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
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
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 India
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
In a move that is also strategic for the
region, the proposed 220 kV line from Srinagar
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
* 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
* 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
*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'.
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