation has put a Draft Policy in January 2015 for comments and
this covers only horticulture sector. Farmers who are covered by the MSP
in farm sector will not be covered by this initiative although the initial
impression was that it would help all farmers. The procurement and
distribution mechanisms in the food sector are set for change as per the
recommendations of Shantakumar Committee. The whole food security
system in the country is getting into a season of uncertainty. Whether it
would usher in order or plunge into chaos, the future only would decide.
In the interregnum, farmers‟ fates hang lose.
• Central Government proposes to work closely with the State
Governments to re-orient their respective APMC Act. There would appear
to be no continuation of this initiative in the Budget 15-16.
Agriculture credit
• “Long Term Rural Credit Fund” to set up for the purpose of providing
refinance support to Cooperative and Regional Rural Banks in 14-15
Budget with an initial corpus of Rs 50,000 crore. There is no evidence
of this fund reaching cooperatives. It would have been more sagacious
for the Finance Minister to announce Technology Management Fund to
bring the entire rural cooperative credit system into mainstream banking
and this would have strengthened the financial inclusion efforts and
helped inclusive growth.
• Sum of Rs 200 crore for NABARD‟s Producers Development and
Upliftment Corpus (PRODUCE) for building 2,000 producers
organisations over the next two years. The scheme is still in a limbo as
NABARD is yet to sanction even a single scheme under this corpus.
• Rs 50 crore for the development of indigenous cattle breeds and an equal
amount for starting a blue revolution in inland fisheries. No status report
on the utilisation either in the Ministry‟s website or with NABARD.
• Invigorate the warehousing sector and significantly improve post-harvest
lending to farmers.
• Finance 5 lakh joint farming groups of “Bhoomi Heen Kisan” via NABARD
– for landless farmers
• New short term credit target is Rs 8.50 lakh crore by 2015-16.

• Corpus of Rural Infrastructure Development Fund (RIDF) to Rs 25,000
cr.
• RIDF has been set up in 1995-96 with the sole objective of giving low
cost fund support to state governments and state-owned corporations for
quick completion of on-going projects relating to medium and minor
irrigation, soil conservation, watershed management and other forms of
rural infrastructure. The evaluation report of IIM, Bangalore of the RIDF
covering the period up to 2007 has clearly mentioned that there is need
for creating RIDF asset management fund as the assets created out of
this fund are languishing for want of proper maintenance. The returns do
not appear commensurate with the investments although compared to
the state governments‟ own projects in these unfinished assets they fared
better. Physical assets were visible but social audit is considered
desirable. There is no evidence of carrying out the improvements in
processes suggested in the evaluation of the project. And yet, year after
year the funds are being allocated from the Budgets. It is time that a
fresh evaluation of the RIDF investments is carried out by an
independent organisation, unconnected with the NABARD or its
associate organisations or organisations in which its Board Directors are
associated.
• Rs 5,000 crore provided for the Warehouse Infrastructure Fund. No
report card.
Infrastructure
Rs 70,000 crore to infrastructure sector: Projects are expected to source
funding from tax-free bonds for projects in rail, road and irrigation.
Public Private Participation (PPP) model for infrastructure development is
expected to be revitalised with the government bearing majority of the risk.
Two aspects are worthy to note in this regard. One, the government
escalating this mode of investment obviously seems to recognise that the
size of private investment capability matches equal to that of the
Government. Second, it is also a tacit recognition that the capacity of the
government to manage such projects is extremely limited. But the evidence
so far in PPP mode of implementation seems to suggest differently.
PPP mode of funding in this country is steeped in scores of scandals ever
since their introduction and billions of rupees have been sunk.
Investigations and recovery of lost money have been subjected to enormous
delays and regulatory interventions also marred the investigation process.
PPP agreements obviously have been faulty. Accountability and

transparency have been found wanting in most of the special purpose
vehicles (SPV) created. A system imported from the western models without
comparable legal supports has spoilt the broth. The Railway Budget and the
Union Budget heavily depend on this mode of investment as a major source
of funding the infrastructure projects.
• Government proposes to set up 5 ultra mega power projects, each of
4000 MW.
• Rs 75 crore for electric cars manufacturing.
• Renewable energy target for 2022: 100K MW in solar; 60K MW in wind;
10K MW in biomass and 5K MW in small hydro.
• Rs 500 crore for Ultra Mega Solar Power Projects in Rajasthan, Gujarat,
TN, AP and Ladakh.
• Rs 400 crore for solar power driven agricultural pump sets and water
pumping stations.
• Rs 100 crore for developing 1 MW Solar Parks on banks of canals.
• Green Energy Corridor Project to facilitate evacuation of renewable
energy across the country. Continuity in Budget allocations in this
directions seen in 2015-16.
• Atal Innovation Mission to be established to draw on expertise of
entrepreneurs, and researchers to foster scientific innovations; allocation
of Rs 150 crore.
Financial sector
• Forward Markets Commission to be integrated with the Securities &
Exchange Board of India.
• NBFCs registered with RBI and with asset size of Rs 500 crore and above
to be considered as „financial institution‟ under the SARFAESI Act, 2002.
• Permanent establishment standards to be adjusted so that country does
not head to “adverse tax consequences.”
• Mudra Bank announced for start-ups, a game changer.
This new bank is expected to boost credit at low cost a whole lot of small
businesses that provide 106 mn jobs among them – tailors, way side retail
food outlets, mechanics, telephone and mobile repair and servicing units.
These actually account for one-fifth of the economy.
Mudra Bank would have equity of Rs 200 crore to help these micro units.
Manpower statistics hold that every month, 10 mn workers are added to the
work force in this category. Only 4% of the 57.7 mn small businesses are
having access to institutional finance. Nearly a trillion rupees is the credit

prospect if adequate guarantee mechanisms are put in place for proper
credit origination and deployment. The limited impact of the existing micro
finance institutions can be escalated to more productive levels through the
new institution.
The mainstream banks have thus far distanced from this sector due to their
poor reach and unconscionable fear of new NPAs from this sector. Banking
is people oriented and thus far the commercial banks, NABARD, SIDBI in
their long history have left this sector to the private money markets. If
Mudra Bank were to succeed a few essentials need to be kept in mind and a
former leading rural banker, Jaganmohan shared the following thoughts in
the Business Standard response column:
1) Mudra Bank should be having headquarters in a city of less than one
million population.
2) It should recruit all young staff below the age of 25 with graduation in
social sciences or rural management with 75% of them coming from
villages and small towns.
3) The bank should adopt technology from day one.
4) The bank should have some refinance arrangements from the RRBs and
State Cooperative Banks for reaching the last mile connectivity to finance
small businesses.
5) The shortfall of commercial banks‟ lending to MSMEs should be invested
in the bonds floated by Mudra Bank on the lines of RIDF window of
NABARD so that Mudra Bank would get access to resources at low cost.
6) Government of India should place the Annual Progress Report on its
performance to Parliament at its winter session to gauge the extent of
inclusion.
• Priority sector redefined to include agro industry and agribusiness with
credit up to Rs 10 crore.
• Priority Sector Lending Certificates will be introduced.
These two measures are a tacit recognition of the fact that the banks are
defaulting on the priority sector targets for agriculture sector. With the
inclusion of agri businesses and agro industry as part of the priority sector
allocation of the overarching 18 per cent of total credit, it is most likely that
both investment and short term credit to farmers per se would further
diminish. Even as it is, credit to farmers is concentrated in just eleven
States and irrigated tracts and least risky commercial crops and urban
agriculture. Lately, horticulture sector and animal husbandry sector got
good slice of it. It is sovereign risk that enhanced the NPAs in this sector
and not farmers‟ unwillingness to repay the loans. Farmers‟ incapacity to
repay in times of natural calamities has not been adequately addressed by

the Government and the RBI. The Budget glosses over the issues when it
made announcements that actually are not part of Budget allocations.
Priority sector lending certificate is an innovative instrument, no doubt. This
would incentivise the banks defaulting on priority sector targets. If Mudra
Bank is active, these instruments can be a good source of liquidity if they
are tradable in the short term.
• Comprehensive regulatory mechanism through a separate institutional
and legal facilitation to improve ease of doing business.
• Amendment to FEMA Act in consultation with RBI for effective capital
control policy will be introduced.
• Indian Financial Code will be shortly introduced.
• Gold Monetisation Scheme; Sovereign Gold Bond, as an alternative to
purchasing metal gold.
• Developing Indian gold coin with Ashoka Pillar in the centre.
• Effectiveness of these instruments would depend upon the rules that are
framed for their introduction. If there is a mechanism that provides for
withdrawal of gold ornaments for festivals and redeposit with adequate
insurance and pricing mechanisms the schemes could make a head way.
Institutions that administer these schemes should have capabilities to
assess the quality of gold. Valuation risks are likely to increase.
• Atal Pension Yojana, to provide a defined pension, depending on the
contribution, and its period with matching 50% contribution from the
government.
• Pradhan Mantri Suraksha Bhima Yojana to cover accidental death risk of
2 lakh for a premium of Rs 12 / yr.
• Pending Insurance Laws Amendment Bill to be enacted soon.
• The regulatory gap under the Prize Chits and Money Circulation Scheme
(Banking) Act, 1978, will be bridged.
• Special small savings instrument to cater to the requirements of
educating and marriage of the girl child introduced.
• National Savings Certificate with insurance cover to provide additional
benefits for small savers.
• In the PPF Scheme, annual ceiling will be enhanced to Rs 1.5 lakh p.a.
from Rs 1 lakh.
• International Finance Centre in Gujarat will be set up.
• Bank Investment Company to fund capitalisation of PSBs and Bank
Board Bureau (P.J. Nayak committee) will be set up. This would

streamline the provision of capital to the PSBs and enhance corporate
governance efficiency.
• Forward Markets Commission is proposed to be merged with SEBI by
amending the SEBI Act.
• Public Debt Management Agency (PDMA) to bring India‟s external and
domestic debt under one roof.
Education
School education
• Primary schools to cover 5 km radius : 80000 primary schools will be up
graded to upper primary and middle schools;
Higher education
• AIIMS in Jammu and Kashmir, Punjab, Tamil Nadu, Himachal Pradesh,
Bihar and Assam.
• IIT in Karnataka; Indian School of Mines in Dhanbad to be upgraded to
IIT.
• PG institute of Horticulture in Amritsar.
• Kerala to have University of Disability Studies.
• Centre of film production, animation and gaming to come up in
Arunachal Pradesh.
• IIM for Jammu and Kashmir and Andhra Pradesh.
While access and infrastructure improvement are issues that might get
addressed with these measures, the quality of teaching that is at its low ebb
missed the attention.
Teacher training needs huge investments right from primary to higher
education concurrent with the changes in the methods of teaching, the
curriculum and the books.
What we have missed out during the last six decades is teaching in history
and geography, ethics, culture, civic and social consciousness in a highly
divisive society and inculcation of a spirit of nationalism.
We do not have teachers who can teach these subjects not with just passing
out of schools with decent marks but absorbing the embedded values for
building better India.
If these issues are not addressed with a sense of urgency accompanies by
suitable Budget allocations, the young India on which we have lot of hopes

could just end up in a digital India in search of outsourced jobs. This would
spell disaster to the future.
Information technology
• Pan India programme “Digital India” to with an outlay of Rs 500 crore
launched in 14-15 but the progress and further initiative in 15-16 in the
same direction announced with broadband connectivity to all the village
panchayats.
• Programme for promoting “Good Governance” to be launched. A sum of
Rs 100 crore provided.
• No status report but further initiatives to take the Digital India forward.
Action Taken Report – No indication
• Retrospective legislation keeping in mind the impact of each such
measure on the economy and the overall investment climate.
• A stable and predictable taxation regime. Still to be seen.
• Legislative and administrative changes to sort out pending tax demands
of more than Rs 4 lakh crore under dispute and litigation.
• Dispute resolution mechanism introduced 15-16.
• Resident taxpayers enabled to obtain on advance ruling in respect of
their income-tax liability above a defined threshold.
• Measures for strengthening the Authority for Advance Rulings have been
introduced.
• Income-tax Settlement Commission scope to be enlarged.
• National Academy for Customs & Excise at Hindupur in Andhra Pradesh.
Yet to be established.
• New Urea Policy to be formulated. Not yet done.
• Introduction of GST to be given thrust. (Increasing VAT to 14% from
12.36% in 15-16 Budget as a precursor to GST of 16-17 per cent and
promise held for introduction in April 2016.)
• High level committee to interact with trade & industry on regular basis to
ascertain areas requiring clarity in tax laws is to be set up.
• Convergence with International Financial Reporting Standard (IFRS) by
adoption of the new Indian Accounting Standards (2nd AS) by Indian
Companies. (This might be part of the Indian Financial Code now
announced.)
• Setting up of Expenditure Management Commission to look into
expenditure reforms. Set up but recommendations not announced yet.

Economic initiatives of 14-15 echoed in 15-16 Budget:
Encourages FDI selectively in sectors
• The composite cap of foreign investment to be raised to 49% with full
Indian management and control through the FIPB route.
• The composite cap in the insurance sector to be increased up to 49%
from 26% 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 sq mtrs to 20,000 sq mtrs and from $10 mn to $5
mn respectively for development of smart cities.
• E-commerce platforms for manufacturing units to sell in retail.
Smart Cities
• A sum of Rs 7,060 crore is provided in the current fiscal for the project of
developing “one hundred Smart Cities‟ - Allocations don‟t match
aspirations even in this Budget.
• It is time that the FM thinks of creating smart villages and lay out a plan
of action integrating the Swatch Bharat, Safe drinking water, rural
infrastructure and digital connectivity.
Tourism
• Development schemes for churches and convents in old Goa; Hampi,
Elephanta caves, Forests of Rajasthan, Leh palace, Varanasi, Jallianwala
Bagh, Qutb Shahi tombs at Hyderabad to be under the new toursim
scheme.
• Visa on Arrival for 150 countries.
Real estate
• Incentives for Real Estate Investment Trusts (REITS). Complete pass
through for the purpose of taxation. Clarity is yet to emerge.
• A modified REITS type structure for infrastructure projects as the
Infrastructure Investment Trusts (INVITS). Yet to be active.
• A REIT is a pooled investment entity registered with SEBI, just like a
mutual fund with investment primarily in real estate of completed and
revenue-generating properties. The rental received from these properties
will be distributed among investors as dividend. Real estate is a big ticket
investment with a huge chunk of money getting locked in buying a
property.

• The advantage of REIT is availability of exposure to real estate with a
smaller ticket size as well as diversification of investment by REIT. It has
been mandated that at least 90% of the value of the REIT assets shall be
in completed revenue generating properties. In order to provide flexibility,
it has been allowed to invest the remaining 10% in other assets as
specified in the proposed regulations, e.g. developmental properties,
listed or unlisted debt of companies, mortgage backed securities, equity
shares of companies deriving not less than 75% revenue from real estate
activities, government securities, money market or cash. This is a huge
window of opportunity for growth of the realty sector in future.
• These two instruments to attract long term finance from foreign and
domestic sources including the NRIs.
MSME sector
• Skill India to be launched with an emphasis on employability and
entrepreneur skills.
• Fund of Funds with a corpus of Rs 10,000 crore for providing equity
through venture capital funds, quasi equity, soft loans and other risk
capital for new startups
• Corpus of Rs 200 crore to be set up to establish Technology Centre
Network.
• Rs 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.
• Textile Mega Clusters: Rs 500 crore at Varanasi, Bareilly, Lucknow,
Surat, Kutch, Bhagalpur and Mysore.
• Rs 20 crore to set up a Hastkala Academy for the preservation, revival,
and documentation of the handloom/handicraft sector in PPP mode in
Delhi.
• Rs 50 crore for starting a Pashmina Promotion Programme (P-3) and
development of other crafts of Jammu & Kashmir.
• No report card on any of these initiatives. Budget announced that all the
skill development programmes functioning in 32 corridors would be
brought under one umbrella.
• Committee to study the flow of credit with mandate to submit report
within 3 months.
• Definition of SMEs to be modified to enable higher investments including
FDIs.

• 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 for 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.
Nine months have passed and the Committee‟s Report is still awaited.
• Electronic Trade Receivables Discounting System (TReDS) financing of
trade receivables of MSMEs, from corporate and other buyers, through
multiple financiers announced to improve liquidity among the MSMEs.
• Atal Innovation Mission (AIM) will be an innovation promotion platform
involving academics, entrepreneurs, and researchers and draw upon
national and international experiences to foster a culture of innovation,
R&D and scientific research in India.
Job orientation in the Budget is missing.
Defence
• Grant of Rs 2,46,726 crore; an increase of 9.87 per cent over the
previous year.
• Emphasis on Make in India for rapid production of defence equipment.
Welfare schemes
• JAM trinity (Jan Dhan Yojana, Aadhaar and Mobile) to boost quality of
life.
• MUDRA bank to refinance micro finance orgs, to motivate first generation
SC/ST entrepreneurs.
• Housing for everyone by 2020.
• Government to contribute 50% of premium for Atal Pension Yojana every
year.
• Government to use Rs 9,000 crore unclaimed capital in PPF/ EPF for
Senior Nationals Fund.
Fiscal measures
• Abolition of Wealth Tax.
• Additional 2% surcharge for super rich with earnings of above Rs 1 crore.
• No amendment in tax slabs.

• Total exemption of up to Rs 4,44,200 for certain sections of population
and not for every taxpayer.
• Service tax surged to 14 per cent.
• Tax-free bonds for schemes in rail, road & irrigation.
• Atal Innovation Mission allocated Rs 150 crore.
• Rate of corporate tax to be reduced to 25% over next four years. The
proposal is icing on the cake. Budget is for a year and the FM should
have been forthright by mentioning that the corporate tax would be
reduced during the current year by just 3%.
• 100% exemption for contribution to Swachch Bharat, apart from CSR.
• Service tax increased to14 per cent.
S.S. Tarapore has said, in a recent article that it is a basic tenet of public
finance that indirect taxes are regressive. In the Budget for 2015-16, the
direct tax proposals result in a loss of Rs 8,315 crore of revenue while the
measures relating to indirect taxes result in an additional yield of Rs 23,383
crore.
This is a trend for many years which accentuates the regressive nature of
the Indian tax system. He also mentions that the exemption of dividends
from tax in the hands of recipients and the withdrawal of estate duty etc.
would make the Indian direct tax regime one of the mildest in the world.
Skill building
While it is laudable that all the skill building interventions of various
departments are brought under one umbrella, lot more needs to be
done both in short and long run.
Although a slew of skill building measures have been announced, these fall
short of practical wisdom. When the primary technology institutions and the
polytechnics failed to generate for years the quality of mechanics, welders,
electricians, carpenters, masons, potters and artisans that the medium and
large industry required, with six to twelve week on the job skills how can
new quality skills be generated, particularly in the rural areas?
Today the urban carpenter, mason, electrician are on an average daily wage
ranging from Rs 400-500 depending on the supply-demand factors.
Education, training, retraining, coaching, mentoring and handholding are
the key components in skill building. These have both institutional and on-
site interventions. Monitorable investments in all these areas from the
National Skill Development Corporation are very important constituents of

this area that went unattended in the Budget vision. In fine, this Budget is
not an accounting document of revenues and expenditure so much as the
vision and road map of the Prime Minister Narendra Modi to keep the Nation
First and Make in India the best. It however falls short of action agenda. In
fact, it is time that the Prime Minister looks at making regulatory impact
assessment as part of every law taken to Parliament for ensuring better
accountability of the law makers to the subjects of law and for ensuring
transparency and good governance. In the words of the Finance Minister;
“The credibility of the Indian economy has been re-established. The world is
predicting that it is India‟s chance to fly.” As mentioned in the beginning of
this paper, it is the baby step towards cooperative federalism and
decentralised planning and allocation of resources.
Part two - Budget nomenclature
• Annual Financial Statement: Government‟s receipts and expenditure
presented to the Parliament – Consolidated Fund; Contingency Fund;
and Public Account
• Consolidated Fund: Summation of all revenues, money borrowed and
receipts from loans it has given. All State expenditure is given from this
fund.
• Contingency Fund: Any urgent and unforeseen expenditure is met from
this Fund and is at the disposal of the President of India.
• Public Account: It is a collection of deposits like the Public Provident
Fund.
• Consolidated Fund is split into revenue and capital budgets.
• Revenue Budget consists of all revenue account; Capital budget or
capital account includes non-revenue receipts and expenditure.
• Revenue Account: All receipts like taxes and expenditure like salaries,
subsidies, interest payments that do not involve creation of any assets.
Capital account: Receipts from liquidating (selling) assets or shares of a
public sector company and spending to create assets and lending to receive
interest. A Central Plan is the Government‟s expenditure that includes a
five-year road map. This is met both from budget and non-budgetary
sources (State owned enterprises) Government‟s support to the Central Plan
is known as Budget support.
Plan expenditure: It is the amount the centre sets aside to States and UTs
split into revenue and capital components in addition to the Budget
support.

Non-Plan expenditure: All those bills the government has to pay under the
„revenue expenditure‟: interest payments, subsidies, salaries, defense and
pension. Most of the capital expenditure goes for Defence.
• Fiscal deficit: Living beyond the means. Non-borrowed receipts-
(revenue receipts+ loan repayments+ miscellaneous capital receipts,
primarily disinvestment proceeds) falling short of expenditure. The
excess of total expenditure over total non-borrowed receipts is called
fiscal deficit.
• Revenue deficit: Ideally all revenue expenditure must be met from
revenue receipts. Where it falls short, it has to raise a debt from the
public.
• Primary deficit: Fiscal deficit-interest payments on earlier borrowings. If
this is growing it means that our fiscal strength is bad.
• Current account deficit: Deficit arising from balance of payments current
assets.
• FRBM Act, 2003, specifies that revenue expenditure shall be met fully
out of revenue receipts only. Any borrowing should be done only to meet
capital expenditure. The Act also mandates 3% fiscal deficit after 2008-
09 in order to maintain fiscal stability. The global financial crisis and our
economy‟s meltdown forced us to abandon this fiscal discipline in 2008-
09.
(Dr B. Yerram Raju is Risk Management Consultant, Hyderabad.)

Long on aspirations and short on action - A monograph on the Union Budget 2015-16 - B. Yerram Raju

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Long on aspirations and short on action - A monograph on the Union Budget 2015-16 - B. Yerram Raju