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CPI Inflation 11.2% in Nov. 2012 5.1% Currently
Current Account Deficit (CAD) 4.6% GDP (1st quarter of 2013-14) 1.3% of GDP expected
Fiscal Deficit 4.5% of GDP in 2013-14 4.1% of GDP expected
Foreign Inflows 15 Billion USD in 2013-14 55 Billion USD in 2014-15
Wholesale Price Inflation - Negative
GDP Growth Around 7.4% 2014-15 8.5% 2015-16 expected
Rupee status Depreciated Badly Appreciated becoming stronger by 6.4% against a basket of currencies

Explanation :

  1. CPI Inflation – This inflation is the measure of price changes of a basket of goods and services e.g. food, transportation etc.
  2. CAD – It is the excess of imports over exports of goods, services and transfers including capital account transfers. E.g. interest and dividends and asset transfers.
  3. Fiscal deficit – Fiscal deficit arises when government spends more than the revenue (taxes) it gets. A developing economy needs to maintain its fiscal deficit but should not eliminate it.
  4. Rupee Depreciation - Reasons of Rupee Depreciation

Postal Bank of India (PBI) – Government will harness the capabilities of the postal network. Now it will also act as a payment bank (not a lending bank) by allowing it to provide payments and remittance services through various channels. Now why is this a good step?

  1. PBI has already incurred investments in core banking solution for managing its existing business.
  2. There is a formidable network of remittances.
  3. It is possible to physically verify the veracity of customers.
  4. Convenience for local people.
  5. Easy availability of transaction trail.

Financial Markets – Bond Market (Read Dealing in Bonds - Practical Aspects) should be promoted to promote investments in India. Public Debt Management Agency (PDMA) will be set up which will bring both India’s external borrowings and domestic debt under one roof.

New IIMs and IITs – 7 News IIMs and 6 New IITs and 6 AIIMS to be set up. Even while the quality of education has not been improved in the new IIMs opened on or after 2008, setting up new ones will do nothing but degrade the brand name and quality of the education.

Taxation (Major Changes) -

  1. Corporate tax to be reduced from 30% to 25% progressively over the next four years. This is a good step forward to promote the investments and reduce the burden on investors and at the same time increasing the tax base thereby revenue.
  2. No change in personal income tax slabs.
  3. Increase in Service Tax from 12.36% to 14%. This will affect the prices of nearly everything from food items to travelling, from education to healthcare, from commodities to accommodations. For every Rs. 1000, a consumer will need to spend an extra Rs. 16.4.
  4. Limit of deduction of health insurance premium increased from Rs. 15,000 to Rs. 25,000 (for senior citizens 20,000 to 30,000).
  5. Additional deduction of Rs. 50,000 for contribution to the new pension scheme u/s 80CCD.
  6. Yoga included under the ambit of charitable purpose u/s 2(15) of Income Tax Act.
  7. Wealth tax abolished (extra 2% surcharge on super rich of income over 1 Crore).

Black Money – Black money is the money which is obtained from illegal activities and is not accounted for by the government (Money Laundering - How is it done?). The measures like agreement with Swiss authorities to provide information under certain conditions and increasing stress on compliance along with rigorous punishments in case of failure to comply are some of the steps that will be taken to curb the black money.

Social Security Schemes –

  1. “Pradhan Mantri Suraksha Bima Yojna” Covering accidental death disk of Rs. 2 lakhs for a premium of just Rs. 12 per year.
  2. Atal Pension Yojana which will provide a defined pension.
  3. Pradhan Mantri Jeevan Jyoti Bima Yojana which covers both natural and accidental death risk of `2 lakhs. The premium will be `330 per year, or less than one rupee per day, for the age group 18-50.
  4. Senior Citizen Welfare Fund for the appropriation of unclaimed deposits of nearly Rs. 3000 Crore in PPF and Rs. 6000 Crores in EPF.
  5. Nai Manzil to enable Minority Youth who do not have a formal school-leaving certificate to obtain one and find better employment.
  6. Rs. 1000 Crores to Nirbhaya Fund.

PMJDY – In a short of period of time, who would have thought that nearly 98% of the families of the country would be having bank accounts. Currently number of families under this scheme is standing at a whooping 12.5 Crores and the steps will be undertaken to cover all the families.

Coal Auction – Coal bearing states will get several lakh of Crores of rupees which can be used for the welfare of their people (as opposed to earlier scenario where states only used to get royalties).

Swachh Bharat Abhiyan – A commendable number of 50 Lakh toilets have already constructed under this scheme. But as far as target is concerned of making 6 Crores toilet, there is still a long way to go.

JAM Trinity – Jan Dhan, Aadhar and Mobile (JAM) to implement direct transfer of benefits. It would allow to transfer benefits in a leakage-proof, well-targeted and cashless manner.

Inflation Control – Under a Monetary Policy Framework Agreement with the RBI, the target is to keep the inflation below 6%. Taking into consideration the pace of recovery in India (CAD, CPI Inflation and rupee depreciation), it is very much possible to achieve this objective.

Basic amenities by 2022-

  1. A roof for each family in India. The call given for ‘Housing for all’ by 2022 would require Team India to complete 2 crore houses in urban areas and 4 crore houses in rural areas.
  2. Each house in the country should have basic facilities of 24-hour power supply, clean drinking water, a toilet, and be connected to a road.
  3. At least one member from each family should have access to the means for livelihood and, employment or economic opportunity, to improve his or her lot.
  4. Electrification, by 2020, of the remaining 20,000 villages in the country, including by off-grid solar power generation.
  5. Connecting each of the 1,78,000 unconnected habitations by all weather roads. This will require completing 1,00,000 km of roads currently under construction plus sanctioning and building another 1,00,000 km of road.
  6. To ensure that there is a senior secondary school within 5 km reach of each child, to upgrade over 80,000 secondary schools and add or upgrade 75,000 junior/middle, to the senior secondary level.
  7. To ensure that education improves in terms of quality and learning outcomes.
  8. Two-thirds of Indian population is below 35. To ensure that the young get proper jobs, it is aimed to make India the manufacturing hub of the world. The Skill India and the Make in India programmes are aimed at doing this.

 Analysis -

  1. Housing for all by 2022 seems to be an unrealistic objective. Though I agree that housing is a must, it is not viable when the infrastructure scenario is not so good in India. It seems like a hurry without taking into consideration the quality check of cements and other material and leakages of funds already allocated.
  2. 24 hour power supply to be provided. There are a lot of homes which are not receiving electricity in urban areas, let alone rural areas. If you see in books of accounts, the supply is still there but nobody accounts for leakages. Frequent load shedding is still a problem.
  3. There are nearly 5 lakh Crores worth of infrastructure projects which are stalled. The reason being inflation, rise in prices of cement and other materials. Banks are not willing to give them loans due to the risk of possible default. The budget has presented a plan to complete construction of existing roads which is a good step forward. The CAPEX of the public sector units is expected to be Rs. 3,17,889 crore, an increase of approximately Rs. 80,844 crore. In fact, investment in infrastructure will go up by `70,000 crore in the year 2015-16, over the year 2014-15 from the Centre’s Funds and resources of CPSEs.
  4. This is the best time to make use of demographic dividend which is highest in India as of now. Skill India and Make in India programmes should ensure that plans materialize.

Agriculture –

  1. “Paramparagat Krishi Vikas Yojana” and “Soil Health Card Scheme” to improve soil fertility.
  2. Pradhanmantri Gram Sinchai Yojana is aimed at irrigating the field of every farmer and improving water use efficiency to provide `Per Drop More Crop’.
  3. Consolidated fund allocation of Rs. 1 Lakh Crore for giving credit to small and marginal farmers.
  4. Enforcing MGNREGA (rural employment guarantee act).

Entrepreneurship funding – Through MUDRA (Micro Units Development Refinance Agency) Bank. New Bankruptcy code in fiscal 2015-16 to meet global standards and providing necessary judicial capacity.


Agricultural Income is under stress - With the modernization, low income farmers are finding it difficult to cope up with the change due to lack of funds thus lagging behind. A suitable plan is required.

Public Private Partnership Model – Government is not flexible or not in a capacity to incur huge borrowings whereas private sector vehicles are flexible in investment. Recently there has been an opposition against this model as we have seen in denationalization or divestment of Coal India Limited. It is becoming difficult to settle the problems with trade unions. To act as a catalyst, public investment needs to step in. Nonetheless, both divestment in loss making units and some strategic divestment is proposed.

Manufacturing declined – Ironically, instead of “Make in India” scheme, the share of manufacturing sector declined by 1% of GDP from 18% to 17%. Even manufacturing exports have remained stagnant at about 10% of GDP. The main reason – Retrospective tax Laws. Now let me explain what it is. It comes under GAAR (General Anti Avoidance Rules) which prevents tax evaders from routing investments through tax haven countries. Tax haven countries are those countries where taxes are levied at a much lower rate. Sometimes this law is misused by taxman to slap tax demand notices on investors (e.g. in Vodafone case) to meet their targets or for whatever reason. But the good news is here, GAAR has been deferred by two years and will apply prospectively to investments made on or after April 1, 2017.

Economic Growth – Standing at 11.5% it was lower this year in nominal terms by about 2% due to lower inflation along with tax buoyancy which was also lower (an economy is buoyant when tax revenues increase proportionately more than the rise in national income).

Good Samaritan Law - As per wiki "Good Samaritan laws offer legal protection to people who give reasonable assistance to those who are injured, ill, in peril, or otherwise incapacitated. The protection is intended to reduce bystanders' hesitation to assist, for fear of being sued or prosecuted for unintentional injury or wrongful death." We really don't need any reason not to consider this. Thousands of people are being killed in road accidents and bystanders are not willing to help them because of fear of exploitation by police along with other fears like monetary loss. A law should be made where expenses incurred by Samaritan should be reimbursed and she should not be given any trouble for her good deeds. Anyone, including the policemen, going against the rules or misbehaving with Samaritans should be punished with fine or imprisonment or both. Unfortunately, nothing was talked about this in the budget.

Focus only on Corporate – This budget seems to benefit corporate level and neglect the aam aadmi. While the corporate tax is proposed to be cut down by 5%, there are no relief for income tax payers. Instead the government is going to put more pressure by the way of increase in the service tax.

Labor Laws – Nothing was talked about labor laws in the budget. Labor laws in India need an overhauling. Stringent checks should be placed. Trade unions and companies should work together on specified set of rules to prevent conflicts.

GST – This indirect tax system is still not implemented this year but confirmed to be put in place by 1st April 2016. GST is the much-awaited taxation structure. The reason being simplified tax laws. It will eliminate cascading effect. Credits of excise duty which is included in cost can't be taken by the trader against the VAT paid and other case where credit of CST is not available against VAT. This is a double taxation system which will be eliminated in GST regime.


Setting aside the deficiencies, this budget 2015-16 is quite good. Economy growth is the number one priority this time with the black money and the upliftment of the poor being the runner ups. Time is not so far when the India will surpass other economies and the citizens will then be lauding the India's growth model.

Chiranjiv Kumar


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CA Chiranjiv Kumar
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