BUDGET FY14 - THE GAINERS AND LOSERS

By Ruma Dubey

At the end of every Budget, the one wish which we all wish is – if only I was a farmer! Yes, sops for the agriculture sector, like in every Budget continues and being a farmer today seems to be much better than a salaried employee or a businessman.

On the whole the Budget was a lot of talk but there does not seem to be the right stride in the walk to meet this talk. The Finance Minister on one hand said that the FY14 plan expenditure is to be raised by 30% but at the same time, he says that fiscal deficit for FY14 will come down to 4.8% from the current year estimate of 5.2%. How does this math add up?  There is a massive jump in social schemes, so one wonders how the fiscal deficit can be contained at the given estimate. This is probably on account of the lower fuel subsidy bill which is thanks to the consistent hikes in fuel and hopefully, with the proposed hike every month, this bill will stay low and it is purely on this math that Chidambaram expects fiscal deficit is lower in FY14. Well, would it be nitpicking if we were to question what happens when crude price goes up?

Overall the Budget was fine, not great but at the same time, it was not as austere or bad as one would have expected. The Budget does not restore faith that growth is now going to take off or revive the investment sentiments in a major way but yes, we can feel happy with the fact at least there was nothing untowardly negative.  And one has to admit that given the 2014 polls, this Budget is not over-the-top populist; it remains real and pragmatic to that extent. But because the growth rate and sentiments are so low, one probably expected Chidambaram to give more.  Maybe the hope is that interest rates coming down will promote growth.

The market is not reacting at all. It had no big surprises and at the same time no big shockers; nothing dramatically new.  It was like a ho-hum kind of Budget and now we are back to living life, on a day-to-day basis, with eyes back on Europe and the global markets.

BUDGET HIGHLIGHTS FY14

• Fiscal deficit at 5.2% for FY13 and at 4.8% in FY14
• Revenue deficit at 3.9% for FY13 and at 3.3% in FY14
• Current Account deficit bigger worry than fiscal deficit
• Need $75 billion to finance CAD over next two years
• No choice but to rationalize spending
• FY13 plan expenditure cut to Rs.3.9 lakh crore from Rs.5.9 lakh crore
• FY14 plan expenditure to be 30% more than FY13
• Total Budget estimate at Rs.16.65 lakh core for FY14
• FY14 plan expenditure at Rs.5.5 lakh core
• Outlays increased across all sector
• FY14 divestment target at Rs.40,000 crore and FY13 at Rs.24,000 crore
• FY14 spectrum revenue pegged at Rs.40.847 crore
• To allocate additional Rs.10,000 crore for Food Security Bill
• SIDBI Refinance Fund doubled to Rs.10,000 crore
• Banks to act as insurance brokers
• To set up PSU bank for women, initial capital of Rs.1000 crore
• Proposal to amend SEBI Act under consideration
• Bank correspondent allowed to sell micro finance products
• FIIs allowed to participate in currency derivative segment
• 10% surcharge for incomes above Rs.1 crore
• STT reduced, CTT introduced on non-agri products
• PPP projects with Coal India
• Rs 2,03,672 crore, including Rs 86,741 crore capital expenditure to Defence in 2013-14

SUBSIDY BILL IN FY14

• Petroleum subsidy Rs.96,900 crore
• Fertiliser subsidy at Rs.66,000 crore
• Food subsidy at Rs.90,000 crore
• Total subsidy at Rs.2.31 lakh crore
• Net MSS at Rs.20,000 crore

TAXES IN FY14

• Direct tax proposals to yield Rs 13,300 crore, indirect tax proposal to give Rs 4,700 crore
• No change in slabs and rate for personal income tax.
• Tax credit of Rs 2000 on income of Rs.5 lakh/annum, to benefit 1.8 crore people
• Super rich tax of 10% on incomes earned above Rs.1 crore
• Surcharge doubled from 5 to 10% on domestic companies whose taxable income exceeds Rs 10 crore.
• Commodities transaction tax (CTT) levied on non-agriculture commodities futures contracts at 0.01%
• Modified GAAR norms to be introduced from April 1, 2016.
• No change in peak rate of customs duty for non-agriculture products.
• Tax residency Certificate necessary but not sufficient to get DTAA benefits
• Crackdown on investment from Mauritius, Sec 90 and 90A amended
• Direct Taxes Code (DTC) bill to be introduced in current Parliament session
• No change in basic customs duty rate of 10% and service tax of 12%
• Securities Transaction Tax (STT) reduced on equity future, mutual fund
• TDS of 1% properties valued above Rs 50 lakh; agriculture land exempted
• Tax Administration Reform Commission to be set up to regularly review tax law applications.
• Rs.9000 crore allocated for the first time on GST, raising hopes that it could become a reality before end of FY14

SOCIAL WELFARE BENEFITS

• Rs 41,561 crore allocated for SC sub-plan; Rs 24,598 crore for tribal sub plan
• Rs. 200 crore to Women and Child Welfare Ministry to address issues of vulnerable women
• Medical colleges in six more AIIMS-like institutions to start functioning this year; Rs 1650 crore allocated for the purpose.
• Rs.10,000 crore set aside for incremental cost for National Food Security Bill
• Rashtriya Swasthya Bima Yojana benefit will be extended to rickshaw pullers, auto and taxi drivers and sanitation workers
• 17% hike in education allocation over Fy13, Rs.65,877 crore allocated for education
• Rs.1400 crore for water purification plants
• Rs.33,000 crore allocation for MGNREGA
• 46% hike in rural development spending
• Rs.14,873 crore for JNNURM in FY14, up from Rs. 7,383 crore RE in FY13; this is to be used for  10,000 buses purchase, especially in hill states
• 22% hike in allocation for agriculture ministry
• Interest subvention on farm loans repaid on time to continue
• 4% farm loan scheme extended to private sector bank
• Grant of Rs 100 crore each to AMU (Aligarh), BHU (Varanasi) and TISS (Guwahati) and INTACH
• Rs 532 crore to make post offices part of core banking.

INDIA INC

• FIIs allowed to participate in currency derivative segment
• Stake of less than 10% is FII and more is FDI.
• Insurance, pension funds can directly trade in debt instruments
• Capital allowance of 15% on companies investments of more than Rs.100 crore
• 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
• SEBI to simplify know-your-customer norms for foreign portfolio investors

BUDGET FY14: WINNERS AND LOSERS