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Posted on Feb 28, 02:31PM | IBNS
New Delhi, Feb 28 : Union Finance Minister P Chidambaram on Thursday presented the Union Budget 2013-14 in Parliament making no revision in the basic tax slabs, but introduced a surcharge for those earning above Rs 1 crore, construed as taxing the super rich, while he aimed at 'higher growth' that can bring inclusive and sustainable development.
With the mood of the country influenced by the growing attack on women, the finance minister also announced a Nirbhaya fund for women empowerment in memory of the Delhi braveheart and announced an all women bank though many criticised the latter saying it is as if women cannot use the existing banks.
P Chidambaram has sought to increase allocation to key areas and provide incentives for investments and savings while containing the fiscal deficit to 4.8% of GDP while keeping in mind the elections this year also focused on some populist measures.
The Finance Minister has taken important steps to reverse the pessimistic mood and have done a commendable job, said the Prime Minister Manmohan Singh praising the budget of Chidambaram, adding that 8 percent growth as envisaged will make the Indian a winner. The PM said Chidambaram has made efforts to bring down the fiscal deficit and keep it in control and if it is achieved it will be good for the economy and contain inflation.
The Finance Minister said that he had no choice but to rationalize government expenditure in view of huge fiscal deficit in 2012-13. "We also took some policy decisions that had been deferred for too long, corrected some prices, and undertook a review of certain tax policies."
"Faced with a huge fiscal deficit, I have no choice but to rationalise expenditure. We took a dose of bitter medicine. It seems to be working," Chidambaram said in his budget speech.
The total expenditure in the Union Budget 2013-14 is pegged at Rs. 16,65,297 crore. Out of it Rs.5,55,322 crore (33%) is Plan expenditure. The non-Plan expenditure is estimated at Rs 11,09,975 crore.
The Plan expenditure in 2013-14 will be 29.4 per cent more than the revised estimates of the current year. All flagship programmes have been fully and adequately funded.
Presenting the Union Budget, the Finance Minister expressed the hope that the India would achieve high economic growth despite slowdown in the global economic growth.
The Minister said that his government has been able to contain the fiscal deficit at 5.2% in 2012-13 by following the path of fiscal consolidation. But the current account deficit (CAD) is a greater worry, the Minister added. He, therefore, proposes to encourage foreign investment that is consistent with India's economic objectives.
The Finance Minister said that the other areas of concern addressed by his Government are inflation and government expenditure.
"Our efforts in the past few months have brought down headline WPI inflation to about 7.0 percent and core inflation to about 4.2 percent.
It is food inflation that is worrying, and we shall take all possible steps to augment the supply side to meet the growing demand for food items," he said.
While there were expectations of a raise in the limit of tax exemption by the salaried class, Union Finance Minister P Chidambaram said there is no scope for any change.
There is no change in Income Tax rates or slabs but a Rs 2000 credit has been given to those who are earning from Rs 2 lakh to Rs 5 lakh per annum, said Chidambaram.
Those with above Rs 1 crore income will be imposed a surcharge of 10 percent, he said.
"The Finance Bill 2013-14 proposes a surcharge of 10 per cent on persons whose taxable income exceed Rs. 1 crore per year. This will apply to individuals, HUFs, firms and entities with similar tax status," said Chidambaram.
Chidambaram said that he also proposes to increase the surcharge from 5 per cent to 10 per cent on domestic companies whose taxable income exceeds Rs.10 crore per year. In the case of foreign companies, the surcharge will increase from 2 per cent to 5 per cent.
In all other cases, such as dividend distribution tax or tax on distributed income, the current surcharge of 5 per cent is being increased to 10 per cent. The additional surcharges will be imposed for only one year, i.e., financial year 2013-14.
The education cess for all taxpayers shall continue at 3 per cent. The Finance Minister said that he expects the relatively prosperous to bear a small burden for one year.
The FM said there is no case to revise either the slabs or rates for the Rs 2 to 5 lakh group.
He said the tax credit of Rs 2000 will benefit 1.8 crore tax payers.
According to an ASSOCHAM survey ahead of the budget, more than 89% said that the slab of tax free income has not moved up in line with real inflation. The current basic exemption limit of Rs. 2,00,000 should be increased to at least Rs, 3,00,000 with the limit for women going upto Rs 3,50,000 lakhs to enchance the purchasing power of individuals and stimulate demand.
The FM announced allocations for the welfare of schedule caste and tribes, differently abled and women related programmes. He said faced with huge fiscal deficit, he had no choice but to rationalise expenditure.
He also announced India's first all women bank as a public sector bank and announced allocation of Rs 1000 crore for initial capital.
The FM also announced a Rs 1000 crore Nirbhaya Fund for empowerment of women, in commemoration of the Delhi braveheart who died after a fatal sexual assault in a bus and triggered a nationwide outrage against sex crimes against women.
The finance minister began saying that the Indian economy has been hit by the global economic crisis too and growth would be his priority as the government has to navigate the economy through the tough situation. He said there is a compelling necessity of equity in India and without growth development and inclusiveness is not possible.
He said only China and Indonesia are growing faster than India.
He said the current account deficit is his big worry. He said foreign investment is imperative and investment that is good for India should be encouraged.
He said inflation has to be curbed and food inflation is particularly worrying.
Juxtaposing economic welfare with the economic policy, the Minister said that the link between policy and welfare can be expressed in a few words: opportunities, education, skills, jobs and incomes.
He said the Budget has before it one overarching goal - to create opportunities for the youth to acquire education and skills that will get them decent jobs or self-employment that will bring them adequate incomes that will enable them to live with their families in a safe and secure environment.
The Budget sets a target of skilling 90 lakh people in 2013-14, for which funds will be released by the National Rural Livelihood Mission and National Urban Livelihood Mission.
Chidambaram made promises to the women, the youth and the poor - the three faces that represent the majority of the people of India. Stating that the government pledges to do everything possible to empower the women and to keep them safe and secure, he said that a number of initiatives were underway and many more would be taken by the Government as well as non-government organizations. He announced the setting up of a fund - Nirbhaya Fund - with the Government contributing Rs. 1000 crore.
The Minister also announced a Rs. 1,000 crore scheme for training youth to boost their employability and productivity. The National Skill Development Corporation will be asked to set the curriculum and standards for training different skills. Trained youth who pass a test at the end of training will get a monetary reward of Rs.10000 on an average. This initiative is likely to motivate 10 lakh youth.
For the benefit of the poor, the Minister assured that Direct Benefit Transfer (DBT) schemes will be rolled out throughout the country during the term of the UPA Government. "We are redoubling out efforts to ensure that the digitized beneficiary lists are available; that a bank account is opened for each beneficiary; and that the bank account is seeded with Aadhaar in due course," he said.
The allocation for Rural Development Ministry has been raised by 46 percent to Rs 80,194 crore in 2013-14.
Pradham Mantri Gram Sadak Yojana (PMGSY)-II has been carved out to benefit States that have substantially fulfilled the objectives of PMGSY. This will benefit states such as Andhra Pradesh, Haryana, Karnataka, Maharashtra, Punjab and Rajasthan, the FM said.
Ministry of Agriculture gets a rise of 22 per cent over the revised estimates (RE) for 2012-13, at Rs 27,049 crore. Rs 500 crore is being allocated to start a programme on crop diversification.
Chidambaram said it will encourage farmers in the original green revolution states to choose alternative crops. A pilot programme on Nutri-Farms will be started for introducing new crop varieties that are rich in micro nutrients, such as iron-rich bajra. A sum of up to Rs 200 crore is to be provided to start the pilots.
The Budget seeks to support Farmer Producer Organizations (FPO), including Farmer Producer Companies (FPC) which have emerged as aggregators of farm produce and link farmers directly to markets.
The target of agricultural credit for 2012-13 (Rs. 5,75,000 crore) is likely to be exceeded, and a target of Rs 7,00,000 crore farm credit has been fixed for the next year.
The interest subvention scheme for short-term crop loans is proposed to be continued for loans by public sector banks, RRBs and Cooperative banks, and expanded to private scheduled commercial banks. Under the scheme, a farmer who repays the loan on time is able to get credit at 4 cent per year.
Rs.307 crore have been provided for setting up of the National Livestock Mission. This will attract investment and enhance livestock productivity. A sub-mission of this Mission seeks to increase the availability of feed and fodder.
Expressing the hope that the National Food Security Bill will be passed by Parliament as early as possible, the Finance Minister has set apart Rs. 10,000 crore towards the incremental cost that is likely under the Act.
Education has been allocated Rs. 65,867 crore, an increase of 17 per cent over the RE for 2012-13.
ICDS gets Rs. 17,700 crore representing an increase of 11.7 per cent. A multi-sectoral programme to tackle maternal and child malnutrition that was announced last year will be implemented in 100 districts during 2013-14. It will be further scaled up to cover 200 districts the year after.
Ministry of Health and Family Welfare has been allocated Rs. 37,330 crore. Of this, the new National Health Mission that combines the rural mission and the proposed urban mission will get Rs. 21,239 crore - an increase of 24.3 percent over the RE.
The Backward Regions Grant Fund (BRGF) has been allocated Rs. 11,500 crore and will include a State component for Bihar, the Bundelkhand region, West Bengal, the KBK districts of Odisha and the 82 districts under the Integrated Action Plan.
Science and Technology related Departments have been allocated funds with substantial enhancements.
A National Institute of Sports Coaching is proposed to be set up at Patiala at a cost of Rs. 250 crore over a period of three years.
Drinking water and sanitation will receive Rs. 15,260 crore. Rs. 1,400 crore is being provided for setting up water purification plants to cover arsenic and fluoride effected rural habitations.
The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) will receive Rs. 14,873 crore as against RE of Rs. 7,383 crore in the current year. Out of this, a significant portion will be used to support the purchase of upto 10,000 buses, especially by hill States.
Defence gets an allocation of Rs. 2,03,672 crore and the assurance that constraints will not come in the way of providing any additional requirement for the security of the nation.
Stating that adequate funds must be provided for programmes that benefit women, children and minorities, as also the scheduled castes and scheduled tribes, the Finance Minister proposed to allocate Rs 41,561 crore to the scheduled caste sub-plan and Rs 24,598 crore to the tribal sub-plan.
The programmes relating to women get Rs. 97,134 crore and child budget, Rs. 77,236 crore. The Ministry of Women and Child and Development has been asked to design a scheme that will address women's concerns, and an additional sum of Rs. 2,000 crore has been provided to the Ministry to began work in this regard. Ministry of Minority affairs has been allocated Rs. 3,511 crore and the Department of Disability Affairs, Rs. 110 crore.
The Finance Minister stated that the key to restart the growth engine was to attract more investment, and that the government will improve communication of its policies to remove any apprehension or distrust in the minds of investors.
A number of steps to mobilize investment have been announced in the Budget keeping in view that as per 12thPlan the private sector will share 47 percent of Rs 55,00,000 crore investment in infrastructure. Infrastructure Debt Funds (IDF) will be encouraged. India Infrastructure Finance Corporation (IIFCL) will offer credit enhancement to infrastructure companies that wish to access the bond market to tap long term funds. Some institutions will be allowed to issue tax - free bonds up a total sum of Rs 50,000 crore (as against Rs 25,000 crore in 2012-13).
Assistance of the World Bank and Asian Development Bank will be sought to build roads in the North Eastern States and connect them to Myanmar. The corpus of Rural Infrastructure Development Funds (RIDF) is proposed to be raised to Rs. 20,000 crore. A sum of Rs 5,000 crore will be made available to NABARD to finance construction of warehouses, godowns, silos and cold storage units designed to store agricultural produce.
Chidambaram informed that the newly set-up Cabinet Committee on Investment has held two meetings and taken decisions in respect of a number of oil and gas, power and coal projects. CCI will take up some more projects shortly, he said. The Minister also informed that a regulatory authority is being constituted for the road sector. Bottlenecks stalling road projects have been addressed and 3,000 km of road projects in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh will be awarded in the first six months of 2013-14.
The Budget introduces an investment allowance for new high value investment. A company investing Rs. 100 crore or more in plant and machinery during the period 1.4.2013 to 31.3.2015 will be entitled to deduct an investment allowance of 15 percent of the investment (in addition to depreciation).
Plans for seven new cities have been finalized for industrial corridors and work on two new smart industrial cities at Dholera (Gujarat) and Shendra Bidkin (Maharashtra) will start during 2013-14. A comprehensive plan is being prepared for the Chennai Bengaluru industrial corridor. Preparatory work has started for the next corridor - Bengaluru Mumbai industrial corridor.
Two new ports will be established in Sagar (West Bengal) and in Andhra Pradesh. In addition, a new outer harbour will be developed in the VOC port at Thoothukkudi (Tamil Nadu) through PPP at an estimated cost of Rs 7,500 crore.
A power transmission system will be constructed from Srinagar to Leh and for this Rs. 226 crore have been provided in 2013-14.
The oil and gas exploration policy will be reviewed to move from profit sharing to revenue sharing contracts. A policy to encourage exploration and production of shale gas will be announced. The natural gas pricing policy will be reviewed and uncertainties regarding pricing will be removed.
To provide greater support to Micro, Small and Medium Enterprises (MSMEs), the refinancing capability of SIDBI is proposed to be enhanced from Rs. 5,000 crore to Rs. 10,000 crore per year. SIDBI will also be provided a corpus of Rs 500 crore to set up a Credit Guarantee Fund for factoring.
Apparel Parks are proposed to be set up within the Integrated Textile Parks, to house apparel manufacturing units. A new scheme, Integrated Processing Developing Scheme, is being started to address to environmental concerns of the textile industry. Working capital and term loans to the handloom sector will be available at a concessional interest of 6 per cent. This will benefit 1.5 lakh weavers and 1,800 primary co-operative societies.
The Budget proposes three measures to promote household savings. One, the income limit for Rajiv Gandhi Equity Saving Scheme for first time investors is being raised from Rs. 10 lakh to Rs. 12 lakh. Two, persons taking loan for first home up to Rs 25 lakh will be entitled to an additional deduction of interest of up to Rs 1 lakh. Three, instruments such as Inflation Indexed Bonds will be introduced to protect savings from inflation.
Chidambaram proposed to constitute a Standing Council of Experts in the Ministry of Finance to analyse the international competitiveness of the Indian financial sector.
The Finance Minister announced that Rs. 14,000 crore worth of capital infusion will be made into public sector banks. It will be ensured that these banks meet the Basel III regulations.
The government has finalized a number of proposals relating to the insurance sector in consultation with IRDA. These include empowering insurance companies to open branches in Tier II cities and below without prior approval of IRDA, having an office of LIC and a public general-insurance company in all towns with the population of 10,000, and permitting banks to act as insurance broker.
The Rashtriya Swasthiya Bima Yojana, which cover 34 million families below the poverty line, will now be extended to other categories such as rickshaw, auto-rickshaw and taxi-drivers, sanitation workers, rag pickers and mine workers.
The Finance Minister proposes to evolve a comprehensive social security package by converging various schemes for life-cum-disability cover, health cover, maternity assistance and pension benefits.
A number of proposals relating to capital market have been finalized in consultation with SEBI. These include simplification of procedure and uniforms norms for foreign portfolio investors, clarity relating to FDI investment, allowing FIIs to participate in new areas, etc.
With regards to Indirect Taxes, the Finance Minister proposed no change in the normal rates of 12 percent for excise duty and service tax. Similarly, no change has been made in the peak rate of custom duty of 10 percent for non-agricultural products.
Custom duty on free gold limit increased to Rs. 50,000 in case of male passenger and Rs. 1,00,000 in case of a female passenger subject to conditions.
Duty on imported luxury goods such as high end motor vehicles, motor cycles, yachts and similar vessels increased. Custom duty on Set Top Boxes increased from 5 to 10 percent while on raw silk increased from 5 to 15 percent to boost domestic production. Custom duty on specified machinery for manufacture of leather and leather goods including footwear reduced from 7.5 to 5 percent. The Budget also proposes that period of concession available for specified part of electric and hybrid vehicles extended upto 31 March 2015.
Excise duty on SUVs increased from 27 to 30 percent. However, this will not apply to SUVs registered as taxies.
Cigarettes will cost more as specific excise duty increased by about 18 percent. Similar increases are proposed on cigars, cheroots and cigarillos. Duty on mobile phones priced above Rs. 2000 has been raised to 6 percent from the current one percent.
The Budget proposes 'Voluntary Compliance Encouragement Scheme' where a defaulter may avail of the scheme on condition that he files a truthful declaration of Service Tax dues since 1.10.2007. It is a one-time scheme in which interest, penalty and other consequences will be waived.
The Budget proposes to mobilize Rs. 18,000 crore in which new proposals in indirect taxes will yield Rs. 4,700 crore and direct taxes of Rs. 13,300 crore.
In a major step to rationalize taxation on goods and services, the Budget has earmarked Rs. 9,000 crore towards the first installment of the balance of CST compensation. The Minister said that overwhelming majority States have agreed that there is a need for Constitutional amendment to pass GST law. It will be drafted by the State Finance Ministers and the GST Council, the Minister added.
· Finance Minister makes three promises: to women, youth and the poor.
· Nirbhaya Fund to empower women and to keep them safe and secure.
· Proposal to set up India's first Women's Bank as a public sector bank.
· Rs. 1,000 crore for skill development of ten lakh youth to enhance their employability and productivity.
· Direct Benefit Transfer (DBT) Scheme to be rolled out throughout the country during the term of UPA Government.
· Fiscal Deficit for 2013-14 is pegged at 4.8 percent of GDP. The Revenue Deficit will be 3.3 percent for the same period.
· Plan Expenditure placed at Rs. 5,55,322 crore. It is 33.3 percent of the total expenditure while Non Plan Expenditure is estimated at Rs. 11,09,975 crore. The plan expenditure in 2013-14 will be 29.4 percent more than the RE of the current year i.e. 2012-13.
· Substantial rise in allocation to the social sector. Allocation for Rural Development Ministry raised by 46 percent to Rs. 80,194 crore.
· The target for farm credit for 2013-14 has been set at Rs. 7,00,000 crore against Rs. 5,75,000 crore during the current year.
· Rs. 10,000 crore earmarked for National Food Security towards the incremental cost.
· Education gets Rs. 65,867 crore, an increase of 17 percent over RE for 2012-13.
· ICDS gets Rs. 17,700 crore. This is 11.7 percent more than the current year.
· Drinking water and sanitation will receive Rs. 15,260 crore. Rs. 1,400 crore is being provided for setting up water purification plants to cover arsenic and fluoride affected rural areas.
· Health and Family Welfare Ministry has been allotted Rs. 37,330 crore. National Health Mission will get Rs. 21,239 crore which represents 24.3 percent over the RE.
· The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) will receive Rs. 14,873 crore as against RE of Rs. 7,383 crore in the current year.
· Defence has been allocated Rs. 2,03,672 crore.
· Rs. 3,511 crore have been earmarked to Minority Affairs Ministry, 60 percent higher than RE for 2012-13.
· The Government will encourage Infrastructure Debt Fund (IDF) and allow some institutions to raise tax free bonds upto Rs. 50,000 crore which is 100 percent more than the current year.
· India Infrastructure Finance Corporation (IIFC), in partnership with ADB will help infrastructure companies to access bond market to tap long term funds.
· Income limit under Rajiv Gandhi Equity Savings Scheme (RGESS) will be raised from Rs. 10 lakh to Rs. 12 lakh.
· First home loan from a bank or housing finance corporation upto Rs. 25 lakh entitled to additional deduction of interest upto Rs. 1 lakh.
· Proposal to launch Inflation Indexed Bonds or Inflation Indexed National Security Certificates to protect savings from inflation.
· On oil and gas exploration policy, the Budget proposes to move from the present profit sharing mechanism to revenue sharing. Natural gas pricing policy will be reviewed.
· On coal, the Budget proposes adoption of a policy of pooled pricing.
· Benefits or preferences enjoyed by MSME to continue upto three years after they grow out of this category.
· Refinancing capacity of SIDBI raised to Rs. 10,000 crore.
· Technology Upgradation Fund Scheme (TUFS) for textile to continue in 12th Plan with an investment target of Rs. 1,51,000 crore.
· Rs. 14,000 crore will be provided to public sector banks for capital infusion in 2013-14.
· A grant of Rs. 100 crore each has been made to 4 institutions of excellence including Aligarh Muslim University, Banaras Hindu University, Tata Institute of Social Sciences, Guwahati and Indian National Trust for Art and Cultural Heritage (INTACH).
· New taxes to yield Rs. 18,000 crore.
· A surcharge of 10 percent on persons (other than companies) whose taxable income exceeds Rs.1 crore have been levied.
· Tobacco products, SUVs and Mobile Phones to cost more.
· Relief of Rs. 2000 for the tax payers in the first bracket of 2 to 5 lakhs.
· 'Voluntary Compliance Encouragement Scheme' launched for recovering service tax dues.
· Rs. 9,000 crore earmarked as the first installment of balance of CST compensations to different States/UTs.