- Prologue
- 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
A: The Three Funds
In his budget speech, FM mentioned three funds
- Nirbhaya
- Innovation fund
- VC for SC
Letās check them one by one
Fund #1: Nirbhaya Fund
- 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 whatās new in Interim Budget 2014?
- Nirbhaya fund made non-lapsable (meaning, even if money is unspent, itāll 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]
Criticism:
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 āsymbolicā gesture.
Fund #2: Innovation @Grassroot
- 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.
Fund #3: Venture Capital fund for SC Entrepreneurs
- Under IFCI [Industrial Finance Corporation of India]
- To promote entrepreneurship among SC ā theyāll receive finance @concessional rates.
- FM gave 200 crores in Interim budget 2014
In short,
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 |
B: Three Schemes
Three schemes related to Human resource development (HRD), mentioned in his speech. (The usual schemes- MNREGA, Indira Awas etc. nothing changed.)
HRD#1: Central Scheme for Interest Subsidy CSIS
- not a brand new scheme.
- already announced by FM Pranab in 2009ās 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) |
HRD#2: NSDC certificate
- under National Skill Development Corporation (Ownership: 51% private ; 49% FM)
- NSDCās 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 āRatingā given in your certificate.
- Chindu announce 1k crore in interim budget for this.
HRD#3: UDAAN
- 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.
One Rank one pension
Although not really an HRD scheme, but letās 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
3 funds |
|
3 schemes |
+ One rank one pension. |
now comes the major development:
C: Scheme Funding: flexibility to states
Until 2012
feature | consequence |
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 ministerās 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
before | after |
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, weāll allot money as āCentral assistance to State plansā (rather than as funds under Central plans.) => States get greater authority and responsibility.
Observe:
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/UTās plan rather than its own five year plan.
Consequences:
- lot of money will be transferred to Stateās 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 onā¦
Their hands are no longer ātiedā 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, āSince Iāve 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)ā
- That way, Unionās 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
D: Manufacturing Sector
Nothing new under the sun. Chindu merely listed the old achievements.
D1: National Manufacturing Policy
- 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
D2: NIMZ (Infra for Manufacturing)
- National Investment and Manufacturing Zones (NIMZ)
- theyāre 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:
region | industrial corridor |
North, the āshoulderā | Amritsar and Kolkata |
North-Western State | Delhi Mumbai |
South-Western States |
|
NIMZ vs SEZ: whatās the difference?
NIMZ | SEZ | |
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 |
innovation/quality? |
|
not specified |
single window clearance to files | yes | yes |
D3: Khadi Mark
- 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.
D4: National Agro Forestry Policy 2014
- 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)
Policy highlights:
- 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 āAgroforestry Commissionā to look after this matter.
- Will provide marketing opportunity to tribals- agroforestry produce ā timber, fruits, vegetables, medicinal plants.
- Sustainable crop production, combating climate change, R&D, HRD and other fancy things.
D5: Misc. Fodder points
Mfg. Exports
- 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.
FDI
- we have liberalized the FDI policy to attract larger investments in telecommunication, pharmaceuticals, civil aviation, power trading exchanges and multi-brand retail.
I: Infrastructure related
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.
Powerplan | development |
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
Phase | Till March |
First | 2013 (this has ended) |
Second | 2017 (we are under second phase) |
Third | 2022 |
2014: we’ll initiate four ultra-mega solar power projects (each ~500MW). or at least thatās 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 |
|
CCI (infra) | Cabinet Committee on infrastructure. No longer exists. It is merged with Cabinet Committee on Economic Affairs (CCEA) |
PMG |
|
Banking Finance Related
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
- Weāll create a single record for all financial assets of every individual (be it FD, mutual funds, Insurance whatever.=easy to monitor tax evasion.)
- Weāll reform the regulatory systems so that Indian companies can easily raise money/finance via
- via ADR/GDR from abroad
- via Rupee-denominated corporate bonds
- Weāll help international investors to invest in such Indian bonds.
[GS3] Health/Science tech related
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
#1: AV Magnivisualizer 4 cervical cancer
- 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.
#2: RDB Kit 4 Thalassemia
- 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)
#3: JENVAC 4 Japanese Encephalitis
- 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)
#4: Mangalyaan
He mentioned Mars orbiter mission, ISRO. Already covered in old article, click me
[Polity] Bills/Act/Legal issues in Budget speech
Iām 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 |
|
Not passed |
|
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. |
[Essay] statements from Interim Budget speech
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.
- āIndia was the first non-Western country ā and also the first poor country in the world ā to commit itself to a resolutely democratic way of governance.ā
- 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 āblah blah blahā¦comment (200 words)ā 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)
Appendix = Excuses, Excuses
Remaining filler material discussed by Chindu, in his speech
#1: Global Risks 2014 report
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 ā its aftershocks will be felt everywhere else as well.
They listed total 31 such āGlobalā 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 whatās 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 ātop-tenā global risks.
2: #GDP down everywhere
GDP growth in (%) | 2011 | 2013 |
World | ~4 | 3 |
Eurozone | — | 0.2% |
China | 9.3 | 7.7 |
India | 7.5 | 4.9 (CSO) |
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.
sir aapka jawab nhi
sir aap ase hi explain karte jao
kasam se sir
bina coaching ke upsc nikal jyege sabki
asa to koi coaching wala bhi nhi abta pata hai
sir u r greatest
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Sir ki mehanat bekar nahi jani chahiye..Is Nek bande ko tahe dil se sukariya.
Sir PART III link in the PROLOGUE PART of this article isn’t working.. please look into it.. Thank You. :)
excellent explanation….the topics i was not able to understand…. Mrunal sir u explained in an excellent way… so easy to understand….Thanks a ton…..
great job sir
Luv d wy u use funny things to mk it understandable….
Highly explanatory, neve before I saw anywhere, about RBI policy rates, as lucid as I found here. Even a lay man can easily understand the policy rates of RBI and how they show impact on our economy.My special thanks for placing such a useful information particularly for SBI po aspirants
Mrunal, you have mentioned under the Agroforestry Policy that it falls under MoEF, but I was reading the official report on Agroforestry Policy. it mentions- “The Ministry of Agriculture has the mandate for agroforestry. Agroforestry Mission / Board will be located in the Department of Agriculture and Cooperation
(DAC) in the Ministry of Agriculture (MoA) ”
Kindly Clarify as it is an important aspect of the policy!
Thanks!
This was the most difficult series ever. I perhaps read this for the forth time and still not able to completely comprehend.
Mrunal Sir,
Please clarify my doubt regarding the funds allocation by Center to State:
Q1) Will Central govt allocate funds to both state’s plan + Central schemes to Consolidated Fund of State from now on? – My understanding is Yes
Q2) Money allocated for central schemes execution for state should be used only for central schemes. Is it??
which means States only have liberty for prioritizing the central schemes that are to be implemented. If the answer is states can use it for purposes outside the central schemes => Very purpose of developing Central schemes is defeated.
Thanks in advance :)