New Delhi: Finance Minister P. Chidambaram presented one of the most highly anticipated Indian budgets of recent years on Thursday, as the government looks to rein in a bloated fiscal deficit and restore confidence in Asia’s third-largest economy.
FISCAL DEFICIT
Fiscal deficit seen at 5.2% of GDP in 2012/13
Fiscal deficit seen at 4.8% of GDP in 2013/14
Faced with huge fiscal deficit, India had no choice but to rationalise expenditure
GROWTH
India faces challenge of getting back to its potential growth rate of 8%
India must unhesitatingly embrace growth as highest goal
SPENDING
Total budget expenditure seen at 16.65 trillion rupees in 2013/14
India’s 2013/14 plan expenditure seen at 5.55 trillion rupees
Non-plan expenditure estimated at about 12 trillion rupees in 2013/14
Revised estimate for total expenditure is 14.3 trillion rupees in 2012/13, which is 96% of budget estimate
Set aside 100 billion rupees towards spending on food subsidies in 2013/14
CURRENT ACCOUNT DEFICIT
India’s greater worry is the current account deficit - will need more than $75 billion this year and next year to fund deficit
INFLATION
Food inflation is worrying, will take all steps to augment supply side
TAX
Proposes surcharge of 10% on rich taxpayers with annual income of more than 10 million rupees a year
To increase surcharge to 10% on domestic companies with annual income of more than 100 million rupees
To continue 15% tax concession on dividend received by India companies from foreign units for one more year
Propose to impose withholding tax of 20% on profit distribution to shareholders
Propose to reduce securities transaction tax on equity futures to 0.01% from 0.017%
Time to introduce commodities transaction tax (CTT)
CTT on non-agriculture futures contracts at 0.1%
CORPORATE SECTOR AND MARKETS
Plans to issue inflation-indexed bonds
Proposes capital allowance of 15% to companies on an 1 billion rupees
Foreign institutional investors (FIIs) can use investments in corporate, government bonds as collateral to meet margin requirements
Insurance, provident funds can trade directly in debt changes
FIIs can hedge forex exposure through exchange-traded derivatives
Investor with less than 10% stake in a company will be regarded as FII, more than 10% stake as FDI (foreign direct investment)
Stock exchange regulator will simplify know-your-customer norms for reign portfolio investors
To implement quickly recommendations of financial sector forms commission
POWER AND ENERGY SECTOR
Proposes zero customs duty for electrical plants and machinery
Proposes to move to revenue-sharing from profit-sharing policy in oil and gas sector
BANKING
To provide 140 billion rupees capital infusion in state-run banks in 2013/14
DEFENCE
To allocate 2.03 trillion rupees to defence in 2013/14
AGRICULTURE
To allocate 801.94 billion rupees to rural development in 2013/14
Plan to allocate 270.49 billion rupees for agriculture in 2013/14
FINANCE MINISTER COMMENTS
“Faced with a huge fiscal deficit, I have no choice but to rationalize expenditure. We took a dose of bitter medicine. It seems to be working.”