* Defence allocation enhanced by 10 pc
* Crackdown on wealth stashed abroad continues
NEW DELHI, Feb 17:
Wooing the middle class ahead of elections, Finance Minister P Chidambaram today slashed excise duty on cars and two-wheelers, capital goods and a variety of consumer items like TV and refrigerators to boost demand and manufacturing while accepting the long-standing demand of ‘one-rank-one-pension’ for ex-servicemen.
Presenting the Budget in the Lok Sabha, Finance Minister P Chidambaram did not propose changes in the tax laws except to continue the 10 per cent income tax surcharge on ‘super- rich’ individuals and up to 5 per cent on corporates.
“In keeping with the conventions, I do not propose to make any announcements regarding changes to tax laws,” he said in UPA-II’s last budget that sought to provide sops in indirect taxes including reliefs in service tax to storage and warehousing of rice and blood banks.
The revenue sacrifice on account of indirect tax concessions would be Rs 300 to Rs 400 crore in the 40 days remaining in the current fiscal and Rs 700 to Rs 800 crore by May. But a 5 per cent pick up in the sales of products in these sectors would make up for the loss of revenue, he said in his post-Budget press briefing.
He also did not agree that today’s concessions amount to a stimulus package saying the two are not comparable.
On continuance of the tax on ‘super-rich’ and corporates, he said he has left it to the new Government to review the impost that was slapped in the last budget.
The indirect tax concessions will be valid up to June 30 and can be reviewed by the new Government.
In a major relief to ex-servicemen who have been demanding one-rank-one-pension for long, the Minister announced that the Government has accepted it in principle for which an allocation of Rs 500 crore has been made. The scheme is expected to benefit around three million defence pensioners.
The concessions aimed at the middle-class and to boost the automobile sector that has been registering a negative growth, include a slashing of excise duty from 12 to 8 per cent on small cars, motor cycles, scooters and commercial vehicles and 6 per cent cut to 24 per cent on SUVs.
Large and middle segment cars will attract an excise duty of 24/20 per cent, reduced from 27/24 per cent. Appropriate reductions will also be made in the excise duty on chassis and trailers.
Excise duty has also been restructured on domestically manufactured mobile phones to boost homegrown industry. In trying to boost manufacturing, excise duty on a range of products from TV and refrigerators to computers, printers, digital cameras, microwave oven and DVD players has been reduced from 12 per cent to 10 per cent.
A similar duty reduction has been given to capital goods.
The other populist measures include continuation of interest subvention scheme for farm loans and a moratorium period for education loans taken before March 31, 2009 to benefit 9 lakh students. The interest moratorium for students will amount to Rs 2,600 crore.
In view of the dip in current account deficit, the Finance Minister promised to relook at the import restrictions and duties imposed on gold earlier in the fiscal when unchecked shipments of the yellow metal had shot up CAD.
Asked whether the sops were intended to be populist ahead of the elections, Chidambaram said, “My intention was not to please anyone. I wanted to talk to the people directly that we are going through a turbulent phase in the economy.”
To a question on continuing curbs on gold, he said, “I can’t make any announcement because Parliament is in session. There are pros and cons to relaxing restrictions. We will weigh them carefully and take a decision.”
To a question a whether it was a populist, pragmatic or please-all Budget, Chidambaram said, “Your question is populist. You expect a populist answer. My intention is not to please anyone. My intention was to speak plainly to the people of India and tell them (that) these are turbulent years. We are navigating through a turbulent period.”
The Government has done a lot in last 21 months to stabilise India’s economy and it believes that a fair measure of success has been achieved, he said.
The allocation for Defence for the coming year has been enhanced by 10 per cent from Rs 2,03,672 crore in Budget estimate of 2013-14 to Rs 2,24,000 crore in 2014-15.
Non-plan expenditure estimated at Rs 12,07,892 crore. Of this expenditure on food, fertiliser and fuel subsidy will be Rs 2,46,397 crore, which will be slightly more than the revised estimate of Rs 2,45,452 crore in 2013-14.
Giving Budget estimates, the Minister said the current financial year will end on a satisfactory note with the fiscal deficit at 4.6 per cent, below the red line of 4.8 per cent, and the revenue deficit at 3.3 per cent.
The fiscal deficit for 2014-15 has been pegged at 4.1 per cent, which will be below the target of 4.2 per cent set by the new fiscal consolidation path. Revenue deficit is estimated at 3 per cent.
With the economy reviving, Chidambaram expressed confidence of achieving a 6 per cent GDP growth next fiscal.
Justifying the excise duty reliefs, Chidambaram said, “The current economic situation demands some interventions that cannot wait for the regular Budget. In particular, the manufacturing sector needs an immediate boost.”
To encourage domestic production of mobile handsets, he restructured the excise duty for all categories fixing it at 6 per cent with CENVAT credit or 1 per cent without CENVAT credit.
Customs duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols has been pegged at 7.5 per cent to encourage to domestic production of soaps and oleo chemicals.
The allocation for Defence for the coming year has been enhanced by 10 per cent from Rs 2,03,672 crore in Budget estimate of 2013-14 to Rs 2,24,000 crore in 2014-15.
Non-plan expenditure estimated at Rs 12,07,892 crore. Of this expenditure on food, fertiliser and fuel subsidy will be Rs 2,46,397 crore, which will be slightly more than the revised estimate of Rs 2,45,452 crore in 2013-14.
Giving Budget estimates, the Minister said the current financial year will end on a satisfactory note with the fiscal deficit at 4.6 per cent, below the redline of 4.8 per cent, and the revenue deficit at 3.3 per cent.
The fiscal deficit for 2014-15 has been pegged at 4.1 per cent, which will be below the target of 4.2 per cent set by the new fiscal consolidation path. Revenue deficit is estimated at 3 per cent.
Customs duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols has been pegged at 7.5 per cent to encourage to domestic production of soaps and oleo chemicals.
Similarly, a concessional customs duty of 5 per cent on capital goods imported by Bank Note Paper Mill India Pvt Ltd has been provided to encourage to indigenous production of security paper for printing currency notes.
Chidambaram said excise duty has been reduced from 12 to 10 per cent on capital goods and consumer non-durables falling under Chapter 84 and 85 of the Schedule to the Central Excise Tariff Act.
Small cars, motorcycles, scooters and commercial vehicles will attract a lower excise duty of 8 per cent from the current 12 per cent, while SUVs will see a 6 per cent reduction in duty from 30 to 24 per cent.
Large and middle segment cars will enjoy an excise duty of 24/20 per cent, down from 27/24 per cent.
Plan expenditure for the coming fiscal has been fixed at Rs 555,322 crore, unchanged from current year, and non-Plan expenditure at Rs 12,07,892 crore, marginally higher than 2013-14.
Outlining a 10-point vision for the future, the Finance Minister said India must achieve the target of fiscal deficit of 3 per cent of GDP by 2016-17 and remain below that level always.
On Current Account Deficit, he said there is no room for any aversion for it since the country will run a CAD every year for some more years and it can be financed only by foreign investments – FDI, FII or ECBs or any other foreign inflow.
As part of the vision, he said a developing economy must accept that when the aim is high growth, there will be moderate level of inflation.
“RBI must strike a balance between price stability and growth while formulating monetary policy,” he said in his vision formula that included financial sector reforms, infrastructure, manufacturing, subsidies, urbanisation, skill development and sharing responsibilities between States and Centre.
Expressing disappointment over not being able to introduce Goods and Services Tax (GST), he said, “I leave it to you to answer the question who blocked the GST when an agreement on the game-changing tax reform was around the corner?”
He said the DTC, which will serve for the next 20 years, is ready and intents to place in on the website for public discussion.
“I appeal to all political parties to resolve to pass the GST laws and DTC in 2014-15,” he said.
Referring to the GDP growth rate, Chidambaram said the slowdown began in 2011-12 and in nine quarters it had declined from 7.5 per cent in Q1 of 2011-12 to 4.4 per cent in Q1 of 2013-14.
He said thanks to numerous measures taken, he was confident the decline will be arrested and the growth cycle will turn in the second quarter.
“I think I have been vindicated. Growth in Q2 of 2013-14 has been placed at 4.8 per cent and growth for the whole year has been estimated at 4.9 per cent. This means that growth in Q3 and Q4 of 2013-14 will be at least 5.2 per cent,” he said.
The Finance Minister said the economy is more stable today than what it was two years ago. “The fiscal deficit is declining, the current account deficit has been contained, inflation has been moderated, the quarterly growth rate is on the rise, the exchange rate is stable, exports have increased and hundreds of projects have been unlocked,” he said.
He said the current year will end with a merchandise exports of USD 326 billion, indicating a growth of 6.3 per cent.
The current account deficit that threatened to exceed last year’s CAD of USD 88 billion, will be contained at USD 45 billion, which will be USD 15 billion more than the foreign exchange reserves by the end of financial year.
Last year, WPI headline inflation stood at 7.3 per cent and core inflation at 4.2 per cent. At the end of January 2014, WPI was 5.05 per cent and core inflation at 3 per cent.
“While our efforts have not been in vain, there is still some distance to go. Food inflation is still the main worry, although it has declined sharply from a high of 13.6 per cent to 6.2 per cent,” he said.
Rejecting the argument of policy paralysis, Chidambaram enumerated the pathbreaking decisions of the Government in 2013-14 which included decontrol of sugar, gradual correction of diesel prices, rationalisation of railway fare, starting the process of issue of new bank licenses and restructuring of power distribution companies.
The Cabinet Committee on Investment (CCI) and the Project Monitoring Group were set up. Thanks to the swift decisions taken by them, by the end of January 2014, the way was cleared for completing 296 projects with an estimated project cost of Rs 6,60,000 crore.
On performance, Chidambaram gave examples of fast growth in various sectors. India produced 263 million tons of foodgrains now as compared to 213 million tons 10 years ago.
Agriculture sector has shown stellar performance in 2013-14. Foodgrain production is estimated at 263 million tons. Production of sugarcane, cotton, pulses, oilseeds and quality seeds has reached new records.
Agriculture exports are likely to cross USD 45 billion. Agriculture credit is likely to touch Rs 7,35,000 crore, exceeding the target of Rs 7,00,000 crore. In the current year, agriculture growth is estimated at 4.6 per cent. For 2014-15, the target for agriculture credit has been fixed at Rs 8 lakh crore.
Chidambaram also announced that the interest subvention scheme shall continue in 2014-15. Under this scheme, a subvention of 2 per cent and an incentive of 3 per cent for prompt payment is provided, reducing the effective rate of interest for farm loan to 4 per cent.
A moratorium period for education loans taken up to March 31, 2009 has been proposed. It will benefit nearly 9 lakh student borrowers by way of reduced interest burden. Rs 2,600 crore has been allocated for it.
The Government will contribute Rs 1000 crore to the Nirbhaya Fund on top of a similar grant provided last year. The Fund has also been made non-lapsable.
Cracking down on alleged wealth stashed by Indians abroad, the Government has initiated enquiries in several cases while information has been received in 67 such cases and prosecution for wilful tax evasion has been launched in 17 other cases.
Giving an update on alleged tax evasion through offshore accounts, Chidambaram said in his interim budget speech that the Government has succeeded through alternative methods and special efforts in obtaining information in 67 cases “despite several hurdles in obtaining from the countries concerned”.
He said that action is underway to determine the tax liability as well as imposition of penalty in these 67 cases.
“Prosecutions for wilful tax evasion have been launched in 17 other cases. More enquiries have been initiated into accounts reportedly held by Indian entities in no tax or low tax jurisdictions,” he added.
“There has been much debate on illegal offshore-accounts held by Indians. Investigations into such accounts were launched in 2011,” Chidambaram said.
The statement assumes significance as the matter of alleged tax evasion through offshore accounts would be discussed at the G-20 meeting of Finance Ministers later this month in Australia, where Chidambaram would also be present.
Meanwhile, after Rahul Gandhi’s push, the Government today accepted the long-standing demand of ex-servicemen for ‘one-rank, one-pension’ and allocated Rs 500 crore for the fund, a decision that is expected to benefit around 30 lakh retired personnel of the Armed forces.
However, the Armed forces were not sure whether the amount would be sufficient to fully implement the scheme that will come into effect from 2014-15 as they feel the requirement would be nearly five times the amount.
Chidambaram, while presenting the Vote-on-Account in the Lok Sabha, said, “I am happy to announce that the Government has accepted the principle of ‘one-rank, one-pension’ for the Defence forces. This decision will be implemented prospectively from the financial year 2014-15.”
The requirement for 2014-15 is estimated at Rs 500 crore and “as an earnest of the UPA Government’s commitment, I propose to transfer a sum of Rs 500 crore to the Defence Pension Account in the current financial year itself.”
The announcement, which is likely to benefit around 3 million defence pensioners, comes days after Rahul Gandhi assured a delegation of ex-servicemen that he supported their demand and would do “all that I can to see that your demands are met”.
Chidambaram said the two UPA Governments had made changes in the pension rules for defence services on three occasions but some gaps remained in the ranks of ‘Sepoy’ and ‘Naik’ among non-officers and ‘Major’ and above among officers.
“We need a young fighting force, we need young jawans and we need young officers. We also need to take care of those who served in the defence forces only for a limited numbers of years. The Government has therefore decided to walk the last mile and closed the gap for all retirees in all ranks,” he announced.
Rahul hailed as “historic” the decision on the ‘one-rank, one-pension’ demand.
“A number of delegations have met me on the one-rank, one-pensions (issue) in last many days. All of them said it is a very necessary and historic step. Our forces are always ready to fight for the nation and people…It is our duty that we provide them all support,” he told reporters.
“I thank the Governmment, the Prime Minister and the Congress President for taking this historic step. Our Government is fully behind them. They always stand behind the nation,” he said.
Defence Minister A K Antony also welcomed the decision, saying it is a “great” day for ex-servicemen.
He said the decision shows the Government is not only concerned about modernisation but also the “happiness” of the forces. “We will continue to do that.”
However, some senior Army officers expressed skepticism over the extent of the scheme’s roll-out, saying Rs 500 crore may not be enough to implement it fully as the total cost could be somewhere around Rs 2,500 crore.
“It could again be a case of modified parity than actual parity. The outlay of Rs 500 cr seems to be on shorter side,” an officer said.
Earlier, the Expenditure Secretary had projected the requirement at over Rs 1,800 cr in his depositions to a Rajya Sabha committee in 2012.
At the same time, a Defence Ministry official said the announcement reflected Sovernment’s categorical statement about implementing the decision.
“The entire contours of the scheme and its implementation will be worked out in the coming weeks,” he said.
The Government has set a revenue collection target of Rs 11,67,131 crore and estimated total expenditure at Rs 17,63,214 crore in the financial year starting April 1.
As per the Budget document, the Ministry of Finance expects to get Rs 9,86,417 crore from tax revenue and Rs 1,80,714 crore from non-tax revenue in 2014-15.
The Government is hopeful of garnering total receipts of Rs 17,63,214 crore, including Rs 10,527 crore from recoveries of loans, Rs 56,925 crore from other receipts and Rs 5,28,631 crore from borrowings and other liabilities.
Gross tax revenue is estimated at Rs 13,79,199 crore, including Rs 4,51,005 crore from corporation tax, Rs 3,06,466 crore from income tax, Rs 2,01,314 crore from customs, Rs 2,00,585 crore in excise duties and Rs 2,15,478 crore from service tax.
The centre’s net tax revenue will be Rs 9,86,417 crore, after deducting the share of States and transfers to the National Calamity Contingency Fund/National Disaster Response Fund.
The Government’s revised revenue collection target for the current financial year is Rs 10,29,252 crore, compared with Rs 10,56,331 crore projected earlier.
The fiscal deficit, which is the gap between expenditure and revenue, is estimated at 4.1 per cent of GDP in 2014-15, compared with 4.6 per cent in the current financial year and 4.9 per cent of GDP in the previous financial year.
The plan expenditure for 2014-15 is estimated at Rs 5,55,322 crore and non-plan expenditure at Rs 12,07,892 crore.
The Interim Budget for 2014-15 revised the estimate of plan expenditure for the current financial year to Rs 4,75,532 crore, compared with an earlier projection of Rs 5,55,322 crore, a reduction of Rs 79,790 crore.
It was an unprecedented scenario in Lok Sabha today when Chidambaram presented his interim budget as some of his own ministerial colleagues were in the Well raising slogans against the decision to create Telangana state.
Chidambaram, who was presenting the last budget of UPA-II, remained unfazed as he delivered his hour-long budget speech amid sloganeering by some Congress members from Andhra Pradesh along with those from TMC, AIADMK and SP.
Union Ministers Chiranjeevi, D Purandeswari, K S Rao, Kotla Jaya Surya Prakash Reddy and other Congress members Bapi Raju and G V Harsha Kumar were in the Well demanding a united Andhra Pradesh.
As the budget was being presented, Harsha Kumar stood near the Speaker’s table and later leaned on it even though some members asked him to move away.
Minister M M Pallam Raju and few other members were on their feet in the aile.
The Finance Minister, who began the budget presentation at around 11.10 am, halted his speech for a couple of minutes in the initial stage due to sloganeering from the members.
The Finance Minister was seen talking to Union Ministers Sushilkumar Shinde and Kamal Nath, apparently conveying his determination to carry on with his speech. He was heard saying, “(I am) not going back.”
This was the first interim budget by Chidambaram who has presented eight full budgets in the past, the second highest in number by a Finance Minister.
The maximum of 10 budgets was presented by Morarji Desai, while Pranab Mukherjee (currently the President), Yashwant Sinha, Y B Chavan and C D Deshmukh had presented seven budgets each.
Chidambaram concluded his speech with couplets of Tamil sage Thiruvalluvar.
Apart from MPs from Seemandhra region who were in the Well, AIADMK members were also raising slogans from their seats during most part of Chidambaram’s speech.
Members from Samajwadi Party and the Left protested against disorder in the House but later went back to their seats after an assurance by Speaker Meira Kumar that she would hear them in her chamber.
Towards the fag end of the Finance Minister’s speech, the high decibel of sloganeering by TMC members rose considerably even as one of them, carrying a placard, shouted ‘Bengal hungry…Shame shame’.
Defence Minister A K Antony was all smiles when Chidambaram announced increase in allocation for defence also the decision to have one-rank one-pension scheme for ex-servicemen.
Some leaders including Congress President Sonia Gandhi and SP chief Mulayam Singh Yadav were seen making notes during the budget presentation.
Chidambaram, clad in his trademark white shirt and dhoti, was greeted by thumping of desks by the Treasury benches when he listed the strides made by the UPA Government in last 10 years, including in the areas of foodgrain production, construction of roads, power generation and education. (PTI)
Cheaper and
costlier items
Cheaper –
* Cars
* Sports utility vehicles
* Motorcycles
* Scooters
* Commercial vehicles
* TVs
* Refrigerators
* Computers
* Printers
* Keyboards
* Mouse
* Hard disks
* Vacuum cleaners
* Dish washers
* Water coolers
* Torch lights
* Scanners
* Digital cameras
* Hair dryers
* Electric irons
* Microwave oven
* MP3 players
* DVD Players
* Soaps
* Charges of cord blood banks
Costlier —
* Entry level mobile handsets costing less than Rs 2,000.
Budget – Highlights
* Income tax rates kept unchanged;
* 10 pc surcharge on ‘super-rich’ having annual income above Rs 1 crore to continue;
* 5 pc surcharge on corporates with turnover of Rs 10 cr
* Foodgrain production estimated at 263 million tonnes in 2013-14;
* Fiscal deficit at 4.6 pc in 2013-14 and 4.1 pc next year, revenue deficit at 3 pc in 2013-14;
* Current Account Deficit to be USD 45 bn as against USD 88 bn in 2012-13;
* Excise duty on small cars, motorcycles and commercial vehicles cut from 12 to 8 pc;
* Excise duty on SUVs cut from 30 to 24 pc
* Large and mid-segment cars from 27-24 pc to 24-20 pc
* Excise duty on mobile handset to be 6 pc on CENVAT credit to encourage domestic production
* Excise duty cut on capital goods, non consumer durables cut from 12 to 10 per cent
* Moratorium on interest on student loans taken before March 31, 2009; to benefit 9 lakh borrowers
* USD 15 bn addition to forex exchange in 2013-14;
* Disinvestment target for FY14 cut to Rs 16,027 cr versus Rs 40,000 cr; next year Govt eyeing Rs 36,925 cr;
* Lowers residual stake sale target to Rs 3,000 cr from Rs 14,000 cr for this fiscal;
* Govt obtains information in 67 cases of illegal offshore accounts of Indians;
* Govt’s net borrowing in next fiscal to be Rs 4.57 lakh cr;
* Plan expenditure cut by Rs 79,790 cr for current fiscal;
* Allocates Rs 1,000 cr more to Nirbhaya Fund;
* CCI cleared 296 projects worth Rs 6.6 lakh cr by end Jan;
* GDP to grow by at least 5.2 pc in Q3 and Q4 in 2013-14;
* Plan expenditure for 2014-15 at Rs 5.55 lakh cr and non-plan at Rs 12.08 lakh cr;
* Govt to infuse Rs 11,200 cr in PSU banks next fiscal;
*Government gets Rs 88,188 cr as dividend from PSUs, Rs 14,000 crore more than budgeted
* PSUs to achieve record capex of Rs 2.57 lakh crore in 2013-14,
* 500 MW fast breeder test reactor in Kalpakkam to be ready shortly; 7 nuclear power reactors under construction.
* National Solar Mission to undertake 4 ultra mega solar power projects in 2014-15;
* Rs 1,200 crore additional assistance to N-E States to be released before end of the year;
* Rs 3,370 crore transferred to 2.1 crore LPG users this fiscal
* Govt committed to Aadhaar-based LPG transfer but scheme on hold temporarily.
* Rs 2,46,397 crore allocated for food, fertiliser and fuel subsidy.
* Defence allocation increased by 10 per cent to Rs 2.24 lakh crore;
* Rs 500 crore estimated requirement for implementing one-rank-one-pay scheme for armed forces in 2014-15;
* Exports target at USD 326 bn in FY14; up 6.3 pc;
* Minority bank accounts have swelled to 43,53,000 by 2013-14 from 14,15,000 bank accounts in 10 years;
* Govt proposes to set up debt management office; to be operational next fiscal. (PTI)
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