2. Analysis of Union Budget 2014-15
By
Laxmi N. Tirlapur
I Ph.D
Major Advisor
Dr N. R. Mamle Desai

3. Sequence of
presentation
Introduction
Terms and concepts used
Current economic situation
Analysis of union budget 2014-15
Future vision
Conclusion

4. Budget- It is a document containing a preliminary approved plan of public
revenue and public expenditure.
Union Budget: A union budget is the most comprehensive report of the
government finances in which revenues from all sources and out lays to all
activities are consolidated.
Union budget 2014-15 was presented by finance minister P. Chidambaram
on 17th
February
The first budget was presented on
November 26, 1947 by India's first Finance
Minister Sri R.K. Shanmugham Chetty.
Introduction

5. Terms and concepts used
• Plan Expenditure- Plan expenditure refers to government expenditure,
which is meant for financing the programmes/schemes formulated under the
ongoing/ previous five year Plan.
• Non-Plan Expenditure- It includes some of the important types of
government expenditure, eg: interest payments, pension, defence
expenditure, spending on law and order, spending on legislature, subsidies.
• Fiscal Deficit - It is the gap between the government’s total Expenditure
(including loans net of repayments) and its Total Receipts (excluding new
debt to be taken). Thus Fiscal Deficit for a year indicates the borrowing to
be made by the government that year.
• Revenue Deficit- The gap between Total Revenue Expenditure of the
Government and its Total Revenue Receipts.

6. • Excise Duties:- It is a type of tax levied on those goods, which are
manufactured in the country and are meant for domestic consumption. It is
paid by the manufacturer, but he passes this burden on to the consumers.
• CENVAT credit- Manufacturers may offset duty paid on materials used in
the manufacturing process by using that duty as a credit against excise tax
through a process known as Central Value Added Tax Credit (CENVAT
Credit).
• Countervailing duties (CVD): are meant to level the playing field
between domestic producers of a product and foreign producers of the same
product who can afford to sell it at a lower price because of the subsidy they
receive from their government.

7. • Foreign exchange reserve: A foreign currency held by central banks and
other major financial institutions as a means to pay off international
debt obligations, or to influence their domestic exchange rate.
• Current Account Deficit: A measurement of a country’s trade in which
the value of goods and services it imports exceeds the value of goods and
services it exports.

8. Current Economic
Situation

9. World economic growth
2012 and 2013 were years of
turbulence. The challenges that we
face are common to all emerging
economies. Only a handful of
countries were able to keep their
head above the water, and among
them was India. It is 11th
largest
economy.
2011
2012
2013
Global risks
•Fiscal crisis
•Structurally high unemployment
or underemployment
•Income disparity
•Governance failure
•Food crisis
•Political and social instability.
Factors responsible for stability of
Indian economy
1.Stable exchange rate
2.Fiscal deficit
3.Reducing current account deficit
4.Moderation in inflation
5.Increasing export

10. Current account deficit
$88 billion- 2013-14
$ 45 billion – 2016-17
Fiscal deficit
4.6% - 2013-14
4.1% - 2014
jan
Deficit and inflation
Revenue deficit
3.3 % 2013-14
3% - 2014-15 jan
Foreign exchange reserves by the end of the financial year 2013-14 was $
15 billion .
Inflation -2013
WPI inflation was 7.3%
Core inflation was 4.2 %.
Inflation -2014 jan
WPI inflation was 5.05%
Core inflation was 3 %.
Although food inflation has declined sharply from a high of 13.6 percent in
2012 to 6.2 percent in 2013, it is still the main worry.

11. Agriculture
Year Food grain
production (In
million tonne)
%
change
2006-07 217.3
2007-08 230.78 6
2008-09 234.47 7
2009-10 218.11 0.3
2010-11 244.49 12
2011-12 259.32 19
2012-13 255.36 17
2013-14 263 21
Agriculture Export
USD 41 billion-2012-13
USD 45 billion-2013-14
Agricultural GDP growth
9th
5 year plan -2.5%
10th
5 year plan -2.4%
11th
5 year plan- 3.6 GDP( 4% T)
In 2013-14 – 4.6%
National Food Security Bill
• Finance minister set aside Rs.
10,000 crore.
•For distribution of subsidized
food grains distribution to 67%
of the population

12. Investment
• In 2011-12 savings rate was 31.3 % Investment rate-35.5%
In 2012-13 savings rate was 30.1 % Investment rate-34.8%
 It was because of the reason that projects were not achieving
Commercial Operation Date (COD) and there were too many
obstacles on the path of implementation.
 Government took the bold step to set up the Cabinet Committee on
Investment and the Project Monitoring Group.
 Because of this committee, by the end of January, 2014, the way
was cleared for completing 296 projects with an estimated project
cost of Rs. 660,000 crore.

13. Foreign trade
Year Trade deficit
(US $ billion)
Indian merchandise export
(US $ billion)
2012-13 18.98 300 (-1.8%)
2013-14 9.91 326 (+ 6.3%)
Our aim must be robust growth in both exports and
imports, with trade in balance over a period of time.

14. Manufacturing
• The deceleration in investment in manufacturing is particularly worrying.
• The National Manufacturing Policy has set the goal of increasing the share
of manufacturing in GDP to 25 percent and to create 100 million jobs
over a decade.
• Eight National Investment and Manufacturing Zones (NIMZ) have been
announced along the Delhi-Mumbai Industrial Corridor and nine projects
have been approved by the DMIC Trust.
• Three more corridors connecting are under different stages of preparatory
work.
Chennai and Bengaluru, Bengaluru and Mumbai, Amritsar and
Kolkata
• Additional capacities are being installed in major manufacturing industries
such as steel, cement, refinery, power and electronics.

15. Infrastructure
• In last financial year, big push to infrastructure and capacity addition in
infrastructure industries.
In 2012 to December 2013
• 29,350 MW of power capacity
• 3,928 Km of national highways
• 39,144 Km of rural roads under PMGSY
• 3,343 Km of new railway track, and
• Besides, 19 oil and gas blocks were given out for exploration and 7 new
airports are under construction.
• Facility of Infrastructure Debt Funds to take-out finance for infrastructure
projects and ease the pressure on the banking system.

16. Trend in GDP growth
 In Q1 of FY11- 7.5 % reduce to 4.4 % in Q1 of FY13.
 Growth in Q2 of FY13 has been placed at 4.8 %
 Growth in Q3 and Q4 of FY13 was 5.2 %.
 Growth for the whole year FY13 was 4.9%.
By this we can assert that the economy is more stable today than what it was
two years ago.
• The fiscal deficit is declining,
• The current account deficit has been contained,
• Inflation has moderated,
• The quarterly growth rate is on the rise, the exchange rate is stable,
• Exports have increased, and hundreds of projects have been unblocked.

17. Overview and analysis of the

18. Budget at a glance
Three kinds of figures in a Budget
The ministries are required to provide three different kinds of figures relating
to their expenditures and receipts during this process of budget preparation.
These are: Budget Estimates, Revised Estimates and Actuals.
Union budget for 2014-15 consists of
• Budget estimates for 2014-15,
•Revised estimates for 2013-14 and
•Actuals of 2012-13.
2011-
12(A)
2012-
13(BE)
2012-
13(RE)
2012-13(A) 2013-
14(BE)
2013-
14(RE)
2014-
15(BE)
Revenue
receipts
751437 935685 871828 877613 10,56,331 1029252
(17)
11,67,131
(32)
Capital
Receipts
552928 555241 558998 532754 6,08,967 561182
(5)
5,96,083
(11)
Total receipts 1304365 1490925 1430825 1410367 16,65,297 1590434
(12)
17,63,214
(25)
Non-plan
expenditure
891990 969900 1001638 996742 11,09,975 1114902
(11)
12,07,892
(21)
Plan
expenditure
412375 521025 429187 413625 5,55,322 475532
(14)
5,55,322
(34)
Total
expenditure
1304365 1490925 1430825 1410367 16,65,297 1590434
(12)
1,763,214
(25)
Revenue deficit 394348 350424 391245 365896 3,79,838 370288 3,82,923
% of GDP -3.6 -3.3 -3.0
Fiscal deficit 515990 513590 520925 490597 5,42,499 524539 5,28,631
% of GDP -4.9 -4.6 -4.1
Primary deficit 242840 193831 204251 177428 1,71,814 144473 1,01,620
(In crore of Rupees)

19. Growth in government
receipts (%)
2013-14 (RE)
over 2013-14
(BE)
2014-15
(BE) over
2013-14
(RE)
Revenue
receipts
-2.6 13.4
Tax revenue -6.2 19.0
Corporate
tax
-6.2 14.6
Income tax -2.4 26.8
Customs
duty
-6.5 15.0
Excise duty 1.7 11.7
Service tax -8.4 30.7
Non tax
revenue
12.1 -6.5
Expenditure of government
(%)
2013-14
(RE) over
2013-
14(BE)
2014-15
(BE) over
2013-14
(RE)
Non plan
expenditure
0.4 8.3
Revenue account 3.5 7.8
Capital account -25.5 14.8
Plan expenditure -14.4 16.8
On revenue
account
-16.1 18.9
On capital account -7.5 9.0
Total capital
expenditure
-16.7 11.7
Total revenue
expenditure
-2.6 10.8
Total expenditure -4.5 10.9

20. 2009-10(A) 2010-
11(A)
2011-12(A) 2012-13(BE) 2012-13
(RE)
2013-14
(BE)
Total Union Budget 10,24,487 11,97,328 13,04,365 14,90,925 14,30,825 16,65,297
Defence 1,80,018
(17.57)
1,94,605
(16.25)
2,13,673
(16.38)
2,38,205
(15.98)
2,23,003
(15.59)
2,53,345
(15.21)
Rural Development 56,637
(5.53)
72109
(6.02)
66689
(5.11)
76430
(5.13)
55052
(3.85)
80250
(4.82)
Human Resource
Development
38429
(3.75)
51904
(4.34)
60146
(4.61)
74056
(4.97)
66819
(4.67)
79451
(4.77)
Health and Family
Welfare
20996
(2.05)
24449
(2.04)
27,198
(2.09)
34,488
(2.31)
29,272
(2.05)
37,330
(2.24)
Agriculture 12,059
(1.18)
17,059
(1.42)
14,936
(1.15)
18,714
(1.26)
16,272
(1.14)
19,818
(1.19)
Drinking Water and
Sanitation
9200
(0.90)
10569
(0.88)
9,997
(0.77)
14,005
(0.94)
13,005
(0.91)
15,265
(0.92)
Women and Child
Development
8,555
(0.84)
10,688
(0.89)
15,671
(1.2)
18,584
(1.25)
17,263
(1.21)
20,440
(1.23)
Social Justice and
Empowerment
2530
(0.25)
4244
(0.35)
5029
(0.39)
6008
(0.4)
5105
(0.36)
6725
(0.4)
Housing and Urban
Poverty
Alleviation
571
(0.06)
828
(0.07)
957
(0.07)
1163
(0.08)
957
(0.07)
1468
(0.09)
New and Renewable
Energy
550
(0.05)
986
(0.08)
1196
(0.09)
1397
(0.09)
1163
(0.08)
1533
(0.09)
Examining the Priorities for different sectors in the Union Budget

21. Allocations for select Ministries as a percentage of the Total
Union Budget from 2009-10 to 2013-14

22. Overview of the interim union budget 2014-15

24. Agriculture
In this budget Rs. 800,000 crore is provided for agricultural.
 In the Budget 2014-15 there is exemption of service tax for loading,
unloading, packing and storage or warehousing of Rice.
 Interest subvention scheme was introduced in 2006-07. There is a
2 % - subvention
3 % - Incentive for prompt payment,
Thus reducing the effective rate of interest on farm loans to 4 %.
So far, Rs. 23,924 crore has been released under the scheme. This scheme
continue in 2014-15.
FY 12 (A) FY 13 (RE) FY 14 (BE)
Subsidies 257,079 255,516 255,708
Fertilizers 65,613 67,972 (3%) 67,970 (3%)
Food 85,000 92,000 (8%) 115,000 (35 %)
Petroleum 96,880 85,480 (-12%) 63,427 (-35 %)
Subsidies
(Rs. in crore)

25. Rural development
Year Budget estimate(Rs.
crore)
% change
2011-12 64,263
2012-13 50,187 -22
2013-14 74,478 48
Negligence of MGNREGA in the last 3 years
Budget for MGNREGA has not kept up with inflation over the period
Housing and poverty alleviation
Scheme (2013-14) BE (Rs. Crore) RE (Rs. Crore)
Ministry of Housing and
Poverty Alleviation
1,468 1,208 18 % decline
Rajiv Awas Yojana - - 38 % decline
Rs. 82,202 crore
Rs. 6,000 crore

26. Health
• Rs. 2,60,000 crore
• For 1700 people there is one
docotor
• Every year 4,00,000 infants die
within 24 hours from birth.
Employment and poverty
related scheme
• Rs. 3,71,000 crore
• 22 per cent of the population are
still below poverty (UNESCO)
• i.e. 27 crore population are below
poverty
Total Budget extended since last 20 years (1995-2014)
Ministry of Health and Family Welfare has requested that services
provided by cord blood banks are also healthcare services and should
be exempt from service tax. It is approved in the budget.
Relief from service
tax

27. Manufacturing
• The share of manufacturing has continue to hover at around 16% of
GDP for the last two decades.
• The government has set a target of taking the share of manufacturing
in GDP to 25 percent by 2022.
• To give immediate boost to manufacturing sector, the interim budget
has introduced the following changes:
• To stimulate growth in the capital goods and consumer non-durables
and electrical machineries, it has reduced the excise duty from 12%
to 10%.

28. Conti…
Small cars, motor cycles, scooters and commercial vehicles -
from 12% to 8%
SUVs - from 30% to 24%
Large and mid-segment cars - from 27/24% to 24/20%
To give relief to the automobile industry which is registering
unprecedented negative growth, excise duty will be reduce for the
period up to 30.6.2014:
Excise duty Before After
Small cars 12% 8%
Mid size cars 24% 20%
Large cars 27% 24%
SUVS 30% 24%
Excise duty Before After
Buses 12% 8%
Trucks 12% 8%
Two wheelers 12% 8%
Three wheelers 12% 8%

29. To encourage domestic production of soaps and oleo chemicals, the
customs duty structure on non-edible grade industrial oils and its fractions,
fatty acids and fatty alcohols at 7.5%.
To encourage domestic production of six specified road construction
machinery, the Finance Minister has withdrawn the exemption from CVD
on similar imported machinery.
To encourage indigenous production of security paper for printing
currency notes, the Interim Budget provides a concessional customs duty of
5% on capital goods imported by the Bank Note Paper Mill India Pvt. Ltd.

30. • To encourage domestic production of mobile handsets (which has
declined) and reduce the dependence on imports (which have
increased), excise duties for all categories of mobile handsets is
reduced. The rates will be 6 % with CENVAT credit or 1 % without
CENVAT credit.

31. • Four ultra mega solar power projects each with a capacity of over
500 MW in 2014-15.
• The IT modernisation project of the Department of Posts, with an
outlay of Rs. 4,909 crore, will be operational by 2015 in all 155,000
locations
• Central assistance to plans of States and Union Territories will rise
substantially from Rs. 136,254 crore in BE 2013-14 to Rs. 338,562
crore in 2014-15.

32.  The MSME sector is known for its immense contribution for promoting
employment intensive growth in the country.
 Recognising the crucial role played by the MSME sector in promoting
inclusive growth, the Finance Minister has set aside an Initial contribution of
Rs. 100 crore to the corpus of ‘India Inclusive Innovation Fund’ under the
Ministry of MSME.
In order to promote entrepreneurship among the scheduled castes and to
provide concessional finance to them, IFCI will set up a Venture Capital Fund
for Scheduled Castes. Amount of Rs. 200 crore, which can be supplemented
this year
Promoting MSMEs

33. Women and child
• Nirbhaya fund announced in last year’s budget into a permanent non-
lapsable fund of Rs.1000 crore. In 2014-15 budget again Rs. 1000 crore
has been allocated to this fund.
Schemes BE (Rs.
crore)
RE (Rs.
crore)
% change
Women and Child Development 20,440 18285.65 -10
Umbrella Scheme for Protection and
Development of Women
288 77 -73
Training & Employment Programme 18 9 -50
Indira Gandhi Matritava Sahyog Yojana 450 270 -60
Total gender budget 97,134 85,495 -12

34. Defence
• In BE 2013-14 - Rs. 2,03,672 crore
In 2014-15 - Rs. 2,24,000 crore
The allocation for defence has been enhanced by 10 percent.
• Government has accepted the principle of One Rank One Pension for the
defence forces. This decision will be implemented prospectively from the
financial year 2014-15.
• So the credit sum of Rs. 500 crore is transfer to the Defence Pension Account
in the current financial year itself.
Central armed police forces
Rs. 11,009 crore has been approved to strengthen the capacity
of Central Armed Police Forces and to provide them state-of-
the-art equipment and technology.

35. Rs 11,300 crore for strengthening the capital base of Public Sector Banks.
5,207 new branches have been opened against the target of 8,023branches
and are near the goal of installing an ATM at every branch.
Creation of a non–statutory Public Debt Management Agency(PDMA).
Yeomen service rendered by our banks in reaching Government's policies
and programmes to the people. In this budget Rs. 800,000 crore is provided
for agricultural.
Rs 6,000 crore - Rural Housing Funds.
 Rs 2,000 crore Urban Housing Funds.
Loans to minorities is Rs 2,11,451 crore.

36. Schemes (2013-14) Budget Estimate (Rs.
crore )
Revised Estimate (Rs.
crore )
Sarva Shiksha Abhiyan 27,258 26,608 (-2.4%)
Rashtriya Madhyamik Shiksha Abhiyan 3,983 3,123 (- 21.6%)
Rastriya
Uchha Shiksha Abiyan
4,000 240 (-40%)
2013-14 Allocation (% of
GDP)
Reduction in
expenditure(crore Rs.)
BE 0.7%
RE 0.66% 4000
Since from last 20 years (1995-2014)
• 4,00,000 crore was spent in education.
•Even than two third of the population are not getting basic education.
•Total population who are not getting education after 18 years are 29
crores
•37% - illiterate youths
•45 lakh teaching posts are vacant

37. • However some students who had borrowed before
31.3.2009, struggled to pay interest during the period
of study, and continued to service the loans
afterwards.
• Moratorium period for all education loans taken up
to 31.3.2009 and outstanding on 31.12.2013.
Government will take over the liability for
outstanding interest as on 31.12.2013, but the
borrower would have to pay interest for the period
after 1.1.2014.

38. It is estimated that nearly 9 lakh student borrowers will benefit
to the tune of approximately Rs. 2,600 crore.
Central Scheme for Interest Subsidy (CSIS) in respect of
education loans disbursed after 1.4.2009 under which
Government took over the burden of interest for the duration of
the period of study and a little beyond.

39. Fiscal consolidation: Achieve the target of fiscal deficit of 3 percent
of GDP by 2016-17 and remain below that level always.
Current Account Deficit: CAD will be inevitable for some more years which can
be financed only by foreign investment. Hence, there is no room for any
aversion to foreign investment.
Price Stability and Growth: In a developing economy, a high growth target
entails a moderate level of inflation. RBI must strike a balance between price
stability and growth while formulating the monetary policy.
Financial Sector reforms To be completed as laid down by Financial Sector
Legislative Reforms Commission.
Massive investment in infrastructure: To be mobilized through the Public
Private Partnership.

40. Conti…
6. Manufacturing sector to be the base of India’s development: All taxes,
Central and State that go into an exported product should be waived or
rebated. There should be a minimum tariff protection to incentivize
domestic manufacturing.
7. Subsidies, which are absolutely necessary should be chosen and targeted
only to the absolutely deserving.
8. Urbanisation to be managed to make cities governable and livable.
9. Skill development must be given priority at par with secondary and
university education, sanitation and universal health care.
10. States to partner in development so as to enable the Centre to focus on
Defense, Railways, National Highways and Tele-communication.

41. Conclusion

42. Thank you