Cigarettes, mobiles, SUVs to cost more; footwear, readymade garments to be cheaper
Highlights
Fiscal deficit seen at 5.2 pct of GDP in 2012/13 - Fiscal deficit seen at 4.8 pct of GDP in 2013/14
- Gross market borrowing seen at 6.29 trln rupees in 2013/14
- Net market borrowing seen at 4.84 trln rupees in 2013/14
- Net short-term borrowing seen at 198.44 bln rupees in 2013/14
- To buy back 500 bln rupees worth of bonds in 2013/14
- Total budget expenditure seen at 16.65 trln rupees in 2013/14
- Non-plan expenditure estimated at about 11.1 trln rupees in 2013/14
- India’s 2013/14 plan expenditure seen at 5.55 trln rupees
- Revised estimate for total expenditure is 14.3 trln rupees in 2012/13, which is 96 pct of budget estimate
- 2013/14 major subsidies bill estimated at 2.48 trln rupees from 1.82 trln rupees
- Petroleum subsidy seen at 650 bln rupees in 2013/14
- Petroleum subsidy assumes crude oil price at $110/barrel
- Revised petroleum subsidy for 2012/13 at 968.8 bln rupees
- Estimated 900 bln rupees spending on food subsidies in 2013/14
- Revised food subsidies at 850 bln rupees in 2012/13
- Revised 2012/13 fertiliser subsidy at 659.7 bln rupees
- Propose surcharge of 10 pct on rich taxpayers with annual income of more than 10 mln rupees a year
- To increase surcharge to 10 pct on domestic companies with annual income of more than 100 mln rupees
- For foreign companies, who pay the higher rate of corporate tax, the surcharge will increase from 2 pct to 5 pct
- To continue 15 pct tax concession on dividend received by India companies from foreign units for one more year
- To impose withholding tax of 20 pct on profit distribution to shareholders
- Amnesty on service tax non-compliance from 2007
- 10 bln rupees for first instalment of balance of GST (Goods and Services Tax) payment
- Propose to reduce securities transaction tax on equity futures to 0.01 pct from 0.017 pct
- To introduce commodities transaction tax (CTT)
- CTT on non-agriculture futures contracts at 0.01 pct
- India faces challenge of getting back to its potential growth rate of 8 pct
- India must unhesitatingly embrace growth as highest goal
- Expect 133 bln rupees through direct tax proposals in 2013/14
- Expect 47 bln rupees through indirect tax proposals in 2013/14
- Target 558.14 bln rupees from stake sales in state-run firms in 2013/14 vs estimate of 240 bln rupees in 2012/13
- Expect revenue of 408.5 bln rupees from airwave surcharges, auction of telecom spectrum, licence fees in 2013/14
- India’s greater worry is current account deficit l Will need more than $75 bln this year and next year to fund current account deficit
- To issue inflation-indexed bonds
- Propose capital allowance of 15 pct to companies on investments of more than 1 bln rupees
- Foreign institutional investors (FIIs) can use investments in corporate, government bonds as collateral to meet margin requirements
- Insurance, provident funds can trade directly in debt segments of stock exchanges
- FIIs can hedge forex exposure through exchange-traded derivatives
- Investor with less than 10 pct stake in a company will be regarded as FII, more than 10 pct stake as FDI (foreign direct investor)
- Stock exchange regulator will simplify know-your-customer norms for foreign portfolio investors
- To implement quickly recommendations of financial sector legislative reforms commission
- To cut factory gate duty on trucks to 13 pct from 14 pct
- Zero customs duty for electrical plants and machinery
- Move to revenue-sharing from profit-sharing policy in oil and gas sector
- To equalise duties on steam and bituminous coal to 2 pct customs duty and 2 pct cvd (countervailing duty)
- Food inflation worrying, will take all steps to augment supply side
- To cut duty on exports of precious and semi-precious stones to 2 pct from 10 pct l To provide 140 bln rupees capital infusion in state-run banks in 2013/14
- To allocate 2.03 trln rupees to defence in 2013/14
- 801.94 bln rupees to rural development in 2013/14 l 270.49 bln rupees for agriculture in 2013/14
- Rs 1,000 Crore ‘Nirbhaya Fund’ for the safety and development of women
Agencies, New Delhi Sports utility vehicles (SUVs), cigarettes, mobiles, imported luxury goods such as high-end motor vehicles, motorcycles, yachts and similar vehicles will become costlier as the government has decided to increase excise and custom duty on these items.
Presenting the Union Budget 2013-14 in the Lok Sabha today, Finance Minister P Chidambaram has increased the excise duty on SUVs from 27 per cent to 30 per cent. However, this will not apply to SUVs registered as taxies. He said cigarettes will cost more as specific excise duty increased by about 18 per cent. Similar increases are proposed on cigars, cheroots and cigarillos. Duty on mobile phones priced above Rs 2,000 has been raised to 6 per cent from the current one per cent, he added. Mr Chidambaram said the customs duty on imported luxury goods such as high-end motor vehicles, motorcycles, yachts and similar vehicles has been increased. n the case of such motor vehicles, the duty has been increased from 75 per cent to 100 per cent; on motorcycles with engine capacity of 800 cc or more the duty now will be 75 per cent instead of 60 per cent. Similarly, the duty on yachts and similar vessels has been increased from 10 per cent to 25 per cent.
However, custom duty on specified machinery for manufacture of leather and leather goods including footwear reduced from 7.5 to 5 per cent. “While the finance minister has, we believe, presented a prudent budget, the question is whether the numbers are achievable,” investment bank Nomura said in a research note. Rating agency Standard & Poor’s (S&P) said the budget would not affect its assessment of India’s creditworthiness. There had been widespread expectations, fuelled in part by comments by finance ministry officials, that Chidambaram would present an austere budget to parliament amid the threat of a sovereign rating downgrade to “junk” status. But the spending plan appeared to have been drawn up with voters in mind, several economists and industrialists said. The coalition government led by Sonia Gandhi’s Congress party, mired in corruption scandals and widely derided as incompetent in the face of the economic slowdown, faces a struggle for re-election in polls due by May 2014.
“With a general election not much (more) than a year away, political pressure from within the Congress Party may well have had an influence on the make-up of the finance minister’s budget,” Credit Suisse said. Chidambaram, a three-time finance minister seen as a potential candidate for prime minister in 2014, has staked his reputation on cutting swollen fiscal and current account deficits that have alarmed rating agencies. “Faced with a huge fiscal deficit, I had no choice but to rationalise expenditure,” he said in his budget speech, which was seen as a balancing act to avert a downgrade while meeting his party’s demands for vote-winning spending.
“We took a bitter dose of medicine. It seems to be working.” S&P said that, while the “relatively prudent” budget would have no impact on India’s BBB-minus credit rating, it was concerned that India remained vulnerable to spikes in oil and other commodity prices that could force it to spend more than it planned. Total budget expenditure will rise by an unexpectedly high 16 percent in the 2013/14 fiscal year to 16.65 trillion rupees. Next year’s fiscal deficit target is in line with expectations but assumes hefty revenue growth, including 558 billion rupees from the sale of government stakes in companies, or more than double the 240 billion rupee target for the current year, which falls short of the initial target. The budget also assumes revenue of 408.5 billion rupees from telecoms sector fees, more than double what it will generate this year, with its next auction of mobile airwaves poised to flop after attracting just one bidder.
“The government may fall short of its tax and disinvestment targets and end up cutting spending closer to the end of the year to attain its fiscal deficit target,” said A. Prasanna, economist at ICICI Securities Primary Dealership Ltd. Net market borrowing of 4.84 trillion rupees for the new fiscal year met investor hopes that the figure would not top 5 trillion rupees, but the gross figure exceeded expectations. The budget included several measures to spur investment both in markets and by corporations, including an incentive on investments in plant and machinery exceeding 1 billion rupees and extending tax breaks for small companies that grow larger, and an expansion of tax-free bonds for infrastructure.
Chidambaram has focused on winning back foreign investors unnerved by proposals from his predecessor, Pranab Mukherjee, to tax merger deals retrospectively and clamp down on tax evasion. Since September, he has implemented a spate of investor-friendly reforms, including allowing entry of foreign supermarkets. “India, at the present juncture, does not have the choice between welcoming and spurning foreign investment. If I may be frank, foreign investment is an imperative,” he said. HEY, BIG SPENDER While the added spending included capital investment that many have said is sorely needed, including a 29 percent increase in funding for infrastructure and development, it also included a 46 percent jump in funding for development programmes in rural areas, the core voter base of the ruling Congress party.
An added surcharge on local firms with incomes of more than 100 million rupees and a 10 percent surcharge on individuals with taxable incomes topping 10 million rupees – a level of earnings currently declared by just 42,800 people – will be put in place for one year. Dozens of corporate executives, watching a telecast at an industry event in New Delhi, exchanged nervous smiles as Chidambaram introduced the surcharge on the rich. “In the larger scheme of things, I guess that is one way of reducing his deficit. Am I going to lose sleep over it? No,” Ganesh Natarajan, CEO of IT outsourcer Zensar Technologies (ZENT.NS), said by phone from Pune, where the company is based.
Budget a cosmetic exercise, has little to offer to country’s economy: BJP
Agencies, New Delhi: The BJP today said Finance Minister P Chidambaram indulged in ‘jugglery’ while presenting the budget 2013-2014. ‘’The Union budget presented before Parliament today has very little to offer to the Indian economy. It is a budget presented by the Finance Minister under adverse circumstances.
The UPA’s policy paralysis has pushed the Indian economy towards a distress situation. The Finance Minister found himself in a helpless situation with very little elbow space,’’ Leaders of the Opposition Sushma Swaraj and Arun Jaitley said in a joint statement. They said the Finance Minister has presented a budget which only makes certain ‘’cosmetic changes’’ in the policy and taxation structure. ‘’Though verbose in content, the budget is low in ambition. It does very little to boost Indian manufacturing. Agriculture continues to face the government’s neglect. Even a ritual of reference to the aam admi has been abandoned,’’ the BJP leaders said. They said the budget contains no steps which could boost exports, inflation contained and the rupee strengthened.
‘’There is a warning in the budget. The petroleum subsidy of Rs 96,980 crore is intended to be brought down to Rs 65,000 crore. It is an indication that petrol, diesel and gas prices will further increase,’’ they said. The BJP leaders claimed that this budget was not a policy statement and it brings no directional change. ‘’It is merely an accounting exercise wherein expenditure has been cut with no prospect of increase. This may not spur growth. The poor and the weaker sections along with the middle classes will be hit the most,’’ they added.
Excellent budget in current economic crisis: Congress
Agencies, New Delhi: Lauding the 2013-14 Union Budget, presented by Finance Minister P Chidambaram in the Lok Sabha today, as an ‘excellent one’ given the current economic slowdown, the Congress today said it would help to boost economic growth in the country and bring down inflation.
Talking to reporters here, AICC spokesperson Sandeep Dikshit said, ‘’considering the economic slowdown being experienced, the Budget presented by Mr Chidambaram is an excellent one and needs to be lauded.
In the budget, the Finance Minister has tried to apportion fund for all areas- be the MGNREGA scheme, the ICDS scheme, Midday mean, the direct transfer scheme, the schemes for rural development, women empowerment and other measures for social sector.’’ Mr Dikshit said in the Budget, he had successfully managed to bring down the current account deficit to 5.1 per cent which would be further brought down to 4.8 per cent next fiscal. He said that a remarkable feature of the Budget was its emphasis on skill development programme of youth. Moreover, Rs 57,000 crore has been allocated for women development and Rs 70,000 crore for child development. Moreover, for the food security Bill, the Budget has allotted Rs 10,000 crore in addition to the amount already allocated for the purpose. He also welcomed the fact that the Budget had touched upon the agricultural credit and insurance sectors positively.
