CONTENTS EDITOR-IN-CHIEF AK MISHRA ASSISTANT EDITOR MADHVI MISHRA BUSINESS HEAD DEEPTI SHARMA PR & MARKETING KURANGANAYANI CHETIA OWAIS ALl BHAT KNOWLEDGE PARTNER IANS, RETIRED BUREAUCRATS, CHANAKYA IAS ACADEMY Marketing Offices South Delhi 124, Satya Niketan, Near Dhaula Kuan, 011-64504615 North Delhi 1596, Outram Line, Kingsway Camp, 011-27607721 Jaitley opens coffers for rural Gurgaon M-24, Sector 14,0124-4111571 India, unveils another tax amnesty Chandigarh S.C.047-48, Sector 8c, 8288005468 COVER STORY PAGES 3-24 Jaipur Flora Mansion, Mansinghpura, Tonk Road, 0141 -2709960 COVER STORY ECONOMY Ahmedabad Pages 3-24 Pages 65-69 Sachet 3, Mirambika School Road, Prabhu skips bitter pill of fare and RBI eases overseas funding norms 079-27437067 freight rate hike in rail budget; for startups Pune E c o nomi c Survey predicts 7-7.5% Pradhan Mantri Fasal Beema Yojna Sunder Plaza, MG -19, 020-26050271 growth rate Patna 304- Navyug Kamla Business Park, PRELIMS SPECIAL-2016 East Boring Canal Road, 9905190260 NATIONAL HISTORY Guwahati Pages 25-40 Pages 70-80 •Headley exposes the role of Pak Industrial Revolution in Europe Bld. No. 12, HR Path 6th Byane(W), Zoo Road, Army and ISI in Mumbai attack Revolt of 1857 09650299662 TRAI rules in favour of net Hazaribagh neutrality IIIrd Floor, Koushalya Plaza, 09771869233 CULTURE Jat agitation for quota claims 30 Ranchi Pages 81-84 1st Floor, Sunrise Form, lives in Haryana Miniature art in India Burdwan Compound, Lalpur, 0651-6572979 INTERVIEW GOVT & POLITY Marketing Pages 41-43 Pages 85-94 Naiyar Alam Mob: 8745849321 Deepak Bansal, CSE rank 113 • Fundamental Rights, Ravi Kumar Mob: 9210717358 Landline No. 011-46033950. INTERNATIONAL Email: [email protected] ECONOMICS Pages 44-49 ADDRESS: TA-111, 1st Floor, •Syria ceasefire kicks in Pages 99-101 Public Distribution System Tughlakabad Extn, Okhla Main Road, UN panel rules against Assange’s Biodiversity Near OBC, New Delhi-110019 ‘arbitrary detention’ © All rights reserved China flexes muscles in S. China Sea Nothing may be printed in whole or in part without ESSAYS the Pages 102-107 written permission of the publisher. DEFENCE •Ethics in Media Opinions in the articles are not of the publisher but Pages 50-54 •Student agitation 10 soldiers die in Siachen avalanche of the India showcases naval might writers concerned. All disputes are subiect to Delhi TEST PAPER Jurisdiction only. Chanakya Civil Services Today is a publication of Chanakya Publications Pvt. Ltd.; PAGES 108-116 SCIENCE & TECHNOLOGY Prelims: GS owned andpublished by AK. Mishra from 124, Satya Pages 55-59 Niketan, •Gravitational waves’ discovery APPOINTMENTS creates ripples NewDelhi -110021 and printed by him at First ever death caused by meteorite PAGES 117-118 SPORTS Hilms printer HEALTH PAGES 119-120 87, DSIDC Okhla Phase - 1, Pages 60-64 BCCI rigid on falling in New Delhi -110020 Zika virus worries global health line with Justice Lodha agencies recommendations APRIL 2016 CHANAKYA CIVIL SERVICES TODAY 1 FROM THE EDITOR’S DESK Start your day with positivity; keep the zest boosted throughout life E veryday whenever you wake up in the morning, you feel lighter and in very positive and vibrational state of mind. But as the day goes on; traffic jam, excessive workload at workplace, fight with some closed ones start giving rise to our expectation, disappointments, frustration which then takes away our entire positivity. To keep the positivity alive entire day, you must begin your day with a thought and commitment that no outer environment can affect your inner being. Although it’s not easy, but by regular practice you can bring this state of mind forever. Let’s dig into few tips to add in your daily routine which will help you establish a positive vibrational tone for the rest of the day. This basic healthy routine will help you to align with your natural state of well-being, will give you more clarity, boost up your zest for life and help you manifest harmonious relationships and prospects. Even if some situations in a day deviate you from the starting point, you can gradually get more control over your reaction by continued practice. Meditation: Sit in a quiet and comfortable place and meditate for 15 minutes. Relax and focus on your breathing to align with the frequency of your source. You can get access to your inner self, your actual positive self by releasing your thought of resistance. You can play a soothing music while meditation. Affirmations: Your thoughts and your positive statements are incredibly powerful when your actual self truly believes on those statements. Simple statements like “I am blessed to have good life, I am strong, I am healthy, I am loved, I am peaceful, I am wealthy, I have the power to make my dreams come true or any such statement that resonates with you. Pray: The most propitious time to offer a prayer is when you are in well state of mind, i.e., when you wake up in the morning. You can Thank God for the things you have in life, you can ask for right guidance, clarity in mind for the questions that are troubling you. You can ask for help in becoming a vibrational match to your desires. You can do it either silently or can speak it loud. Be still: Sometimes being still and letting the universe work for you can bring some unexpected wonders to you. Allow yourself to be open to anything that may come up. You may experience a feeling of peace or joy, or perchance some words of encouragement may accumulate into your thoughts. We often get answers of many questions when we end the routine with quiet stillness. Gratitude: Be grateful to universe for all the things in life you are blessed with. Be grateful for your family, friends, health, life, body, your home, your passions or anything that comes to your mind you are thankful for. By focusing more on the wonderful things you have, you can manifest even more wonderful things in your life. In this edition we are publishing the success story and interview experience of Deepak Bansal, who secured All India Rank 113th in Civil Services Examination 2014. His journey to making his dream true has been a rare and highly motivational one. Your precious feedbacks are always welcome. You are also requested to spare some time to tell us how are your finding the magazine and do suggest what more you want to read in it. Best Wishes! AK Mishra Editor-in-Chief, CHANAKYA CIVIL SERVICES TODAY 2 CHANAKYA CIVIL SERVICES TODAY APRIL 2016 UNION BUDGET 2016-17 COVER STORY Jaitley opens coffers for rural India, unveils another tax amnesty Finance Minister Arun Jaitley with Minister of State Jayant Sinha and his ministry officials before presenting the Budget. F ocusing on rural economy and infrastructure with minor additional capital for banks, Jaitley told a press conference later rebate for small taxpayers but amnesty for defaulters, that more money would follow as and when warranted. “The Finance Minister Arun Jaitley unveiled a `19.78 lakh Budget is not the last word on this,” he said, adding he was also open crore ($300 billion) Budget for the Financial Year (FY) 2016-17, to consolidation of commercial banks. earmarking more money for health, literacy and roads. The focus On cutting subsidies, he promised a Bill soon to use Aadhaar on rural economy and the promise to double the income of farmers for direct transfer of cash. Prime Minister Narendra Modi was in five years came against the backdrop of a distressed agrarian quick to appreciate the Budget and said its focus on development economy, fewer jobs and assembly elections in five states this and of agriculture, farmers, women and rural areas will give a major next year. push to India’s agrarian economy. “It will also help the poor man The direct impact on taxpayers from the proposals announced realise the dream of owning a house,” he said. Jaitley also said the during the 100-minute Budget speech will be a `3,000 rebate, government would meet its fiscal targets but said from next year, benefiting 20 million assessees. Those living in rented homes will he proposed to do away with the classification of plan and non-plan get a higher exemption of `60,000 now, against `24,000 earlier. expenditure–a move bound to stir up a controversy. But the tax slabs remain unchanged. “I have weighed the policy options and decided that prudence At the same time, withdrawal of pension upon retirement will lies in adhering to fiscal targets. Consequently, the fiscal deficit be partially taxable. in revised estimated 2015-16 and budget estimates 2016-17 have Jaitley also announced an amnesty for those with disputed tax been retained at 3.9 per cent and 3.5 percent of GDP, respectively,” claims, with a waiver of penalty on amounts up to `10 lakh. He said he said. 300,000 such cases were pending before appellate authorities, for Jaitley enhanced the total expenditure for this fiscal to `19.78 an amount totalling `.5.5 lakh crore. lakh crore from `17.85 lakh crore in the revised estimates for Similarly he also unveiled a limited tax compliance window this fiscal – a hike of 10.7 per cent – while the plan expenditure from June 1 to September 30 for people to declare their undisclosed component was revised upward by 15.3 per cent. incomes, with a tax liability of 45 per cent of value, including the “A broad understanding over years has been plan expenditures surcharge and penalties – together with immunity from scrutiny, are good and non-plan expenditures are bad. This results in skewed in quiry and prosecution. His other steps include a pilot project allocations in the Budget,” he said, adding this would be dispensed to extend the direct cash benefit transfers, currently in areas like with from 2017-18 to focus on revenue and capital classification of cooking gas, to the fertilizer sector, as also `25,000 crore for the expenditure. recapitalisation of state-run banks that are under financial stress Jaitley, a lawyer by profession, decided to bring his fellow on account of mounting bad loans. practitioners under the service tax net of 14 per cent. He also While there were misgivings over money set aside for imposed an across-the-board cess of 0.5 percent on services towards APRIL 2016 CHANAKYA CIVIL SERVICES TODAY 3 COVER STORY UNION BUDGET 2016-17 farmer welfare, which will add 50 paise for every `100 one spends also for human resource development with allocation up by 7 per on food to mobile bills. cent at ` 72,394 crore. He also left the market mood sullen by proposing to hike The Budget also used the opportunity to send out signals to the securities transaction tax for options to 0.05 per cent from 0.017 global investor, seeking to ease the foreign equity norms. Notably, per cent, levying an additional dividend distribution tax of 10 per 100 per cent such equity will now be permitted in multi-brand cent payable by recipients in excess of ` 10 lakh per annum and 1 retailing where the produce sold has been processed and sourced per cent surcharge on luxury cars. locally. This was enough to sully the market mood. The sensitive index In a bid to boost entrepreneurship, a lower corporate tax rate of the BSE dipped sharply to a 52-week low soon after the Finance has been proposed for small firms with a turnover of below `5 Minister read out these proposals, but eventually recovered crore, to 29 plus surcharge and cess, and 100 per cent deduction of slightly towards the end of the day, but still down 0.66 per cent. profits for three out of five years for start-ups set up between April Jaitley said the bulk of his tax plan was in nine categories: 2016 and March 2019. Relief to small assessees, boosting growth and employment, Similarly, to boost ‘Make in India’, changes were proposed incentivising ‘Make in India’, encouraging pension, promoting in customs and excise levies on certain inputs to reduce costs affordable housing, pushing rural economy, reducing litigation, and improve competitiveness in sectors such as IT hardware, simplification of taxation and accountability. capital goods, defence, textiles, minerals fuels, chemicals and Among the various sectors, the allocation for the ministry of petrochemicals, and aircraft and ship repair. agriculture and farmers welfare was enhanced by 93 per cent to Jaitley opened his speech saying while the global economy was `44,485 crore, for rural development by 10.7 per cent at `87,765 in stress, India was still going strong. “The risks of further global crore and for health and family welfare by 13 per cent to `39,533 slowdown and turbulence are mounting. This complicates the task crore. A major boost was also given to infrastructure including of economic management for India,” he said, adding, “We see these energy with a 11.3 per cent hike in the outlay to ` 246,246 crore, as challenges as opportunities.” • Footwear • Various tobacco products other than • Pension plans beedi by about 10-15% • Luxury cars above ` 10 lakh • Routers and • Dining out broadband modems p • Gold bars • Digital video u o • Bottled water recorders g • Air Travel • Set top boxes, CCTV s e c • Branded apparel of more than `1,000 cameras i r P • E-reading devices • Microwave ovens n • Legal services w • Solar lamp o • Goods and services above `2 lakh in cash d • Hybrid electric e • Plastic bags m vehicles • Bill payments o • Braille paper c • Aluminium foil s e • Houses with less c • Ropeway, cable car rides i than 60 sq mt carpet r P • Jewellery articles, excluding silver area jewellery, other than studded with • Sanitary pads diamonds and some other precious stones • Refrigerated • Imported imitation jewellery containers • Lottery tickets 4 CHANAKYA CIVIL SERVICES TODAY APRIL 2016 UNION BUDGET 2016-17 COVERH SeTaOltRhY A slew of measures for rural development LPG for all poor households U nveiling the Union Budget for 2016-17, Finance Minister Arun The government will provide LPG connections Jaitley announced a string of measures for the development of rural to all poor households, Union Finance Minister areas. Arun Jaitley announced while presenting the “A sum of `2.87 lakh crore will be given as grant in aid to Gram annual Budget in the Lok Sabha. Panchayats and municipalities as per the recommendations of the 14th The government has set aside Finance Commission. This is a quantum jump of 228 per cent compared to a sum of `2,000 crore in this the previous five-year period,” Jaitley said. year’s budget to meet the initial He observed that the funds he has allocated would translate to an average cost of providing these LPG assistance of over `80 lakh per Gram Panchayat and over `21 crore per connections. urban local body. “We have decided to embark “There is an urgent need to focus on areas of drought and rural distress. upon a massive mission to Every block in these distress areas will be taken up as an intensive block under provide LPG connection in the name of women Deen Dayal Antyodaya Mission,” the Finance Minister said. members of poor households. This will benefit “As many as 300 rurban clusters will be developed under the Shyama about 1 crore 50 lakh households below the poverty Prasad Mukherjee Rurban Mission launched by the honourable Prime line in 2016-17. The scheme will be continued for Minister recently. These clusters will incubate growth centres in rural areas at least two more years to cover a total of five crore by providing infrastructure amenities and market access for the farmers,” BPL households,” said Jaitley. he said. Cluster Facilitation Teams will be set up under Mahatma Gandhi The minister said the step would ensure universal National Rural Employment Guarantee Act (MGNREGA) to ensure water coverage of cooking gas in the country, empower conservation and natural resource management. Jaitley has allocated women and protect their health, reduce drudgery `38,500 crore for MGNREGS in this fiscal. and the time spent on cooking and provide “The government is committed to achieve 100 per cent village employment for rural youth in the supply chain of electrification by May 1, 2018” Jaitley said, allocating `8,500 crore cooking gas. towards rural electrification. Overall, `87,765 crore was allocated for rural According `2,000 crore earmarked to development as a whole. to the 2011 provide LPG connection “Priority allocatioHn firgomh cleingtrhaltlys sponsored schemes will be made to C e n s u s , to poor households; connection reward villages that have become free from open defecation,” he added. about 142 in the name of women members “We now plan to launch a new Digital Literacy Mission Scheme for rural m i l l i o n Plan to benefit 1 crore 50 India to cover around six crore additional households within the next three rural Indian lakh BPL households years,” he said, asserting on the need to spread digital literacy in rural India. households Total 5 crore BPL “The National Land Record Modernisation Programme has been use firewood households to be covered; 142 revamped under the Digital India Initiative and will be implemented as and other million rural Indian households a central sector scheme with effect from April 1, 2016,” Jaitley said. He solid fuels use firewood and other solid announced a new scheme, Rashtriya Gram Swaraj Abhiyan with initial that include fuels according to 2011 Census allocation of `655 crore. animal dung, “We have decided to embark upon on a massive mission to provide charcoal, crop waste and coal as the primary liquefied petroleum gas (LPG) connection in the name of women members of source of household energy. poor households. I have set aside a sum of `2,000 crore in this year’s Budget “This will significantly improve the health to meet the initial cost of providing these LPG connections,” he said. of women and those BPL families who suffer Jaitley said the government had targeted agriculture credit of `8.5 lakh adversely from the ill-effects of chulha cooking,” crore in the fiscal 2015-16, which was being enhanced to `9 lakh crore in the said Jaitley. next fiscal. According to experts, having an open fire in the He also said that `19,000 crore will be allocated for rural roads kitchen is like burning 400 cigarettes an hour. development programme. The time has come to remedy this situation, the Finance Minister said. Promoting digital literacy in rural India The government will soon launch two novel schemes to spread digital literacy in rural India for deriving greater benefit from demographic advantage. Announcing that the government had approved the National Digital Literacy Mission and Digital Saksharta Abhiyan (Disha) to promote digital literacy, Finance Minister Arun Jaitley said in his Budget speech that the details of the twin schemes would be spelt out separately. Of the 16.8 - crore rural households across the country, 12 crore did not have computers and were unlikely to have digitally literate persons, Jaitley said. APRIL 2016 CHANAKYA CIVIL SERVICES TODAY 5 HCOeVaElRth STORY UNION BUDGET 2016-17 In a nutshell Govt to give statutory status to Aadhaar Overall allocation of `87,765 In a bid to ensure that benefits of the government subsidies directly reach those who deserve it, the government has decided to accord crore for rural development statutory status to Aadhaar, Finance Minister Arun Jaitley said. The government would introduce a Bill for targeted delivery of financial and other subsidies, benefits and services by using the Aadhaar `2.87 lakh crore grant-in-aid to framework, he announced in his Budget speech. gram panchayats and municipalities, “A social security platform will be developed using Aadhaar to accurately target beneficiaries. This will be a transformative piece of a quantum jump of 228% vis-à-vis legislation which will benefit the poor,” said Jaitley. previous five-year period Till date, over 98 crore Aadhaar numbers have been generated. Aadhaar numbers have been seeded in 11.19 crore direct benefits `19,000 crore allocated for rural transfer accounts, out of total 16.5 crore beneficiaries. roads development The statutory status will provide a legal foundation to Aadhaar for expanding its use for a range of 300 rurban clusters to be developmental purposes. developed under the Shyama Prasad Jaitley also said that ration shops would be automated. “Of the 5.35 Mukherjee Rurban Mission lakh Fair Price Shops in the country, `8,500 crore allocated for rural automation facilities will be provided in 3 lakh Fair Price Shops by March 2017.” electrification Digital Literacy Mission Bill introduced Scheme to cover 6 crore rural households in next 3 years As announced in the Budget, the government introduced the Aadhaar Rashtriya Gram Swaraj (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Bill, 2016 in the Lok Sabha on March 3. The Bill to Abhiyan with initial allocation of provide Aadhaar statutory backing and make it the mainstay of the `655 crore government’s direct benefit transfer (DBT) programme for subsidies was tabled as a Money Bill. Jaitley targets ‘income security’ to farmers with agri measures C alling agriculture and farmers’ welfare a pillar of the effective implementation of the Prime Minister Fasal Bima Yojana government’s agenda to transform India, Finance Minister and `15,000 crore for loan interest subvention. Arun Jaitley said in his Budget speech that the government Noting only 46 per cent of the 141 million hectares of net would strive to double the income of farmers by 2022. cultivated area in the country was covered by irrigation, he said Jaitley said the target for agricultural credit in the coming the Pradhan Mantri Krishi Sinchai Yojana would be implemented fiscal would be an all-time high of `9 lakh crore and an online in a mission mode with an aim to irrigate 28.5 lakh hectares, while procurement system would be undertaken through the Food 89 languishing projects under Accelerated Irrigation Benefits Corporation of India, while laying stress on optimal utilisation Programme (AIBP) would be fast-tracked to help 80.6 lakh hectares. of water resources, creating new infrastructure for irrigation, “These projects require `17,000 crore next year and `86,500 conserving soil fertility and connectivity from farm to markets. crore in the next five years. We will ensure that 23 of these projects He said that there was a need to think beyond ‘food security’ and give back to farmers a sense of ‘income security’. “The government will reorient its interventions in the farm and non-farm Paramparagat Krishi sectors to double Vikas Yojana will bring five the income of lakh acres under organic farming over the farmers by 2022,” he said. a three-year period. Allocating Organic Value Chain `35,984 crore Development in the North-East for agriculture region will help in promoting organic and farmers’ farming. welfare, he said A provision of `412 crore made that `5,500 crore has been for these schemes. allocated for 6 CHANAKYA CIVIL SERVICES TODAY APRIL 2016 UNION BUDGET 2016-17 COVERH eSTaOltRhY are completed before March 31, 2017,” he said. Jaitley said organic farming was being promoted through The minister said a dedicated long-term irrigation fund would schemes such as ‘Paramparagat Krishi Vikas Yojana’ and ‘Organic be created in National Bank for Agriculture and Rural Development Value Chain Development in North East Region’ and ` 412 crore with an initial corpus of about `20,000 crore, while a major have been made available for the same. programme for sustainable management o f He said `500 crore had been assigned to pulses under the groundwater resources had been National Food Security Mission and the number of districts prepared with an estimated cost covered had been increased to 622, while a Unified Agricultural of `6,000 crore and proposed for Marketing e-platform would be dedicated to the nation on the multilateral funding. birth anniversary of B.R. Ambedkar on April 14. Meanwhile, over five lakh farm The minister said four new projects would be taken up to make ponds and wells and 10 lakh compost dairying more remunerative pits will be taken up through the Mahatma Gandhi National Rural Krishi Kalyan Cess Employment Guarantee Act scheme. Jaitley said the government aimed to cover all 14 crore farm holdings under the Soil Health The Finance Minister is hoping to mop up around ` 5,000 Card Scheme by March 2017 and 2,000 model retail outlets will be crore with his new Krishi Kalyan Cess at 0.5 per cent on all taxable provided with soil- and seed-testing facilities during the next three services during 2016-17. year. Fertilizer companies will also co-market city compost, which The cess that will come into force from June 1, 2016 increases the efficacy of chemical fertilisers. will be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers. Organic farming promotion DBT of fertilizer subsidy The government has launched two important schemes to increase crop yield in rain-fed areas, including India’s north eastern states. The government will introduce on a pilot basis direct transfer “To increase crop yields in the rain-fed areas, which account of subsidy on fertilizers to the farmers on the lines of Direct for nearly 55 per cent of the country’s arable land, organic Benefit Transfer (DBT) of LPG. The DBT of fertilizer will be farming is being promoted. Towards this end, the government has introduced on a pilot basis in select districts across the country launched two important schemes which are Parmparagat Krishi with a view to improving the quality of service delivery to farmers, Vikas Yojana and Organic Value Chain Development in north east Arun Jaitley said in his Budget speech. region,” Arun Jaitley said while presenting the annual Budget. The emphasis is on value addition so that organic produce In a nutshell grown in these parts find domestic and export markets, Jaitley said. Allocation for agriculture and farmers Irrigation welfare: `35,984 crore, up from `34,699 in 2015-16 Agriculture credit enhanced to `9 lakh crore from Pradhan Mantri Krishi Sinchai Yojana will be `8.5 lakh crore implemented in a mission mode with an aim to Allocation for crop insurance (Pradhan Mantri fasal irrigate 28.5 lakh hectares; Beema Yojna): ` 5,500 crore 89 projects to be fast-tracked to cover 80.6 lakh For loan interest subvention: `15,000 crore hectares; these projects require `17,000 crore All 14 crore farm holdings to be covered under the next year and `86,500 crore in the next five Soil Health Card Scheme by March 2017; `386 crore years; 23 of these projects are completed before allocated for this March 31, 2017 2,000 model retail outlets to be provided with soil- and Long-term irrigation fund to be created in Nabard seed-testing facilities during the next three year with an initial corpus of about `20,000 crore `500 crore assigned to pulses under the National Food Security Mission; number of districts covered A programme for sustainable management of increased to 622 groundwater resources prepared; estimated cost A Unified Agricultural Marketing e-platform is `6,000 crore, multilateral funding proposed to be dedicated to the nation on April 14, birth anniversary of B.R. Ambedkar MGNREGA allocation hiked by ` 3,800 crore The NDA government, which had earlier raised doubts over the had written in this regard to Jaitley December on 30 last year efficacy of MGNREGA, has increased its allocation by over apprehending a “shortfall of Rs 5000 crore” in the scheme for ` 3,800 crore in 2016-17, with Finance Minister Arun Jaitley this financial year if the promised additional ` 5000 crore laying down the road map for rural development in the Budget. was not granted. Earlier in February, the government said it “ `38,500 crore have been allocated for MGNREGA in 2016-17. had “transformed” UPA’s flagship rural jobs scheme giving it If the total amount is spent, it will be highest record funds to boost economic growth. `38,500 crore allocated budget spend on MGNREGA,” Jaitely said in his The Mahatma Gandhi National Rural speech. for MGNREGS, up from Employment Guarantee Act (MGNREGA) Reminding the government of its promise, `34,699 crore in 2015-16 was notified on September 07, 2005. Rural Development Minister Birender Singh APRIL 2016 CHANAKYA CIVIL SERVICES TODAY 7 COVER STORY UNION BUDGET 2016-17 Finance Minister Jaitley sticks to the path of fiscal consolidation D eclaring that prudence lies in of revenue deficit for this fiscal had come adhering to fiscal targets, Finance down to 2.5 per cent from the previous Fiscal deficit targets Minister Arun Jaitley in his estimates. He said indirect tax measures kept at 3.9% this year, Budget retained the “much awaited figure” would lead to `21,670 crore in additional 3.5% in 2017 of fiscal deficit for the current financial revenue while his direct tax measures year at 3.9 per cent. would result in a loss of `1,060 crore, Revenue Deficit target from 2.8% The government has targeted reducing leading to a net revenue gain of `19,610 to 2.5% in Revised Estimate for the fiscal deficit to 3.9 per cent of the gross crore. FY 2015-16 domestic product (GDP) in the current The revised estimate (RE) of gross financial year, and reduce it further to 3.5 tax collections for this fiscal is around Plan expenditure pegged at `5.50 per cent in 2016-17. The fiscal deficit for `14.60 lakh crore, as against the Budget lakh crore under, an increase of 2014-15 touched 4.1 per cent of the GDP. estimate (BE) of nearly `14.50 lakh crore. 15.3% However, while retaining the fiscal The budget estimate for the next fiscal on deficit target for the current fiscal, Jaitley this count has been pegged at `16.30 lakh A committee to be formed to said a committee would review the Fiscal crore. review Fiscal Responsibility and Responsibility and Budget Management The government’s fiscal deficit target Budget Management (FRBM) Act (FRBM) Act to look into the feasibility of 3.9 per cent for the current fiscal of having a range for fiscal deficit targets “seems achievable”, the Economic Survey to determine a fiscal deficit range instead of a set figure. presented before Parliament a few days for the medium term instead of “Since public investment had to be before the Budget said. explicit year-wise targets in order kept high, we have revised the target for Significant increase in revenue to provide necessary policy space the second year running,” he said while receipts, led by buoyant indirect tax to the government to deal with making a case for having a targeted range collection, higher level of capital macroeconomic developments. for fiscal deficit to provide the necessary expenditure on the plan side, lower policy space to the government. subsidies and enhanced untied resources From fiscal year 2017-18, the He further said that while adhering transferred to the states following the distinction between Plan and to fiscal targets, it was also ensured acceptance of recommendations of the non-Plan expenditure will be that the development agenda was not 14th Finance Commission were the basis done away with, once the 12th compromised. He made a massive push for of the government’s optimism on this Five-year Plan ends in 2016-17. the infrastructure and agriculture sectors. count, the Survey said. The finance minister said the estimate BUDGET 2016-17: STATE OF THE ECONOMY Budget Estimates FY 2016-17 Revised Estimates FY 2015-16 Total outlay (receipts and expenditure) 19,78,060 17,85,391 Revenue receipts 13,77,022 12,06,084 Capital receipts 6,01,038 5,79,307 Non-plan expenditure 14,28,050 13,08,194 Plan expenditure 5,50,010 4,77,197 Revenue Deficit 3,54,015 3,41,589 F i s c a l d e f i c i t 5,33,904 5,35,090 All figures in `crore TAX COLLECTIONS Budget Estimates FY 2016-17 Revi sed Est imates FY 201 5-16 Gross Tax Revenue 16,30,888 14,49,490 Customs 2,30,000 2,08,336 Income Tax 3,53,174 3,27,367 Union Excise Duties 3,18,670 2,29,808 Corporation Tax 4,93,923 4,70,628 Service tax 2,31,000 2,09,774 All figures in ` crore 8 CHANAKYA CIVIL SERVICES TODAY APRIL 2016 UNION BUDGET 2016-17 COVERH eSTaOltRhY Jaitley’s capital infusion in state-run banks falls short of expectations C ontinuing government efforts to deal with the high levels sheets by March 2017 following an order from the Reserve Bank of non-performing assets (NPAs), or bad debts, of state-run of India (RBI). The clean-up drive has meant a surge in bad loans banks, Finance Minister Arun Jaitley allocated `25,000 and provisions against bad loans, which in turn have eaten into crore towards their recapitalisation in the next fiscal. profit and capital adequacy ratios. Jaitley plans to provide `25,000 crore capital each in the current and next financial years, while `20,000 crore will be Funds to come in 3 tranches provided during 2017-18 and 2018-19. In his Budget speech, Jaitley also proposed bringing down government’s stake in public The `25,000 crore this year is being provided through three sector banks to 52 per cent post-recapitalisation. tranches. Around 40 per cent of the amount is to be given to those However, with regard to IDBI Bank, the government intends banks which require support, and all PSBs will be brought to the to lower its stake to even below 50 per cent. It currently holds level of at least 7.5 per cent core capital by the end of fiscal 2016, 80.16 per cent in IDBI Bank. the finance ministry said. He said the government’s “first and immediate agenda” was to In the second tranche, 40 per cent of capital is to be allocated strengthen the banks by recapitalising them and thereafter look to State Bank of India, Bank of Baroda, Bank of India, Punjab at “consolidation”. National Bank, Canara Bank and IDBI Bank. ‘Not the last word’ The remaining 20 per cent is to be allocated to the banks based on their performance during the three quarters in the current As disappointment ran high over the funds that fell way year. short of expectations, Jailtey said a day later that the `25,000 A day before crore “should not be considered as the last word” with respect to the Budget, the recapitalisation of state-owned banks and that the government g o v e r n m e n t was committed to providing more capital. formed the Banks In July 2015, the government had presented in Parliament a Board Bureau that supplementary demand for grants to provide for `12,000 crore will give advice on towards recapitalisation of public sector banks (PSBs). how to recover the In August 2015, the government committed to a capital bad loans of state- infusion of `70,000 crore in state-run banks over a four-year run banks. Apart period. Of this, `25,000 crore was to be provided in 2015-16 and from advising on again in 2016-17, and `10,000 crore each in 2017-18 and 2018- ways of raising 19. Since then, the perceived capital requirements of state-owned funds and dealing with stressed assets, it will also recommend banks have risen as they have moved to clean up their balance appointment of directors in PSBs. Bankruptcy code among finance sector reforms proposed in Budget D eclaring financial sector reforms as being one of the “nine insolvency cases and improve recoveries of amount lent to pillars” of Budget 2016-17, Finance Minister Arun Jaitley companies. The draft Bill has proposed a timeline of 180 days, said a comprehensive bankruptcy code would be enacted extendable by another 90 days, to resolve cases of bankruptcy. and legislation brought in to deal with illicit deposit taking schemes. “A systemic vacuum exists with regard to bankruptcy Norms eased for ARCs situations in financial firms. A Comprehensive Code on Resolution of Financial Firms will be introduced as a Bill in To improve the management of stressed assets in the banking Parliament during 2016-17,” Jaitley said while presenting the sector, the government has proposed to allow sponsors of Asset Budget for the next fiscal. Reconstruction Companies (ARCs) to hold up to 100 per cent stake This Code will provide a specialised resolution mechanism to in companies and even allow non-institutional investors to invest deal with bankruptcy situations in banks, insurance companies in Securitization Receipts. and financial sector entities, the minister said. “This Code, At present, sponsors of any ARC, typically banks or financial together with the Insolvency and Bankruptcy Code 2015, when services companies, cannot hold more than 50% stake in the enacted, will provide a comprehensive resolution mechanism for company. The remaining stake has to be held by individuals. our economy,” he added. Jaitley also announced that the Reserve Bank of India (RBI) The Insolvency and Bankruptcy Bill, 2015, proposes to would facilitate retail participation in government securities and enact a single bankruptcy code and set deadlines for processing that state-run general insurance companies would now be listed in insolvency cases. the stock exchanges. The proposed law aims to reduce delays in resolution of APRIL 2016 CHANAKYA CIVIL SERVICES TODAY 9