Important provisions in Budget 2015-16

The budget is also called the Annual Financial Statement of the government. Under Article 112 of the Indian Constitution, the finance minister of India presents the Budget in the Parliament on the last working day of February every year.

The budget documents presented to the Parliament include not only the Budget speech of the Finance minister but also the following sub items,

1. Annual financial Statement (AFS)
2. Demand for Grants (DG)
3. Appropriation bill
4. Finance Bill
5. Memorandum explaining the provisions in the finance bill
6. Macro-economic framework for the relevant financial year
7. Medium term fiscal policy statement
8. Medium term expenditure framework statement
9. Expenditure Budget
10. Receipts Budget
11. Statement of Revenue Impact of Tax Incentives under the central Tax System
12. Budget at a glance
13. Highlights of Budget  

Here I mention the very interesting fact about presenting of the Budget in the Parliament. Until the year 2000, the budget was announced at 5 PM in the evening following the colonial provision of first passing of the British Budget followed by the Indian Budget. It was government of  Atal Bihari Vajpayee who dispensed away with this colonial practice of presenting India's Budget after the British.

The Halwa tradition is observed following the Indian tradition of having something sweet before starting any important work. The staffs and officers of the Finance ministry are served Halwa and the Finance Minister also participates.

This year's budget also observed the said tradition. More importantly, this year's budget is the first full budget of the new government led by PM Narendra Modi. It was a highly anticipated budget by everyone including the industry, market and investors.

The main takeaways from this budget is as follows:

This budget had been prepared after the government had accepted the recommendation of the 14th Finance Commission (FCC). And, also after the Planning Commission was dissolved, this was a major exercise in financial management of the country. The FCC has recommended to enhance states' share in net proceeds of Union Tax revenue from 32 per cent to 42 per cent. This can have two fold effects in state allocations from the centre. While share of the tax revenue will increase substantially, mainly it would affect the central allocation in state plan which is expected to reduce in a big way. Second, some centrally sponsored schemes (CSS) would be wound up or the state will be asked to finance the project if it wishes to continue it.

The ministry that is going to take a big cut include the welfare ministries and also the key social sector scheme would be cut. Panchayati Raj ministry is one big looser in this game of centre Vs state financial re-balance exercise. It is actually dramatic if we look at how progressively the budget of this ministry has been cut to size. It was given 7000 Cr only last year, but in RE it came down to 3400 Cr. But, in this year's budget that is of 2015-16, it has been allotted only 95 Cr. 

But, it should not be seen to be "Cut" as such, because, following FCC's recommendations States have been allocated this money to use it the way they want to use. So, it can be said that States will be more free to carry on the development work according to their own priorities rather than following centre's instructions in completing CSS. They can use the money according to the local needs of each state and each region.

Some of the major official schemes will be wound up. These include Backward Regions Grant Fund, the scheme for Panchayats, modernisation of police and National e-governance Plan. The states will have to take a call to continue with the schemes or not. 

For additional 24 schemes, states will now have to shoulder greater responsibility of the finances. These schemes include among many others, Swachh Bharat Abhiyaan (SBA), National Health Mission (NHM), Rashtriya Madhyamik Shiksha Abhiyan (RMSA), ICDS, National AIDS & STD conrol program and Rural Housing Scheme.

Apart from that, there are 31 schemes, including MGNREGS, Mid-Day meal scheme, Sarva Siksha Abhiyan and scholarship schemes will remain fully funded by the Central Government. The government has plans to implement GST and JAM (Jan Dhan, Aadhar and Mobile), which is supposed to enhance the quality of life of the common man and to transfer the benefits to the common man directly.

Spending on defence increased by 9.87 per cent over last year. Its allocation reached to Rs 2,46,726 Cr. The focus will be on Make In India for quick manufacture of the defence equipments. While the spending on the subsidies has declined a bit.

Borrowings form nearly a quarter of the government's receipt. These include 24% borrowings, 20% corporation tax, 14% income tax, 9% customs, 10% Union excise duties, 9% service tax and other tax, 10% non-tax revenue and 4% non-debt capital receipt.

Gender budgeting has not been done adequately. But, since money has been allocated to states via recommendation of FCC, States will make their own gender sensitive budget.

Tax-concessions and relaxations on customs and excise duty is collectively called revenue foregone. The revenue foregone is a big amount in this budget too and it has grown upto Rs. 4.89 Lakh Cr. But, as pointed out in Economic Survey of the Government, revenue foregone is not about loss to the government as such, but it is a policy decision that government takes time to time to encourage any area of the economy to produce desired results or to stimulate a certain sector for their revival to make it export competitive and make it viable.

Wealth tax has been abolished. But, an additional 2% surcharge has been applied on the super rich whose income cross over Rs 1 Crore. 100% exemption has been given for contribution to SBM. And, service tax has been increased to 14%.   

These are some of the broad outline of this year's budget. Although, budget is an extensive document that needs more study and explanation. I hope to do it in the next post on the economy.