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India’s Budget 2014-15 : Beautiful but not Bold

, July 10, 2014, 31 Comments

India Budget 2014-15-MarketExpress-InUnion budget was awaited with bated breath, but after the presentation the markets were a tad sluggish. With all its good intent, the ambition and boldness expected from “Modinomics”, it connotes a lost opportunity. In the end, it seems politics triumphed over economics; making incremental change over making a visionary change; maintaining the ‘sarkari’ way of doing things over transparency and credibility; and the “NDA” way of doing things versus the “UPA” way. Somehow, the great expectations that the markets and investors had built up was kept in abeyance for another day.

The “NDA” way was highlighted by stress on domestic manufacturing, focus on small and medium scale enterprises. It provided a fillip to infrastructure creation. Manufacturing and infrastructure where most of the forward and backward linkages lie, have been used to jumpstart the economy. Providing investment allowance at the rate of 15 percent to a manufacturing company that invests more than Rs. 25 crore in any year in new plant and machinery, mega textile clusters, seven industrial cities, FDI of upto 49% in defence, would be the bunch of arrows used to boost jobs and accelerating domestic manufacturing.

Similarly, special thrust to PPP, encouraging banks to extend long-term loans to finance infrastructure projects, alongwith faster clearances, will give a thrust to the infrastructure sector to accelerate investments. This is in contrast to the UPA emphasis on the social sector. This is expected to positively impact both the Current Account Deficit (CAD) through lower imports, and the fiscal deficit through higher production, (higher tax collection, lower relative allocation to social sector). In addition some demand push is also expected from increased jobs, and higher disposable income through higher tax slab exemptions.

The overarching positive from the budget was a huge commitment towards fiscal prudence and capping the fiscal deficit at 4.1% of GDP.

However, the budget was a replica of initiatives and intents that his predecessor, Mr. Chidambaram had laid out. Despite having a historic majority mandate, the finance minister failed to capitalize on this opportunity to usher in bold reforms. In essence, the budget was as cautionary and as incremental as the earlier budgets. For instance, it missed the opportunity of streamlining the government’s accounting system from a receipts based one to an accrual one.

Essentially, this is a tool used to show a ‘good’ fiscal deficit number. All the receipts are asked for and accounted for upfront, while expenditure is postponed onto the next financial year. Needless to say, this does not engender trust. Retrospective tax amendments are a big dampener for FDI (Foreign Direct Investment), as it changes the level playing field for the company which already has come in and invested. This disincentivises new companies from coming in. First instituted in 2012, the retrospective tax amendments have not been rescinded in this budget leading to continuing huge legal and tax disputes with the government, further eroding foreign confidence in the Indian economy.

The other fronts which could have been game changers include majority FDI limits in sectors like insurance; widening the tax base; dramatically increasing capital expenditure over revenue expenditure, and third generation economic reforms. The markets hence, were expecting a more revolutionary change.   Though following short on expectations the markets continue to hope that this has been just a start and new government would do much better.






  • Chintan Mankodi

    Definately it is beautiful but not bold. Going through the budget it is seen that prices of habits have been increased by striking percentage while few luxuries and neccesities have been reduced to an affordable level.

  • atin gulati

    Ya government have taken a very smart step they have increased the price of those goods to which public is habitual and decreased the price of luxuries goods………..

  • Nisha Chauhan

    The step towards increasing FDI in defence is a good step from the govt. and the could have done the same for FDI in other sectors as well. The govt is efficient to deal with CAD and Fiscal deficit but we would need to wait for an year to see the results.

  • Abhimanyu Chauhan

    A good approach for revival of economy but still have to do a lot

  • David Noronha

    The union budget is an extension of the modi government in guarantee …With more emphasis on domestic manufacturing n small and medium scale entrepreneurs

  • Dinesh Kewlani

    Budget is all set to help in increasing the no. of manufacturing firms in India and hence affecting a favourable current account deficit.

  • Dinesh Kewlani

    Budget is all set to help in increasing the no. of manufacturing firms in India and hence affecting a favourable current account deficit.

  • Pooja Lotade

    I agree on the long term funds provided by banks for development of infrastructure projects.

  • Nisha Chauhan

    The FDI in defence is a step that deserves appreciation and the same could have been allowed for other private sectors also. Also, the govt has taken efficient steps to deal with CAD and fiscal deficit but only time will show the results.

  • bhavika jain

    I think it is a balanced budget, but let us hope that it will boost the economic growth

  • Mohit Kumar Singh

    This being the first next budget may bring more cheers to the common people. Maiden budget by NDA we cannot expect more than this. Finance Minister has done lot of home work before presenting the budget. Let us hope that if our economy improves People can expect next budget may be better than this .

  • Ashwin Patel

    Raise of foreign direct investment limit in insurance and defence manufacturing from 26% to 49%,hopefully will result in a lot of job creation.

  • Tumpa Roy

    The ‘UNION BUDGET’ 2014 is definitely too flattering to deceive.
    However “Action speaks louder than words”.
    We can only hope for a better India and improvements in our economy as promised and keep faith on our honourable Finance Minister Mr. Arun Jaitley.

  • Tumpa Roy

    The ‘UNION BUDGET’ 2014 is definitely too flattering to deceive.
    However “Action speaks louder than words”.
    We can only hope for a better India and improvements in our economy as promised and
    keep faith on our honourable Finance Minister Mr. Arun Jaitley.

  • Surbhi Jha

    The Union budget 2014-15 allow us to spend, within our means and also focused on building infrastructure and job, which leads to change in the economic situation of the country.

  • Surbhi Jha

    Overall “UNION BUDGET” 2014 is good, which gives us freedom to spend more within our means. also good to know the increase in investor’s appetite, which will lead to more employment and economic growth of the country.

  • Surbhi Jha

    Overall “UNION BUDGET” 2014 is good, which gives us freedom to spend more within our means. Also good to know the increase in investor’s appetite, which will lead to more employment and economic growth of the country.

  • Radhika Goenka

    The budget undoubtedly has no flaws in it except it being too safe and nothing extraordinary about it. But it being the first budget by the new Union Minister for Finance, we can definitely keep our hopes intact.

  • Nishita Vadodaria

    Indeed no bold steps were taken by NDA, but we can sure hope for better utilization of funds unlike previous government.

  • Shamik Bandyopadhyay

    Market was expecting a ‘Big-Bang’ budget with retrospective tax removal and immediate GST implementation but, by considering the fact that the budget has been prepared within 6 weeks, it is a good budget. The main chunk of voters, voted for new government, has got the return back through tax exemptions and price reduction on consumer goods.

    For the excellent one, we have to wait till next year’s February.

    Besides that real boost for primary sector of the economy, whether it is agriculture and manufacturing, region based emphasis is given.

    Much depends on implementation. We have to wait and see how the new government moves in that direction.

  • Atul Madaan

    Money invested should be made accountable and not blindly
    invest as previous govt, especially in NE, exemption of taxes for armed forces
    would have been a blessing, overall Very good and
    futuristic budget.

  • Barkha Jain

    ‘Beautiful But Not Bold’

    2014-15 Budget has set some really Good points for almost every sector of the economy, Real Estate, Irrigation, Sanitation, Developing Cities etc but there is an urgent need to generate more resources to fuel the economy, which may be a tough task. Hope for the Best from the Modi-fied Government.

  • bhagyashree mandre

    Budget 2014 overall is good but lacking in expectation for common people. Hope so it would try to control inflation rate.

  • Diksha Pradhan

    ya its an average budget and i think government will do better in future.

  • P V Rajeev

    Will bullet train fares in India be more than air fares and if so by how much or how many times

  • Brijesh Verma

    “UNION BUDGET” 2014 is good, which gives us freedom to spend more within our means. The step towards increasing FDI in defence is a good step from the govt. they have taken a very smart step they have increased the price of those goods to which public is habitual and decreased the price of luxuries goods.

  • Brijesh Verma

    controlling fiscal deficit at 4.1% is a major step towards fiscal consolidation and macroeconomics stability of india.

    the boost to financial saving is extremely +ve for domestic and international savers.

  • Brijesh Verma

    controlling fiscal deficit at 4.1% is a major step towards fiscal consolidation and macroeconomics stability of india.

    the boost to financial saving is extremely +ve for savers.

  • Naina Garg

    49% FDI in defence will create good job opportunity

  • Chandni aggarwal

    I agree with the article as Modi could have done a lot reforms in this budget, but he restricted himself somehow…and just concentrated on few of the major areas.

  • Avin Rebello

    The Budget 2014 sets out some forthcoming proposals like setting up INR 10,000 crore fund to act as a catalyst to attract private capital for start-up companies, proposal to amend the Apprenticeship Act, 1961 etc. I strongly appeal to the GoI to adopt a cogent, coherent and comprehensive approach vis-à-vis ‘entrepreneurship’, ‘science & technology’, ‘innovation’ and ‘IP law framework’ in the coming years. Mr. Arun Jaitley had a lot of things to worry about in the last forty five days. Only a naïve would expect Budget 2014 to be a panacea. I would, however, appeal to the GoI to set a healthy course of action in the coming years.