India's Union Budget Analysis for FY 2013-2014

7/30/2019 India's Union Budget Analysis for FY 2013-2014

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UNION BUDGET 2013-14

Impact Analysis


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UNION BUDGET 2013-14: Impact Analysis

CONTENTS

BUDGET AT A GLANCE ............................................................................................ 1

UNION BUDGET 2013-14 : A MACROECONOMIC PERSPECTIVE .......................... 2-3

SECTORAL IMPACT ............................................................................................. 4-29

CHANGE IN CENTRAL PLAN OUTLAY ..................................................................... 30

RECEIPTS .......................................................................................................... 31-32

EXPENDITURE .................................................................................................. 33-34

KEY ECONOMIC INDICATORS (Absolute Values) ................................................... 35

KEY ECONOMIC INDICATORS (Percentage Change Over Previous Year) ............... 36

GLOSSARY ........................................................................................................ 37-38


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BUDGET AT A GLANCE

(` bn) 2012-13 2013-14

Revised Es mates Budget Es mates

1) Revenue Receipts 8,718.28 10,563.31

Tax Revenue (net to centre) 7,421.15 8,840.78

Non-Tax Revenue 1,297.13 1,722.52

4) Capital Receipts (5+6+7)$ 5,589.98 6,089.67

Recoveries of loans 140.73 106.54

Other receipts 240.00 558.14

Borrowings and other liabili es * 5,209.25 5,424.99

8) Total Receipts (1+4)$ 14,308.25 16,652.97

9) Non-Plan Expenditure 10,016.38 11,099.75

On Revenue Account of which 9,196.99 9,929.08

Interest Payments 3,166.74 3,706.84

On Capital Account 819.39 1,170.67

13) Plan Expenditure 4,291.87 5,553.22

On Revenue Account 3,433.73 4,432.60

On Capital Account 858.14 1,120.6216) Total Expenditure (9+13) 14,308.25 16,652.97

Revenue Expenditure (10+14) 12,630.72 14,361.69

Of which, Grants for crea on of Capital Assets 1,242.75 1,746.56

Capital Expenditure (12+15) 1,677.53 2,291.29

20) Revenue De cit (17-1) 3,912.45 3,798.38

% of GDP (3.9) (3.3)

21) E ec ve Revenue De cit (20-18) 2,669.70 2,051.82

% of GDP (2.7) (1.8)

22) Fiscal De cit {16-(1+5+6)} 5,209.25 5,424.99

% of GDP (5.2) (4.8)

Primary De cit (22-11) 2,042.51 1,718.14

% of GDP (2.0) (1.5)

$ Excluding receipts under Market Stabilisa on Scheme.* Includes draw-down of Cash Balance.

Note: 1) GDP for BE 2013-2014 has been projected at ` 113.7 trillion assuming 13.4%growth over the advance es mates of 2012-2013 ( ` 100.3 trillion) released by CSO.2) Individual items in this document may not sum up to the totals due to rounding o .


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UNION BUDGET 2013-14 : A MACROECONOMIC PERSPECTIVE

The Union Budget for FY14 is presented at a me when the Indian economy is faced with various

challenges posed by domes c and global issues. The budget was expected to implement scalprudence on one hand and support growth on the other. The Finance minister has ar culated a

scal de cit (FD) target of 4.8% of GDP during FY14 with a commitment to bring down the FD,revenue de cit and the e ec ve revenue de cit to 3.0%, 1.5% and zero, respec vely by FY17.What is commendable is the fact that the scal de cit for FY13 at 5.2% has been marginallyhigher than the budgeted es mate of 5.1%.

While scal de cit has been targeted to be lower than the previous year, total expenditure hasbeen budgeted at ` 16,652.97 bn, a 16% increase as compared to the revised es mates (RE) of FY13. Besides, there has been a signi cant hike in plan expenditure which is likely to boost ruraldemand and support inclusive growth. Concerns do arise on whether the government would beable to generate the requisite revenue to nance the total expenditure laid out in the budget.If revenue genera on falters owing to failure of revival of economic growth or due to di cul esin implemen ng the revenue genera ng measures, either scal consolida on will have to beforegone or expenditure will need to be curtailed.

Even though modera on in growth might pose di cul es in revenue genera on, the governmentis hopeful of raising adequate revenue through various measures. The budget es mates a highercollec on of tax and non tax revenue. However, the disinvestment target for FY14 which has been

more than doubled from the revised es mates in the current scal seems to be a tad ambi ous.Besides reitera ng its commitment towards scal consolida on, the budget has tried to addressvarious crucial issues i.e. promo ng investments, encouraging infrastructure ac vi es, boos ngrural demand through enhanced social sector spending, ini a ng measures to boost savings,besides giving a thrust to capital markets including developing the debt market and so on.

The focus of the government towards increasing investment in infrastructure, crea ng aregulatory authority for the road sector, introducing investment allowance for a rac ng new highvalue investments, crea ng industrial corridors besides announcement of projects in Na onal

Waterways, Road and Ports sectors, devising a PPP policy framework in the coal sector to someextent would boost infrastructure ac vi es. Besides, a number of ini a ves in the Oil & Gassector is also commendable.

However, measures directed towards easing the structural bo lenecks needed more focus.Moreover, no speci c ac on has been presented to curb the current account de cit which posesa signi cant downside risk to the overall growth. Though the measures announced are good onintent they would yield the desired results only on e ec ve and mely execu on. The policyini a ves that the government has been taking since Sept-12 has to con nue in future and thealloca on announced in the budget also needs to be e ec vely u lised to help the economyrevive from the slowdown.


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Fiscal Arithme c for FY14

Reviving the economy on a sustainable growth path will remain a major challenge for thegovernment during FY14. The government has thus, budgeted a higher expenditure to boostgrowth. For FY14, total expenditure is budgeted to increase by 16.4% to ` 16,652.97 bn ascompared to the revised es mates (RE) of ` 14,308.25 bn for FY13. As in the last budget, the planexpenditure received a major boost with an alloca on of ` 5,553.22 bn, an increase of 29.4%over FY13 (RE). Non-plan expenditure is also budgeted to increase by 10.8 % to ` 11,099.75 bn.The subsidy though budgeted to decrease by 10.3% during FY14 from the revised es mates of FY13; is budgeted to increase by over 21.6% over the budget es mates of FY13.

For FY14, the gross tax receipts are budgeted to increase by 14.7% over FY13 (BE) and by 19.1%

over FY13 (RE). On the direct tax front, revenue from corporate tax is budgeted to increase by16.9% (RE). While there has been no change in the income tax slabs or rates, there has beena provision of a tax credit of ` 2,000 to every person who has a total income upto ` 0.5 mn.The personal income tax collec on is budgeted to increase by 20.2% in FY14 over FY13 (RE). Therehas been no change in the normal rate of excise duty of 12% and the normal rate of service tax of 12%. However, revenue from Union excise duty is budgeted to increase by 14.9%. Services tax isbudgeted to increase by a huge 35.8% by FY14 over FY13 (RE) and by 45.3% over FY13 (BE).

Non-tax revenue is also budgeted to record a signi cant increase of 32.8% during FY14 as

compared to (RE) of FY13. This would be achieved primarily owing to signi cant 45.0% increasein other non-tax revenue collec ons and 33.2% increase in dividend and pro t even as externalgrants have been budgeted to register a decline. During this budget, the Government plans togenerate ` 558.14 bn through disinvestments which is almost more than double the revisedes mates of FY13 which is ` 240.00 bn. During the previous year the disinvestment target of the Government has been ` 300.00 bn. As a result of expected lower revenue genera on ascompared to higher expenditure, the Government has pegged the scal de cit target of 4.8%during FY14 as compared to an es mated 5.2% during FY13 (RE). Gross market borrowings areslated to increase by around 12.7% to around ` 6,290.09 bn as compared to ` 5,580.00 bn inFY13 (RE).


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SECTORAL IMPACT

Sector Ra ng

1. Agriculture Posi ve+

2. Social Sector Posi ve+

3. Infrastructure Posi ve

Services

4. Banking, Financial Services and Insurance (BFSI) Posi ve+/Marginally Posi ve/Posi ve/Posi ve

5. Hospitality Neutral

6. IT/ITeS Marginally Posi ve7. Media & Entertainment Marginally Posi ve

8. Real Estate & Construc on Marginally Posi ve

9. Retail Marginally Posi ve

10. Telecom Nega ve

Manufacturing

11. Automo ve Marginally Posi ve

12. Capital Goods & Engineering Posi ve

13. Cement Marginally Posi ve

14. Consumer Goods Marginally Posi ve

15. Gems & Jewellery Marginally Posi ve

16. Leather Marginally Posi ve

17. Metals & Mining Neutral

18. MSMEs Marginally Posi ve

19. Oil & Gas Marginally Posi ve

20. Pharmaceu cals & Healthcare Marginally Posi ve21. Power Posi ve

22. Tex les and Garments Posi ve

Ra ngs:

Posi ve+ Predominantly posi ve proposals

Posi ve Posi ve proposals

Marginally Posi ve Posi ve proposals but not upto industry expecta ons

Neutral Nega ve proposals o se ng posi ve proposals

Nega ve Nega ve proposals impac ng the sector


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Agriculture

`

270.49 bn allocated to the Ministry of Agriculture, an increase of 22% over the RE of currentscal year.

Alloca on of ` 34.15 bn for agricultural research.

For FY14, target of agricultural credit kept at ` 7,000 bn.

Interest subven on scheme for short-term crop loans to be con nued. Scheme extended forcrop loans borrowed from private sector scheduled commercial banks.

` 10 bn allocated for bringing Green Revolu on to eastern India.

` 5 bn allocated to start a programme of crop diversi ca on that would promote technological

innova on and encourage farmers to choose crop alterna ves.

Rashtriya Krishi Vikas Yojana and Na onal Food Security Mission provided ` 99.54 bn and ` 22.50 bn respec vely.

Alloca on for Integrated watershed programme increased from ` 30.50 bn in FY13 (BE) to ` 53.87 bn in FY14.

Alloca on made for pilot programme on Nutri-Farms for introducing new crop varie es thatare rich in micro-nutrients.

Na onal Ins tute of Bio c Stress Management for addressing plant protec on issues will beestablished at Raipur, Chha sgarh.

The Indian Ins tute of Agricultural Bio-technology will be established at Ranchi, Jharkhand.

Pilot scheme to replant and rejuvenate coconut gardens implemented in some districts of Kerala and the Andaman & Nicobar Islands extended to the en re state of Kerala.

Matching equity grants to registered Farmer Producer Organiza on (FPO) upto a maximum of ` 1 mn per FPO to enable them to leverage working capital from nancial ins tu ons.

A Credit Guarantee Fund to be created in the Small Farmers Agri Business Corpora on withan ini al corpus of ` 1 bn.

Na onal Livestock Mission to be set up and a provision of ` 3.07 bn made for the Mission.

Addi onal provision of ` 100 bn for Na onal Food Security Act.

Posi ve+

In view of the sharp increase in prices of food ar cles, especially proteins, fruits and vegetablesand the growing foodgrains stocks in public sector, the Government has maintained its focuson the agriculture sector through increased alloca ons and introducing ini a ves for crea ng

e cient agricultural market. The hike in farm credit limit and crea on of a credit guarantee fund for Farmer Producer Organisa ons (FPOs) would provide some respite to small and marginal


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farmers. The programme of crop diversi ca on would be an e ec ve measure to alleviate rural poverty and generate rural employment.

While the measures announced in the Budget for the agriculture sector are posi ve, legal impediments restric ng the entry of big private players to marke ng, storage and processing facili es of agricultural commodi es also need to be modi ed.

Social Sector

Human Resource Development and Social Jus ce

` 658.67 bn allocated to the Ministry of Human Resource Development, an increase of 17%

over the RE of the current scal year.

Alloca ons for Scheduled Caste Sub Plan and Tribal Sub Plan increased to ` 415.61 bn and ` 245.98 bn respec vely. The total represents an increase of 12.5% over the BE and 31% overthe RE of the current scal year. Funds allocated to these Sub Plans cannot be diverted.

` 971.34 bn allocated for programmes rela ng to women and ` 772.36 bn allocated forprogrammes rela ng to children.

Ministry of Women and Child Development to design schemes that will address the concernsof women belonging to the most vulnerable groups, including single women and widows. An

addi onal sum of ` 2 bn proposed to be provided to the Ministry to begin work. An alloca on of ` 35.11 bn to the Ministry of Minority A airs, an increase of 12% over the BEand 60% over the RE of FY13.

Alloca on of ` 1.6 bn to the corpus of Maulana Azad Educa on Founda on to raise its corpusto ` 15 bn during the 12th Five Year Plan period.

A sum of ` 1.10 bn to the Department of Disability A airs for Assistance to Disabled Personsfor Purchase/Fi ng of Aids and Appliances (ADIP) scheme in FY14 as against RE FY13 of ` 0.75 bn.

Educa on

` 16.5 bn allocated for six All India Ins tute of Medical Sciences (AIIMS) - like ins tu ons.

` 272.58 bn allocated for Sarva Shiksha Abhiyaan (SSA).

An increase of 25.6% over RE of the current scal year for investments in Rashtriya MadhyamikShiksha Abhiyan (RMSA).

` 52.84 bn allocated to Ministries/Departments in FY14 for scholarships to students belonging

to SC, ST, OBC, Minori es and girl children. Alloca on of ` 132.15 bn for Mid-Day Meal Scheme (MDM).


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Health & Sanita on

` 373.30 bn allocated to the Ministry of Health & Family Welfare. Of this, the new Na onal

Health Mission that combines the rural mission and the proposed urban mission will get ` 212.39 bn, an increase of 24.3% over the RE of current scal year.

` 47.27 bn allocated for medical educa on, training and research.

` 1.5 bn provided for Na onal Programme for the Health Care of Elderly.

Alloca on of ` 10.69 bn to Department of AYUSH.

` 177 bn allocated for Integrated Child Development Scheme (ICDS) in FY14, represen ng anincrease of 11.7% over FY13.

Alloca on of ` 3 bn in FY14 for a mul -sectoral programme aimed at overcoming maternal andchild malnutri on. Programme to be implemented in 100 districts during FY14 to be scaled tocover 200 districts the year a er.

` 152.60 bn allocated to Ministry of Drinking Water and Sanita on.

` 14 bn provided for se ng up of water puri ca on plants in 2,000 arsenic - and 12,000uoride-a ected rural habita ons.

Employment and Skill Development

Na onal Skill Development Corpora on to set the curriculum and standards for training in di erent skills; ` 10 bn set apart for this scheme.

5% of the Border Area Development Programme Fund, 10% of the Special Central Assistanceto the Scheduled Caste sub plan and the Tribal sub plan, and some other funds will also beused for skill development.

Rural Development

Alloca on of ` 801.94 bn in FY14 for Ministry of Rural Development, marking an increase of

46% over FY13 (RE). Proposal to carve out Pradhan Mantri Gram Sadak Yojana (PMGSY) II and allocate a por onof the funds to the new programme that will bene t states such as Andhra Pradesh, Haryana,Karnataka, Maharashtra, Punjab and Rajasthan.

` 148.73 bn allocated for Jawaharlal Nehru Na onal Urban Renewal Mission (JNNURM) inFY14 as against RE of ` 73.83 bn. Out of this, a signi cant por on will be used to support thepurchase of upto 10,000 buses.


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Posi ve+

Despite the constraints being faced on the scal front, the Government con nued to increase

the magnitude of budgetary support for social sectors. And rightly so, as social sectors includethose sectors where Government interven ons are expected to have a direct in uence on humandevelopment. The Budget 2013-14 has allocated ` 2,067 bn to the social services sector,accoun ng for 30.4% of the total plan outlay. Among the various heads under the social sector,the Budget provides a signi cant boost for the health sector, with the alloca ons for Health and Family Welfare having increased by 31.5% in Budget 2013-14 over RE of FY14. Even as the 24.3%increase in alloca on for the Na onal Health Mission is a welcome move, the progress on healthinfrastructure remains far from sa sfactory. The higher outlay for educa on is encouraging, giventhe signi cant challenges of achieving higher enrollment and enhancing the quality of educa on.The Budget also has several announcements that promote inclusive growth.

However, a prime concern that persists across social sector programmes and schemes and whichremains unaddressed in the Budget is that of under-u lisa on of available budgetary resources.It is therefore impera ve to improve the quality of spending on social sector schemes so as to get be er outcomes for the money spent. However, the measures announced during the Budget havesigni cant posi ve impact on social sector.

Infrastructure

Infrastructure Financing

Infrastructure Debt Fund (IDF) to be encouraged. These funds will raise resources andprovide long-term low-cost debt to infrastructure projects through take-out nance, creditenhancement and other innova ve means.

India Infrastructure Finance Corpora on Ltd (IIFCL) in partnership with the Asian DevelopmentBank (ADB) will provide access to the bond markets for long term funds through creditenhancements to infrastructure companies.

Allowed some ins tu ons to issue tax free bonds up to ` 500 bn in FY14 strictly on capacity toraise funds from the market.

With assistance from World Bank and the ADB, to build roads in the Northern Eastern statesand connect them to Myanmar.

Increased corpus of the Rural Infrastructure Development Fund (RIDF) operated by NABARDto ` 200 bn in FY14.

Alloca on of ` 50 bn to NABARD to nance construc on of warehouses, godowns, silos andcold storage units designed to store agricultural produce.


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Reduced the rate of tax on interest paid to non-resident investors from 20% to 5% on longterm infrastructure bonds in foreign currency and extended the same bene t to investmentsmade through a designated bank account in rupee-denominated long term infrastructurebonds.

Roads and Highways

A regulatory authority for the road sector is proposed to be cons tuted to address theuna ended challenges including nancial stress, enhanced construc on risk and contractmanagement issues.

3,000 kms of road projects will be awarded in the rst six months of FY14.

Rural Infrastructure

Budgetary alloca on of ` 801.94 bn for rural development schemes in FY14, represen ng anincrease of 46% over FY13 (RE). Alloca on of ` 330 bn to Mahatma Gandhi Na onal RuralEmployment Guarantee Scheme (MGNREGS), ` 217 bn to Pradhan Mantri Gram Sadak Yojana(PMGSY) and ` 151.84 bn to Indira Awaas Yojana (IAY).

Alloca on of a por on of funds to new programme PMGSY-II which will bene t states whichhave completed PMGSY; other states will con nue with PMGSY.

Urban Infrastructure

Alloca on of ` 148.73 bn for the Jawaharlal Nehru Na onal Urban Renewal Mission (JNNURM).A signi cant por on of this will be used to support the purchase of upto 10,000 buses.

Industrial Corridors

Plans for seven new ci es nalised and work for two smart industrial ci es at Dholera andShendra Bidkin will start in FY14.

Delhi Mumbai Industrial Corridor (DMIC) to be provided addi onal funds, if required.

A comprehensive plan for the Chennai Bengaluru Industrial Corridor is being prepared by theDIPP and JICA.

Preparatory work for the Bengaluru Mumbai Industrial Corridor has started.


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Ports

Two new major ports will be established in Sagar, West Bengal and in Andhra Pradesh which

will add 100 mn tonnes of capacity. A new outer harbour will be developed at Thoothukkudi, Tamil Nadu at an es mated cost of ` 75 bn.

Posi ve

The Government has taken a number of measures such as encouragement to IDF, credit enhancement for long term funds, increased corpus of RIDF etc to mobilise funds in the infrastructure sector through innova ve instruments. The Budget has also allowed some ins tu ons to issue tax free

bonds up to `

500 bn in FY14. These measures are likely to provide some support to infrastructure nancing going forward.

The proposal to cons tute a regulatory authority for the road sector to address some of thechallenges faced by the sector is a good move. Also, awarding of 3,000 kms of road projects inthe rst six months of FY14 is expected to enhance road connec vity in India. Further, a 46%increase in budgetary alloca on for rural development schemes is expected to improve overall rural infrastructure. Further, the new proposals for industrial corridors are welcome ini a ves asthey are expected to ease conges on and aid in the rapid development of the industry.

Given the increased focus to revive growth in the infrastructure sector by boos ng infrastructure nancing coupled with the measures to increase thrust on rural infrastructure and urbaninfrastructure, the Budget is expected to have a posi ve impact on the infrastructure sector.

Services

Banking, Financial Services and Insurance (BFSI)

Banking Agricultural and Rural Finance

The target for credit ow to farmers raised from ` 5,750 bn in FY13 to ` 7,000 bn in FY14.

The interest subven on scheme for short term crop loans to con nue and farm loans repaidon me to get credit at 4% p.a. Scheme extended to crop loans borrowed from private sectorScheduled Commercial Banks (SCBs).


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Financial Inclusion

SCBs and all Regional Rural Banks (RRBs) are on core banking solu on (CBS) and electronic

payment systems (NEFT and RTGS). All other banks including some co-opera ve banks are tobe on CBS and e-payment systems by December 31, 2013. All branches of Public Sector Banks(PSBs) to have ATMs by March 31, 2014.

An IT-based project to modernise the postal network at an expenditure of ` 49.09 bn has beenini ated. Post o ces will be on CBS and o er real- me banking services. Provision of ` 5.32bn for the project in FY14 is proposed.

Housing Credit

The provision under Rural Housing Fund enhanced from ` 40 bn to ` 60 bn.

Addi onal deduc on of interest up to ` 0.1 mn for a person taking rst home loan up to ` 2.5mn during the period April 1, 2013 to March 31, 2014.

Capital Support and Funding

A sum of ` 140 bn capital allocated to PSBs for FY14, keeping in view compliance of PSBs withBasel III norms.

Se ng up of Indias rst Womens Bank as a PSB with a provision of `

10 bn as ini al capital isproposed. Necessary approvals and the banking license expected by October 2013.

Na onal Housing Bank to set up Urban Housing Fund with a provision of ` 20 bn to the fund.

Infrastructure Debt Funds (IDF) to be encouraged.

The corpus of the Rural Infrastructure Development Fund (RIDF) will be raised to ` 200 bn.

` 50 bn will be made available to NABARD to nance construc on of warehouses andgodowns.

Issuance of infrastructure tax-free bonds up to ` 500 bn to be allowed during FY14.

Enhancing the re nancing capability of SIDBI from the current level of ` 50 bn to ` 100 bn peryear.

Addi onal sum of ` 1 bn to be provided to India Micro nance Equity Fund.

A corpus of ` 5 bn to SIDBI to set up a Credit Guarantee Fund for factoring.

Posi ve+

The Budget is expected to have a posi ve impact on the banking industry. Some of the growth

drivers of the Indian banking sector include nancial inclusion and enhanced payment systemswhich will help the banking sector to achieve its aim of expansion and growth. A number of


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measures have been announced towards enabling inclusive growth such as other banks includingsome co-opera ve banks adop ng CBS and e-payment systems, all branches of PSBs having ATMs, post o ces becoming a part of the core banking solu on and o ering real- me banking servicesand se ng up of Indias rst Womens Bank as a PSB. Measures have also been announced toenable be er ow of credit to various sectors, including agriculture, housing, infrastructureand MSMEs which is expected to encourage overall credit growth. In addi on, the Budget hasemphasised on the nancial strengthening of PSBs. The alloca ons made towards capital infusionin PSBs are expected to bring more stability to the sector. The Government aims to keep all thePSBs adequately capitalised for compliance with Basel III regula on.

Overall, the Budget is likely to have a signi cant posi ve impact on the banking industry by focusing on nancial inclusion, boos ng credit growth and suppor ng capital base of banks.

Finance

A standing Council of Experts will be established in the Ministry of Finance to understand theinterna onal compe veness of the Indian nancial sector.

In cases of dividend distribu on tax or tax on distributed income, current surcharge increasedfrom 5% to 10%.

Permissible premium rate to be raised from 10% to 15% of the sum assured by relaxingeligibility condi ons of life insurance policies for persons su ering from disability and certainailments.

Concessional 15% tax rate on dividend received by an Indian company from its foreignsubsidiary is proposed during FY14.

To increase investment in long term infrastructure bonds in foreign currency, tax rate on interestpaid to non-resident investors declined in the prior year from 20% to 5%. Extending this samebene t to investment made through a designated bank account in rupee denominated longterm infrastructure bonds is proposed.

Exempt of Securi sa on Trust from income tax. Levy of tax at certain rates during distribu onof income for companies, individual or HUF etc. No addi onal tax on income received byinvestors from the Trust.

Investor Protec on Fund of depositories to be exempted from income tax in some situa ons.

Parity in taxa on between IDF-Mutual Fund and IDF-NBFC when the payment is made to anon-resident.

A Category I Alterna ve Investment Funds (AIF) set up as Venture capital fund permi ed passthrough status as part of Income-tax Act.


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A nal withholding tax at 20% on pro ts distributed by unlisted companies to shareholdersthrough buyback of shares.

Modi ca on of provisions of General An Avoidance Rules (GAAR) will be in e ect from April 1, 2016.

Administra ve measures such as extension of refund banker system to refund more than ` 50,000; technology based processing, extension of e-payment through more banks andexpansion in the scope of annual informa on returns by Income-tax Department.

Marginally Posi ve

The Budget has few announcements having a marginally posi ve impact on the nancial sector.On the nancial front, increased surcharge on the dividend distribu on tax will impact earningsof corporates as well as investors. However, corporates are expected to marginally bene t by the reduced taxa on on foreign dividends. Reducing tax rates on investments made through adesignated bank account in rupee denominated long term infrastructure bonds will be bene ng.Securi sa on Trust to be exempted from income tax will also bene t investors.

Capital Markets

Rajiv Gandhi Equity Savings Scheme (RGESS) to be liberalised. Income limit for RGESS eligibilityto be raised from ` 1 mn to ` 1.2 mn.

In a on indexed instruments such as In a on Indexed Bonds or In a on Indexed Na onalSecurity Cer cates to be introduced.

Proposal to amend the SEBI Act, to strengthen the regulator, being considered.

Designated depository par cipants, authorised by SEBI, will be free to register di erent classesof por olio investors, subject to compliance with KYC guidelines.

SEBI to simplify the procedures for entry of foreign por olio investors. SEBI will converge thedi erent KYC norms making it easy for foreign investors to invest in India.

Proposal to follow interna onal prac ce to di eren ate between FII and FDI. An investor with a stake of 10% or less in a company, will be treated as FII and, where an investor with a stakeof more than 10%, will be treated as FDI.

FIIs will be allowed to par cipate in exchange traded currency deriva ve segment.

FIIs will also be allowed to use their investment in corporate bonds and Government securi esas collateral to meet their margin requirements.

SEBI to prescribe requirements for angel investor pools to be recognised as Category I AIFventure capital funds.


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Small and medium enterprises, to be permi ed to list on the SME exchange without makingan ini al public o er (IPO). This is in addi on to the exis ng SME pla orm in which lis ng canbe done through an IPO.

Stock exchanges to be allowed to introduce a dedicated debt segment. Insurance companies,provident funds and pension funds will be permi ed to trade directly in the debt segment.

Mutual fund distributors will be allowed to become members in the mutual fund segment of stock exchanges.

The list of eligible securi es in which Pension Funds and Provident Funds may invest will beenhanced to include exchange traded funds, debt mutual funds and asset backed securi es.

Reduc ons in Securi es Transac on Tax on equity futures from 0.017% to 0.01%, on MF/ETFredemp ons at fund counters from 0.25% to 0.001% and on MF/ETF purchase/sale from 0.1%to 0.001% but only on the seller.

Levy Commodity Transac on Tax (CTT) on non-agricultural commodi es futures contracts atthe same rate as on equity futures, at 0.01% of the price of the trade. Agricultural commodi eswill be exempted.

Posi ve

The measures undertaken by the Government to boost the capital market are posi ve as they aimto enhance ac vity in the market. Reduc on of STT will reduce transac on cost, revive intra-day trading, promote retail par cipa on and boost the equity market. Further, levy of CTT on non-agricultural commodi es to bring deriva ve trading in the securi es market at par with deriva vetrading in the commodi es market will further boost the equity market.

To develop the debt market, stock exchanges will be allowed to introduce a dedicated debt segment on the exchange. Insurance companies, provident funds and pension funds will be permi ed totrade directly in the debt segment. ETFs will be eligible for pension and insurance investment.

Measures have been taken to boost greater foreign investments in the Indian capital market such

as SEBI simplifying procedures for FIIs and unifying FII categories, allowing FIIs to par cipate inexchange traded currency deriva ve segment and to use their investment in corporate bondsand Government securi es as collateral to meet their margin requirements. As part of e orts toa ract more investments into the capital market, SEBI would prescribe requirements for angel investor pools by which they can be recognised as category I venture funds.

Permission to list on the SME exchange without making an ini al public o er will boost entrepreneurs and start-ups. The mutual fund industry will be bene ed by the liberalisa onof RGESS. Mutual fund distributors will be allowed to become members in the Mutual Fund

segment of stock exchanges so that they can leverage the stock exchange network to improvetheir reach and distribu on.


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Insurance

Insurance companies will be able to open branches in Tier II ci es and below without prior

approval of the IRDA. All towns in the country with a popula on of 10,000 or more will have an LIC o ce and ano ce of at least one public sector general insurance company by March 31, 2014.

KYC of banks will su ce to acquire insurance policies.

Banks will be allowed to act as insurance brokers for the en re network of bank branches tobe u lised to enhance penetra on.

Banking correspondents will be allowed to sell micro-insurance products.

Group insurance products to be o ered to similar groups such as SHGs, domes c workersassocia ons, anganwadi workers, teachers in schools, nurses in hospitals etc.

Rashtriya Swasthya Bima Yojana to be extended to other categories such as rickshaw, auto-rickshaw and taxi drivers, sanita on workers, rag pickers and mine workers.

A comprehensive social security package to be developed for the unorganised sector byfacilita ng convergence among di erent schemes.

Proposal to pass Insurance Laws (Amendment) Bill and the PFRDA Bill in the current session.

Posi ve

The announcements made in the Budget would have a posi ve impact on the insurance sector as measures have been ini ated to increase penetra on, thereby boos ng investments and growth. Insurance companies opening branches in Tier II ci es and below without IRDA approval,KYC of banks su cient to acquire insurance policies, banks to act as insurance brokers and bank correspondents selling micro nance products are all e orts to increase penetra on and distribu on.


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Hospitality

Levy of service tax on all air condi oned restaurants.Alloca on of ` 12.98 bn for the Ministry of Tourism, an increase of 34.6% over the RE of thecurrent scal year.

Neutral

The levy of service tax on all air condi oned restaurants would increase the overall cost incurred by restaurant operators who will pass it on to customers. Consequently the cost of dining out for a customer would go up. Although there has been an increased alloca on for the tourism sector,the quantum of alloca on is expected to bene t the overall tourism sector only to a limited extent.Hence, the overall Budget announcements have a neutral impact on the hospitality sector.

IT & ITeS

Zero customs duty for equipment required for se ng up semi-conductor (electronic chips)plants.

Rangachary Commi ee has been formed to provide clarity on taxa on ma ers related toresearch and development ac vi es in the IT sector and for safe harbour.

Marginally Posi ve

The removal of customs duty on electronic chips would boost manufacturing of high tech electronic products in India. Moreover, the forma on of the Rangachary Commi ee would help to solveissues pertaining to taxa on of development centres, tax treatment of onsite services of domes cso ware rms and those related to nalising safe harbour. The ini a ves taken in the Budget,thus, will have a marginal impact on the sector.

Media & Entertainment

Service tax exemp on granted to lms exhibited in cinema halls.

Ci es with popula on of more than one lakh will be covered by private FM channelproviders.

About 839 new FM radio channels to be auc oned in FY14.

Hike in import duty on set-top boxes from 5% to 10%.


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Marginally Posi ve

Exemp on of lms exhibited in cinema halls from service tax is expected to help the industry.

Also, the Governments ini a ve to expand private FM radio services to 294 more ci es will provide more opportuni es to the private FM radio operators and thereby impac ng the industry posi vely.

However, hike in import duty on set-top boxes to 10% is a nega ve announcement for the exis ngDTH players. This announcement is expected to safeguard the interest of domes c set-top box manufacturers; promo ng produc on in home market.

Real Estate and Construc on

Na onal Housing Bank (NHB) to set up ` 20 bn Urban Housing Fund in FY14.

Proposal to provide ` 60 bn to the Rural Housing Fund in 2013-14 through Na onal HousingBank for rural housing.

First housing loan up to ` 2.5 mn would get addi onal deduc on of interest up to ` 0.1 mnwhich will enhance the total deduc on to ` 0.25 mn in FY14.

Excise duty on marble slabs increased from ` 30 per sq. mtr to ` 60 per sq. mtr.

Reduc on in abatement rate on home and at having a carpet area of more than 2,000 sq. .or cos ng more than ` 10 mn from 75% to 70%.

TDS at the rate of 1% to be charged on the transfer of immovable property (which excludeagriculture property) where the considera on exceeds ` 5 mn.

Marginally Posi ve

With the NHB se ng up an Urban Housing Fund and enhancing the fund alloca on to Rural Housing Fund from ` 40 bn in FY13 to ` 60 bn in FY14, the Government is trying to focus onmi ga ng acute housing shortage by providing low cost a ordable houses. Further, the extension

of enhanced interest deduc on granted on housing loan is expected to promote home ownershipin er-II and III ci es and towns on one hand and encourage the growth in various other sectorslike steel, cement, brick, wood, paint, glass etc. The increased fund alloca on for the construc onof urban and rural housing units is likely to have a mul plier e ect on the economy via growth indownstream sectors and increase in employment.

However, the reduc on in abatement rate would result in increased service tax ou low and makingthe luxury house more expensive. Also, the hike in excise duty on marble would increase thedevelopment cost of the developer which may be passed on to the end customer. The introduc on

of TDS on transfer of high value immovable property which is generally charged on gross value of


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the property is likely to have an unfavorable impact on the cash ow of the seller in a situa on of distress property sales or on property sale making minimal gain.

The various announcements by the Government during the Budget will have direct and indirect impact on the construc on and real estate sector. Overall the Budget is marginally posi ve for the construc on and real estate sector.

Retail

Reduc on in customs duty on dehulled oat grains from 30% to 15%.

` 50 bn to be made available to the Na onal Bank for Agriculture and Rural Development

(NABARD) to nance construc on of warehouses, godowns, silos and cold storage units. Fund alloca on of ` 200 bn to the Rural Infrastructure Development Fund (RIDF) operatedby NABARD in FY14. Proposal to increase budgetary alloca on by 46% for rural developmentschemes.

Marginally Posi ve

Reduc on in the customs duty on dehulled oats is likely to have a favorable impact on theFMCG players. The Governments increased focus to nance the construc on of warehouses,

cold storage units etc and road infrastructure will help in improving the overall supply chaininfrastructure on the one hand, and removing the supply side bo leneck on the other hand.This will further enable the reduc on in overall wastage of foodgrains, vegetables and fruitswhich in turn willhelp to control the food in a on. Further, increased fund alloca on towardsrural infrastructure development will encourage the retail players to expand their reach to theunder-penetrated rural segment in the country.

Alloca on to the MGNREGS would fuel the rural income growth and thereby crea ng moredemand for various products among rural segment. Thus, the announcements in the Budget areexpected to have a marginally posi ve impact on the sector.


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Telecom

Excise duty on mobile handsets cos ng more than `

2,000 increased from 1% to 6%.

Nega ve

The telecom sector has been facing issues like high debt, pressurised margins and huge spectrumcosts. The sector expected revisions in taxes and levies from this Budget. However, the consistent tax structure is a disappointment for the sector and is expected to have a nega ve impact.Moreover, increase in excise duty on high-end mobile handsets to 6% will nega vely impact themobile handset industry.

Manufacturing

Automo ve

Increase in the basic customs duty from 75% to 100% on new passenger cars and other motorvehicles (high-end cars) with cost, insurance and freight (CIF) value more than US$ 40,000and/or engine capacity exceeding 3,000cc for petrol-run vehicles and exceeding 2,500cc fordiesel-run vehicles.

Increase in the basic customs duty on motorcycles with engine capacity of 800cc or more from60% to 75%.

Increase in the excise duty on sports u lity vehicles (SUVs) from 27% to 30%.

Reduc on in the excise duty on truck chassis from 14% to 13%.

Proposal to purchase up to 10,000 buses under the Jawaharlal Nehru Na onal Urban RenewalMission (JNNURM).

Extension of the me period of exemp on (Nil basic customs duty, countervailing duty of 6%and Nil special addi onal duty) for the speci ed parts of electric and hybrid vehicles by twomore years up to March 31, 2015.

Full exemp on from basic customs duty to lithium ion automo ve ba ery for manufacture of lithium ion ba ery packs for supply to the manufacturers of hybrid and electric vehicles.

Marginally Posi ve

A hike in the customs duty on high-end cars and motorcycles would lead to an increase in the prices of these vehicles. Further, increase in excise duty on sports u lity vehicles would also be passed on to the consumers by way of increased vehicle prices. However, these announcements

are not likely to have any adverse impact on demand as the price sensi vity in these segments islow.


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An extended me period of exemp on for certain speci ed parts of electric and hybrid vehicles and full exemp on from customs duty to lithium ion automo ve ba ery are posi ve developments, inline with the Governments increased thrust on promo ng green vehicles. However, from a short-to-medium term perspec ve, these announcements would have negligible impact on the overall automo ve industry, given the meagre market share of such vehicles.

Increased alloca on to the infrastructure and defence sectors could indirectly bene t manufacturers of commercial vehicles such as Tata Motors and Ashok Leyland, among others.Similarly, an alloca on of ` 148.7 bn under the JNNURM would boost demand and sale of buses.The Governments con nued focus on rural development would have a posi ve impact onboos ng demand for two-wheelers in the rural and semi-urban areas. Thus, the overall Budget announcements would have a marginally posi ve impact on the automo ve industry.

Capital and Engineering Goods

A deduc on of 15% will be allowed as investment allowance for companies inves ng ` 1 bn ormore in plant and machinery during the period Apr 2013-Mar 2015. This will be in addi onto the current rates of deprecia on.

Incen ves to semiconductor wafer fab manufacturing facili es, including zero customs dutyfor plant and machinery.

Basic customs duty to be reduced from 7.5% to 5.0% on speci ed machinery for manufactureof leather and leather goods including footwear.

Full exemp on from excise duty on ships and vessels. Consequently, there will be nocountervailing duty on imported ships and vessels.

Posi ve

Investment allowance deduc on for investment in plant and machinery over and above deprecia onis likely to increase the capital expenditure especially by small and medium enterprises. This

is likely to facilitate growth of the capital & engineering goods industry. Further, reduc on of customs duty on plant and machinery for leather goods and water fab manufacturing should have posi ve impact on the capital & engineering goods industry.

The Union Budget FY14 also outlines the importance of the infrastructure sector with emphasison investment required in construc on of roads. It is an cipated that 3,000 kms of road project will be awarded in H1FY14 which is likely to boost demand for construc on equipment. Further,alloca on of ` 867.41 bn for capital expenditure made in the defence services will also provideboost to the capital & engineering goods industry in FY14. Overall, the Budget is an cipated tohave a posi ve impact on the capital & engineering goods sector.


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Cement

Approximately 3,000 kms of road projects in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan and U ar Pradesh to be awarded in the rst half of FY14.

Proposal to provide ` 60 bn to the Rural Housing Fund in 2013-14 through Na onal HousingBank for rural housing.

Proposal to start a fund for urban housing by providing ` 20 bn to set up a Urban Housing Fundthrough Na onal Housing Bank.

` 50 bn to be made available to Na onal Bank for Agriculture and Rural Development (NABARD)to nance construc on of warehouses, godowns, silos and cold storage units.

Marginally Posi ve

The Budget has no announcements having a direct impact on the cement sector. But theGovernments increased focus on infrastructure development and construc on is expected todrive the demand for cement and thereby impac ng the sector indirectly. The con nued thrust on infrastructure is likely to provide support to the cement industry going forward. Overall, theannouncements in the Budget are expected to have a marginally posi ve impact on the sector.

Consumer Goods

Increase in excise duty to 18% on cigare es exceeding length of 65 mm. Duty on cigars andcigarillos also raised to 18%.

Reduc on in customs duty on dehulled oat grains to 15% from 30%.

Customs duty on imported hazel nuts reduced to 10% from 30%.

Excise duty on mobile phones of retail sale price exceeding ` 2,000 increased from 1% to 6%.

Withdrawal of export duty on de-oiled rice bran oil cake.

Withdrawal of exemp on of educa on cess and secondary & higher educa on cess onsoyabean oil, olive oil, etc.

Full exemp on from excise duty provided to intermediate goods manufactured and consumedcap vely by exempted units under Area-Based Exemp on Scheme in Himachal Pradesh andU arakhand.

Marginally Posi ve

Withdrawal of exemp on of educa on cess and secondary & higher educa on cess on soyabean

products, soya oil and olive oil is likely to increase domes c produc on of these products. Moreover,reduc on in both imported hazel nuts and dehulled oat grains is expected to boost domes c


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produc on of the nal products manufactured using these raw materials, thereby providing aboost to the domes c industry.

Increase in excise duty on mobile phones will lead to increase in prices for the end customers.Further, the increase in excise duty on cigare es will hit companies in the short-term as volumesare likely to get impacted.

The consumer goods sector is expected to remain resilient on the backdrop of posi veannouncements in the Budget combined with strong domes c consump on. Increase in basicexcise duty on cigare es and cigars is likely to have a marginally nega ve impact on the sector.However, reduc on/withdrawal of customs duty on soya product and hazel nut is likely to boost the FMCG sector. On the overall basis, the Budget is marginally posi ve for the consumer goods

sector.

Gems & Jewellery

Reduc on in the rate of customs duty on pre-forms of precious and semi-precious stones from10% to 2%.

Levy of 4% excise duty on silver manufactured from smel ng zinc or lead, thereby bringing itat par with the excise duty applicable to silver obtained from copper ores and concentrates.

Marginally Posi ve

The Budget announcement to reduce the customs duty on precious and semi-precious stones isexpected to boost exports and in turn bene t the diamond and gemstone industry. In addi on,no further increase in the rate of import duty and excise duty has reduced the burden on theindustry. The levy of 4% excise duty on silver manufactured from smel ng zinc or lead might havea marginal nega ve impact on the sector. Overall, by not adding to the tax burden of the sector,the Union Budget 2013-2014 has a marginally posi ve impact on the gems & jewellery sector.

Leather

Reduc on in customs duty on plant and machinery used in the leather sector and footwearindustry from 7.5% to 5%.

Re nancing capability of SIDBI doubled from ` 50 bn to ` 100 bn in a year.

Non-tax bene ts to be made available to the MSME units for a period of three years a er theygraduate to a higher category.


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Marginally Posi ve

Reduc on in the customs duty on plant and machinery used in manufacturing leather and leather

products is likely to facilitate the import of tradi onal as well as new technology in the sector at a lower cost and result in process innova on. Further, the doubling of the re nancing capabili esof SIDBI to ` 100 bn will enhance the availability of funds for the MSME players. Also, provisionof non-tax bene ts to MSME units for a period of three years a er gradua ng to a higher level would a ract the interest of many MSME players to scale up their opera on and move up thevalue chain as against con nuing to stay small in order to enjoy the various bene ts applicableto MSMEs. As the leather sector occupies a prominent place among MSMEs, the above measuresannounced for the MSMEs are likely to have a favorable implica on on the players in the leather industry as well. Overall, the announcements made in the Budget would have a marginally posi veimpact on the leather sector, par cularly in the medium term.

Metals & Mining

Levy of export duty at the rate of 10% on bauxite.

Levy of export duty at the rate of 10% on unprocessed ilmenite and at 5% on upgradedilmenite.

Levy of excise duty at the rate of 4% on silver manufactured from smel ng zinc or lead.

Compounded levy on stainless steel Pa a Pa increased from ` 30,000 to ` 40,000 permachine per month.

Reduc on of basic customs duty from 10% to 5% on stainless steel wire cloth stripe and from7.5% to 5% on wash coat for use in the manufacture of cataly c convertors and their parts.

Full exemp on from export duty to galvanized steel sheets falling under certain sub-headings,retrospec vely with e ect from March 1, 2011.

Neutral

The levy of export duty at the rate of 10% on bauxite is aimed at improving domes c availability and bene ng the domes c aluminium industry, which uses bauxite as a key raw material.However, it will have only a negligible impact since exports account for a small propor on of domes c produc on of bauxite. Further, the other Budget announcements made for the metals& mining industry are not likely to have any signi cant impact on the industry, mainly as therehave been no major announcements for the key sectors such as steel or aluminium. Nevertheless,announcements pertaining to the infrastructure and housing sectors are expected to providesome llip to the metals industry, par cularly the steel industry. Hence, the overall impact of theBudget announcements on the metals and mining sector is neutral.


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MSMEs

Proposal to enhance the re nancing capability of SIDBI from the current level of `

50 bn to ` 100 bn per year.

Provide a corpus of ` 5 bn to SIDBI to set up a Credit Guarantee Fund for factoring.

Provide an addi onal sum of ` 1 bn to the India Micro nance Equity Fund that was set up bySIDBI in 2011-12.

Provide a sum of ` 22 bn during the 12th Five Year Plan period for the se ng up of 15 addi onalTool Room and Technology Development Centres.

Funds provided to technology incubators located within academic ins tu ons and approved

by the Ministry of Science and Technology or the Ministry of MSME will qualify as CorporateSocial Responsibility (CSR) expenditure.

The non-tax bene ts to be made available to an MSME unit for three years a er it graduatesto a higher category.

Marginally Posi ve

The various Budget announcements men oned above are aimed at enhancing the availability of funds to the MSMEs. These are posi ve moves for this sector, which has been struggling to

raise funds at compe ve rates. Apart from nance, technology upgrada on is another major challenge faced by the MSME sector. An alloca on of ` 22 bn for se ng up Tool Room and Technology Development Centres could encourage technology adop on/upgrada on among theMSMEs.

In terms of speci c sectors, the proposal to reduce duty on speci ed machinery for manufactureof leather and leather goods would encourage greater investment in plant & machinery, whichis necessary to boost both quality and scale of produc on, and thereby increase exports. The proposal to provide working capital and term loans to handloom weavers at a concessional rateof 6% is aimed at improving the nancial status of sector. Thus, the overall Budget announcementshave marginally posi ve impact on the MSMEs.


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Oil & Gas

Oil and gas explora on policy will be reviewed and new contracts will be moved from pro t sharing to revenue sharing model.

Natural gas pricing policy will be reviewed.

Policy to encourage the explora on and produc on of shale gas will be announced.

Revenue sharing policy on shale gas explora on would be announced.

Oil and gas blocks awarded under the New Explora on Licensing Policy (NELP), but which arestalled will be cleared.

Petroleum subsidy for FY14 is expected to be at ` 650 bn down from ` 960 bn incurred during

FY13.

5 million tonne Dhabol LNG terminal will be opera onal in FY14.

Marginally Posi ve

Announcements outlined in the Budget are posi ve for the oil and gas sector as they are aimed at removing the prevailing ambiguity surrounding cost recovery during explora on and natural gas pricing. Further, the policy announcement surrounding NELP blocks and shale gas explora on isaimed at safeguarding the energy security of the country by increasing domes c produc on.

The exis ng pro t sharing model has delayed approvals in the oil and gas sector due to theinvolvement of the Government in day-to-day opera ons so as to monitor the cost of explora on.Shi from pro t sharing to revenue sharing model would reduce the involvement of the Government in the day-to-day opera ons and is expected to remove delays in approvals.

Proposed review of natural gas pricing would help to address the prevailing uncertainty regardingnatural gas pricing. A liberal pricing policy would help in a rac ng fresh investments into oil and gas explora on from both private and overseas players. Further, clearing of blocks awarded

under New Explora on Licensing policy (NELP) would encourage be er par cipa on in the comingrounds of auc ons of oil and gas blocks. Focus on shale gas explora on and produc on is in linewith the growing interest in shale gas explora on around the world. This type of policy would help improve the domes c energy produc on


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Pharmaceu cals & Healthcare

Proposal to allocate `

373.3 bn to the Ministry of Health and Family Welfare (MoHFW).Out of this, ` 212.39 bn will be allo ed to the new Na onal Health Mission (NHM), includingthe rural mission and the proposed urban mission.

To provide ` 47.27 bn for medical educa on, training and research.

Proposal to provide ` 1.5 bn to the na onal programme for the healthcare of elderly, which isbeing implemented in 100 selected districts across 21 Indian states.

Proposal to allocate ` 10.69 bn to the department of AYUSH (Ayurveda, Unani, Siddha andHomoeopathy).

Proposal to earmark ` 3,000 mn in FY14 for a mul -sectoral programme for maternal care andaddress child malnutri on problem. This programme will be executed across 100 districts inFY14 and is aimed to be scaled up to include 200 districts in the subsequent year.

Provision to o er MRP based assessment in respect of branded medicaments of AYUSH andbio-chemic systems of medicine with a reduc on of 35%.

Alloca on of ` 177 bn in FY14 to Integrated Child Development Services (ICDS) scheme.

Marginally Posi ve

The Budget has focused towards improving the welfare and health of family. Alloca on of ` 373.3bn towards MoHFW and ` 177 bn towards ICDS scheme is expected to have a posi ve impact onthe sector. Further, to integrate the department of AYUSH into the healthcare delivery system, ` 10.69 bn has been allocated to the same through the Na onal Health Mission (NHM). Themeasures announced in the Budget are expected to have a marginally posi ve impact on thesector.


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Power

Proposal to construct a transmission system from Srinagar to Leh region in the state of Jammuand Kashmir at a cost of ` 18.4 bn, out of which ` 2.26 bn will be allocated for the project in2013-14.

A public-private partnership (PPP) policy framework with Coal India Limited (CIL) as one of thepartners, to be devised to increase coal produc on.

State Governments are asked to prepare nancial restructuring plan for power distribu oncompanies and sign the Memorandum of Understanding (MOU) at the earliest and takebene t of the approved nancial restructuring scheme for DISCOMS (Distribu on Company(India).

Bene t for projects in the power sector under sec on 80-IA of the Income-tax Act is extendedby an addi onal one year, from March 31, 2013 to March 31, 2014.

Customs duty and countervailing duty (CVD) on imports of steam and bituminous coal is madeuniform at 2% each.

To provide low-cost interest bearing funds, over a life span of ve years, from Na onal CleanEnergy Fund (NCEF) to Indian Renewable Energy Development Agency (IREDA) to on-lend toviable renewable energy projects.

To reintroduce genera on-based incen ve for wind energy projects and o er ` 8,000 mn to

the Ministry of Non Renewable Energy (MNRE). Proposed to encourage ci es and municipali es to take up waste-energy projects throughPPPs mode.

Posi ve

The proposed PPP policy framework along with CIL is expected to increase the domes c produc onof coal and reduce the countrys dependence on imported coal. The Government has con nued to encourage and help companies genera ng power through renewable energy sources such

as wind. With an aim to o er nancial aid towards feasible renewable energy projects, theGovernment proposes to o er low-cost interest bearing funds through IREDA. This move isexpected to encourage players to enter into renewable energy genera on. Further, extension of tax bene ts U/S 80-IA by another year is an cipated to encourage investments in power projects.These measures are expected to have a posi ve impact on the sector.


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Tex le and Garments

The Zero excise duty route, as existed prior to Budget FY12, is being re-established with respect to branded readymade garments and made-ups. Going by this, in the case of co on,there will be zero duty at the bre stage also and in the case of spun yarn, there will be a dutyof 12% at the bre stage. The zero excise duty route will be in addi on to the CENVAT routenow available.

Alloca on of ` 0.5 bn to the Ministry of Tex les for establishing apparel parks within theScheme for Integrated Tex le Parks (SITP).

Alloca on of ` 0.96 bn to the Ministry of Tex les to provide working capital and term loans ata concessional interest rate of 6%.

The exis ng Technology Upgrada on Fund Scheme (TUFS) for the tex les sector to con nue.Alloca on of ` 24 bn for modernisa on of the powerloom sector.

The Integrated Processing Development Scheme with plan disbursement of ` 5 bn would beimplemented in the 12th Five Year Plan for addressing environmental issues faced by thetex les industry. It is proposed to provide ` 0.5 bn in FY14 for the scheme.

Full exemp on is provided from excise duty on handmade carpets and tex le oor coveringsof coir or jute whether or not handmade.

In order to give a measure of protec on to domes c sericulture, the rate of customs duty isincreased on raw silk (not thrown) of all grades from exis ng 5% to 15%.

Reduc on of basic customs duty on tex le machinery & parts from 7.5% to 5%.

Leverage aid from Mul lateral Development Banks to extend the Scheme of Fund forRegenera on of Tradi onal Industries (SFURTI) in the 12th Five Year Plan covering 800 clustersincluding khadi, village and coir industry.

Posi ve

The restora on of zero excise duty route in addi on to the present CENVAT route is one of thesigni cant announcements for the tex les and readymade garments industry. The zero exciseduty is going to moderate the cost pressure borne by the readymade garments sector amid sluggish demand. The move is expected to revive demand in the garment sector and improve theindustrys performance in terms of higher revenue and improve pro ts. Another major incen veto the readymade garments industry is to house apparel manufacturing units in SITP. The home furnishing and dcor segment of the tex le industry is also likely to bene t from excise duty exemp on of handmade carpets and tex le oor coverings of coir or jute. The proposed interest subven on scheme in the handloom sector is likely to bene t 150,000 individual weavers and 1,800 primary coopera ve socie es in FY14. Steps are also taken to protect the interest of domes c

sericulture. Another posi ve incen ve for the sector includes con nua on of the TUFS and reduc on of customs duty on tex le machinery and parts for promo ng technology upgrada on.


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Thus, the measures announced covering every aspect of the tex les industry is going to revive the prospects of the tex les and readymade garments sector.


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CHANGE IN CENTRAL PLAN OUTLAY

( bn)2012-13 2013-14

% ChangeRevised Es mates Budget Es mates

Ministry of Agriculture 137.87 170.95 23.99Ministry of Chemicals and Fer lisers 47.04 44.28 -5.87Ministry of Civil Avia on 92.88 88.65 -4.55Ministry of Coal 95.19 117.54 23.48Ministry of Commerce and Industry 30.00 37.27 24.23Ministry of Communica ons and Informa on Technology 112.48 167.83 49.21Ministry of Consumer A airs, Food and Public Distribu on 3.62 6.58 81.77Ministry of Corporate A airs 0.28 0.34 21.43Ministry of Culture 8.64 14.35 66.09Ministry of Development of North Eastern Region 1.47 2.26 53.74

Ministry of Drinking Water and Sanita on 130.00 152.60 17.38Ministry of Earth Sciences 8.20 12.81 56.22Ministry of Environment and Forests 18.00 24.30 35.00Ministry of External A airs 16.20 30.00 85.19Ministry of Finance 178.15 201.32 13.01Ministry of Food Processing Industries 6.60 7.08 7.27Ministry of Health and Family Welfare 248.94 327.45 31.54Ministry of Heavy Industries and Public Enterprises 18.44 23.89 29.56Ministry of Home A airs 68.28 105.00 53.78Ministry of Housing and Urban Poverty Allevia on 152.43 148.29 -2.72Ministry of Human Resource Development 562.23 658.69 17.16Ministry of Informa on and Broadcas ng 8.76 11.05 26.14

Ministry of Labour and Employment 20.33 25.24 24.15Ministry of Law and Jus ce 8.25 11.03 33.70Ministry of Micro, Small and Medium Enterprises 28.83 32.85 13.94Ministry of Mines 16.54 29.19 76.48Ministry of Minority A airs 22.00 35.11 59.59Ministry of New and Renewable Energy 42.32 39.15 -7.49Ministry of Panchaya Raj 2.66 5.00 87.97Ministry of Personnel, Public Grievances and Pensions 1.67 2.79 67.07Ministry of Petroleum and Natural Gas 768.50 790.52 2.87Ministry of Planning 15.42 80.00 418.81Ministry of Power 546.96 593.29 8.47Ministry of Road Transport and Highways 289.33 375.00 29.61

Ministry of Rural Development 550.00 801.94 45.81Ministry of Science and Technology 50.30 62.75 24.75Ministry of Shipping 55.58 70.87 27.51Ministry of Social Jus ce and Empowerment 50.12 66.25 32.18Ministry of Sta s cs and Programme Implementa on 4.86 6.31 29.84Ministry of Steel 163.87 197.31 20.41Ministry of Tex les 45.00 46.31 2.91Ministry of Tourism 9.64 12.98 34.65Ministry of Tribal A airs 14.27 17.62 23.48Ministry of Urban Development 83.59 100.21 19.88Ministry of Water Resources 6.50 15.00 130.77Ministry of Women and Child Development 171.80 203.50 18.45

Ministry of Youth A airs and Sports 8.90 10.93 22.81Ministry of Railways 511.63 622.61 21.69GRAND TOTAL 5561.76 6801.23 22.29


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RECEIPTS

( bn)2012-13

Revised Es mates2013-14

Budget Es mates

REVENUE RECEIPTS

1) Tax Revenue

Gross Tax Revenue 10,380.37 12,358.70

Corpora on Tax 3,588.74 4,195.20

Taxes on Income 2,060.95 2,476.39

Wealth Tax 8.66 9.50

Customs 1,648.53 1,873.08

Union Excise Du es 1,719.96 1,975.54

Service Tax 1,326.97 1,801.41

Taxes on Union Territories 26.56 27.58

Less - NCCD transferred to the Na onal Calamity Con gency Fund/Na onal Disaster Response Fund

43.75 48.00

Less States' Share 2,915.47 3,469.92

1 a) Centre's Net Tax Revenue 7,421.15 8,840.78

2) Non-Tax Revenue

Interest receipts 165.95 177.64

Dividend and Pro ts 554.43 738.66External Grants 27.62 14.56

Other Non Tax Revenue 537.90 780.00

Receipts of Union Territories 11.23 11.66

Total Non-tax Revenue 1,297.13 1,722.52

Total Revenue Receipts (1a+2) 8,718.28 10,563.31


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RECEIPTS(Contd...)

( bn)2012-13


Budget Es mates

3) CAPITAL RECEIPTS

A) Non-debt Receipts

Recoveries of loans and advances@ 140.73 106.54

Miscellaneous Capital Receipts 240.00 558.14

Total 380.73 664.68

B) Debt Receipts*

Market Loans 4,673.84 4,840.00

Short term borrowings 457.46 198.44

External Assistance (Net) 22.14 105.60

Securi es issued against Small Savings 86.26 57.98

State Provident Fund (Net) 100.00 100.00

Other Receipts (Net) -78.95 122.97

Total 5,260.75 5,424.99

Total Capital Receipts (A+B) 5,641.48 6,089.67

4) DRAW-DOWN OF CASH BALANCE -51.5 N.A

Total Receipts (1a+2+3+4) 14,308.25 16,652.97

Financing of Fiscal De cit (3B+4) 5,209.25 5,424.99

Receipts under MSS (Net) N.A 200.00@ excludes recoveries of short-term loans and advances fromStates, loans to Government servants, etc.

229.95 114.00

* The receipts are net of repayments.


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EXPENDITURE

( bn)2012-13


Budget Es mates

1. NON-PLAN EXPENDITURE

1 A. Revenue Expenditure

1 Interest Payments and Prepayment Premium 3,166.74 3,706.84

2 Defence Services 1,089.25 1,169.31

3 Subsidies 2,576.54 2,310.84

4 Grants to State and U.T. Governments 579.01 769.81

5 Pensions 638.36 707.26

6 Police 371.31 408.95

7 Assistance to States from Na onal Calamity Con ngecyFund (NCCF)/NDRF

43.75 48.00

8 Other General Services (Organs of State, tax collec on,external a airs etc.)

210.95 229.03

9 Social Services (Educa on, Health, Broadcas ng etc.) 213.04 231.14

10 Economic Services (Agriculture,Industry, Power,Science & Technology, etc.)

219.65 243.34

11 Postal De cit 58.38 67.17

12 Expenditure of U.T. without Legislature 41.47 43.95

13 Amount met from NCCF/NDRF -43.75 -48.00

14 Grants to Foreign Govts. 32.29 41.44

Total Revenue Non-Plan Expenditure 9,196.99 9,929.08

1 B. Capital Expenditure

1 Defence Services 695.79 867.41

2 Other Non-Plan Capital Outlay 81.02 301.31

3 Loans to Public Enterprises 4.69 4.17

4 Loans to State and U.T. Governments 34.07 0.80

5 Loans to Foreign Governments 7.00 N.A

6 Others -3.18 -3.02

Total Capital Non-Plan Expenditure 819.39 1,170.67

Total Non-Plan Expenditure 10,016.38 11,099.75


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EXPENDITURE (Contd...)

( bn)2012-13


Budget Es mates

2. PLAN EXPENDITURE2 A. Revenue Expenditure

1 Central Plan 2,437.72 3,200.38

2 Central Assistance for States & Union Territory Plans 996.01 1,232.22

State Plan 960.68 1,188.73

Union Territory Plan 35.33 43.49

Total Revenue Plan Expenditure 3,433.73 4,432.60

2 B. Capital Expenditure

1 Central Plan 734.13 990.30

2 Central Assistance for State & Union Territory Plans 124.01 130.32

State Plan 110.79 110.57

Union Territory Plan 13.22 19.75

Total Capital Plan Expenditure 858.14 1,120.62

Total-Plan Expenditure 4,291.87 5,553.22

Total Budget Support for Central Plan 3,171.85 4,190.68

Total Central Assistance for State & UT Plans 1,120.02 1,362.54

TOTAL EXPENDITURE* 14,308.25 16,652.97

DEBT SERVICING

1 Repayment of Debt** 1,166.69 1,670.722 Total Interest Payments 3,166.74 3,706.84

3 Total Debt Servicing (1+2) 4,333.43 5,377.56

4 Revenue Receipts 8,718.28 10,563.31

5 Pecentage of 2 to 4 36.32% 35.09%

** Excludes expenditure matched by receipts

** The gures exclude discharge of all Treasury bills, discharge of Cash Management Bills, discharge of Ways andMeans Advances including Overdra , repayment under MSS and all Public Account Disbursements (except dischargeof Special Securi es issued in lieu of Subsidies).


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2010-11 2011-12 2012-13

Gross Domes c Product at factor cost ( ` bn)

At current market prices 77953 b 89749 a 100281 AE

At 2004-05 prices 49370 b 52436 a 55035 AE

Output

Foodgrains (mn tonnes) 244.8 259.3 250.14 AE

Power genera on ( by u li es) (bn kWh) 811.1 876.9 683.75 e

Prices

Wholesale Price Index (All commodi es, average) 143.32 156.1 166.9 c

CPI-IW (Average) 179.8 194.8 213.5 c

External Sector (US$ mn)

Exports 251,136 305,964 239687 c

Imports 369,769 489,320 406855 c

Current Account Balance (net) -45945 R -78155 PR -38700 f

Foreign Direct Investment (net) 9,360 22,060 16246 f

Monetary and Finance

Money Supply (M 3) ( ` bn) 65,041 73,577 81600g

Foreign Exchange Reserves (US$ bn) 304.82 294.40 293.5 h

Exchange rate ( ` /US$) (Average) 45.58 47.92 54.46 i

Source: RBI, CSO, Commerce Ministry, Economic Survey, 2012-13

Footnotes

AE: Advance Es mates; R: Revised; PR : Provisionally Revised

a: First Revised Es mates; b: Second Advance Es mates; c: Apr12-Jan13; e: Apr12-Dec-12; f: Apr-Sept-12;

g: Outstanding as on 8-Feb-2013; h: As on 15-Feb-2013; i: Apr-12- 27 Feb-2013

KEY ECONOMIC INDICATORS(Absolute values)


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2010-11 2011-12 2012-13

Gross Domes c Product at factor cost

At current prices 20.3 b 15.1 a 11.7 AE

At 2004-05 prices 9.3 b 6.2 a 5.0 AE

Sectoral Growth Rates at Constant (2004-05) prices

Agriculture & allied 7.9 b 3.6 a 1.8 AE

Industry 9.2 b 3.5 a 3.1 AE

Services 9.8 b 8.2 a 6.6 AE

Prices

Wholesale Price Index e (All Commodi es) 9.6 8.9 7.5 c

CPI-IW f (Average) 10.4 8.4 10.2 c

External Sector

Export 40.5 21.8 -4.9 c

Import 28.2 32.3 0.01 c

Foreign Direct Investment (net) -47.9 R 135.7 PR -25.7 f

Monetary and Finance

Money Supply (M 3) 16.1 13.1 12.7g

Foreign Exchange Reserves 9.2 -3.4 0.03 h

Exchange rate n ( ` /US$) (Average) -3.9 5.1 14.1 i

Source: RBI, CSO, Commerce Ministry, Economic Survey, 2012-13

FootnotesAE: Advance Es mates; R: Revised; PR: Provisionally Revised;a: First Revised Es mates; b: Second Revised Es mates; c Apr12 -Jan13; e: Apr-12-Dec-12; f: Apr-Sept-12;

g: Outstanding as on 8-Feb-2013; h: As on 15-Feb-2013; i:Apr-12- 27 Feb-2013

KEY ECONOMIC INDICATORS(Percentage change over previous year)


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Appropria on Bill: This Bill entails the Parliaments approval for withdrawal of money from theConsolidated Fund to pay o expenses. A er the Demands for Grants are voted by the Lok Sabha,theParliament approves this bill. Under Ar cle 114(3) of the Cons tu on, no amount can be withdrawnfrom the Consolidated Fund without the enactment of such a law by the Parliament.

Capital Expenditure: It is the expenditure incurred on acquisi on of assets like land, buildings, machinery,equipment etc and also loans and advances granted by the Central Government to State and Unionterritories, Public sector enterprises and other par es. This expenditure is also categorised as plan andnon-plan capital expenditure.

Capital Receipts: Capital receipts include loans raised by the Government from public which are calledMarket Loans, borrowings by the Government from the Reserve Bank of India and other par es through

sale of Treasury Bills, loans received from foreign Governments and bodies and recoveries of loans grantedby Central Government to State and Union Territory Governments and other par es.

Consolidated Fund: All revenues received by the Government, loans raised by it, and also its receiptsfrom recoveries of loans granted by it, form the Consolidated Fund. All expenditure of the Governmentis incurred from the Consolidated Fund and no amount can be withdrawn from the Fund withoutauthorisa on from the Parliament.

Con ngency Fund: It is an imprest from the Consolidated Fund, and may be used by the Governmentwithout wai ng for an appropria on bill to be passed by the Parliament. If it becomes necessary for theGovernment to incur expenditure not included in the budget, it can do so from the Con ngency Fund.

Customs Du es: Customs duty is a type of indirect tax levied on goods imported into India as well as ongoods exported from India.

E ec ve Revenue De cit: E ec ve Revenue De cit is the di erence between revenue de cit and grantsfor crea on of capital assets.

Excep onal Grant: Through the Excep onal Grant the House of People can make provision for anexcep onal grant that does not form part of the current service of any nancial year.

Excise Du es: Central excise duty is an indirect tax levied on those goods which are manufactured in Indiaand are meant for home consump on.

Finance Bill: At the me of presenta on of the Annual Financial Statement before the Parliament, aFinance Bill is also presented in ful lment of the requirement of Ar cle 110(1) (a) of the Cons tu on,detailing the imposi on, aboli on, remission, altera on or regula on of taxes proposed in the Budget.A Finance Bill is a Money Bill as de ned in Ar cle 110 of the Cons tu on.

Fiscal De cit: The di erence between the total expenditure of the Government by way of revenue,capital and loans net of repayments on the one hand and revenue receipts of the Government and capitalreceipts which are not in the nature of borrowing but which nally accrue to the Government on theother, cons tutes scal de cit.

Non-Plan Expenditure: It includes expenses that do not form a part of the Governments ve year plan.These expenses consist of revenue and capital expenditure on defense, subsidies, interest payments,postal de cit, pensions, police, loans to public sector enterprises, economic services and loans as well as

grants to State Governments, Union Territories and foreign Governments.Non-Tax Revenues: Revenues earned by the Government from sources other than taxes are termed as

GLOSSARY


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non-tax revenues. The sources of non-tax revenues may include; dividends and pro ts received frompublic sector companies, interest receipts, nes, penal es and fees for various services rendered by theGovernment.

Plan Expenditure: It consists of both revenue expenditure and capital expenditure of the Centre onthe Central Plan and Central Assistance to States and Union Territories. Plan expenditure re ects theGovernments investment in enhancing the economys produc ve ap tude. It arises out of schemesfreshly introduced in an ongoing Five Year Plan (FYP) period.

Plan Outlay: Plan Outlay refers to the amount sanc oned for expenditure on projects, schemes andprogrammes announced in the Plan. The provision for this amount is made through extra budgetaryresources and from provisions in the Demands for Grants. The budgetary support is also re ected as planexpenditure in Government accounts.

Primary De cit: The amount by which the Governments total expenditure exceeds its total revenuegenerated, excluding the interest payments on debt. It is primarily the di erence between the gross scalde cit and gross interest payments.

Public Account: Besides the normal receipts and expenditure of the Government which relate to theConsolidated Fund, certain other transac ons enter Government accounts, in respect of which theGovernment acts more as a banker. For example, transac ons rela ng to provident funds, small savingscollec ons, other deposits, etc. The money thus received is kept in the Public Account and the connecteddisbursements are also made therefrom.

Public Debt: It refers to the total debt of the central and the State Governments. Public debt can be classi edinto internal debt (comprising of money borrowed within the country) and external debt (comprising of funds borrowed from non-Indian sources). The net accre on to public debt is the di erence in borrowing

and repayments during a scal year.Revenue De cit: Revenue De cit is the excess of Governments revenue expenditure over revenuereceipts.

Revenue Expenditure: It is the expenditure incurred by the Government for running of Governmentdepartments and conduc ng various economic, social and general services, interest payments, subsidies,grants and assistance to State and Union territories etc. This expenditure is also categorised as plan andnon-plan revenue expenditure.

Revenue Receipts: It includes revenues garnered by the Government through taxes and other non-taxsources. Other receipts of the Government mainly consist of interest and dividend on investments madeby the Government, fees, and other receipts for services rendered by it.

Tax Revenues: It comprises of revenue receipts through taxes and other du es levied by the Government.Tax revenue includes revenue generated through both direct taxes (personal income tax, corporate tax,capital gain tax and wealth tax) and indirect taxes (central excise duty, customs duty, service tax andVAT).

Vote on Account: It means a grant made in advance by the Parliament, in respect of the es matedexpenditure for a part of the new nancial year, pending the comple on of the procedure rela ng to thevo ng of the demand for grants and the passing of the Appropria on Act.

Vote of Credit: Through the Vote of Credit the House of People can approve grant for mee ng anunexpected demand upon the resources of India when on account of the magnitude or the inde nite

India's Union Budget Analysis for FY 2013-2014

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Transcript of India's Union Budget Analysis for FY 2013-2014