Tuesday, July 15, 2014

2014 Indian Budget – The Good, Great and Awesome!!!

In the last article, we covered the points from the 2014 budget that were Not So Good and also why I felt that way. One of the things I had mentioned in that article was that, the budget had a lot of good stuff and that we would take a detailed look at them soon. So, here we are. The purpose of this article is to cover all those in detail. We will also categorize them as – Good, Great and Awesome

The Good Aspects of our Budget

Fiscal Deficit 

Though the Government has not changed its fiscal deficit target for this year (which will be 4.1% of the GDP), the budget has set targets for the next financial year for the deficit to be at 3.6% of GDP and for 2016-17 at 3% of the GDP. 

This indicates that the Government is keen on Fiscal Consolidation and is taking steps towards the same. GDP is the measure of our Country’s Economy and if it grows, its Good News. Isnt it? 

Sanitation Schemes 

One of the biggest reasons for the developed nations to think we are a Third World country is the fact that, a majority of our population that live in Villages still don’t have access to Toilets or clean Sanitation. The Government is planning to cover every household with Sanitation through the “Swatchh Bharath Abhiyan” scheme by the year 2019. This year marks the 150th birth anniversary of Mahatma Gandhi and the Government is aiming to accomplish this humongous task by that time. 

Such a scheme that can help improve the living conditions of millions of Indians and improve our nations image globally would definitely qualify as Good News. Right? 

New Smart cities to be Built

Our honorable PM Mr. Modi envisions creation of 100 Smart Cities as Satellite Towns across the country. In fact, for this purpose, the Finance Minister has allocated Rs. 7060 crores in this Budget. This is good news for the public as well as Infrastructure and Real Estate Companies. 

Clarity on Indirect taxes

As you might already be aware, our government taxes industries for production of goods and services. It also charges an amount for import of goods. As part of this budget, the FM has reduced basic custom duties on certain items which are used as raw materials. This is to encourage investment and domestic production. This tax cost is usually passed onto consumers. As a result, a change in indirect tax often leads to a rise or fall in retail prices of goods to consumers. 

If there was more clarity in terms of how much cost savings will get passed on to us (Retail Customers) this news could have qualified as Great or Awesome but since we don’t have that info right now, we just qualify as Good because, at the end of the day, if this isn’t Good News, what is? 

Cultivating Interest in Sport 

Nations whose population is 1/100th or lesser than ours and Economies much smaller than ours manage to get more medals than us. One of the reasons for this is our lack-of-focus on Sports. 

Excepting Cricket (which has become more of a multi-billion-dollar Industry) Parents don’t want their kids to spend time on Sports because – they feel it is a waste of time. No wonder - In a country of Billion plus people, we struggle to get a couple of medals every 4 years in the Olympics.

In order to help improve participation in Sports, National Sports Academies will be set-up in Major Parts of our country for Track and Field events. A Sports university will also be set up in Manipur. The government has set aside Rs. 100 crores for this. 

Though 100 crores is a very small amount considering the amount of work that is required to take us towards medals in the Olympics, this is a start and hence this qualifies as “Good”. 

The Great Aspects of our Budget

Economic Growth

This Budget has actually announced a roadmap of policy initiatives that could help lead our Indian economy back to 7-8% growth levels in the next 3-4 years. The government also aims to stabilize the macro-economy with lower levels of inflation, narrow fiscal deficit and a manageable current account deficit. All these put together, translates to Great News…

Farmland Irrigation 

A Huge Chunk of our Farm Lands are Irrigated by “Rain Water” and are directly dependent on Monsoons. We all know how unpredictable these Monsoons could be and as a result, our Agricultural production gets affected. In order to cut down on this rain risk, our Government has proposed to set aside a sum of Rs. 1000 crores under the scheme “Pradhan Mantri Krishi Sinchayee Yojana” which will help provide Irrigation to farm lands. 
This is great news, isn’t it? 

Single Demat account

The finance minister announced during the budget that investors can now operate all their financial products through a single operating Demat account. This means that, you can now access all your Investments including Bonds, Fixed Deposits, Stocks and Mutual Funds through your Demat Account itself. This also means that, the Know Your Customer (KYC) norms will also be uniform across the financial sector. 

More Autonomy to PSU banks

One of the reasons why Private Banks are able to grow much faster than Government Banks is the fact that, they need to obtain so many approvals and permissions from Government Entities which kind of delays things. An RBI committee had recommended that the government give greater autonomy to PSU banks to help improve their profitability. The government has given its in principle approval for this. This will help PSU Banks perform better and grow much faster than they do now. This is great news for the country’s financial sector. 

New IITs, IIMs and Medical Colleges in India

As part of this budget, the Government has set aside huge sums of money to build new AIIMS, IITs and IIMs across the country. This is great news for students. 

New and Improved Airports

Though a lot of new flights are being introduced in our country, a majority of them are actually straining the existing infrastructure that is working on “Peak Load” which results in a lot of delays. To help improve our Air Connectivity, the FM has introduced a scheme for development of New Airports in Tier I and Tier II cities plus upgrades to our Existing Airports. This is definitely great news for us as a Nation because, lack of Air Connectivity to smaller cities/towns and inefficient airport service is one of the major complaining points for Indian travelers as well as foreign tourists who visit us. 

Increased Personal Tax Exemption Limit 

The Finance Minister has announced that the minimum taxable salary (or Tax Exemption Limit) is hiked by Rs.50,000. For regular citizens it goes up from 2 lakhs to 2.5 lakhs. The same for Senior citizens is also hiked from 2.5 lakhs to 3 lakhs. On top of this, the Section 80C Limit has been hiked by Rs. 50000 too. It was 1 lakh earlier and will be 1.5 lakhs from this year onwards. This means that, you can invest a bit more each year and achieve your financial goals much faster. 

Personally I was expecting a lot of upgrades to our taxation structure. The allowances like Medical, Transportation etc. are very low and do not reflect the current financial situation. However, the Finance Minister clarified that he wanted to help out the common man more but due to our Nations Fiscal Deficit & Economic Situation, he wasn’t able to give more for us. Though this hike will actually reduce the “Tax Income” for our Government, it was given to help out the Common Man. Had all sections of our Tax Structure been revisited, this would have been Awesome News. Nonetheless, a benefit is a benefit and hence, this classifies as “Great News”

Note: In my book on Indian Income Tax, to help the readers, I had actually created an Example Tax Calculation for Mr. Hari. He had an Income of about 11 lakhs per annum and fell in the 20% tax bracket. His Tax Liability of Rs. 84000 per year. With these revisions his tax liability actually came down to just Rs. 68,500 per year. And this reduction would’ve been much higher had Hari been in the 30% Tax slab. If you want to know more about Indian Income Tax – All you gotta do is buy this book. Check out the current offer about the book By Clicking Here.

A Boost to our Tourism Sector 

As a Boost to Tourism, the Government is facilitating Visa on Arrival (Technical Term – Electronic Travel Authorization) in a phased manner across 9 Major Airports in India. The necessary infrastructure required for this would be put in place over the next 6 months. The list of countries for which this visa on arrival will be made available will also be released shortly. 

The Indian Visa Formalities have been considered age-old, complex and time consuming by most foreigners. In spite of this, thousands of them visit us every year. Imagine the hike in tourist inflow into our country with easier visa norms.. This is Great News for both Tourists and our country. 

A Helping Hand to MSME’s 

The micro, small and medium sized enterprises (MSMEs) are the backbone of our economy. Not every company can be of the size of a Reliance or a TATA. The biggest problem these companys face is the “Funding Shortage”. The Government has proposed to establish a Rs. 10000 crore corpus to act as a catalyst to attract private capital by way of providing equity, loans and other risk capital for start-up companies. The Finance Ministry has also said that, the definition of MSME will be reviewed to provide for a higher capital ceiling. This will help companies get funds easier.

This is great news because, this will help companies grow and this in-turn will generate more employment and greater GDP for our country.

The Awesome Aspects of our Budget 

Pension for Senior Citizens 

The Government is reviving the “Varishtha Pension Bima Yojana” Pension Scheme for Senior Citizens for 1 year to provide pension to citizens aged 60 and above. On top of this, the government is planning to try and use the large amount of unclaimed funds in PPF and Post Office Savings Accounts to benefit the Senior Citizens of our country. 

Affordable Housing 

The government is keen on taking steps towards Affordable Housing. Not only are steps being taken towards building cost-efficient or low-cost houses, the government has also hiked the Interest Exemption on “Self Occupied Property” which is on “Home Loan” by Rs. 50000/-

So, up to 2 lakhs Interest that you repay each year towards your home loan is exempt from Income Tax. Isnt this Awesome News? This will boost sale of houses as well as increase the demand for home loans. Not to mention the tax savings for us. 

PPF Investment Limit Increased 

One of the biggest and most popular Safe Investment options in India is the Public Provident Fund or PPF. Most people would like to invest more in PPF but are unable to do so because of the 1 lakh per year upper-limit set by the Government. As part of this budget, this upper limit has been hiked to Rs. 1.5 lakhs. This will help us save more each year. 

Roads & Infrastructure 

If you have travelled by Road in India, you will definitely agree that our Roads need a lot of help. The government aims to construct about 8500 kms of Roads in the current financial year and about 37,880 crores has been set aside for the same. About 3000 crores from this amount has been specifically earmarked for the North-East. 
On top of this, 14,839 crores has been set aside for improving or laying of roads in our villages as part of the Pradhan Mantri Gram Sadak Yojana. 

Interest in Renewable Energy

The Government has kick-started the move towards Renewable Energy Sources like Wind-Energy and Solar Energy to meet our Energy Requirements. New Solar and Wind Power Projects are planned across India. This will not only help meet our electricity needs but also help prevent further damage to our environment. 

Some Final Words

As you can see, there are tons of good, great and awesome aspects of our Budget. Though there are many more things our Government could’ve done, we have to remember the fact that its been just a couple of months since the new Mr. Modi Led government took charge and there is a lot of work left to do for them as well. 

Personally, I feel that, this budget is a good starting point towards the Governments commitments towards Growth and Prosperity.  What more can we ask as a citizen? 

Jai Hind!!! 

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