 "Budget sticks to fiscal consolidation roadmap")
The prudent fiscal consolidation exercise is stated to be achieved despite Chidambaram allocating additional Rs 10,000 crore to food subsidy due to Food Security Bill as he cut plan expenditure significantly.
While the budget had estimated the Centre's fiscal deficit to be 5.1% for 2012-13, Chidambaram pegged it at 5.2%. Though it is a bit higher than Budget Estimates, it is also a bit lower than revised target of 5.3% given by the Finance Minister last year. If the actual figures of fiscal deficit come around the level, projected by the Budget today, it would prove many economists wrong.
For 2013-14, he projected the Centre's fiscal deficit to be 4.8%, the same as was given in his fiscal consolidation roadmap. Chidambaram also expressed his commitment to prune fiscal deficit to 3% by 2016-17. This may satisfy the rating agencies, warning India of downgrading its sovereign rating to junk.
However, revenue deficit was projected to widen to 3.9% for the current financial year against 3.1% this year, suggesting that much of the deficit is not leading to capital generation.
For the next financial year, revenue deficit was pegged at lower 3.3%.
Without altering the basic rate of personal income tax slab of 10-20-30%, the Finance Minister asked the rich having a taxable income of Rs 1 crore a year to pay surcharge of 10%. Also, companies having a turnover of Rs ten crore will have to pay higher surcharge of 10% from 5% a year ago.
The higher surcharge, also payable on dividend distribution tax over a limit, will be for the financial year 2013-14 only.
The direct tax measures, mainly the rich surcharge, will yield Rs 13,300 crore to the coffers.
Though the government has not been coming out with an amnesty scheme for personal income tax after he announced the one in late 1990s, Chidambaram today gave an offer to service tax payers to file returns since October 1, 2007. They will be not be imposed penalty and interest rates and will have to pay just service tax. Of 17 lakh service tax assessees in the country, only 7 lakh pay tax.
He also reduced abatement from service tax by five percentage points to 70% for homes with a carpet area of 2,000 sq feet and imposed service tax also on air condition restaurants not serving liquor.
Chidambaram also refrained from raising general indirect tax rates, but raised customs duty on products like imported high value motor bikes, cars, and excise duty on mobiles costing over Rs 2,000 and cigarettes.
His indirect tax proposals would add to Rs 4,700 crore to the government's kitty.
The Finance Minister also moved ahead with his two pet subjects-- Direct Taxes Code and Goods and Services Tax (GST). He kept aside Rs 9,000 crore for states as a compensation to losses due to central sales tax (CST).
Armed with 17.4% cut in plan expenditure for 2012-13, Chidambaram was able to lower overall outlays by over 4% in revised estimate over the budget estimate, Chidambaram cut outlays by over 4%. This also enabled the finance minister to show just 11% increase in total expenditure for 2013-14 at Rs 16.65 lakh crore from 14.90 lakh crore (BE to BE). End