Indian Budget 2013-14

The finance minister Mr. P Chidambaram recently unveiled a bigger-than-expected outlay for the coming fiscal year in what is known to be one of the most highly anticipated Indian budgets of recent years.

Some of the highlights of the budget are elucidated as under:

FISCAL DEFICIT

• The year 2012-13 saw fiscal deficit at 5.2% of GDP, which is a matter of concern for the country as rising fiscal deficit lead to inflation and country’s sovereign rating is hampered
• For the year 2013-14, fiscal deficit is targeted at 4.8%
• India has to rationalize the expenditure due to the huge fiscal deficit

BORROWING

• Gross market borrowing is projected at 6.29 trillion rupees in 2013/14, where in short term borrowing is seen at 198.44 billion rupees in 2013/14
• India to buy back 500 billion rupees worth of bonds in 2013/14.

SUBSIDIES

• Major subsidies bill estimated at 2.48 trillion rupees from 1.82 trillion rupees in the year 2013-14. Petroleum subsidy projected at 650 billion rupees in 2013-14. Revised petroleum subsidy for 2012-13 at 968.8 billion rupees
• Food subsidies in 2013-14 estimated at 900 billion rupees. Revised food subsidies at 850 billion rupees in 2012-13
• Fertilizer subsidy revised at 659.7 billion rupees for 2012-13.

GROWTH

• The economy is facing the biggest challenge of getting back to its growth back to the rate of 8 point. Growth must be embraced as highest goal as of now for the economy.

SPENDING

• Total budget expenditure is seen at 16.65 trillion rupees in 2013-14 of which non-plan expenditure is estimated at about 11.1 trillion rupees and planned expenditure is seen at 5.55 trillion rupees
• Total expenditure for 2012-13 revised at 14.3 trillion rupees which is 96 point of budget estimate.

REVENUE

• Direct tax proposal in 2013-14 is expected at 133 billion rupees where as 47 billion rupees through indirect tax proposals.
• Stake sales in state-run firms will fetch around 558.14 billion in 2013-14. Revenue of 408.5 billion rupees is expected from airwave surcharges, auction of telecom spectrum, etc. 2013-14.

CURRENT ACCOUNT DEFICIT

• CAD is India’s greatest worry. More than $75 billion is required this year and next year to fund the deficit. Food inflation is a sign of worry and proper steps to check the supply side will be taken so as to control the inflation in primary articles.

TAX

• Surcharge of 10 point on rich taxpayers with annual income of more than 10 million rupees a year is to be implemented. Also an increment of surcharge to 10 point on domestic companies with annual income of more than 100 million rupees will be implemented.
• Surcharge for foreign companies paying higher rate of corporate tax will be increased from 2 pct to 5 pct.
• 15 point tax concession on dividend received by India companies from foreign units will be continued for a period of one year
• Withholding tax of 20 point on profit distribution to shareholders is proposed
• Reduction in STT on equity futures to 0.01 point from 0.017 point to encourage participation. Also a proposal to introduce commodities transaction tax (CTT) will be implemented if required. CTT on non-agriculture futures contracts at 0.01 point.

CORPORATE SECTOR AND MARKETS

• Issue of inflation-indexed bonds
• Capital allowance of 15 point to companies on investments of more than 1 billion rupees
• Investment in corporate, government bonds to allowed to use as margin requirement for Foreign institutional investors (FIIs)
• Allowing Insurance, provident funds to trade directly in debt segments of stock exchanges
• Allowing FIIs to hedge foreign exchange exposure with exchange-traded derivatives
• Investors to be regarded as FII and FDI on the basis of the percent stake. Investor with less than 10 point stake in a company will be regarded as FII and FDI the other way round
• KYC norms for foreign portfolio investors to be simplified by stock exchange regulator.

POWER AND ENERGY SECTOR

• Zero customs duty for electrical plants and machinery
• Move to revenue-sharing from profit-sharing policy in oil and gas sector.

Read more about Oil & Gas Companies in India.

FOREIGN TRADE

• Duty cut on exports of precious and semi-precious stones to 2 point from 10 point
• No duty on import of ships, vessels.

BANKING

• Capital infusion to State-run banks to the tune of 140 billion rupees in 2013-14.

Read more about Top Ten Banks in India.

DEFENCE

• 2.03 trillion rupees allocated to defence in 2013-14.

AGRICULTURE

• Allocation of 801.94 billion rupees to rural development in 2013-14 along with the allocation of 270.49 billion rupees for agriculture in 2013-14.

As far as the budget is concerned the finance minister has very well looked into the key problems of Indian economy which is CAD, fiscal deficit and the rising inflation (mainly the primary articles). Finance Minister’s target of maintaining the deficit at the level of 4.8 is undoubtedly a positive move and will help in curbing the inflation.