The document provides an overview of the key aspects of the 2016 Indian Union Budget. It discusses the economic context, vision and objectives, and how various policy decisions fit together. The budget aims to boost infrastructure development, implement fiscal consolidation measures, reform subsidies and taxation, and address issues in agriculture and banking. However, successful implementation and global economic conditions will ultimately determine whether the budget achieves its goals.

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Union Budget 2016
VistaMind Education

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What will we cover?
 Economic Overview
 Context for the Policy decisions
 Vision and Objective:
 How various parts fit together
 What could go wrong?

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Overview
 GDP Growth
 Expected to be 7.4% and between 8.1 to 8.5%
 Fiscal Deficit on course for FY 16 at 3.9% and then 3.5%
 Current Account Deficit under control, Forex Reserves High
 Global Economy down: Imports & Exports down TD@106.8Bn
 FDI up by 40%, Forex Reserves at 350 Bn record high
 Infrastructure projects stalled, slowly being unclogged
 Bank balance sheets in trouble, NPA’s at a record high
 Industrial growth very slow
 Private sector lacks funds/desire to invest
 LPG PAHAL scheme reduction in leakages down by 24%
 Record addition in Power Generation & Coal production

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Context for Budget 2016
 Global economic slowdown
 Commodity prices at major low
 Two big bills
 OROP
 Seventh Pay commission
 Industrial growth very slow
 IIP at 3.1% compared to 2.6% last year
 Infrastructure clogged with stalled projects
 Banks in deep trouble
 High NPAs & Restructured loans
 Rural distress
 2 successive droughts
 Farm productivity is key to growth without inflation

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Target Areas
 Subsidy reform
 Leakages very high in Fertilizer, Kerosene etc
 DBT based JAM Trilogy
 Power sector Mess
 Electricity Discoms accumulated losses at 3.8 lakh crore
 Banking sector mess
 Why 25 banks?
 Will government keep bailing out banks?
 Exit policy
 Rule of the market: Productive Efficient firms survive & Grow
 Privatization
 PSU’s accumulated losses: 1.04 lakh Crore (13-14 fig)
 Why should government run Telco’s, Airlines, Steel plants etc

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Theme 1: Fiscal Consolidation
 High Fiscal Deficit
 Higher Borrowings
 Inflation  High Interest rates
 Poor International Ratings
 Need for Public Investment
 Fiscal Deficit
 2015-16 at 3.9%, 2016-17 to 3.5%
 Achieved through rise in indirect taxes (Excise on Oil sector)
 2016-17 FD depends on Revenue assumptions holding

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Theme 2: Infrastructure
 Infrastructure Vs Subsidies and Schemes
 2.18 lakh Crore direct investment
 Roads, Railways, and Irrigation
 Solving the Infrastructure traffic jam
 Higher pace of highway construction
 Power generation, Village electrification, coal production
 JAM approach to subsidies
 JDY – Aadhar Card – Mobile Transfers
 Successful experiment in LPG Reduction in leakages by 24%
 Fertilizers next?
 The Power sector Mess
 UDAY scheme

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Theme 3: Tax Reforms
 Amnesty Scheme
 5.5 Lakh crore locked in Tax litigation
 Pay 45% Tax and get immunity
 Upto 10 lakhs, pay arrears without penalty or interests
 Tax dispute settlement
 Increases revenues, Unclogs legal system
 Tax reform
 Tax on super rich.
 Taxes on Diesel & Luxury Cars
 Additional 10% tax on dividends above 10 lakhs
 All Savings schemes brought to standard platform
 Regulatory Environment
 New Bankruptcy code to create exit policy

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Theme 4: Agriculture & Rural
 Aid transfer to Gram Panchayats at 2.87 lakh crore
 Massive 228% increase
 Crop Insurance & Farm Interest subvention
 Rs 5500 Cr
 NREGA highest ever allocation
 Rural Electrification, Massive push for Rural gas connections
 Irrigation
 Increase in irrigated land : 28.5 lakh hectares
 Focus on ground water recharging: 6000 Cr
 Unified Agri mrket
 585 regulated wholesale markets
 States to ammend APMC acts

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Theme 5: Banking reforms
 Banks in deep trouble
 180,000 Crore to 400,000 Crore
 Bankruptcy code, New ARCs
 Too little too late?
 11,200 Cr to 25,000 Cr allocation
 Indradhanush: Banking reforms
 Bank Boards Commission: Vinod Rai.
 Will appoint directors and key posts
 Implement Banking reforms
 Where will the rest of the money come from?
 IDBI: Signals willingness to dilute stake below 50%
 Why do we need 25 PSU banks?

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The Verdict
 A thoughtful and well Intentioned budget
 Under severe constraints
 But will it be enough?
 Implementation is the key
 Irrigation & Farm productivity: Difficult execution
 Soil Health Cards – Sustainable Irrigation – Crop insrance
 Scientific fertilizer usage – Change crop usage patterns – Free Agri markets
 Inshallah!
 God, Global Economy & GST
 Will Oil prices stay low?
 Subsidy reforms
 DBT is the key
 Biometric authentication at Subsidy POS
 Targeted Subsidies minimizing leakages & administration costs!
 Key misses
 Banking reforms
 Privatization

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The Verdict
 Fiscal Consolidation
 Non tax receipts (Spectrum, Disinvestment, Tax amnesty)
 Low FD  Low Inflation  RBI cuts rates Pvt investment boost
 The Banking Mess
 25,000 Cr is nowhere near enough
 Consolidation of banks, Privatization
 Tentative & Timid steps?
 Corporate tax reforms
 Eliminate exemptions & Reduce Tax rate has not happened
 Govt to pay 8.33% EPF for 3 years
 Small Incentive to generate employment
 Where is the Big bang reform?
 Fear of electoral backlash
 Legislation struck in RS