Union Budget 2013-14 - Eastern Financiers

Finance Minister, Shri P. Chidambaram opted for austerity over free-spending populism in his Budget statement for the FY13-14, despite of general elections due early next year and a sagging domestic as well as global economic scenario. Mr. Finance Minister tabled a statement that reflected minor hiccups on one hand and sanguinity on certain fronts on the other which may lead the Budget to be called as a realistically balanced Budget.

Shri Chidambaram, presenting the eighth budget of his career pegged the fiscal deficit at 5.2% for the current financial year and 4.8% for FY14, reflecting his commitment to fiscal prudence. Revenue deficit for the current year has been estimated at 3.9% and for FY14 at 3.3%. By FY17 fiscal deficit is estimated to be brought down to 3%, revenue deficit to 1.5% and the effective revenue deficit to zero percent. He highlighted the need to curb the country's current account deficit, and said that he believes it to be a higher worry than the fiscal deficit. He said that growing imports of oil, coal and the country's passion for gold shall weigh on the CAD, due to which India does not have choice between welcoming and spurning foreign investment.

Walking the tight rope ahead of next year's elections, the Finance Minister offered minor sops to income tax payers but slapped a 10% surcharge on 'super-rich' individuals and corporates, levied an inheritance tax and raised duties on mobile phones, cigarettes and luxury vehicles. Implementing the much-talked about super-rich tax, Chidambaram proposed to levy 10% surcharge on income of Rs 1 crore and above and increase in surcharge from 5% to 10% on domestic corporates whose income exceeds Rs 10 crore a year. In his tax proposals in the Budget for 2013-14 to raise an additional Rs 18,000 crore, he announced a benefit of Rs 2,000 to individual tax payers with taxable income of up to Rs 5 lakh but made no change in either slabs or rates of personal income tax which will continue at 10, 20 and 30%. However, reforms on the Goods & Services Tax are still in the future.

In an attempt to encourage investment in capital markets, the Finance Minister curtailed securities transaction tax (STT) on equities futures and mutual fund units. The government also introduced a tax on transaction of nonagricultural commodities futures contracts on exchanges as Commodity transaction tax (CTT) so as to facilitate a more open and transparent trading process, especially in gold contracts at 0.01%. CTT that was originally proposed in the Union Budget 2008 but abolished in the Budget of 2009 based on the recommendation of the Prime Minister's Economic Advisory Council.

Mr. Minister promoted manufacturing industry by proposing an Investment Allowance which was a long standing demand of the Industry. Companies investing Rs. 100 crore or more in plant and machinery during the period 1-4-2013 to 31-3-2015 will be entitled to deduct an investment allowance of 15% of the investment. He sought to promote investment in infrastructure by issue of tax free bonds, freeing up NELP blocks and increasing tax holiday period for power sector. Emphasizing that Food Security Bill is a promise of the UPA government, Finance Minister P Chidambaram allotted Rs 10,000 crore as incremental cost to implement the bill. He added that food subsidy is seen at Rs 90,000 crore in FY14.

The veteran minister in the UPA government who has been attempting a course correction since being reappointed to the finance portfolio in mid-2012 proposed a hike of 29.4% in Budget expenditure for FY14 at Rs. 16,65,297 crore and plan expenditure of Rs.5,55,322 crore and non-plan expenditure of Rs. 1109975 crores.

Ensuring dignity and safety of women, Shri Chidambaram announced setting up of a special Nirbhaya fund for women's safety with a corpus of Rs.1,000 crore. He moved on to announce setting up of India's first women public sector bank with an initial fund of Rs.1,000 crore.

Overall, the Union Budget neither had surprises nor any big announcements but had the necessary caution and intent to revive growth in the economy. However, at a time when the government is walking on a thin rope of staying in power or losing it all—this probably is the best that the FM could have delivered!!!

Source : Equity Bulls

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