Union Budget 2013-14: Focuses on Economic Growth, Middle Class To Pay More

Finance minister P. Chidambaram presented the Union Budget for 2013-14 in the Parliament on February 28. It was Chidambaram's eighth annual budget, the second highest by anyone in India after a record ten by former Prime Minister Morarji Desai. Overall, it was 82nd Union Budget in the Indian history, including interim and special-situation budgetary proposals, since the first one of independent India was presented by then finance minister R.K. Shanmukham Chetty on November 26, 1947.

Individually, Chidambaram presented the Union Budget for the eighth time, the second-highest by any finance minister. The maximum number of 10 budgets have been presented by Morarji Desai, while Pranab Mukherjee (currently President of the country), Yashwant Sinha, Y.B. Chavan and C.D. Deshmukh have presented seven budgets each in the past.

Plan Outlay

The finance minister has proposed a 29.4 percent hike in the plan expenditure for the union budget 2013-14. The plan expenditure for the next fiscal will be about Rs.5.53 lakh crore, the finance minister said.

The budget expenditure is Rs.16,65,297 crore and the plan expenditure is Rs.5,55,322 crore," Chidambaram said, adding that the plan expenditure in 12th Five-Year Plan was revised to Rs.14,30,825 crore or 96 percent of budgeted expenditure.

Growth Rate

India’s economic growth, as per official estimates, decelerated to 5 percent and 6.2 percent in the past two years, from 8.6 percent and 9.1 percent in the two years preceding them. Chidambaram said the Indian economy was today constrained by three factors: high fiscal deficit, slow growth and high inflation.

The finance minister said a whopping Rs.16.65 lakh crore (Rs.16.65 trillion or nearly $300 billion) would be spent under plan expenditure during 2013-14, which will be 30 percent higher than the outlay for this fiscal.

Fiscal Deficit

While doing a shade better than the targeted fiscal deficit of 5.3 percent of Gross Domestic Product (GDP) at 5.2 percent for the current fiscal, the finance minister has stuck to his target of 4.8 percent of GDP for 2013-14, even while stepping up defense allocation by 14 percent over the revised estimates in the current fiscal.

Similar hikes have been proposed in various sectors. although it is clear that he managed to create a cushion through compression in spending during the current financial year. Expenditure under several key heads, including roads and rural housing actually fell in the current fiscal compared to the previous year.

Tax Rates

The 2013-14 Budget proposed a tax cut of Rs.2,000 for people earning an annual income of between Rs.200,000 and Rs.500,000 and said anything beyond that was not possible given the current circumstances. The finance minister said any hike in the exemption limit for direct tax that is paid by individuals would take millions out of the tax net and was neither a desirable proposition, nor feasible. Accordingly, he proposed a Rs.2,000 tax credit for those in the first slab. This measure will benefit 1.8 crore (18 million) tax payers," he said, adding that this would entail an outgo of Rs.3,600 crore ($650 million) to the exchequer.

The finance minister sought to kick-start the engines of growth by providing incentives for productive investment, stepping up expenditure in social sectors to invigorate the economy in the longer term and giving a token tax break at the lowest slab rate to offset the inflationary burden on the middle class.

The Budget proposed to levy a surcharge of 10 percent on individuals whose annual taxable incomes exceed Rs.1 crore. The surcharge will be levied for the 2013-14 financial year. The finance minister said there are only 42,800 individuals in the country who will be liable to pay the surcharge.

To provide for the various increased allocations, the finance minister moved to tap the well-heeled by way of a one-year surcharge of 10 percent on the ‘super rich’ section of tax payers – all 42,800 of them, that is — along with duties on imported or domestic luxury vehicles such as SUVs, mobile phones (priced over Rs. 2,000), and what has been the tax horse of most Finance Ministers —cigarettes. With other minor tinkering of duties, including Tax Deducted at Source (TDS) on sale of property worth Rs. 50 lakh, the net additional tax revenue in the kitty works out to Rs. 18,000 crore.

However, given the challenges that he faced by way of low growth, high inflation, the widening fiscal and current account deficits coupled with lower than targeted revenue collection during 2012-13, Chidambaram may have disappointed taxpayers looking for some major breaks. But he did provide a tax break of Rs. 2,000 to individual tax payers with taxable income of up to Rs. 5 lakh. This itself is estimated to benefit 1.8 crore tax payers and work out to a revenue sacrifice of Rs. 3,600 crore. Likewise, first-time buyers of affordable homes will get an additional deduction of interest of Rs. 1 lakh for home loans up to Rs. 25 lakh, which will be over and above the current Rs. 1.5 lakh deduction allowed for self-occupied dwellings.

Defense Allocation

The government has marginally increased its defense spending by 5.31 percent than 2012-13. The defense budget for 2013-14 starting April 1 will be Rs 2,03,672 crore, an increase of Rs 1,93,407 crore more from the 2012-13 budget.

The revised budget after the mid-fiscal cut was Rs 1,78,504 crore in December 2012. The hike is 14.10 percent, much lower than last year’s 17.6 percent hike. Also the share of defense spending in the GDP will be reduced from 1.9 percent for the year ending March 31 to 1.79 percent of the GDP. The share of defense spending in the overall expenditure will be 10 percent of government expenses, a decrease of 11 percent this year.

Finance Minister P. Chidambaram said that India plans to spend up to 2.03 trillion rupees ($37.7 billion) on defense next year, up from a revised 1.78 trillion rupees this year.

The finance minister said 867.41 billion rupees will be spent to buy defense equipment in the next fiscal year, up from this year's about 695.79 billion rupees. The government had originally planned to spend 795.78 billion rupees on purchasing defense equipment this year.

Despite the cut in this year's defense budget, India will become the world's fourth-largest defense spender by 2020, behind the United States, China and Russia, and surpassing France, Japan and the United Kingdom. It is predicted that India's defense spending will reach $65.4 billion in 2020.

Boost to Agriculture

Finance Minister P Chidambaram hiked the agriculture budget by 22 percent, increased farm credit limit to small and marginal farmers from Rs 5,75,000 crore to Rs 7,00,000 crore in 2013-14 and announced setting up “nutri-farms” pilot project.

The sector got a major boost, in line with the UPA’s ambitious food security Bill (which got an allocation of Rs 10,000 crore) and the next general election, as sufficient sops have been announced for farmers in the Budget.

Also for the first time perhaps, the government set aside separate funds - Rs 500 crore - to start a program on crop diversification.

Education Sector

The Union Budget set aside a budget of Rs 79,451 crore for the entire education sector, including literacy and higher and technical education. This represents a meagre Rs 5,395 crore increase over the budget estimate of Rs 74,056 crore for the Ministry of HRD in the last financial year. The hike constitutes 7.2 percent over 2012-13, whereas last year the increase for the education sector budget was a handsome 18.6 percent. Expenditure on education as a proportion of the GDP has increased from 2.59 percent in 2007-08 to 3.31 percent in 2012-13.

The Plan Budget is Rs 65,869 crore which is Rs 4,442 crore more than Rs 61,427 crore in last fiscal. It will certainly ask for more money with the Right to Education Act (RTE) in mind.

The budget for school education is Rs 49,659 crore which is only 8 percent more than last year. The allocation for the Sarva Shiksha Abhiyan (SSA) is up from Rs 25,500 crore last fiscal to Rs 27, 258 this year an increase of Rs 1,758 crore which is very low considering SSA is the main vehicle to implement the RTE Act. Midday Meal Scheme has been allocated Rs 13,125 crore as against Rs 11,937 crore last year, an increase of Rs 1,260 crore.

Skill Development of Youth

The 2013-14 Budget has allocated Rs.1,000 crore to develop job-oriented skills among youth. Assuming that 10 lakh (one million) youth can be motivated in one year, skill trained youth will give enormous boost in employment and productivity," Chidambaram said, while presenting the federal 2013-14 budget to the Lok Sabha, the lower house of parliament.

The finance minister allocated Rs.1,000 crore (Rs.10 billion) for the "ambition", saying that it would be a "trigger for skill development in the country".

Infrastructure

Infrastructure got a major thrust in the 2013-14 budget with Finance Minister P. Chidambaram announcing a slew of measures to boost sector's growth, like raising Rs 50,000 crore through taxfree bonds and setting up of major ports.

In some other decisions which would boost the infrastructure development in the country, the government also said that it would set up a road regulatory authority in the financial year 2013-14 to address financial stress, construction risk and contract management in the road sector and start work on two more industrial corridors between Bangalore and Chennai and Bangalore and Mumbai.

"The power transmission system from Srinagar to Leh will be constructed at the cost of Rs 1,840 crore, Rs 226 crore provided in current budget," Chidambaram said in his budgetary proposals for next fiscal.

In a move that is also strategic for the region, the proposed 220 kV line from Srinagar to Leh, to be implemented by Power Grid Corp, will pass through Kargil, Drass, Khalsi and is aimed at enhancing the reliability of power supply.

Highlights

* Fiscal deficit for 2013-14 pegged at 4.8 percent of GDP and 5.2 percent in 2012-13

* Plan expenditure pegged at Rs. 5,55,322 crore and Non-Plan at Rs. 11,09,975 crore

* New taxes to collect Rs. 18,000 crore for government

* Voluntary Compliance Encouragement Scheme launched for Recovering service tax dues

* Rs 14,000 crore earmarked for capital infusion in public Sector banks in 2013-14

* Refinance capacity of SIDBI raised to Rs. 10,000 crore

* TUF Scheme for textile sector to continue in 12th Plan With an investment of Rs. 1.51 lakh crore

* No change in income tax slabs

* Relief of Rs. 2,000 for tax payers in tax bracket of Rs2-5 lakh

* Ten percent surcharge on persons with taxable income of over Rs. 1 crore

* Tobacco products, SUVs and mobile phones to cost more

* Income limit under Rajiv Gandhi Equity Savings Scheme Raised to 12 lakh from Rs. 10 lakh

* First home loan of up to Rs. 25 lakh to get extra Interest deduction of up to Rs. 1 lakh

* Duty free limit of gold import increased to Rs. 50,000 For male passengers and Rs. 1 lakh for female passengers

* India’s first women’s bank to be set up by October

* Concessional six percent interest on loans to weavers

* Commodity transaction tax of 0.01 percent proposed on non-agri futures traded on commodity bourses

* Securities transaction tax brought down to 0.01 percent

* No change in basic customs duty; normal excise and Service tax rates unchanged at 12 percent

* Handmade carpets and textile floor coverings of coir or jute exempted from excise duty

* Excise duty on SUVs increased to 30 percent from 27 percent

* Chidambaram says India to become $5 trillion economy, And among top five in the world by 2025

* Rashtriya Swasthya Bima Yojana benefit extended to Rickshaw pullers, auto and taxi drivers, among others

* ‘Nirbhaya Fund’ of Rs. 1,000 crore to empower women and Provide safety in the wake of Delhi gang rape incident

*Rs 9,000 crore earmarked as first installment of balance of CST compensation to states

* Defense allocation at Rs. 203,672 crore, education Rs. 65,867 crore and rural development ministry Rs. 80,194 crore

* Rs 10,000 crore earmarked for national food security toward incremental cost

* Farm credit target set at Rs. 7 lakh crore as against Rs. 5.75 lakh crore in 2012-13

* Direct benefit transfer scheme to be rolled out in the entire country during tenure of UPA government

Assessment

At first glance, the budget may appear harmless to the middle-class. In fact, it might even appear friendly what with all those improvements in housing loan deductions and stock market investments. But make no mistake, this budget will bite the average citizen in more ways than one.

Just take the seemingly innocuous proposal to impose service tax on all air-conditioned restaurants. With most decent restaurants — we are not talking of the up-market ones here — climate-controlled, eating out will become at least another 12 percent more expensive. Remember that restaurants are in the process of revising their price-lists even now with rising prices of food commodities.

Cellular phones are now a necessity and smart phones are increasingly becoming so as they help you do your daily business on the go. As much as 97 percent of all telephone connections in the country are cellular. Yet, smart phones (or phones that cost more than Rs.2,000) will now become pricier with the sharp rise in excise duty to 6 percent from 1 percent. In addition to driving business to the grey market, this proposal will also undo the efforts to push people into using their mobiles extensively for transactions.

It can be said that it must not be forgotten that the finance minister appears to have placed enormous trust in the growth figures going northward in the coming months, and with that he hopes the revenues will follow. After all, by not changing the income tax slabs or too significantly altering the indirect tax proposals which previously existed, Chidambaram hopes to mop just under Rs18,000 crore from his new tax proposals.

However, since that is far less than what the Government needs to meet its expenditure, the Minister is banking heavily on upward economic growth to trigger revenue generation. But growth has dipped from a high of nine percent only a few years ago to around five percent now. While the Minister hopes for a turnaround to six percent and above, there remains a big ‘if'.

Economic Survey 2012-13: Reflects India's Grim Reality, Cautions Against Growing Taxes

Finance Minister P. Chidambaram presented the pre-Budget Economic Survey for 2012-13 to Parliament on February 27. The Survey reflects the grim reality that India is facing a severe slowdown and must act fast to spur investment, restart stalled projects, cut interest rates and contain its fiscal deficit.

Growth Rate

The Survey made it clear that this fiscal’s five per cent growth, the slowest in the past decade, could no longer be blamed on external factors alone, and the government will have to act on the domestic front to come out of the slump.

The Economic Survey, while projecting an optimistic growth rate of 6.1-6.7 percent for 2013-14, stated that to contain the fiscal deficit the government should widen the tax base and cap subsidies, particularly through better targeting and plugging leakages. It also claimed the downturn was more or less over, and that the economy was looking up. Claiming that the downturn was “more or less over” and that the economy was looking up, the Survey projected a cautiously optimistic growth rate of 6.1-6.7 percent while conceding that the Gross Domestic Product (GDP) growth for the current fiscal was likely to slip to the decade’s low of five per cent — compared to the estimates by the Central Statistical Organisation (CSO) of 6.2 percent for 2011-12 and 9.3 percent the year before.

Fiscal Deficit

The Survey had pegged the fiscal deficit at 5.1 percent for the GDP for 2012-13, which the finance minister later revised to 5.3 in view of the rising expenditure and subdued revenue collection. For the new fiscal, the finance minister has committed to bring it down to 4.8 per- cent.

The 2012-13 Survey notes that the government needs to contain the fiscal deficit especially by shrinking wasteful and discretionary subsidies. The Survey said: "Controlling the expenditure on subsidies will be crucial. The domestic prices of petroleum products, particularly diesel and LPG need to be raised in line with their prices prevailing in the international market.

In addition, delays in getting permissions for projects need to be curbed so that investment can pick up. Implementation of GST, if approved, would create an integrated market and bring more producers in the tax net. Also, the direct benefit transfer scheme recently rolled out on the AADHAAR platform will target subsidies better.

Agriculture Reforms

Economic Survey states that with agriculture growth rate falling short of the four per cent target in the past five years, the country’s annual economic report card (the first since the beginning of the 12th Five-Year Plan period), calls for increase in yields and reforms like a suitable sustainable strategy to maximize agricultural income and make it a viable option.

The farm sector achieved 3.6 percent growth during the 11th Five year Plan (2007-12) – higher than growth of 2.5 and 2.4 percent during ninth and 10th Five-Year Plans but lower than expectations of 4 percent growth target.

Therefore, in the face of stiff challenge of feeding its growing population, the Survey has sought urgent reforms to boost crop yield and private investment in infrastructure to motivate farmers.

Economic Survey for 2012-13 has emphasized putting in place a strategy for farm development in the eastern and northeastern regions amid saturation in crop yields in Green Revolution belt, especially in the States of Punjab and Haryana.

Tax Rate

In what may bring cheer to the well-heeled in the wake of a raging pre-Budget debate over squeezing more out of the super-rich class, the Survey suggested the government’s efforts to raise additional revenue should be through widening of the tax base and not by increasing the rates. The Survey stated: “It is much better to achieve a higher tax-GDP ratio by broadening the base which is taxed rather than increasing marginal tax rates significantly — higher and higher tax rates impinge more and more on incentives to undertake taxable activity, while encouraging tax evasion.”

Several experts, including PMEAC Chairman C. Rangarajan, have pitched for higher rates of taxes on super-rich. The Survey, prepared by a group of economist led by Chief Economic Advisor Raghuram Rajan, said it is better to achieve fiscal consolidation partly through a higher tax-GDP ratio than merely through reduction in expenditure as it would only hurt development spending.

The Tax-GDP ratio touched a peak of 11.9 percent in 2007-08, but declined to 9.6 percent in 2009-10. It was 9.9 percent in 2011-12. “Raising the tax-GDP ratio to above the 11 percent level is critical for sustaining the process of fiscal consolidation in the long run,” it said.

Gross tax revenue in April-December 2012 has grown by 15 percent to over Rs. 6.81 lakh crore. However, the growth in tax collection was “significantly” short of the growth envisaged in Budget. The tax collection until December 2012, was 63.2 percent of Budget estimates, lower than the last five-year average of 69 percent.

Rate of Inflation

Predicting that headline inflation may fall to 6.2–6.6 percent by next month, the Survey stated that elevated food inflation would continue to remain an area of concern as it inched towards double digits in December 2012. While 2012, the inflation was driven by protein items, this year it has been due to increase in prices of cereals such as wheat, rice and maize.

Inflation which is one of the major areas of concern for the United Progressive Alliance (UPA) Government, has remained in the range of above seven per cent since December 2009, while to add to its woes food inflation, too, has remained on the higher side during the same period, and according to the Economic Survey for 2012-13, easy money policy of major developed and developing nations may further aggravate inflationary expectations in India.

The survey further added that inflation has remained muted in the current financial year and declined to a three year low of 6.62 percent in January 2013. The average wholesale prices-based inflation in 2012 (April-December) moderated to 7.55 percent from 8.94 percent in the corresponding period of 2011-12.

Industrial Production

With the spurt in factory output last October turning out to be an aberration in the wake of sharp downturns in the months after, the latest Economic Survey has sought to describe the industrial production scenario as a ‘mixed picture’ of sluggishness bottoming out as well as continuing for a little longer period.

What came as a surprise to the government while India Inc. maintained a ‘we said so’ stance to clamor for easing of interest rates, was that industrial growth, as measured by the Index of Industrial Production (IIP), witnessed a smart recovery with a robust 8.3 per cent expansion in October, 2012.

Despite the downward bias, the Survey has highlighted at least two factors which point to some optimism on the industrial front.

First is the data on frequency distribution of products/product groups within the IIP basket which indicates that the number of products with negative growth has declined from 182 in the fourth quarter of 2011-12 to 160 in October-November 2012.

The second positive factor is the Reserve Bank of India’s ‘Business expectation index’, which showed moderately positive growth during the third quarter of the current fiscal after posting persistent negative growth for the previous six quarters. Since the RBI business index tracks IIP growth fairly closely, the change in trend suggests a possible bottoming out of IIP growth moderation.

Foreign Direct Investment

According to the Economic Survey, Foreign Direct Investment (FDI) in India slumped by 43.3 percent at $15.85 billion in April-November period of the current financial year as compared to $27.93 billion in the corresponding period previous year. The overseas investment flows in top five services declined by 9.7 percent at $8.19 billion during the period under review.

The Survey stated that overall FDI inflows increased by 33.6 percent in 2011-12. Overseas investment inflows in services surged by 57.62 percent in the financial year ended March 31, 2012.

The document presented a day ahead of the Union Budget 2013-14 pointed out that the government has taken many policy initiatives to liberalize FDI policy for services sector. This includes increasing FDI limit from 49 percent to 74 percent in teleports and DTH and cable networks, permitting FDI up to 74 percent in mobile TV, up to 49 percent in scheduled and non-scheduled air transport services and up to 50 percent in multi-brand retail trading.

The Survey stated that the government has also amended the existing policy on FDI in single brand product retail trading.

Health Sector

The country’s spending on health remains abysmally low with the Survey revealing that the spending on health, as compared to the spending on the rest of social services, has actually been declining in the country. Raising alarm over the decline, the survey has called for increased focus on health and education if India's demographic dividend is to be used to its advantage. Between 2011 and 2016, as many as 63.5 million workers, mainly aged between 20 and 35 years, will join India's pool. For this segment to be productively engaged, spending on health and education must remain consistent, the survey says.

But the ground situation paints to a sorry picture. The combined central and state expenditure on social services as a proportion of total expenditure increased from 22.4 per cent in 2007-08 to 25.1 per cent in 2012-13 and the spending on education among all the social services also increased over this period from 43.9 to 46.6 per cent.

However, the combined general spending (federal and states) on health has fallen over the past five years from 21.5 per cent to 19.2 per cent.

Petroleum Subsidies

The 2012-13 Survey has called for addressing the key issues of petroleum subsidies, clarity on gas pricing policy, petroleum price distortion and concerns over various disputes pertaining to the New Exploration Licensing Policy (NELP). It stated that addressing the key fiscal risk of petroleum subsidies is critical in better fiscal marksmanship.

It stated further that the overall subsidy bill of the government, it said, was likely to overshoot the target of Rs.1.79 lakh crore this financial year due to higher crude oil prices. The government had put the petroleum products subsidy at Rs.43,580 crore, food subsidy at Rs.75,000 crore and fertilizer subsidy at Rs.60,974 crore, taking the total subsidy bill to Rs.1,79,554 crore for 2012-13.

Employment Rate

The 2012-13 Economic Survey stated that the employment rate between June 2011 and June 2012 went up by approximately 7 lakh led mainly by the IT and BPO sector which accounted for almost half of the increase. It stated that upward trend in employment since July 2009 continues despite the economic slowdown.

A sector wise analysis shows that the textiles sector including apparels saw 1.70 lakh job additions, followed by transport sector (0.45 lakh), metals (0.26 lakh), gems and jewelry (0.19 lakh) and automobiles (0.11 lakh) in June 2012 over June 2011.

The survey said that employment in handloom/power loom and leather sectors has marginally declined during this period.

It said that there has been a sustained and consecutive increase in employment in both the public and private sectors covered at overall level during the last eleven quarters with a total addition of 30.73 lakh employment during this recovery period.

According to the Survey, India is on the brink of a demographic revolution with the proportion of working-age population between 15 and 59 years likely to increase from approximately 58 per cent in 2001 to more than 64 per cent by 2021. Moreover around 63.5 million new entrants to the working age group between 2011 and 2016, the bulk of whom will be in the relatively younger age group of 20-35 years.

The Survey added that the annual growth rate of employment in the private sector in 2011 was 5.6 per cent whereas that in the public sector was negative.

Railway Budget 2013-14: Passengers Fare Untouched, Hike in Freight Tariff

Railway Minister Pawan Kumar Bansal presented the Railway Budget for 2013-14 in the Parliament on February 26. The Budget spared passengers a fare hike, but raised various charges on tickets as well as freight tariff to net in additional Rs 4,683 crore a year.

Plan Outlay

The railway minister announced the highest-ever plan outlay of Rs 63,363 crore for the public sector behemoth. Of this, Rs 14,260 crore would be raised from internal resources with Rs 26,000 crore budgetary support. Other sources of financing include Rs.14,260 crore from railway's internal resources and Rs.2,000 crore from railway's share in road safety fund. There is also a plan to raise Rs.15,103 crore from the market and mobilize Rs.6,000 crore through Public-Private-Partnership (PPP) route to fund its expansion plans in 2013-14.

While tatkal charges for sleeper class have been raised by Rs 15 to Rs 25 and for AC chair car from Rs 25 to Rs 50, tatkal charges in AC-3 tier have been increased by Rs 50 and AC-2 tier and executive class by Rs 100. The reservation fee for AC First and Executive classes has been raised to Rs 60 from Rs 35 and that of First Class and AC-2 doubled to Rs 50. Reservation fee for AC chair car, AC-3 economy and AC-3 tier has been increased to Rs 40 from Rs 25 and supplementary charges for superfast trains raised between Rs 5 and Rs 25.

Growth Rate

It is creditable that an operating ratio of 88.8 per cent is being achieved during the current year 2012-13, even after fully repaying the loan of Rs 3,000 crore along with interest that was taken from the Ministry of Finance, and after setting aside Rs. 9500 crore for Depreciation Reserve Fund (DRF). Against this, the budget estimate for 2013-14 projects an Operating Ratio (OR) of 87.8 per cent with a DRF appropriation of only Rs.7500 crore. This once again highlights the need for a more reliable index of financial performance rather than the present OR, which can be tweaked to suit by appropriately adjusting the DRF allocation. It is hoped that the proposed revamping of the accounting system will look into this aspect.

The Gross Budgetary Support (GBS) component out of this was projected as Rs. 2.5 lakh crore. It is rather distressing to note that the 12th Five-Year Plan approved by the Planning Commission has scaled down the Railway plan to Rs. 5.19 lakh crore with a GBS component of Rs. 1.94 lakh crore.

In other words, the government is not in a position to provide for a much higher rate of growth of the railway sector than it has historically done. The long-term implication of this modest growth rate on the economy as a whole needs to be looked into.

Highlights

* No increase in passenger fares

* Rs.6,600 crore increase in earnings from fare adjustment in January

* Rs.63,000 crore investment in 2013-14

* 1,047 million tons freight loading estimated during 2013-14

* Passenger earnings of Rs 42,000 crore estimated in 2013-14

* Indian Railways Institute of Financial Management to be set up at Secunderabad

* Chair at Delhi to promote research in reducing carbon footprint

* 22 new lines to be taken up in 2013-14

* Superfast and Tatkal charges to rise

* 67 new Express trains to be introduced

* 27 new passenger trains; run of 58 trains to be extended

* New debt service fund to be set up

* Six more Rail Neer bottling plants to be set up

* Losses mounted from Rs.22,500 crore in 2011-12 to Rs.24,600 crore in 2012-13

* Planning Commission pegged 12th Five-Year Plan at Rs.125.19 lakh crore

* Fall in accidents - per million accidents down from .41 to .13

* Aim to eliminate 31,846 level crossings

* Will close fiscal 2012-13 with fund balance against previous deficit; need to build fund balance to Rs.30,000 crore by end of 12th Five-Year Plan

* Operating ratio of 88.8 percent achieved

* Dividend reduced from 5 to 4 percent

* Electrification of 1,200 km to be completed this year

* 72 additional suburban services in Mumbai and 18 in Kolkata

* Complementary passes of freedom fighters to be renewed every three years instead of annually

* New wheel factory to be set up at Rae Bareli

* Greenfield EMU manufacturing facility at Bhilwara

* Railway energy management company to be set up to harness solar and wind energy

* 1,000 crossings to be energized by solar power

* 1.51 lakh vacancies to be filled up

* Locomotive cabs to be air-conditioned

* Azadi Express to be introduced to travel to places associated with freedom struggle

* India in 1 billion ton freight club

* By end of 2013-14, 1,500 km of contracts to be awarded for two dedicated rail corridors

* Rs.1 lakh crore target set for public-private-partnership route

* Free Wi-Fi to be provided on some trains

* Rs.100 crore for improving stations in New Delhi

* 179 escalators and 400 lifts at A 1 and other select stations

* E-ticketing through mobile phones

* SMS alerts for passengers on reservation status

* Next generation e-ticketing system by end of 2013

Assessment

The 2013-14 Budget has skirted the prickly issue of structural reforms. There is no mention in the budget of even the proposal in the last budget to expand the Board to include two members to look after PPP /Marketing and safety/research. The proposal has perhaps been shelved.

Overall, the budget conveys an impression of an exercise to keep the system going very much as it has done in the past, at a modest growth rate. Whether such a rate of growth of this key infrastructure sector will be sufficient to sustain the projected growth rates of the economy as a whole remains to be seen.

Nevertheless, it is a matter of pride that the Indian Railways has joined the select club of world railways moving more than a billion tons of freight annually, and is entering into yet another exclusive group of railways moving more than 10,000 tons per train. Some concomitant steps that should improve maintainability, reduce maintenance costs and improve staff productivity such as widespread introduction of track friendly/self-steering bogies and doing away with the anachronistic institution of goods guards, have not been explicitly mentioned in the budget. Hopefully, these and other steps will be implemented.

Japanese Prime Minister’s India Visit: Tokyo-New Delhi Hold Annual Summit

Japanese Prime Minister Yoshihiko Noda has paid a visit to India. During his stay he met his Indian counterpart Manmohan Singh. After the meeting he said that Japan could contribute to India’s rapidly growing manufacturing sector. A total of 421 Japanese companies have established their presence in India and created 150,000 jobs.
India and Japan need to establish firm partnerships and enter a new era of economic cooperation to capitalize on mutual complementarities, Noda said while addressing the joint business forum organized by industry chambers Associated Chambers of Commerce and Industry of India (ASSOCHAM), Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry (FICCI).
Commerce and Industry Minister Anand Sharma said both countries need to work closely to address current global challenges and have a defining influence in Asia and beyond. The two-way trade can reach a level of US $25 billion by 2014, up from $13.82 billion in 2010-11.
Sharma said Japanese firms have a major opportunity in India’s infrastructure and manufacturing. The country plans to invest $1 trillion in the 12th Five-Year Plan (2012-17) to build infrastructure.
The Delhi-Mumbai industrial corridor and dedicated freight corridor are the most ambitious infrastructure projects conceived so far which will have integrated townships. At the same time, the national manufacturing policy aims to boost production in sectors like electronics hardware, information technology, agro food processing and green power technologies. The Japanese government is committing $4.5 billion for implementation of this project.
Steady Progress in Relations
The meeting between Prime Minister Manmohan Singh and his Japanese counterpart Yoshihiko Noda, the sixth of the annual India-Japan summits, is a marker of the steady progress. It yielded the first official confirmation since Japan's devastating tsunami-earthquake-Fukushima meltdown that the country has not shut the door on a civilian nuclear deal with India. While Noda stressed the importance of learning the right lessons from Japan's nuclear accident, it appears that negotiations on a deal to assist India develop peaceful nuclear energy will continue.
The Japanese prime minister’s pledge of $4.5 billion over the next five years for the development of the Delhi-Mumbai Industrial Corridor, a commitment of financial assistance for two more infrastructure projects — Phase 3 of the Delhi Metro and a biodiversity conservation project in West Bengal — and his interest in sharing high-speed railway technology with India are significant.
Currency Swap Arrangement
During the Japanese prime minister’s stay, New Delhi and Tokyo have agreed to a $15 billion currency swap line, in a positive move for the troubled Indian rupee, Asia's worst performing currency this year.
India and Japan previously had a $3 billion swap arrangement that expired in June, said the official, speaking on condition of anonymity.
The currency swaps are expected to support the Indian rupee as it continues to weaken against the greenback and Europe's sovereign debt crisis hits India's exports. The dollar-swap arrangement with India follows a similar agreement with South Korea in October.
New Beginning Intensified
Noda's India visit started a year of intense bilateral activity. The foreign ministers of the two countries held a strategic dialogue in October, followed by talks between the defense ministers. In February, the two countries signed the Comprehensive Economic Partnership Agreement covering trade in goods as well as services; it came into effect in August.
Earlier in December 2011, India, Japan, and the United States held their first trilateral strategic dialogue. It is creditable that despite the political instability in Japan, and the scandal-induced paralysis in India, both countries managed to fit in these high-level exchanges. It is crucial that growing India-Japan ties are viewed independently of each country's relations with China.
Civil Nuclear Cooperation Agreement
The 10-page India-Japan joint statement has no doubt called for concluding the agreement with “due regard to each side’s relevant interests, including nuclear safety.” But this will hardly lessen the fears in the minds of millions of people who live in the vicinity of the areas where nuclear power plants are located or planned.
It is not surprising that Noda has been making a strong plea for the resumption of negotiations on a civil nuclear cooperation agreement between his country and India. He was a man on a mission, reiterating this whenever he got an opportunity during his stay in New Delhi as part of the annual summit between the two nations’ prime ministers.
The stakes are high as India expects to have 20,000 MWe of nuclear capacity on line by 2020 and Japan would like a share in this. India has already signed civil nuclear agreements with the United States, Russia, France, Britain, Canada, South Korea, Argentina, Kazakhstan, Mongolia and Namibia. Negotiations with Japan were brought to a halt after three meetings held last year after the March 2011 disaster that hit one of Japan’s oldest nuclear power plants — Fukushima Daichi Nuclear Power Station — which saw a meltdown after being crippled by a tsunami.