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Finance Minister P. Chidambaram presented one of the most highly anticipated Indian budgets of recent years on Thursday, as the government looks to rein in a bloated fiscal deficit and restore confidence in Asia's third-largest economy.
He started his speech by saying that average economic growth rate in 11th Plan period is 8%, highest ever in any Plan period and that economic space is constrained due to high fiscal deficit, lower savings and investment and tight monetary policy.
He said that current account deficit continues to be high due to excessive dependence on oil, coal and gold imports and slowdown in exports and that India does not have choice between welcoming and spurning foreign investment. He termed FDI as 'imperative'.
He said that faced with huge fiscal deficit, he has no choice but to rationalise expenditure, for which "battle against inflation must be fought at all fronts".
Chidambaram claimed that during the last one fiscal year, UPA has brought down headline WPI inflation to 7% and core inflation to 4.2%. However, he termed food inflation as 'worrying'.The Plan expenditure in 12th Five Year Plan has been revised to Rs 14,30,825 crore or 96% of budgeted expenditure and Budget expenditure is Rs 16,65,297 crore and Plan expenditure is Rs 5,55, 322 crore.
The revised expenditure target is Rs 14,30,825 crore or 96 per cent of Budget estimate for this fiscal. In 2013-14, the budget estimate is Rs 16,65,297 crore.
He said the one overarching goal of the UPA government is to provide education and skills to youth for securing jobs in the 2013-14.
Rs 37,330 crore has been allocated for Ministry of Health & Family Welfare in FY14.
Chidambaram allocated Rs 3,511 crore to Minority Affairs Ministry which is 60% of the revised estimates.
Rs 65,867 crore allocated to Ministry of HRD in 2013-14.
In other allocations, Rs 4,727 crore for medical education and research and Rs 1,069 crore to be given to Department of Ayush.
(Also read: Why tour operators are upset with Chidambram)
In the key area of agriculture, Chidambaram allocated Rs 27,049 crore and for rural development programmes he set aside Rs 80,194 crore. About Rs 33,000 crore has been provided to UPA's flagship programme National Rural Employment Guarantee Act. To improve agricultural production in eastern Indian states and spawn a green revolution they will get Rs 1,000 crore. Chidambaram said rice output increased in Assam, Odisha, Jharkhand and West Bengal during FY13.
A Rs 7 lakh crore target has been fixed for agri credit for 2013-14 as compared to Rs 5.75 lakh crore in the current year, said Chidambaram.
The finance ministry is providing Rs 13,215 crore to the mid-day meal scheme. Chidambaram claimed foodgrain production in 2012-13 will be over 250 million tonnes.
Jawaharlal Nehru National Urban Renewal Mission got an almost double allocation with Rs 14,873 crore for urban transportation for FY14 as against Rs 7,880 crore in the current fiscal.
For the corporate sector, Chidambaram plans to issue inflation-indexed bonds and proposes capital allowance of 15% to companies on investments of more than Rs 100 crore. In a major boost for infrastructure sector, four Infrastructure debt funds have been registered. What more, tax free bonds issue will be allowed up to Rs 50,000 crore in 2013-14 strictly based on capacity to raise funds from the market.
In order to encourage SMEs a company investing Rs 100 crore or more in plant and machinery in April 1, 2013 to March 31, 2015 will be allowed 15 % investment deduction allowance apart from depreciation. SIDBI's re-financing facility to MSMEs will be doubled to Rs 10,000 crore. Also, small and medium companies to be allowed to listed on MSME exchange without making a public offer
Rs 10,000 crore have been set aside for incremental cost for National Food Security Bill over and above food subsidy. Rs 5,387 crore are to be allocated for integrated watershed programme for farmers in 2013-14, a whopping increase from Rs 3,050 crore in the current fiscal. Rs 5,000 crore will be made available to NABARD to finance construction of godowns and warehouses.
The Finance Minister lamented that many manufacturing projects have been stalled due to regulatory processes due to which the government has decided to constitute a regulatory authority for the road sector.
The Rajiv Gandhi Equity Scheme (RGESS) will be liberalised to allow first time investor to invest in mutual funds and equity.
To encourage home buyers, a first housing loan of up to Rs 25 lakh would get additional deduction of interest of up to Rs 1 lakh in 2013-14. The Department Of Industrial Policy & Promotion and Japan International Cooperation Agency are preparing a plan for Chennai- Bengaluru Industrial corridor.
The FM promised that oil and gas exploration policy will be reviewed and moved from profit sharing to revenue sharing. He also assured that a policy on exploration of shale gas is on the anvil. Chidambaram said the contentious natural gas pricing policy will be reviewed and the uncertainty shall be removed.
On shipping industry front, two new major ports will be set up in West Bengal and Andhra Pradesh. The coal imports during Apr-Dec 2012 have crossed 100 million tonnes and are expected to go up to 185 million tonnes in 2016-17.
In a first of its kind, the government will set up India's first women's bank as a public sector bank by October 2013. Chidambaram asked state governments to prepare financial restructuring plan for power distribution companies at the earliest. He promised that the 5 million tonnes Dabhol LNG import terminal to be operate at full capacity in 2013-14.
Incubators set up by companies in academic institutions will from now on qualify for Corporate Social Responsibility (CSR) activities. There will be a capital infusion of Rs 14,000 crore in public sector banks in FY14 and Rs 6,000 crore to be allocated for rural housing fund in 2013-14.
National Housing Bank (NHB) to set up urban housing bank fund and Rs 2,000 crore will be allocated in this regard, Chidambaram said. Insurance companies will be empowered to open branches in Tier-II cities with approval of Insurance Regulatory and Development Authority. For speedy redressal of insurance claim disputes public sector general insurance companies will set up adalats to clear them. The Rashtriya Swasthya Bima Yojana benefit shall henceforth be extended to rickshaw pullers, auto and taxi drivers and sanitation workers.
The foreign institutional investors will be allowed to participate in exchange traded currency derivatives. An investor with stake of 10% or less will be treated as FII and any stake more than 10% will be treated as FDI. A Rs 86,741 crore capital expenditure committed to Defence in 2013-14.
A National Institute for Sports to train coaches will be set up at Patiala at a cost of Rs 250 crore. Grant of Rs 100 crore each to AMU (Aligarh), BHU (Varanasi) and TISS (Guwahati) and INTACH. A 'Nirbhaya Fund' of Rs 1,000 crore to empower women and provide safety in the wake of the Delhi gang-rape incident. The fund is named after the moniker was given to the girl who was gang raped in Delhi.
Rs 5,87,082 crore to be transferred to states under share of taxes and non plan grants in 2013-14. Chidambaram said 11 lakh beneficiaries have received benefit under Direct Benefit Transfer scheme in FY13. The non plan expenditure is pegged at Rs 11,09,975 crore for 2013-14.
No change in slabs and rate for personal income tax. A tax credit of Rs 2,000 will be provided to every person to having income of up to Rs 5 lakh. The move, Chidambaram says, will benefit 1.8 crore people. He gave a few numbers during the speech. In 2011-12, tax-GDP ratio was 5.5 per cent for direct taxes and 4.6 per cent for indirect taxes.
Chidambaram promissed to reduce fiscal deficit to 3% by 2016-17 and revenue deficit to 1.5% of GDP. In other tax reforms a Tax Administration Reform Commission will be set up to regularly review tax law applications. He felt transactions on immovable properties is usually undervalued and therefore a TDS of one per cent will be levied on value of properties above Rs 50 lakh. However, agriculture land is exempted. A surcharge of 10 per cent is imposed on individuals whose taxable income is over Rs 1 crore and a 5 to 10 per cent surcharge on domestic companies whose taxable income exceeds Rs 10 crore.
The Securities Transaction Tax (STT) will be reduced on equity future, mutual fund and the Investor Protection Fund set up by depositories will be exempt from tax.
He gave a few estimates. Chidambaram said fiscal deficit will be 5.2 per cent in current year and 4.8 per cent in the next fiscal. The FM said education cess will continue at 3%. Chidambaram said the modified GAAR norms will be introduced from April 1, 2016.
The import duty on set-top boxes has been raised from 5 to 10 per cent to safeguard interests of domestic producer, Chidambaram said.
The duty free limit on gold has been raised to Rs 50,000 in case of male and Rs 100,000 in case of female. Chidambaram had the import duty raised from 75 to 100 per cent on luxury vehicles. Excise duty on SUVs has been increased to 30 per cent from 27 per cent but SUVs registered as taxis are exempted. The Specific excise duty on cigarettes and cigars has been raised by 18 per cent.
Chidambaram said direct tax proposals will yield Rs 13,300 crore and indirect tax proposal to give Rs 4,700 crore. The duty on mobiles above Rs 2,000 has been raised from one to six per cent, based on their maximum retail prices and a service tax will be levied on all air-conditioned restaurants.
Some strange initiatives from the FM this year. The public-sector bank for women doesn't seem to fill an obvious need, for example.
Also puzzling is the item where the FM sets aside Rs 200 crore for some "amazing innovations" he discovered. What are they? Why can't the market scale them up, if they're so amazing?
Budget favours existing players in infra, and real-estate while being very weak on renewable energy. Lack of imagination.
Also, a hit to aspirational young people, especially in the lower middle class: this tax on smartphones. Will also increase transaction costs and make 3G/4G less attractive.
Meanwhile, no brave moves anywhere - bad policies like interest subvention in agriculture, which is widely misused, are continued unquestioning.
Some strange initiatives from the FM this year. The public-sector bank for women doesn't seem to fill an obvious need, for example.
Also puzzling is the item where the FM sets aside Rs 200 crore for some "amazing innovations" he discovered. What are they? Why can't the market scale them up, if they're so amazing?
Budget favours existing players in infra, and real-estate while being very weak on renewable energy. Lack of imagination.
Also, a hit to aspirational young people, especially in the lower middle class: this tax on smartphones. Will also increase transaction costs and make 3G/4G less attractive.
Meanwhile, no brave moves anywhere - bad policies like interest subvention in agriculture, which is widely misused, are continued unquestioning.
