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Business News/ Politics / Policy/  Jaitley bats for boosting public expenditure in infrastructure
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Jaitley bats for boosting public expenditure in infrastructure

With gradual growth acceleration and under assumptions of continuing price stability, the nominal growth rate during 2016-17 and 2017-18 is expected to be around 12.2% and 12.4%, respectively

The budget provided for an additional Rs70,000 crore in 2015-16 to boost infrastructure spending in sectors such as roads and railways. Photo: Pradeep Gaur/Mint (Pradeep Gaur/Mint)Premium
The budget provided for an additional Rs70,000 crore in 2015-16 to boost infrastructure spending in sectors such as roads and railways. Photo: Pradeep Gaur/Mint
(Pradeep Gaur/Mint)

New Delhi: Finance minister Arun Jaitley has tried to kick-start growth by boosting public expenditure in building infrastructure and creating a conducive environment for companies to flourish.

The growth agenda of the government has been tethered to the revival of manufacturing as revealed in the Make In India initiative, accompanied by the liberalization of foreign direct investment (FDI), a large array of investment facilitation measures and steps to improve saving.

The budget provided for an additional 70,000 crore in 2015-16 to boost infrastructure spending in sectors such as roads ( 14,000 crore) and railways ( 10,000 crore), which is expected to crowd in private investment.

The proposed international financial services centre Gujarat International Finance Tech-city (GIFT), on the lines of international finance centres in Singapore or Dubai, may also act as a catalyst for financial markets.

“The proposal has languished for years. I am glad to announce that the first phase of GIFT will soon become a reality. Appropriate regulations will be issued in March," Jaitley said in his speech.

Jaitley also increased the income-tax deduction limit of 50,000 above the current limit of 1.5 lakh for contributions made to the National Pension Scheme, with an eye on boosting savings and growth.

To promote domestic manufacturing that leads to job creation, Jaitley announced a series of cuts in customs and excise duties in the budget.

Customs duties on certain inputs such as metal parts, insulated wires and cables, refrigerators compressor parts, compounds used in catalytic converters, sulphuric acid for use in manufacturing of fertilizers and components of video cameras have been reduced.

Similarly, basic customs duty has been reduced on certain raw materials such as LCD/LED TV panels from 10% to nil. Special additional duty of customs (SAD) is reduced in metal scrap of iron and steel, copper, brass and aluminium from 4% to 2% to address the problem of CENVAT (central value added tax) credit accumulation. For inputs for use in the manufacturing of LED driver and metal clad printed circuit boards (MCPCB) for LED lights, fixture and LED lamps, SAD is reduced from 4% to nil.

Excise duty has been restructured on certain goods such as wafers for use in the manufacturing of integrated circuit modules for smart cards from 12% to 6%, inputs for use in the manufacturing of LED lamps from 12% to 6%, specified raw materials for use in the manufacturing of pacemakers to nil, solar water heater and systems from 12.5% to nil and tablet computers from 12% to 2%.

Seeking to address the problems faced by small companies and to facilitate the inflow of technology, Jaitley proposed to amend the Income-Tax Act to reduce the rate of tax on royalty and fees for technical services from 25% to 10%.

Rating agency Crisil Ltd chief economist D.K. Joshi said the budget is “mildly supportive" of growth with measures to increase capital expenditure and create a conducive business environment.

The budget envisions 11.5% nominal growth in 2015-16 at 141.1 trillion through 8.5% real growth and 3% GDP deflator (inflation). With gradual growth acceleration and under assumptions of continuing price stability, the nominal growth rate during 2016-17 and 2017-18 is expected to be around 12.2% and 12.4%, respectively.

Ahead of the budget, the Economic Survey on Friday said India has reached a sweet spot in which it could be launched on a double-digit medium-term growth trajectory that would allow the country to attain the fundamental objectives of wiping every tear from every eye.

Indian economy has weathered many challenges successfully in recent times and is currently placed on a cyclical upturn on the back of strong policies and a whiff of optimism, the finance ministry said in its macroeconomic framework statement part of the budget.

“Growth is back with its desirable concomitants of mild inflation and manageable current account balance, a stable rupee and rising foreign exchange reserves, signalling improvements in macroeconomic stability," the finance ministry said in the statement.

With inflation easing and the government putting out a medium-term fiscal consolidation road map, the budget also eyes monetary policy easing by the Reserve Bank of India to support growth. “The current scenario of price stability and related expectations seems to have convinced the RBI, focused on a glide disinflationary path, on gradual monetary easing to support growth," the budget said.

RBI has, in two successive announcements, reduced the repo rate by 25 basis points and statutory liquidity ratio by 50 basis points. One basis point is one-hundredth of a percentage point.

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Published: 01 Mar 2015, 01:07 AM IST
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