- A: The Three Funds
- B: Three Schemes
- C: Scheme Funding: flexibility to states
- D: Manufacturing Sector
- I: Infrastructure related
- Banking Finance Related
- [GS3] Health/Science tech related
- [Polity] Bills/Act/Legal issues in Budget speech
- [Essay] statements from Interim Budget speech
- Appendix = Excuses, Excuses
In the past three articles, we saw the financial/technical aspects of the budget (tax rates, classification, receipt, Expenditure in ascending-descending order etc.) Now the remaining highlights of Interim Budget 2014.
by the way, you can download the Interim budget speech and documents from http://indiabudget.nic.in/#content
In his budget speech, FM mentioned three funds
- Innovation fund
- VC for SC
Let’s check them one by one
- This is not a brand new fund. It was Launched in Budget 2013 [Rs.1000 crore]
- in response to the Delhi Gangrape of Dec 2012.
Money from Nirbhaya fund will support projects such as:
- CCTV @Public places
- GPS and emergency buttons in public buses, trains
- Toll free numbers
- self-defense lessons for women
Then what’s new in Interim Budget 2014?
- Nirbhaya fund made non-lapsable (meaning, even if money is unspent, it’ll not go back in the consolidated fund of India.)
- And FM announced additional Rs.1000 crore. [=1000 from 2013+1000 from 2014=2k in this fund]
According to an RTI filed in January 2014, not a single paisaa has been spent from Nirbhaya fund- on any scheme/project. So this is a mere ‘symbolic’ gesture.
- official name: India Inclusive Innovation Fund
- under MSME ministry +National Innovation Council (NInC- head Sam Pitroda)
- To promote grass root innovations- related to MSME sector. with main focus on focus on healthcare, food and nutrition, agriculture, education, energy, financial inclusion, environment, technology
- Jan 2014: fund launched
- Feb 2014: FM gave 100 crores in Interim budget 2014
- another 400 will come from public sector banks, financial institutions, insurance companies, multilateral/bilateral development agencies, Indian & global corporates.
- =total 500 cr.
- This fund will operate for 9 years.
- Under IFCI [Industrial Finance Corporation of India]
- To promote entrepreneurship among SC – they’ll receive finance @concessional rates.
- FM gave 200 crores in Interim budget 2014
|Fund||Launch||cash allotted in Interim Budget (Cr.)|
|1. Nirbhaya: women security||2013||1000|
|2. India inclusive innovation: grassroot/MSME||2014||100|
|3. Venture capital fund for SC (IFCI)||2014||200|
Three schemes related to Human resource development (HRD), mentioned in his speech. (The usual schemes- MNREGA, Indira Awas etc. nothing changed.)
- not a brand new scheme.
- already announced by FM Pranab in 2009’s budget
- matter falls under HRD ministry.
|BENEFICIARY:||Student pursuing professional study (Engineering, medical etc) but his parents are earn less than 4.5 lakh per year)|
|FEATURE:||IF such student has taken education loan after 1st April 2009, then government will pay thre loan interest rate on his behalf, during his study period (and few months after that).|
|PROBLEM:||Many poor students had taken loans just few weeks/months before 1/4/2009, but they were not eligible. (Because of the deadline.)|
|SOLUTION:||In the interim budget 2014, Chindu gives solution:|
|IMPACT:||9 lakh students will benefitsubsidy Expenditure: ~2600 crore. Where will we put this? Ans. under Non-plan Revenue Expenditure (Because this is one type of subsidy)|
- under National Skill Development Corporation (Ownership: 51% private ; 49% FM)
- NSDC’s target: give skill training to 150 million Indians by 2022.
- Scheme: National Skill Certification and Monetary Reward Scheme (not a brand new scheme)
- Under this Scheme NSDC gives training (welding, plumbing etc.) once you pass the exam, you get certificate PLUS 5000-10000 rupees depending on the “Rating” given in your certificate.
- Chindu announce 1k crore in interim budget for this.
- By Home ministry
- To give employment to youth of J&K
- NSDC trains the youth, ties up with private company to get them recruited.
- Problem: barely 6000-15,000 salary per month. Hardly any takers.
- This is not a brand new Scheme. Chindu gave no extra money here, but he mentioned this name, hence we have to prepare for the stupid sacred MCQs.
Although not really an HRD scheme, but let’s just continue it with the flow
- 2006: Government changed the pension rules for defense forces.
- As a result, soldier retired before 2006 = would get less pension than the soldier retired after 2006. Even if both soldiers had served in same rank (e.g Subedar) for same duration (e.g. 20 years.)
- Result? Dissatisfaction, demoralization.
- Subsequently in 2010 and 2013, government tried to tweak the rules but dissatisfaction continued. Soldiers kept demanding one rank-one pension.
- Few days back Rahulbaba also demanded the same. And as any bookie can predict-Chindu accepted.
- Interim budget allotted Rs.500 crore to implement the one rank one pension scheme.
so far we learned
+ One rank one pension.
now comes the major development:
|140+ centrally sponsored schemes||lack of coordination, lot of overlapping, leakages.|
|Funding: 100%, 90:10%, 80:20%, 75:25% etc.||State government would not release their part of money (10/20/25%), as a result the scheme will not start @grassroots level.|
|in some of the scheme, money directly given to NGO/implementing agencies/Gram sabha||Chief minister’s ego is hurt. Hence lack of cooperation, lack of synergy.|
2013: To fix this mess, Government setup a Group of Ministers (GoM), took following steps
|140+ centrally sponsored schemes||just ~66 schemes (merged lot of schemes)|
|some schemes directly gave money to NGO/implementing agencies/gram Sabha||Now money directly sent to Consolidated fund of the State. From there, state government free to spend money as per its requirement.|
Interim Budget 2014: FM made two big announcements/changes on how money is allotted to Schemes:
Change #1: money will be given as Central Assistance
From now on, we’ll allot money as “Central assistance to State plans” (rather than as funds under Central plans.) => States get greater authority and responsibility.
Plan Expenditure (Revenue part)
|Revenue Expenditure (Cr)||BE 2013||BE 2014|
|To Central’s own Five year Plan||320038||116641|
|Central Assistant to State/UT’s plan||123222||325632|
|Total (Plan) Revenue Expenditure||443260||442273|
Observe there is hardly any difference in the total (Plan) Revenue Expenditure. At both places, total is nearly 4.4 lakh crores. But the internal breakup (or ratio) has changed- now Union allotting more money to State/UT’s plan rather than its own five year plan.
- lot of money will be transferred to State’s consolidated fund.
- State government can spend this cash, as per their plan requirements e.g.
- A coastal state may spend more on maritime/fisheries Development
- State with higher percentage of tribal population => more on forestry, healthcare, skill development related plans
- State with high ratio of child population =>more on primary education
- lot of teenagers=>focus vocational skill education and so on…
Their hands are no longer “tied” to align with Central Five year plan. Money is given to their consolidated fund. They now have greater autonomy.
Change #2: Requested CMs to allot more money
- Chindu says, “Since I’ve given you freedom to spend money, (as explained above), therefore, from now you also all increase your own allocation for education, healthcare etc. (from your own revenues)”
- That way, Union’s money is sparred, we can spend it for defense, railways, national highways and telecommunications. (All these matters fall under Union List.)
+ He gave additional funding to the hill states:North Eastern States, Himachal Pradesh and Uttarakhand.
-THE end of funds and schemes-. Moving to the next issue
Nothing new under the sun. Chindu merely listed the old achievements.
- Falls under Department of Industrial Policy & Promotion (DIPP) under Commerce Ministry. (2011)
- by 2022, this policy wants to have:
- Share of MFG sector in GDP=25%
- Create 100 million jobs
- National Investment and Manufacturing Zones (NIMZ)
- they’re part of the National MFG. policy
- these NIMZ are Industrial township with all the necessary infrastructure for mfg. industries.
- these townships are created on ~5000 ht. uncultivated land. ( Management in the hands of an SPV company owned by State + Union + private players)
- At present, 8 NIMZ, around Delhi Mumbai Industrial Corridor (DMIC) e.g. Ahmedabad-Dholera investment Region, Gujarat
- In the interim budget, Chindu proposed 5 more NIMZs outside DMIC
Chindu also mentioned that similar to DMIC, three more corridors under progress:
- Chennai and Bengaluru
- Bengaluru and Mumbai
- Amritsar and Kolkata
If you visualize the map, almost entire India will be covered through these industrial corridors:
|North, the “shoulder”||Amritsar and Kolkata|
|North-Western State||Delhi Mumbai|
NIMZ vs SEZ: what’s the difference?
|origin||under National MFG. policy||under SEZ Act|
|Minimum area||5000 ht.||10-1000 ht depending on sector. Smaller for gems/jewellary/IT|
|maximum area||not specific||5000 ht.|
|EIA?||State government||the project developer|
|Energy?||Part of the electricity has to be procured from renewable sources. State Government will give subsidy||no such requirement.|
|does government give special preference to these units in procurement? (e.g. papers/ballpens for sarkaari offices)||yes||not specified|
|single window clearance to files||yes||yes|
- Launched in 2013. (FM merely mentioned the name)
- By Khadi and Village Industries Commission (KVIC) [statutory body]
- Under Ministry of MSME.
- Khadi Mark assures mark will pure hand-woven, hand spun khadi.
- Chindu mentioned it in the speech. falls under Ministry of environment and forest.
- originally announced @ World Congress on Agroforestry, held in Delhi. (few days before Interim budget)
- Increase tree cover (to 33%)
- Use agroforestry to meet country’s population demand for food, fodder, firewood and timber.
- coordinate among various ministries (e.g. MNREGA to increase timber plantation)
- simplify laws and regulations
- Will setup a new “Agroforestry Commission” to look after this matter.
- Will provide marketing opportunity to tribals- agroforestry produce – timber, fruits, vegetables, medicinal plants.
- Sustainable crop production, combating climate change, R&D, HRD and other fancy things.
- for new Infrastructure projects, we should adopt PPP model- because it is tried and tested. (Besides government cannot spend lot of money here, we have to reduce the damn fiscal deficit).
- In 2014-15, I hope world economy will bounce back, demand of desi export will increase, our mfg. export will bring ~325 billion $
- But to help mfg. exporters, we need to waive/rebate all the Central and State imposed on the exported items.
- we have liberalized the FDI policy to attract larger investments in telecommunication, pharmaceuticals, civil aviation, power trading exchanges and multi-brand retail.
Nothing major. He mostly talked about past achievements.
[Infra] Communication related:
gave funding for two projects: (1) Community radio stations (2) IT modernization in post offices
#1: Community radio stations
- 2006: Government allowed NGOs and educational institutions to setup their own Community Radio Stations.
- matter falls under Ministry of Information and Broadcasting
- 2014: interim budget Gave 100 crores to setup new Community radio stations.
#2: Postal IT modernization
- Gave 5k crores to Postal department. For Information technology (IT) modernization.
- By 2015, all the (1.5 lakh) post offices will have this modern IT infrastructure.
[Infra] Nuke Energy
Nothing new. He only cited past developments.
|Kudankulam, TN||started generating electricity|
|Kalpakkam, TN||its fast breeder reactor work near completion|
other Seven nuclear power reactors are under construction
[Infra] Solar Energy
- Jawaharlal Nehru National Solar Mission [under ministry of new and renewable energy]
- launched in 2010, under National plan on climate change
|First||2013 (this has ended)|
|Second||2017 (we are under second phase)|
2014: we’ll initiate four ultra-mega solar power projects (each ~500MW). or at least that’s what Interim budget claims.
[Infra] File clearance
Government had created Cabinet Committee on Investment and the Project Monitoring Group (under PMO). By the end of January, 2014, they helped clear ~300 projects files worth >6 lakh crore rupees.
|CCI (infra)||Cabinet Committee on infrastructure. No longer exists. It is merged with Cabinet Committee on Economic Affairs (CCEA)|
Nothing major, just lip service.
#1: Banking related
Highlights of Budget speech:
|2013 (we did this)||2014 (we hope this)|
|Public sector banks gave 7lakh crore as agri loans.||Target: 8 lakh crores in agri loans|
|Interest subvention scheme for farmers (2%)||Continued.|
|Public sector banks opened ~5k branches, with almost one ATM per branch.||Their NPA will reduce as economy starts to improve|
|Bharatiya Mahila bank started in November 2013 (100% owned by Government of India)||—|
#2: Finance Sector related
- We’ll create a single record for all financial assets of every individual (be it FD, mutual funds, Insurance whatever.=easy to monitor tax evasion.)
- We’ll reform the regulatory systems so that Indian companies can easily raise money/finance via
- via ADR/GDR from abroad
- via Rupee-denominated corporate bonds
- We’ll help international investors to invest in such Indian bonds.
FM mentioned some Sci-tech related terms in his interim budget speech. Thus, they automatically became important for GS3 (mains): Achievements of Indians in science & technology
- for detection of cervical cancer in women.
- by Indian Council of Medical Research (ICMR)
- until now, we relied on Foreign device (Cost 8-10 lakh rupees)
- But this desi Magnivisualizer one costs just 10,000.
- Runs on battery- good for rural areas without electricity.
- Even a healthworker with basic training can use it.
- Reverse Dot Blot Hybridization (RDB) Kit
- For Thalassemia (=genetic disease)
- Till now we relied on imported kits. But this desi kits cost just Rs.400
- can detect Thalassemia in kids and even in prenatal diagnosis (of the foetus in pregnant woman)
- Developed by:
- Indian Council for Medical research (ICMR)
- National Institute of Immunohaematolgoy (NIIH)
- Viral disease, spread via mosquitoes. More theory click me
- Until now, we relied on Chinese vaccine. But Now desi vaccine JENVAC by Indian scientists.
- This is the first vaccine to be manufactured in the public-private partnership mode between the ICMR vs Bharat Biotech. (+ input from National Institute of Virology (Pune)
- dual pricing strategy (=~150 rupees for private distributors and cheaper cost to sarkaari hospitals)
He mentioned Mars orbiter mission, ISRO. Already covered in old article, click me
I’m only giving the list from his speech. You refer Prsindia.org to get the salient features of these bills/acts.
|Name||Context in the interim budget speech|
|>12 lakh land titles given to tribals|
|Notified in 2014, has replaced the colonial law of 1894|
|Has been passed. Will give food security to 67% of juntaa. (+ I allotted ~88k crores to Food security Act.)|
|Replaced old act of 1956|
|Passed. Established Statutory regulator|
|Not passed. But until then, government will setup a non-statutory PDMA to start work in 2014-15.|
|Need to amend it, so NSEL-like crisis doesn’t happen again.|
Some burning issues:
|Direct tax code and GST||Not yet passed. FM will release discussion paper on his site.|
|Financial Sector Legislative Reforms Commission||We need to atleast implement some of its recommendations that donot require passing/amending any laws.|
FM made following essay-worthy statements in his speech. I suggest you write 2500 words essays on each of them under 3 hours timelimit @home.
- “India was the first non-Western country – and also the first poor country in the world – to commit itself to a resolutely democratic way of governance.”
- Democracy acknowledges diversity, respects dissent, encourages debate, and decides through elected representatives.
- Neither populism nor majoritarianism nor individualism is an alternative way of governance.
- Not the spear, but scepter swayed with equity alone gives the ruler victory.
These statements are even relevant for “blah blah blah…comment (200 words)” type questions under General studies (Mains). For example,
- Statement #1 can be asked under GS1 (post-independence topic / Decolonization topic).
- #3 can even be asked under GS2 (Important aspects of Governance) or GS4 (Probity in Governance).
- #4 under GS4: (empathy, tolerance and compassion)
Remaining filler material discussed by Chindu, in his speech
Chindu quoted this report in his speech.
- World economic forum has made this report.
- To show that global risk are interconnected. if something bad happens in one country – its aftershocks will be felt everywhere else as well.
They listed total 31 such “Global” risks given. Top ten are:
- fiscal crisis
- structurally high unemployment or underemployment
- income disparity
- water crisis
- climate change
- extreme weather events (Floods, storms, fires)
- food crisis
- governance failure
- failure of a major financial institution
- Political and social instability
Chindu: These are common to all Emerging market economies. (in other words, we are not the only loser, and we are not the losers by our own deeds only).
ya but what’s the point in learning?
- for MCQ: global risk report by World Economic forum (and not IPCC/UN/G20/ASEAN/OPEC.)
- for Essay topic revolving around globalization/IR: you can buildup points parallel to above “top-ten” global risks.
|GDP growth in (%)||2011||2013|
With this data, FM tried to hint that GDP has declined everywhere (on the aftermath of Subprime crisis). In short we are not the only bad performers on GDP angle.
This concludes the 4 parts of Interim [Budget] 2014 article series. MCQs later.
Visit Mrunal.org/Economy For more on Money, Banking, Finance, Budget, Taxation and Economy.