Highlights of the Union Budget 2013-14

Highlights of the Union Budget 2013-14

• Finance Minister makes three promises: to women, youth and the poor. 
• Nirbhaya Fund to empower women and to keep them safe and secure. 
• Proposal to set up India’s first Women’s Bank as a public sector bank. 
• Rs. 1,000 crore for skill development of ten lakh youth to enhance their employability and productivity. 
• Direct Benefit Transfer (DBT) Scheme to be rolled out throughout the country during the term of UPA Government. 
• Fiscal Deficit for 2013-14 is pegged at 4.8 percent of GDP. The Revenue Deficit will be 3.3 percent for the same period. 
• Plan Expenditure placed at Rs. 5, 55,322 crore. It is 33.3 percent of the total expenditure while Non Plan Expenditure is estimated at Rs. 11, 09,975 crore. The plan expenditure in 2013-14 will be 29.4 percent more than the RE of the current year i.e. 2012-13. 
• Substantial rise in allocation to the social sector. Allocation for Rural Development Ministry raised by 46 percent to Rs. 80,194 crore. 
• The target for farm credit for 2013-14 has been set at Rs. 7, 00,000 crore against Rs. 5, 75,000 crore during the current year. 
• Rs. 10,000 crore earmarked for National Food Security towards the incremental cost. 
• Education gets Rs. 65,867 crore, an increase of 17 percent over RE for 2012-13. 
• ICDS gets Rs. 17,700 crore. This is 11.7 percent more than the current year. 
• Drinking water and sanitation will receive Rs. 15,260 crore. Rs. 1,400 crore is being provided for setting up water purification plants to cover arsenic and fluoride affected rural areas. 
• Health and Family Welfare Ministry has been allotted Rs. 37,330 crore. National Health Mission will get Rs. 21,239 crore which represents 24.3 percent over the RE. 
• The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) will receive Rs. 14,873 crore as against RE of Rs. 7,383 crore in the current year. 
• Defence has been allocated Rs. 2, 03,672 crore. 
• Rs. 3,511 crore has been earmarked to Minority Affairs Ministry, 60 percent higher than RE for 2012-13. 
• The Government will encourage Infrastructure Debt Fund (IDF) and allow some institutions to raise tax free bonds upto Rs. 50,000 crore which is 100 percent more than the current year. 
• India Infrastructure Finance Corporation (IIFC), in partnership with ADB will help infrastructure companies to access bond market to tap long term funds. 
• Income limit under Rajiv Gandhi Equity Savings Scheme (RGESS) will be raised from Rs. 10 lakh to Rs. 12 lakh. 
• First home loan from a bank or housing finance corporation upto Rs. 25 lakh entitled to additional deduction of interest upto Rs. 1 lakh. 
• Proposal to launch Inflation Indexed Bonds or Inflation Indexed National Security Certificates to protect savings from inflation. 
• On oil and gas exploration policy, the Budget proposes to move from the present profit sharing mechanism to revenue sharing. Natural gas pricing policy will be reviewed. 
• On coal, the Budget proposes adoption of a policy of pooled pricing. 
• Benefits or preferences enjoyed by MSME to continue upto three years after they grow out of this category. 
• Refinancing capacity of SIDBI raised to Rs. 10,000 crore. 
• Technology Upgradation Fund Scheme (TUFS) for textile to continue in 12th Plan with an investment target of Rs. 1, 51,000 crore. 
• Rs. 14,000 crore will be provided to public sector banks for capital infusion in 2013-14. 
• A grant of Rs. 100 crore each has been made to 4 institutions of excellence including Aligarh Muslim University, Banaras Hindu University, Tata Institute of Social Sciences, Guwahati and Indian National Trust for Art and Cultural Heritage (INTACH). 
• New taxes to yield Rs. 18,000 crore. 
• A surcharge of 10 percent on persons (other than companies) whose taxable income exceeds Rs.1 crore has been levied. 
• Tobacco products, SUVs and Mobile Phones to cost more. 
• Relief of Rs. 2000 for the tax payers in the first bracket of 2 to 5 lakhs. 
• Voluntary Compliance Encouragement Scheme’ launched for recovering service tax dues. 
• Rs. 9,000 crore earmarked as the first installment of balance of CST compensations to different States/UTs. 

Economic Survey 2012-13

Promises growth, employment and inclusion

The Economic Survey is promising in terms of growth prospects as the downturn seems to be more or less over and the economy is looking up. The economic growth prospects, widening role of private investments, strategies to fight inflation and focus on creating job opportunities, all are inspiring. The Indian economy is likely to grow between 6.1% - 6.7% in 2013-14 driven by its strong fundamentals. However, the survey underlines that the challenge for India is to make the key drivers and enablers of growth-be it infrastructure, the transportation sector, housing, or sustainable agriculture growth. The way out lies in shifting national spending from consumption to investment, increasing opportunities for savers to boost investment, job creation and removing structural bottlenecks to growth.

While India's recent slowdown is partly rooted in external causes, domestic causes are also important. Economic survey reveals that the Indian economy remained resilient to the global financial crisis in 2008-09 and achieved a growth rate of 8.6% and 9.3% respectively in 2009-10 and 2010-11. The strong post-financial-crisis stimulus led to stronger growth in 2009-10 and 2010-11. However, due to a combination of both external and domestic factors, the economy decelerated growing at 6.2% and an estimated 5% in 2011-12 and 2012-13 respectively. According to the Economic Survey 2012-13, the global economy is also likely to recover in 2013 and various government measures will help in improving the Indian economy’s outlook for 2013-14. The services sector has shown more resilience to worsening external conditions than agriculture and industry.

These are difficult times, but India has navigated such times before, and with good policies it will come through stronger. Slowdown is a wake-up call for increasing the pace of actions and reforms. The way out lies in shifting national spending from consumption to investment, removing the bottlenecks to investment, growth, and job creation, in part through structural reforms, combating inflation both through monetary and supply side measures, reducing the costs for borrowers of raising finances and increasing the opportunities for savers to get strong real investment returns—Dr. Raghuram G. Rajan, CEA, MoF

It is inspiring to note that owing to good production in food grains in recent years and remunerative MSPs, even states which were not traditionally procuring sufficient foodgrains like Bihar, MP, Chhattisgarh and West Bengal have all shown significant increase. The survey highlights the need for stable and consistent policies and rapid investment in infrastructure, related to food management, wholesale processing, storage, packaging and distribution/ retailing. FDI in retail allowed by the government can pave the way for investment in new technology and marketing of agricultural produce in India. Lower interest rates could act as a catalyst to boost business sentiments inducing investment in various critical sectors of the economy, going forward. At this juncture, the focus of the government should be to tackle inflation by reducing the fiscal impetus to demand, she added

The Chamber hails the Economic Survey which holds promises for India to capitalize on opportunities arising out of the “demographic dividend”. India has enormous potential to create jobs in not only the construction segment but also manufacturing and services sector which is critical to employment generation and inclusive growth.

Another consequence of the slowdown has been lower-than-targeted tax and non-tax revenues. With the subsidies bill, particularly that of petroleum products, increasing, the danger that fiscal targets would be breached substantially became very real in the current year. The government should address governance issues like sealing leakages in public welfare programmes which often fail to reach the targeted beneficiaries. Direct Benefit Transfer (DBT) with the help of the Unique Identification Number (Aadhaar) can help plug some of these leakages. GST, if approved, would replace a number of state and central taxes, make India a national integrated market and bring more producers into tax net. By improving efficiency as well as revenues, it can substantially help the government finances. 

The strong post-financial-crisis fiscal and monetary stimulus in India led to spectacular growth in the immediate aftermath of the crisis. But with corporate and infrastructural investment not keeping pace, and food production constrained, the boost to consumption eventually led to higher inflation. And falling savings, partly as a result of government spending and partly as a result of high inflation, have led to a widening CAD. With slowdown in external demand and slag in net exports, India’s balance of payments is still under stress on the back of fluctuating foreign exchange reserves and extremely volatile rupee. This is a major cause of concern that needs to be addressed.