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Narendra Modi's Seventh (7th) week in Office Analysis

Narendra Modi's Seventh (7th) week in Office Analysis

This week can be termed as the Budget week with the presentation of the NDA government‘s first Railway and Union Budget.

Highlights of the Railway Budget

It is no secret that the Indian Railways is ailing and cash-strapped. In such a scenario, the Budget presented this week showed a ray of hope that a turnaround is possible for the national carrier. The path may be difficult but the government’s resolve to walk on the path seemed strong.

Presenting the Budget, Railway Minister Sadananda Gowda, in his speech, made it clear that finances were a huge concern and tough decisions were but imminent. He said the Budget had been designed to focus on greater efficiency and improved services to passengers. One of the key highlights was the intention to attract private investors – both domestic and foreign - through Public Private Partnership (PPP) model. It also promised to open up foreign direct investment (FDI) in railway projects. It gave a go ahead to the much awaited bullet trains and promised more trains to religious destinations. Better railway facilities were also on cards at major tourist destinations.

Other highlights were: No hike in passenger fares and freight charges. Wi-Fi to be introduced in A1 and A category trains. Reservation system to be revamped and ticket booking via mobile phones and post offices to be made popular; online booking of tickets to support 7200 tickets per minutes, allowing about 1,20,000 users to log in at the same time; a separate online platform for unreserved tickets and women constables to be assigned to women coaches – boosting an induction of about 4000 women constables; food courts to be introduced at major stations and food to be ordered through SMS, phone and cleanliness budget to be hiked by 40 percent as compared to last year.

While few were of the opinion that the Budget lacked timelines and specifics, many hailed the Budget as futuristic and growth-oriented.

Economic Survey

Tabling the Economic Survey this week, Finance Minister Arun Jaitley pegged the economic growth at 5.4-5.9 percent. The high food inflation that has constantly been a source of concern has been predicted to ease off by the end of the year and is expected to reach a moderate level. However, poor monsoon and the constant increase in the price of crude oil continue to be causes of worry. Once the high food inflation is contained to a certain extent, the RBI will find some room to cut the rate of interest.

Other highlights of the Survey were rehaul of subsidy regime and increase in tax revenues. The fiscal deficit for 2013-14 was supposed to be 4.5 per cent of Gross Domestic Product (GDP) at 508,149 crore. Primary deficit stood at 1.2 per cent of GDP while revenue deficit at 3.2 per cent of GDP; revenue receipts at 8.9 per cent of GDP at 1,015, 279 crore and indirect tax collection was at 496.231 crore, which was less than the 18 percent of GDP target.

Highlight of the Union Budget

The NDA government presented its maiden Budget on 10 July 2014. Given the fact that the Budget was prepared within 45 days of Finance Minister Arun Jaitley’s assumption of office, it has been hailed as a progressive one.

The Budget has managed to uplift the mood of the middle class people. With the rise of the existing income tax exemption limit by Rs 50,000 to Rs 2.5 lakh,; investment cap under 80 C by Rs 50,000 to Rs 1.5 lakh and the rise in the deduction limit on interest on housing loan by Rs 50,000 to Rs 2 lakh, a salaried employee can now manage about tax saving of Rs 39,000. This certainly seems to bring a smile on the faces of all tax-paying employees.

The Finance Minister was actually walking the talk when he said he wanted the salaried employees to reap some benefit out of this Budget. He went on to add that he would have done more if he had some more money to spend. This statement comes in the wake of the economic conditions that India is currently reeling under – high inflation, a GDP that is crawling at the rate of less than 5 per cent growth, gnawing fiscal deficit and low investor confidence.

Apart from making salaried employees happy, the announcement of hike in the foreign direct investment limit in the insurance sector from 26 percent to 49 percent has brought a cheer to the insurance industry. This will help the insurance industry gain about an additional Rs 7800 crore. The defence sector too saw a hike in the FDI limit to 49 percent from the existing 26 percent.

The General Sales Tax (GST) is likely to see some kind of initiation by the year end. The Minister has assured that he will be fair to all the state governments.

He set aside funds to develop new cities and to give a boost to the manufacturing industry and infrastructure projects. He also allocated funds to improve irrigation and promised sanitation in every household. He also sanctioned the establishment of four more All India Institute of Medical Science (AIIMS) in Andhra Pradesh, West Bengal, Vidharbha and Purvanchal to improve the doctor-people ratio. Five more Indian Institutes of Management (IIM) and Indian Institutes of Technology (IIT) are scheduled to come up too.

He set aside Rs 200 crore for a statue of Sardar Patel while the allocation towards women safety was about Rs 100 crore.

The Minister clarified that the projects falling between Rs 100 to 200 cores would take few months to be implemented. Considering that four months of this financial year are almost over, it made sense to hand over the funds as an ‘initiation’ amount. Once the projects were initiated, more funds could be allocated towards the same. As far as the statue was concerned, the Minister emphasised that it was important to recognise the stalwarts who shaped up this country.

Mobile phones, LCDs, computers, shoes, branded clothes got cheaper while cigarettes and aerated drinks were made costlier..

On the whole, it was a balanced budget. While the common people are smiling, the market is terming it as a budget where there is something for everyone. However, the real success of this Budget would be seen in the coming months provided all the steps outlined in the Minister’s speech are implemented.

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Last Updated on July 12, 2014, 10:05 am