India’s Economic Realities

• Actual expenditure in FY 15 = Rs. 16.8 lakh crores*

• Actual revenue collection in FY 15 = Rs. 11.3 lakh crores*

• Borrowings to run the government = Rs. 5.1 lakh crores*; this is 45% of revenue collection

• Interest payments = Rs. 4.1 lakh crores*; represents 36% of revenue collection

• India’s Tax/GDP ratio, Fiscal Deficit level, and Debt levels among the worst in developing world

• Historic inflation rates were 8-12% and have only come down this year

• Fourteenth Finance Commission reduced Plan Expenditure by further Rs. 1.1 lakh crores

• Fiscal deficit had to be brought down to 3.9% of GDP and more money had to be devolved to theStates – this significantly constrained our fiscal resources

* As per revised estimates

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3

Sabka Budget

Yuvaon ko Rojgaar Kisaanon ki Samriddhi Garibon ka Uddhaar

Mak

e in

Indi

a

Skill

Indi

a

Irrig

atio

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Acce

ss to

Cre

dit

Basic

nee

ds

Socia

l sec

urity

Hous

ing

Ports, Highways,Waterways

Railways Energy Housing &Urbanization

Financing system – Taxes and Financial Markets

Soil

Ferti

lity

Inno

vate

in In

dia

Team India – Cooperative Federalism

Sabka Budget – Gareeb ka Apna BudgetPM Suraksha Bima Yojana to cover accidental death risk

PM Jeevan Jyoti Bima Yojana to cover natural and accidentaldeath risk

Atal Pension Yojana to provide a defined pension

Electrification of all villages by 2020Food security, NREGA, and kerosene / fertilizer subsidyProviding access to medical services and schools to all

6 crore urban and rural houses by 2022Each house to have uninterrupted power supply, clean water

and a toilet

SocialSecurity

BasicNeeds

Housing

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High Impact – Universal Social Security

JanSuraksha

PM JanDhan

Yojana

PMSuraksha

BimaYojana

SeniorCitizen

WelfareFund

AtalPensionYojana

PM JeevanJyoti Bima

Yojana

• Providing banking facilities to every household• JAM Trinity for direct benefit transfers

• Covering accidental death risk• Cover of Rs. 2 lakh for a

premium of Rs. 12 per year

• Providing a defined pension• Govt to contribute 50% of

beneficiaries’ premium (uptoRs. 1,000) for 5 years

• Covering natural andaccidental death risk

• Cover of Rs. 2 lakh for apremium of Rs. 330 peryear

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• Used to subsidise premiumsof vulnerable age groups

• Old age pensioners, BPL card-holders, small and marginalfarmers, etc. to benefit

Sabka Budget – Kisaan ka Apna BudgetSoil health cards provided to all farmers

Paramparagat Krishi Vikas Yojana to be fully supportedRs. 5,300 cr support for micro irrigation, watershed

development and Pradhan Mantri Krishi Sinchai Yojana

Target of Rs. 8.5 lakh cr of agricultural credit during 2015-16Rs. 1 lakh cr available through 4 different funds, including

25,000 cr through RIDF in NABARD

Proposal to create a National Agriculture MarketFarmers will benefit and price rises will be moderated

SoilFertility &Irrigation

Access toCredit

UniversalMarket

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Sabka Budget – Yuva ka Apna BudgetMore jobs with Make in India and revival in investment cycle

Big boost given to innovation and entrepreneurshipNational Skills Mission backed with a digital vouchers

Rs. 1500 cr for Deen Dayal Upadhyay Gramin Kaushal Yojana

New IITs, AIIMS and several other institutesScholarships under PM Vidhya Lakshmi KaryakramSenior secondary school within 5 km of every child

Better roads and railwaysSwacch Bharat - Improved hygiene and sanitation

Uninterrupted power supply by 2022

Jobs

Education

Quality ofLife

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Quality of Life

• More jobs• Improved roads• Better railway connectivity• Swacch Bharat• 24x7 power supply by 2022• Medical facilities• More schools

Tax Savings

• Total deductions increase to4.44L from 3.74L

• Income tax of Rs. 7,960 can besaved (even at 10% marginalrate)

• Minor increase in service tax(Rs. 164 for monthly expensesof Rs.10k)

• Encouragement given tosavings and insurance

• Lot to look forward to as fiscalcapacity improves

Householdexpenses decrease

• Interest rates expected to godown

• With 50 bps decrease in rates,for loans worth Rs. 20L, EMIsreduce by Rs. 10k

• Subsidies directly come intobank account through DBT

• Prudent fiscal policies toreduce inflation

• CPI inflation projected at 5%by year end

Sabka Budget - Pro-Middle Class

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Increased Benefits for Middle-Class

Illustrative only 9

Assumptions• Annual Income of Rs. 10 lakhs• HRA of Rs. 2 lakhs• Benefit of all mentioned deductions

is taken• Monthly expenses of Rs.10,000 on

which service tax is charged• Total loans of Rs. 20 lakhs at 10%

interest• Rates come down by 50 bps• Benefits in income tax due to

savings will increase with increasingmarginal tax rate

Make in India

• Reforms to inverted dutystructure

• Bankruptcy code of globalstandards

• Revival of growth andinvestment

• Easy to set up businesses• GAAR to be deferred by 2 years• Promotion of domestic

manufacturing for job creation

Innovation andEntrepreneurship

• Setting up Mudra Bank withcorpus of 20,000 cr

• Atal Innovation Mission to spurinnovation

• Implementation of Rs. 10,000crore fund-of-funds

• Small finance banks willaugment credit supply toMSMEs

• A separate 7.5% sub-target isbeing created under prioritysector lending for MSMEs

Reformed TaxRegime

• Reduction in corporate taxesand removal of exemptions innext 4 years

• Domestic transfer pricingthreshold limit increased from5cr to 20cr

• Wealth tax abolished• Rationalisation of tax

procedures

Sabka Budget - Pro-Business

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20 High Impact Initiatives• Cooperative Federalism and GST – reshaping the financial

architecture

• Reduction in corporate tax rates and removal ofexemptions

• Abolition of wealth tax

• Curbing black economy through two new bills focused onforeign and domestic black money

• Monetary policy focused on explicit inflation objective

• Massive increase in irrigation spending

• Subsidy reform through eliminating leakage and bettertargeting of beneficiaries

• Massive increase in public investment in infrastructure

• National Investment & Infrastructure Fund

• Universal social security

• National Skills Mission backed with a digital voucherprogram

• Make in India

• Banking reform through the Bank Bureau

• Clean tax pass-through for Alternative Investment Fundsand elimination of permanent establishment

• Major boost for Innovation & Entrepreneurship includingimplementation of Rs. 10,000 crore fund-of-funds

• Strategic Disinvestment, which implies a new flexibility inthis area

• Mudra Bank for MSMEs

• World-class bankruptcy code to be introduced

• Public Contracts (Resolution of Disputes) Bill proposed

• Gold monetisation scheme and Sovereign gold bond 11

High Impact - Curbing the Black Economy

• Rigorous punishment and penalties for tax evasion• Imprisonment for incomplete or absent returns• PML Act, 2002 and FEMA to be amended• Benami Transactions Bill to be introduced soon

Legislative Action

• Getting information for cases independently investigated by ITDepartment

• Confirm genuineness of bank accounts• Commence talks for automatic exchange of information

Cooperation with SwissAuthorities

• Mandatory to quote PAN for purchase/sale above Rs. 1L• Provision to tackle splitting of reportable transactions• Leveraging technology to access information• Prohibition of cash advances above 20k for immovable property

Preventive Steps

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GST

• Biggest tax reform sinceindependence

• To be implemented by Apr 1,2016

• Will create a unified, commonmarket and replace aconfusing array of taxes

• Will prevent cascading taxes• We are demonstrating

flexibility in discussions withstates

CooperativeFederalism

• Vertical devolution betweenUnion and the States of 42% inthe Divisible Pool

• States to get 48.4% of total taxrevenues versus 37%previously

• Special packages andassistance given to severalstates

• Several schemes to be turnedover to states

Tax Reforms

• Stable tax policy and non-adversarial tax regime

• Simplified tax procedures• Direct taxes aligned with global

standards• Service tax plus cess increased

to 14% to facilitate transitionto GST

• Exemptions given to promotesavings, insurance, SwacchBharat, business growth, etc.

High Impact – Change in Fiscal Architecture

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High Impact – Boost to Infrastructure

Creation of National Investment & Infrastructure Fund with anannual flow of Rs. 20,000 crores

Tax free bonds for projects in rail, road and irrigation sectors

Massive increase in public spendingSharp increase in outlays of roads and railways

Capital expenditure of PSUs to increase

Ports in public sector promoted and will attract investment5 new Ultra Mega Power Projects (4000 MW each)Considering removing multiple prior permissions

Renewable energy capacity target revised to 175k MW till 2022

Funding

IncreasedSpending

Projects

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High Impact – Financial Sector Reforms

Better grievance redressalmechanism for investors

Monetising gold andintroducing a sovereign

gold bondDeepening bond markets

through PDMAPromoting REITs and InvITs

Allowing FIs in AIFsClean pass-throughs in AIFsElimination of Permanent

EstablishmentGIFT to be completedRemoving distinction

between FPIs and FDIs

Setting up of Bank boardbureau

Improving governance ofpublic sector banks

FinancialMarkets

InvestmentManagement Banking

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