16 Feb, 2017
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Government set aside Rs. 17,000 crore to boost Skill India Mission
Economic Times: February 03, 2017
New Delhi: The government has set aside over Rs 17,000 crore for skilling, employment generation and providing livelihood to millions of youth who enter the workforce every year, giving Skill India Mission—Prime Minister Narendra Modi’s pet project— a major leg up.
At least 10 million young people enter the country’s workforce every year, but job creation in India has not kept pace with this influx, making rising unemployment a major challenge for the government.
The total sector outlay for 2017-18 has been pegged at Rs 17,273 crore, 16% higher than 2016-17’s revised estimate of Rs 14,870 crore. In fact, the ministry of skill development and entrepreneurship, which has been set up by the BJP-led NDA government to implement the ‘Skill India Mission’ project, has seen a 38% jump in its allocation for the next fiscal at Rs 3,016 crore, as compared with Rs 2,173 crore in the revised estimate of 2016-17.
“The highest ever allocation to the sector will be used to speed up the process of skilling in a manner that we make our youth employable in the fastest possible way,” a senior official said. According to the official, the role of the skill development ministry does not end after imparting skills to the young labour force.
“For the success of Skill India Mission, the ministry has to facilitate employment for these skilled youths, and this requires mediation with industry and other ministries to help create quality and sustainable jobs in the market,” the official said. Finance Minister Arun Jaitley, in his budget speech on Wednesday, announced at least half a dozen skilling initiatives not just for the youth but also for women to ensure gender parity.
The biggest initiative under the programme is the launch of SANKALP (Skill Acquisition and Knowledge Awareness for Livelihood Promotion Programme) at an investment of Rs 4,000 crore to provide marketrelevant training to 350 million youths. Besides, the ministry would set up 100 India International Skills Centres that will conduct advanced courses in foreign languages to help youngsters prepare for overseas jobs.
Budget 2017: Arun Jaitley pushes for a cashless economy
Livemint: February 02, 2017
Finance minister Arun Jaitley proposed a slew of measures to hasten India’s movement to a cashless economy. Among them are a ban on cash transactions more than Rs3 lakh, tax breaks for the creation of a cashless infrastructure, greater usage of non-cash modes of payments and making Aadhaar-based payments more widespread.
The government has been pushing for a shift to a less-cash economy, especially after the cancellation of legal tender of high-value notes on 9 November. These measures will create a paper trail for all transactions, thus providing an effective check against tax evasion.
The budget proposed to ban all cash transactions above Rs3 lakh, in line with the recommendations of the special investigative team (SIT) on black money.
The government will make the necessary amendments to the Income Tax Act to facilitate this, the finance minister said. The Supreme Court-constituted SIT, in its report last year, had proposed banning cash transactions above Rs3 lakh and capping cash holdings of individuals and companies at Rs15 lakh.
High-value cash transactions are a common feature in the real estate sector where buyers try to get away with paying lower stamp duty.
Curbing black money is one of the electoral promises of the National Democratic Alliance and the government has announced a number of steps over the last couple of years to check black money, including the recent move to demonetize high-value banknotes.
In the Union budget, the government has sought to incentivize greater use of non-cash transactions for small businesses by lowering the tax rate on presumptive income to 6% from 8% for all non-cash transactions.
Jaitley also announced tax exemptions for manufacturers of point-of-sale (PoS) card readers, mobile PoS (mPOS), fingerprint readers and iris scanners.
The budget also announced the setting up of a separate payments regulator within the Reserve Bank of India (RBI) to regulate the payments space. A review of the Payments and Settlements Act will also be undertaken, aimed at its overhaul.
To give a major push to Aadhaar-based transactions, the government announced that one million biometric PoS machines will be installed by March and subsequently scaled to two million by September.
Aadhaar Pay, a merchant version of Aadhaar-Enabled Payment System (AEPS), will be launched soon to enable those who do not have debit cards, mobile wallets and mobile phones to make digital payments.
The government will also take steps to encourage and possibly mandate digital payments at petrol pumps, fertilizer depots, road transport offices, universities, colleges, hospitals and other institutions.
It plans to strengthen the digital payment infrastructure, especially in rural and semi-urban areas.
It also announced two new schemes—Referral Bonus Scheme for individuals and a Cashback Scheme for merchants—to promote the usage of the Bharat Interface for Money (BHIM) app aimed at encouraging merchants and individuals to use the app and make more digital payments.
The government estimates that around 25 billion digital transactions will take place in 2017-18 via different modes of payments such as the Unified Payments Interface (UPI), immediate payment service, AEPS and debit cards used on PoS terminals.
Since the 8 November announcement of the demonetization of high-value currency notes, several incentives to promote cashless payments have been announced, including waiver of service charges on card payments and reducing the merchant discount rate. The government hinted that it will consider and work with the various stakeholders for the early implementation of the interim recommendations submitted to Prime Minister Narendra Modi by the chief ministers’ panel, headed by Andhra Pradesh chief minister N. Chandrababu Naidu, on digital transactions.
“The problem with digital payments has been with the merchants and not the consumers while accepting the payments. Therefore, the incentives and tax exemptions are a part of the budget. The merchant discount rate (MDR) is too expensive and there is a need to look at ways to bring it down,” said Rahul Matthan, partner at law firm Trilegal.
“There is a benefit in having a separate body for digital payments. Though RBI should still be on top of it, there must be freedom to think flexibly on this issue,” Matthan added.
Jaitley also announced that railways will no longer levy service charge on train tickets booked online through the IRCTC website. Earlier, a service tax of Rs20 had to be paid while booking sleeper class tickets and Rs40 for AC class tickets.
The budget suggested additional cashless initiatives such as Aadhaar-based smart cards for senior citizens.
It also announced a computer emergency response team for the financial sector (CERT-Fin) to increase security of digital transactions.
Budget 2017: Arun Jaitley proposes plan to merge state firms to create global oil major
Livemint: February 02, 2017
India may be on its way to having its own hydrocarbon behemoth that can take far more risks than individual oil companies can at present and make larger investment decisions. The aspiration is to create an entity on the lines of ExxonMobil Corp. or Royal Dutch Shell Plc.
Finance minister Arun Jaitley, in Union Budget 2017-18, proposed an integrated “oil major” which can create more value for shareholders.
The move is in line with the Narendra Modi government’s plan to utilize the synergy between various state entities for achieving efficiency and cost competitiveness.
International firms such as ExxonMobil, Royal Dutch Shell and BP Plc have integrated operations across upstream exploration, refining and fuel retail.
“We see opportunities to strengthen our central public sector companies through consolidation, mergers and acquisitions. By these methods, they can be integrated across the value chain of an industry. Possibilities of such restructuring are visible in the oil and gas sector,” said Jaitley.
Although the move would result in fewer firms in the energy sector dominated by state-run entities, experts said that having an integrated entity would not diminish competition in retailing or in oil and gas block auctions.
“The competition between state-owned oil companies is rather limited today for the reason that although they are different legal entities, they are under the control of the oil ministry and constitute a single economic entity with the President of India as the controlling shareholder. The issue before government seems to be the choice between the internal competition among these companies vis-à-vis creating an entity that can compete globally,” said Subodh Prasad Deo, partner at Saikrishna and Associates, a law firm.
Deo had earlier initiated an examination of the issue of competition among state-owned oil companies as additional director general in the Competition Commission of India (CCI) but that was not concluded due to a Delhi high court stay.
State-owned firms in the oil and gas sector are: Oil and Natural Gas Corp. Ltd (ONGC), Oil India Ltd, GAIL (India) Ltd, Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd, Hindustan Petroleum Corp. Ltd, Numaligarh Refinery Ltd, Chennai Petroleum Corp. Ltd, Engineers India Ltd, Balmer Lawrie and Co. Ltd, and Biecco Lawrie Co. Ltd.
ONGC welcomed the move.
“Though the finer details are yet to come, but the intention appears to be to form an integrated company on the lines of oil firms such as ExxonMobil, Shell and BP,” said Dinesh K. Sarraf, chairman and managing director of ONGC.
India’s energy demand growth is expected to outpace that of the other BRIC (Brazil, Russia, India and China) countries, according to the latest BP Energy Outlook released last week.
“The new entity will have economies of scale and Indian industry’s negotiating power globally will increase significantly. This will also contribute to improved stability of the industry because of integration,” added Sarraf.
“The integration may take more than a year, unless the government has already done considerable groundwork. These are all listed entities and the pros and cons of such a move need to be assessed carefully,” said Debasish Mishra, partner at Deloitte Touche Tohmatsu India Llp.
The move to create an oil behemoth comes in the wake of domestic companies increasingly scouting for overseas assets in a bid to protect themselves from volatility in crude oil prices.
Global PE firms invested record US$ 6.6 billion in realty sector last year
Economic Times: February 02, 2017
International private equity firms may have pumped in record capital into India’s real estate sector last year, but it is still just 1% of what they invested globally during the year. India attracted $6.6 billion of inflows into the property sector as against over $610 billion global capital inflows in 2016, a JLL India study showed.
However, this is likely to change with the advent of transparency through Real Estate Regulatory Act, tax reforms and an exit avenue in the form of Real Estate Investment Trusts. The global funds that assign higher weightage to political stability, particular phase of the country’s property cycle, uptake in commercial spaces have now been reviewing Indian real estate’s potential as their key investment market.
“India’s real estate received just 1 per cent of global private equity realty-focused investment and this is due to the lack of depth and high ly fragmented nature of real estate sector here. While they were keen to invest more, PE funds have had to struggle with finding the right partners, and in recent times, their focus has changed to quality of partners instead of IRR (Internal Rate of Return),“ said Ramesh Nair, COO Business & International Director, JLL India. A vibrant real estate sector with improved transparency will augur well for future fund flows.
“The real estate sector in India is going through a reform-driven transformation and global institutional investors such as sovereign wealth funds and global pension funds are noticing this. These funds are looking at stable yields for their long-term investments, but along with better governance and practices. India, given the political stability and changing business environment, will find its ranking moving up in terms of investments henceforth,” said Gaurav Karnik, Tax Partner & Real Estate practice leader at Ernst & Young.
Budget’s thrust on stimulating growth, relief to Middle Class, Affordable Housing, Curbing Black Money, promoting Digital Economy, transparency of Political Funding and simplification of Tax Administration
Press Information Bureau: February 02, 2017
- Government committed to eliminate Black Money component from the economy
- MSME companies to pay income tax @ 25%
- Custom duty on LNG reduced from 5% to 2.5%
- Small and medium tax payers to pay less under presumptive income tax scheme
- Measures announced to ensure transparency in Electoral funding
- Income tax reduced from 10% to 5% for individual having income in the slab of Rs. 2.5 Lakh to Rs. 5 Lakh
- Individuals in the slab of Rs. 50 Lakh to Rs. 1 Crore will have to pay surcharge of 10%
- GST council’s recommendations on major issues finalised
Presenting the General Budget 2017-18 in Parliament here today, the Union Minister of Finance and Corporate Affairs Shri Arun Jaitley said that the major thrust of his Budget proposals is on stimulating growth, relief to middle class, affordable housing, curbing black money, promoting digital economy, transparency of political funding and simplification of tax administration.
Presenting the overall economic scenario of the country, Shri Jaitley said that we are largely a tax non-compliant society. Among the 3.7 crore individuals who filed the tax returns in 2015-16, only 24 lakh people show income above Rs. 10 lakh. Of the 76 lakh individual assesses who declared income above Rs. 5 lakh, 56 lakh are from salaried class. The number of people showing income more than Rs. 50 lakh in the entire country is only 1.72 lakh, while more than 1.25 crore cars have been sold in the last five years and over 2 crore people flew abroad in the year 2016.
Highlighting the priorities of the Government, the Finance Minister Shri Jaitley in his Budget Speech said that one of the main priorities is to eliminate the black money component from the economy. He said that the Government is committed to make our taxation rates more reasonable, our tax administration more fair and expand the tax base in the country. Presenting a revealing picture after the demonetization, he said that during the period from 8th November to 30th December, 2016 deposits between Rs. 2 lakh and Rs. 80 lakh were made in about 1.09 crore accounts with an average deposit size of Rs. 5.03 lakh. Deposits of more than Rs. 80 lakh were made in 1.48 lakh accounts with average deposit size of Rs. 3.31 crore. This data mining will help the Government immensely in expanding the tax net as well as increasing the revenues, which was one of the main objectives of demonetization.
For the second year in a row, the growth rate of tax revenue will be 17% as per the RE of 2016-17. Because of the serious efforts made by the Government, the rate of growth of advance tax in personal income tax in the first three quarters of the Current Financial Year is 34.8%. The tax collections both in Direct and Indirect taxes in the current financial year even after demonetization have shown a remarkable surge.
Mentioning the measures for promoting affordable housing in real estate sector, the Finance Minister said that the scheme for profit linked income tax exemption for promoters of affordable housing will be broad based. Instead of built-up area of 30 and 60 sq. mtrs., the carpet area of 30 and 60 sq. mtr. will be counted. Also the 30 sq. mtr. will apply only in case of municipal limits of four metropolitan cities while for the rest of the country limit of 60 sq. mtr. will apply. In order to be eligible, the scheme was to be completed in three years after commencement. Now, it will be extended to five years. The tax on notional rental income will be applicable after one year of the end of the year in which completion certificate is received so that builders get some breathing time for liquidating their inventory. Announcing changes in the capital gain taxation provisions in respect of land and building, Shri Arun Jaitley said that the holding period for considering gain from immovable property is being reduced to two years from existing three years now. Also, the base year for indexation is proposed to be shifted from 1.4.1981 to 1.4.2001 for all classes of assets including immovable property. In respect of new capital for State of Andhra Pradesh, persons holding land on 2.6.2014 whose land is being pooled for creation of new capital city under the Government Scheme, will be exempted from capital gain tax.
Delineating measures for stimulating growth, Shri Jaitley said that a concessional withholding rate of 5% being charged on interest earned by foreign entities in external commercial borrowings or in bonds in Government securities is proposed to be extended to 30.6.2020. For the purpose of carry forward of losses in respect of start ups, the condition of continuous holding of 51% of voting rights has been relaxed subject to the condition that the holding of the original promoters continues. Also, the profit linked deduction available to the start ups for three years out of five years is being changed to three years out of seven years. Shri Arun Jaitley said that it is not practical to remove or reduce Minimum Alternate Tax (MAT). However, in order to allow companies to use MAT credit in future years, carry forward of MAT upto a period of 15 years instead of 10 years at present will be allowed. Announcing tax benefits to medium and small enterprises to make them more viable and to encourage them to migrate to company format, the income tax for smaller companies with annual turnover upto Rs. 50 crore will be reduced to 25% . As per data of Assessment Year 2015-16, there are 6.94 lakh companies filing returns of which 6.67 lakh companies fall in this category. This will make MSME sector more competitive as compared to large companies. The revenue forgone estimate for this measure is expected to be Rs. 7200 crore per annum.
To give a boost to Banking Sector, allowable provision for non performing asset is being increased to 8.5% from 7.5%. This will reduce the tax liability of Banks. In respect of NPA accounts, interest receivable on actual receipts instead of accrual basis will be taxed. This will remove hardship of having to pay tax even when interest income is not realized. Shri Jaitley further announced reduction in basic custom duty on LNG from 5% to 2.5% in view of wide range of use of LNG as fuel as well as feed stock for petro-chemical sector.
In order to incentivize domestic value addition and to promote Make In India, Shri Jaitley announced changes in Customs & Central Excise duties on several items related to the Renewable Energy Sector. This includes all items of machinery required for – fuel based power generating system to be set-up in the country for demonstration purposes; systems operating on biogas/ biomethane/ byproduct Hydrogen; LED lights or fixtures etc.
Proposals for reduction in Customs duty on inputs and raw materials to reduce costs have been submitted for certain items like Liquefied Natural Gas (LNG), Nickel, Vegetable Tanning Extracts and certain Capital Goods.
Proposal to hike Excise duties and to levy additional duties under Sec 85 of the Finance Act, 2005 on several tobacco and tobacco related products have also been made in the Budget.
Mentioning measures to promote digital economy/cashless transactions, Shri Arun Jaitley said that BCD, Excise/CV duty and SAD on miniaturized POS card reader for m-POS, micro ATM standards version 1.5.1, Finger Print Readers/Scanners and Iris Scanners will be exempted. Also, parts and components for manufacture of such devices so as to encourage domestic manufacturing of these devices will be exempted. No transaction above Rs. 3 lakh will be permitted in cash. The cash expenditure allowable as deduction, both for revenue as well as capital expenditure will be limited to Rs. 10,000. Similarly, the limit of cash donation which can be received by charitable trust is being reduced to Rs. 2000 from Rs. 10,000. As regards, scheme of presumptive income tax for small and medium tax payers whose turnover is upto Rs. 2 crore, 6% of their turnover instead of 8% at present will be counted as presumptive income.
Expressing concern over funds being received by political parties through anonymous donations shown in cash, Shri Jaitley said that the measures taken in the past to check such donations has only marginally improved the situation. A transparent method of funding political parties which is vital to the system of free and fair elections needs to be evolved. Shri Jaitley proposed the following schemes to cleanse the system of funding of political parties:
a) The maximum amount of cash donation that a political party can receive will be Rs. 2000/- from one person,
b) Political party will be entitled to receive donations by cheque or digital mode from their donors.
c) Reserve Bank of India Act will be amended to enable the issuance of electoral bonds in accordance with a scheme to be framed by the Government in this regard.
Under this Scheme, a donor could purchase bonds from authorized Banks against cheque and digital payments only.
They shall be redeemable only in the designated account of a registered political party.
These bonds will be redeemable within the prescribed time limit from issuance of bond.
d) Every political party would have to file its return within the time prescribed in accordance with the provisions of Income Tax Act.
Mentioning ease of doing business measures, Shri Arun Jaitley said that in order to reduce the compliance burden due to domestic transfer pricing provision, the scope of domestic transfer pricing will be restricted if one of the entity involved in related party transaction enjoys specified profit linked deduction. The threshold limit for audit of business entities opting for presumptive income scheme is being increased from Rs. 1 crore to Rs. 2 crore. Similarly, threshold maintenance of books for individuals and HUF is being increased from turnover of Rs. 10 lakh to Rs. 25 lakhs or income from Rs. 1.2 lakh to Rs. 2.5 lakh.
Shri Jaitley further announced to exempt Foreign Portfolio Investor (FPI) Category I & II from indirect transfer provision. Indirect transfer provision will not be applicable in case of redemption of shares or interests outside India as a result of or arising out of redemption or sale of investment in India which is chargeable to tax in India. He further announced that a TDS of 5% being deducted from Commission payable to individual insurance agents will be exempted subject to their filing a self declaration that their income is below taxable limit. Professionals with receipt upto Rs. 50 lakh per annum will be given benefit in terms of paying advance tax in one instalment instead of four under presumptive taxation scheme. The time period for revising a tax return is being reduced to 12 months from completion of financial year to allow the people to claim the refund expeditiously. Also, the time for completion of scrutiny assessment is being compressed further from 21 months to 18 months for assessment year 2018-19 and further to 12 months for assessment year 2019-20 and thereafter.
Giving details of proposals on personal income tax, the Finance Minister said that the existing rate of taxation for individual assesses between income of Rs. 2.5 lakh to Rs. 5 lakh will be reduced to 5% from the present rate of 10%. This would reduce the tax liability of all persons below Rs. 5 lakh income either to zero (with rebate) or 50% of their existing liability. In order not to have duplication of benefit, the existing benefit of rebate available to the same group of beneficiaries is being reduced to Rs. 2500 available only to assesses upto income of Rs. 3.5 lakh. The combined effect of both these measures will mean that there would be zero tax liability for people getting income upto Rs. 3 lakh per annum. And the tax liability will only be Rs. 2500 for people with income between Rs. 3 and 3.5 lakh. If the limit of Rs. 1.5 lakh under Section 80C for investment is used fully the tax would be zero for people with income of Rs. 4.5 lakh. While the taxation liability of people with income upto Rs. 5 lakhs is being reduced to half, all the other categories of tax payers in the subsequent slabs will also get a uniform benefit of Rs. 12500 per person. The total amount of tax forgone on account of this measure is Rs. 15500 crore, Shri Jaitley said.
A surcharge of 10% of tax payable on categories of individuals whose annual taxable income is between Rs. 50 lakh and one crore, will be levied. The existing surcharge of 15% of tax on people earning more than 1 crore will continue. This is likely to give additional revenue of Rs. 2700 crore. A simple one page form to be filed as Income Tax Return will be made for the category of Individual having taxable income upto Rs. 5 lakh other than business income. Also, a person of this category to file Income Tax Return for the first time would not be subjected to any scrutiny in the first year unless there is specific information available with the Department regarding his high value transactions. Shr Jaitley appealed to all citizens of India to contribute to Nation Building by making a small payment of 5% tax if their income is falling in the lowest slab of Rs. 2.5 lakh to Rs. 5 lakh. The Finance Minister further announced that in line with exemption available to the Prime Minister’s Relief Fund and certain other funds, the income of the Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund shall be exempted from tax.
Mentioning Goods and Service Tax as a path-breaking reform, Shri Arun Jaitley said that preparatory work for GST is Government’s top priority. The GST Council has finalized its recommendations on almost all the issues based on consensus. The preparation of IT system for GST is also on schedule. The extensive reach out efforts to trade and industry for GST will start from 1st April, 2017 to make them aware of the new taxation system. Without compromising the spirit of cooperative federalism, Government shall continue to strive to achieve the goal of implementation of GST. Shri Jaitley expressed hope that GST will bring more taxes both to Central and State Governments because of widening of tax net.
Making a mention of Prime Minister’s approach of RAPID (Revenue, Accountability, Probity, Information and Digitization), Shri Arun Jaitley said that Government is trying to bring in maximum use of information technology to remove human contact with assesses as well as to plug tax avoidance. He assured everyone that honest, tax compliant persons would be treated with dignity and courtesy. The Direct Tax proposals for exemptions would result in revenue loss of Rs. 22700 crore while revenue gain through additional resource mobilization proposals would be at Rs. 2700 crore i.e. the net revenue loss in Direct Tax would come to Rs. 20000 crore.
Concluding his Budget Speech, Shri Arun Jaitley outlined the Government’s overarching agenda: “Transform, Energise and Clean India’. Government’s emphasis will be on implementing all these proposals for the benefit of the farmers, the poor and the under privileged sections of the society, the Finance Minister added.
Jaitley sticks to fiscal prudence
Business Standard: February 02, 2017
New Delhi: Finance Minister Arun Jaitley has chosen to deviate marginally from the path of fiscal consolidation by budgeting the fiscal deficit for 2017-18 at 3.2 per cent of GDP against the target of 3 per cent set under the existing Fiscal Responsibility and Budget Management (FRBM) framework.
This, however, marks a steady improvement in the fiscal deficit over the last four Budgets that Jaitley has presented, from 4.1 per cent in 2014-15.
Jaitley has signalled the government’s commitment to fiscal consolidation, creating at the same time fiscal space to boost spending to lift the economy reeling from demonetisation and slower private sector investment. In absolute terms, the fiscal deficit for 2017-18 stands at Rs 5.46 lakh crore, up from Rs 5.34 lakh crore in 2016-17.
Though Jaitley has said that he has refrained from using the “escape clause” provided by the N K Singh committee on the new fiscal framework, the 3.2 per cent target falls well within limits prescribed by the committee.
The expert panel headed by former revenue secretary N K Singh has suggested a new fiscal framework that has recommended bringing down the debt-to GDP ratio to 60 per cent by 2023 — 40 per cent would be the Centre’s and 20 per cent the states — and maintaining fiscal deficit at 3 per cent of GDP for the next three financial years.
The committee has allowed a leeway of 0.5 per cent of GDP for the deficit, by clearly identifying the triggers and including unavoidable fiscal situations. At present India’s debt-to-GDP ratio is at 66 per cent, which is higher than that of its emerging market peers.
For the purpose of calculations, the Budget has assumed nominal GDP to grow at 11.75 per cent in FY18. Given that the Economic Survey released yesterday projected real GDP to grow between 6.75 and 7.5 per cent in FY18, this implies an inflation range of 4.25 to 5 per cent in FY18.
At the same time, the government appears to have been overly cautious on revenue projections.
Gross tax revenue is forecast to grow at 12.2 per cent in FY18 to Rs 19.1 lakh crore. In FY17, it grew 17 per cent. On the other hand, non-tax revenues are budgeted to contract by 13.7 per cent in FY18, after growing at 33.2 per cent in FY17. Presumably, the contraction reflects the absence of revenue from telecom auctions.
Total government expenditure is budgeted to grow at a slower pace at 6.6 per cent in FY18, after growing 12.5 per cent in FY17. The three major government subsidies namely — food, fuel and fertiliser — are now budgeted to grow at 3.28 per cent in 2017-18 to Rs 2.4 lakh crore.
Food subsidy has been budgeted to grow to Rs 1.45 lakh crore in FY18, up from Rs 1.35 lakh crore the year before. Petroleum subsidy is forecast to decline marginally to Rs 25,000 crore in FY18 from Rs 27,532 crore the year before, while the fertiliser subsidy is budgeted to remain at Rs 70,000 crores.
Spending on 28 core social sector schemes is budgeted to grow at 13.45 per cent in FY18 to Rs 2.8 lakh crore, up from Rs 2.46 lakh crore in FY17.
The revenue deficit for FY18 has been pegged at 1.9 per cent compared to 2.1 per cent in 2017.
Budget 2017: Govt abolishes two decade old FIPB, to bring more FDI policy easing reforms
Economic Times: February 02, 2017
Finance minister Arun Jaitley has proposed abolition of the Foreign Investment Promotion Board (FIPB), a move that sets the stage for more reforms in the FDI policy. Housed in the finance ministry’s Department of Economic Affairs, the FIPB is an inter-ministerial body responsible for processing of FDI proposals and making recommendations for government approval.
It was initially constituted under the Prime Minister’s Office in the wake of the economic liberalisation drive of the early 1990s. “FIPB has successfully implemented e-filing and online processing of FDI applications,” Jaitley said in his Budget speech. “We have now reached a stage where FIPB can be phased out.”
The government is yet to announce the modalities of the new system of processing applications, which fall under the approval route. The finance minister said a road map for the post-FIPB scenario will be announced in the next few months.
“We will have to see how the policy will develop in the days to come and if concerned departments will be given the authority to consider the FDI proposals,” a senior government official told ET. The government is also considering further liberalisation of the FDI policy and will make necessary announcements in the due course, the minister said.
Experts said they will wait to see if abolition of the FIPB will bring about ease of doing business and simplify procedures. The FIPB had been meeting twice a month since 2015 to speed up approvals.
“FIPB was processing the foreign investment proposals in a time-bound manner, in consultation with various ministries. We have to wait for the announcement of the road map for foreign investment proposals to understand the impact of the move,” said Devraj Singh, executive director-tax and regulatory services at Ernst & Young.
The Department of Industrial Policy and Promotion is expected to release the annual consolidated FDI policy circular by March.
“It will be interesting to see the approval mechanism that will be put in place for sectors currently under approval route such as retail trade, defence and in-kind (non-cash) FDI investments,” said Radhika Jain, director at Grant Thornton Advisory.
Agriculture to grow more than 4 per cent as Government announces a slew of pro-farmer measures in General Budget 2017-18
Press Information Bureau: February 02, 2017
Farm credit fixed at a record level of Rs 10 lakh crores;
Irrigation fund hiked to Rs 40, 000 crores
Finance Minister announced setting-up of a Dairy Processing and
Infrastructure Development Fund with a corpus of Rs 8,000 crores to augment farm income
Government says, with a better monsoon, agriculture is expected to grow at 4.1% in the current year i.e.2016-17 as the total area sown under kharif and rabi seasons are higher than the previous year. Presenting his Fourth Budget in Parliament today, the Union Finance Minister Shri Arun Jaitley said that adequate credit would be made available to the farmers in time and the target for agricultural credit in 2017-18 has been fixed at a record level of 10 lakh crores. He said that special efforts would be taken to ensure adequate flow of credit to the under serviced areas, the Eastern States and Jammu & Kashmir. The farmers will also benefit from 60 days’ interest waiver announced by the Prime Minister in respect of their loans from the cooperative credit structure.
The Finance Minister Shri Jaitley said that about 40% of the small and marginal farmers avail credit from the cooperative structure and the Government is committed to support NABARD for computerisation and integration of all 63,000 functional Primary Agriculture Credit Societies (PACS) with the Core Banking System of District Central Cooperative Banks. This will be done in 3 years at an estimated cost of Rs 1,900 crores, with financial participation from the State Governments to ensure seamless flow of credit to small and marginal farmers.
Elaborating on other pro-farmer measures, the Finance Minister said that a Long Term Irrigation Fund has already been set-up in NABARD and the Prime Minister has announced an addition of Rs 20,000 crores to its corpus which will take the fund to Rs 40,000 crores.
The coverage of Fasal Bima Yojana will be increased from 30% of cropped area in 2016-17 to 40% in 2017-18 and 50% in 2018-19. The Finance Minister Shri Jaitley said that the Budget provision of `Rs. 5,500 crores for this Yojana in BE 2016-17 was increased to Rs. 13,240 crores in RE 2016-17 to settle the arrear claims. For 2017-18, a sum of Rs 9,000 crores will be provided and the sum insured under this Yojana has more than doubled from Rs 69,000 crores in Kharif 2015 to Rs 1,41,625 crores in Kharif 2016.
Referring to his last year’s Budget Speech, where the Finance Minister had focused on ‘income security’ of farmers to double their income in 5 years, Shri Jaitley said, that the Government will take more steps and enable the farmers to increase their production and productivity and to deal with post-harvest challenges. The coverage of National Agricultural Market (e-NAM) will be expanded from the current 250 markets to 585 APMCs. Moreover, assistance up to a ceiling of Rs 75 lakhs will be provided to every e-NAM market for establishment of cleaning, grading and packaging facilities.
Admitting that Dairy is an important source of additional income for the farmers, the Finance Minister Shri Jaitley announced that a Dairy Processing and Infrastructure Development Fund would be set-up in NABARD with a corpus of Rs 8,000 crores over 3 years. He said that issuance of Soil Health Cards has gathered momentum, even as the Government has decided to set-up new mini labs in Krishi Vigyan Kendras (KVKs) and ensure 100% coverage of all 648 KVKs in the country.crores to augment farm income
Budget 2017 seeks to revive public investments in agriculture: Nabard chief
Livemint: February 10, 2017
New Delhi: The budget has tasked the National Bank for Agriculture and Rural Development (Nabard), India’s apex bank for rural finance, with supporting irrigation and dairy schemes totalling Rs35,000 crore. According to Harsh Kumar Bhanwala, chairman of Nabard, these measures will revive public investments in agriculture, and rejuvenate the dairy sector where processing infrastructure is outdated. Edited excerpts from an interview:
How do you perceive this year’s budget announcements for the rural and agriculture sector?
For the rural and agriculture sector, the budget is futuristic. For several years, public investment in agriculture was going down. It used to be very high during the Green Revolution years (in the 1960s), but recent estimates suggest nearly 80% of it is private investment (by farmers or rural entrepreneurs). This year, lots of public investment in irrigation and dairy is a positive sign. While the long-term irrigation fund (Rs 40,000 crore corpus announced in the past two budgets) will make available large volumes of water, the micro-irrigation fund (Rs 5,000 crore) will help in efficient use of that water.
From a farmers’ income point of view, dairy will play a critical role. Our dairy processing infrastructure is outdated and requires rejuvenation. India is the largest producer of milk but only 20% of it goes for organized processing. We require larger processing capacities and whatever exists now is Operation Flood investments from 1970s and 1980s. So, the dairy processing fund announced in the budget (Rs 5,000 crore under Nabard) is a timely move.
For small and marginal farmers, a model law on contract farming (proposed in the budget) will allow for collectivization of cultivation so that scale of operations (farming) can go up and investments are made.
The budget tasked Nabard with schemes totalling Rs 35,000 crore for irrigation, dairy and cooperative banks. How will these take off ? Last year’s budget gave Nabard charge of a Rs 20,000 crore long-term irrigation fund. How much did you borrow and allocate to states?
Most of the funds will be raised from the market and advanced as loans to states and central government agencies. The idea is to make large funds available upfront, than say, allocate Rs 4,000 crore every year, for the next few years. This will help finish pending irrigation projects on time. The centre will service the interest on these market borrowings and repay the principal amount (for its share) to Nabard. States will allocate the funds they borrow from us directly to complete the projects. They will have to repay the borrowed funds within 15 years.
We have raised and disbursed Rs 5,600 crore to state governments for the long-term irrigation fund, and expect it to reach Rs 12,000 crore by year end (March 2017) depending on how projects are progressing.
Will Nabard also monitor progress of these projects?
Nabard does milestone-based funding. This means instalments are made available on satisfactory progress based on previous allocations. We have a monitoring arrangement and that’s why completion rates of projects that we are funding are higher.
That’s a lot of responsibility. Do you think the budget has entrusted Nabard with more tasks, than say, the agriculture ministry?
Nabard cannot do anything on its own. We work with state and central government departments. They need us for fund-raising upfront as there is a limitation on raising resources within one year. We are as much a part of the government as the department of agriculture is.
India’s GDP growth rate for 2015-16 revised to 7.9% from 7.6%
Livemint: February 01, 2017
New Delhi: India’s economy grew faster in 2015-16 than earlier estimated, which could result in slower growth in the current fiscal because of a higher base.
Data released by the statistics department on Tuesday showed India’s gross domestic product (GDP) grew 7.9% in 2015-16 against an earlier estimation of 7.6%.
The statistics department earlier this month said India’s economic growth is likely to decelerate to 7.1% in 2016-17 based on the 7.6% estimate for the previous year, chiefly because of an industrial slowdown. However, it did not take into account the possible impact of demonetisation.
On Tuesday, the Economic Survey 2016-17 authored by chief economic adviser Arvind Subramanian said the demonetisation exercise could slow GDP growth by 25-50 basis points in 2016-17 on the baseline growth assumption of 7%. One basis point is 0.01%.
For 2017-18, the survey projected the economy to grow in the wide range of 6.75% to 7.5%.
The upward revision of the 2015-16 data was mostly due to a significant increase in growth estimates for the industrial and services sectors. While the industrial sector is now estimated to have grown at 8.2% against the earlier estimation of 7.4%, the services sector is estimated to have grown at 9.9% against 8.9% earlier. The farm sector growth rate was, however, cut to 0.76% from 1.2% estimated earlier.
Gross fixed capital formation, the proxy for investment demand in the economy, was also underestimated earlier. It is now revised to 6.1% from the earlier estimate of 3.9% for 2015-16. Private consumption demand, however, has been marginally revised downward, from 7.4% to 7.3% for 2015-16.
Agencies that have revised India’s growth projection downward after the note ban may be forced to further scale down their projections for 2016-17 based on the new information. The International Monetary Fund (IMF) has cut its growth projection for India to 6.6% for 2016-17 and 7.2% in 2017-18, taking into account the impact of the note ban.
“In India, the growth forecast for the current (2016-17) and next fiscal year were trimmed by one percentage point and 0.4 percentage point, respectively, primarily due to the temporary negative consumption shock induced by cash shortages and payment disruptions associated with the recent currency note withdrawal and exchange initiative,” IMF said.
Andreas Bauer, senior resident representative of IMF in India, said the downgrade for 2016-17 was because growth in the first half of the fiscal was slower than IMF’s expectations, as well as demonetisation. “We expect the impact of demonetisation will gradually dissipate in 2017-18 and there will be a recovery in economic growth,” he added.
Moody’s and its Indian unit Icra Ltd on Monday said India’s gross value added (GVA) growth at basic prices will ease in 2017 to about 6.6% from around 7% in 2016, with a likely pick-up in the second half, as the economy readjusts after the invalidation of old Rs500 and Rs1,000 currency notes in November.
The Economic Survey pointed out that demonetisation will have both short-term costs and long-term benefits. “Briefly, the costs include a contraction in cash money supply and subsequent, albeit temporary, slowdown in GDP growth; and benefits include increased digitalization, greater tax compliance and a reduction in real estate prices, which could increase long-run tax revenue collections and GDP growth,” it said.
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