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Union Budget 2016

VistaMind Education

+What will we cover?

Economic Overview Context for the Policy decisions Vision and Objective: How various parts fit together What could go wrong?

+Overview GDP Growth

Expected to be 7.4% and between 8.1 to 8.5% Fiscal Deficit on course for FY 16 at 3.9% and then 3.5% Current Account Deficit under control, Forex Reserves High Global Economy down: Imports & Exports down

TD@106.8Bn FDI up by 40%, Forex Reserves at 350 Bn record high Infrastructure projects stalled, slowly being unclogged Bank balance sheets in trouble, NPA’s at a record high Industrial growth very slow Private sector lacks funds/desire to invest LPG PAHAL scheme reduction in leakages down by 24% Record addition in Power Generation & Coal production

+Context for Budget 2016 Global economic slowdown

Commodity prices at major low

Two big bills OROP Seventh Pay commission

Industrial growth very slow IIP at 3.1% compared to 2.6% last year Infrastructure clogged with stalled projects

Banks in deep trouble High NPAs & Restructured loans

Rural distress 2 successive droughts Farm productivity is key to growth without inflation

+Target Areas Subsidy reform

Leakages very high in Fertilizer, Kerosene etc DBT based JAM Trilogy

Power sector Mess Electricity Discoms accumulated losses at 3.8 lakh crore

Banking sector mess Why 25 banks? Will government keep bailing out banks?

Exit policy Rule of the market: Productive Efficient firms survive & Grow

Privatization PSU’s accumulated losses: 1.04 lakh Crore (13-14 fig) Why should government run Telco’s, Airlines, Steel plants etc

+Theme 1: Fiscal Consolidation High Fiscal Deficit

Higher Borrowings Inflation High Interest rates Poor International Ratings

Need for Public Investment Fiscal Deficit

2015-16 at 3.9%, 2016-17 to 3.5% Achieved through rise in indirect taxes (Excise on Oil

sector) 2016-17 FD depends on Revenue assumptions holding

+Theme 2: Infrastructure Infrastructure Vs Subsidies and Schemes

2.18 lakh Crore direct investment Roads, Railways, and Irrigation

Solving the Infrastructure traffic jam Higher pace of highway construction Power generation, Village electrification, coal production

JAM approach to subsidies JDY – Aadhar Card – Mobile Transfers Successful experiment in LPG Reduction in leakages by 24% Fertilizers next?

The Power sector Mess UDAY scheme

+Theme 3: Tax Reforms Amnesty Scheme

5.5 Lakh crore locked in Tax litigation Pay 45% Tax and get immunity Upto 10 lakhs, pay arrears without penalty or interests Tax dispute settlement Increases revenues, Unclogs legal system

Tax reform Tax on super rich. Taxes on Diesel & Luxury Cars Additional 10% tax on dividends above 10 lakhs All Savings schemes brought to standard platform

Regulatory Environment New Bankruptcy code to create exit policy

+Theme 4: Agriculture & Rural Aid transfer to Gram Panchayats at 2.87 lakh crore

Massive 228% increase

Crop Insurance & Farm Interest subvention Rs 5500 Cr

NREGA highest ever allocation Rural Electrification, Massive push for Rural gas connections Irrigation

Increase in irrigated land : 28.5 lakh hectares Focus on ground water recharging: 6000 Cr

Unified Agri mrket 585 regulated wholesale markets States to ammend APMC acts

+Theme 5: Banking reforms Banks in deep trouble

180,000 Crore to 400,000 Crore Bankruptcy code, New ARCs

Too little too late? 11,200 Cr to 25,000 Cr allocation

Indradhanush: Banking reforms Bank Boards Commission: Vinod Rai. Will appoint directors and key posts Implement Banking reforms

Where will the rest of the money come from? IDBI: Signals willingness to dilute stake below 50% Why do we need 25 PSU banks?

+The Verdict A thoughtful and well Intentioned budget

Under severe constraints But will it be enough?

Implementation is the key Irrigation & Farm productivity: Difficult execution Soil Health Cards – Sustainable Irrigation – Crop insrance Scientific fertilizer usage – Change crop usage patterns – Free Agri markets

Inshallah! God, Global Economy & GST Will Oil prices stay low?

Subsidy reforms DBT is the key Biometric authentication at Subsidy POS Targeted Subsidies minimizing leakages & administration costs!

Key misses Banking reforms Privatization

+The Verdict Fiscal Consolidation

Non tax receipts (Spectrum, Disinvestment, Tax amnesty) Low FD Low Inflation RBI cuts rates Pvt investment boost

The Banking Mess 25,000 Cr is nowhere near enough Consolidation of banks, Privatization

Tentative & Timid steps? Corporate tax reforms

Eliminate exemptions & Reduce Tax rate has not happened Govt to pay 8.33% EPF for 3 years

Small Incentive to generate employment

Where is the Big bang reform? Fear of electoral backlash Legislation struck in RS