The Union Budget 2014-15

Summary

This Forum of Free Enterprise booklet collects three commentaries on India’s Union Budget 2014-15, the first budget of the newly elected BJP government under Prime Minister Narendra Modi. In the rendered pages, the lead essay by Minoo R. Shroff (President, Forum of Free Enterprise) assesses Finance Minister Arun Jaitley’s debut budget as an ‘encouraging but halting’ first step that gestures toward reform without decisively confronting subsidies, inflation, retrospective taxation, or public-sector reform. A second contribution surveys the budget against the Economic Survey’s structural-reform prescriptions, and a third (by Prof. Kanu H. Doshi) walks through the direct-tax and capital-gains amendments in the Finance Bill. The volume is sponsored by the Shailesh Kapadia Memorial Trust and frames the budget from a classical-liberal, pro-market standpoint, welcoming infrastructure, manufacturing, and FDI measures while pressing for bolder fiscal and structural action.

Essays

Encouraging but Halting Debut of the New Finance Minister

By Minoo R. Shroff

Minoo R. Shroff reads the 2014-15 Union Budget as the earnest but incomplete debut of a new Finance Minister operating under a fresh and decisive electoral mandate. In the rendered pages he credits the budget with incorporating several reform concepts the Prime Minister had earlier signalled and with strong signals on infrastructure (smart cities, the Delhi-Mumbai Industrial Corridor, industrial corridors and a National Industrial Corridor Authority), manufacturing resurgence, ease of doing business, and liberalised FDI caps in defence and insurance (26% to 49%). He is sharply critical, however, of what the budget left undone: the failure to remove the retrospective tax amendment, continued aversion to confronting subsidies and consumer inflation, the unhealthy state of public-sector banks and the obsession with retaining 51% control, and a budget strategy he characterises as incremental rather than the ‘bitter pills’ the moment demands. He welcomes the proposal for an Expenditure Management Commission while warning it must not be staffed only by bureaucrats. Shroff concludes that the budget is unlikely to transform the outlook on its own, but that full implementation of the work-in-progress proposals could underpin a moderate growth recovery toward 5.4-5.9% real GDP in 2014-15.

• Reads Jaitley’s first budget under the new BJP government as ‘encouraging but halting’ — reformist in intent, incremental in execution.
• Welcomes infrastructure thrust: 100 Smart Cities, Delhi-Mumbai Industrial Corridor, road/NHAI investment, and a National Industrial Corridor Authority.
• Praises FDI liberalisation (defence and insurance raised from 26% to 49%) but notes control stays with Indian nationals.
• Criticises the failure to remove the retrospective tax amendment as a major disappointment for foreign investors.
• Faults continued aversion to tackling subsidies, consumer inflation, and the 51% government stake in weak public-sector banks.
• Backs the proposed Expenditure Management Commission but warns against staffing it solely with bureaucrats.
• Projects a moderate growth recovery toward 5.4-5.9% real GDP for 2014-15 if proposals are implemented in full.

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