An overview of the Indian Union Budget 2014-15 by ValueNotes Research - spending; borrowing; subsidies; revenues; direct & indirect tax; and its impact on sectors such as automobiles, BFSI, FMCG, IT, mining, infrastructure, capital goods, oil & gas, real estate, manufacturing, and power

1. Overview of
Union Budget
2014 - 15

2. 3.8
9.6
8.9
7.4
6
FY'10 FY'11 FY'12 FY'13 FY'14
WPI
8.6 8.9
6.7
4.5 4.7
FY'10 FY'11 FY'12 FY'13 FY'14
GDP Growth (%)
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GDP Growth Inflation ( WPI )
Index of Industrial Production (IIP)Trends in Fiscal Deficit
Source : Central Statistical Office Source : Reserve Bank of India
Source : Reserve Bank of IndiaSource : Economy Survey 2012 – 13
6.5
4.8
5.7
4.9
4.5
FY'10 FY'11 FY'12 FY'13 FY'14
Gross Fiscal Deficit as % of GDP
5.3
8.2
2.9
1.1
-0.7
FY'10 FY'11 FY'12 FY'13 FY'14
Index of Industrial Production
Overview: Indian Economy

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Overview: Union Budget 2014 - 2015
• Total budget expenditure is seen at INR 17.95tr in 2014 – 15
• Non- planned expenditure estimated at about INR 12.20tr in 2014 – 15
• India’s 2014 – 15 planned expenditure is seen at INR 5.75tr
Spending
• Gross market borrowing stands at INR 6tr in 2014-15
• Net borrowings will be INR 4.61tr, after considering repayments of past loans and interests
Borrowing
• Total payments towards subsidies earmarked at INR 2.51tr in 2014-15
• Petroleum subsidy seen at INR 634.27bn in 2014-15
• Revised food subsidies at INR 1.15tr in 2014-15
• Revised 2014-25 fertilizer subsidy at INR 729.70bn
Subsidies
• Capital receipts seen at INR 739.5bn in 2014-15
• Non-tax revenues are estimated to rise by a more modest 10% to INR 2.13tr
Revenue

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Direct Tax
Personal Tax
1) No change in tax rates
2) Income Tax exemption limit raised from INR 2 lacs to INR
2.5 lacs per annum for all tax payers below the age of 60
years and from INR 2.5 lacs to INR 3 lacs per annum for
all senior citizens
3) Raised investment cap under section 80C from INR 1 lac
to INR 1.5 lacs
Indirect Tax
Customs/Excise
1) Additional 5% excise tax to be levied on aerated drinks
with added sugar (cold drinks)
2) Excise duty on tobacco products increased between 11%
and 72%
3) Excise duty for specified food package industry reduced
from 10% to 6%
4) Excise duty on footwear reduced from 12% to 6%
Corporate Tax
1) No change in the rate of surcharge either for the
corporate or the individuals, HUFs, firms etc
2) Investment allowance at the rate of 15% to a
manufacturing company that invests more than INR 25cr
in any year in new plant and machinery. This benefit
will be available for the investments up to 31st
March, 2017
3) Extended the above investment linked deduction to two
new sectors, namely, slurry pipelines for the
transportation of iron ore and semiconductor wafer
fabrication manufacturing units
Service Tax
1) Taxes proposed on the service provided by radio-taxis to
place them on par with rent-a-cab service
2) Exemptions withdrawn, including those extended to
services by air-conditioned contract carriages and
technical testing of newly developed drugs on human
participants
3) The government will work to introduce the much awaited
Goods and Service Tax (GST) this year. GST will
streamline tax administration and result in higher tax
collection for the centre and the states
Overview: Union Budget 2014 - 2015

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Sector Policy Changes Budget Impact
Automobiles
1. Extended the excise duty concessions beyond 30th June 2014 for a period of 6
months up to 31st December 2014
Banking and Non Banking
Financial Institutions
1. PSU Banks would need INR 2.4 lac cr government infusion by 2018
2. Finance Minister(FM) to examine proposal to give additional autonomy to banks
3. FDI in insurance to be increased from 26% to 49% through Foreign Investment
Promotion Board (FIPB) route
4. Banks will be encouraged to extend long term loans to infrastructure sector
5. RBI will create framework for licenses of small banks
6. INR 5,000cr short time rural credit refinance fund for 2014-15
7. FM proposes to up cap gains tax cut-off for Mutual Funds, other than equity
oriented funds, to 36 months
8. FM aims for INR 8 lac cr farm credit in FY’15
9. FM proposes additional 3% interest subsidy on farm loans
FMCG
1. Excise duty for specified food processing and packaging machinery reduced from
10% to 6%
2. Excise duty on footwear reduced from 12% to 6%
3. Basic custom duty on LCD and LED panels below 19 inch made nil
4. Additional 5% excise tax to be levied on aerated drinks with added sugar (cold
drinks)
5. Excise duty on tobacco products increased between 11% and 72%
Post Budget Impact: Sector Summary
Positive Neutral

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Sector Policy Changes Budget Impact
Information Technology
1. Impose basic customs duty at 10% on specified telecommunication products that are
outside the purview of the Information Technology Agreement
2. Exempt all inputs/components used in the manufacture of personal computers from
4% Special Additional Duty (SAD)
Mining
1. Rationalize coal linkages which will optimize transport of coal and reduce cost of
power
2. Custom duty cut on steel grade limestone and steel grade dolomite from 5% to 2.5%
3. Increased the basic customs duty on imported flat-rolled products of stainless steel
from 5% to 7.5%
4. The current impasse in mining sector, including, iron ore mining, will be resolved
swiftly. Changes, if necessary, in the MMDR Act, 1957 would be introduced to
facilitate this
Infrastructure
1. INR 37, 800cr allotted for National Highways
2. New airports to be created in Tier I and Tier II cities
3. Proposal for 15,000km gas pipelines using appropriate PPP model
4. INR 1,000cr provided for rail connectivity in northeastern region
5. INR 7,060cr fund earmarked for smart cities
6. Ultra modern power projects to be taken up in Rajasthan, Tamil Nadu, Ladakh with
INR 500cr
Post Budget Impact: Sector Summary

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Sector Policy Changes Budget Impact
Capital Goods
1. Extended the excise duty concessions beyond 30th June 2014 for a period of 6 months up
to 31st December 2014
Oil & Gas
1. Proposal for 15,000km gas pipelines using appropriate PPP models
2. Accelerate production and exploitation of Coal Bed Methane reserves
Real Estate
1. Increase the deduction limit on account of interest on loan in respect of self occupied
house property from INR 1.5 lac to INR 2 lac to reduce burden on middle and lower income
groups
2. PM has vision of developing 100 new cities; INR 7,060cr fund earmarked for smart cities
3. Government proposes National Housing Banking programme; sets aside INR 8,000cr for
this program
4. New mission for low cost affordable housing for urban poor -INR 4,000cr allocated
Manufacturing
1. The manufacturing units will be allowed to sell its products through retail including E-
commerce platforms without any additional approval
Power
1. Extend the 10 year tax holiday to the undertakings which begin generation, distribution
and transmission of power by 31st March 2017
Post Budget Impact: Sector Summary

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