Union Budget 2013-14

Feb 28, 2013

Union Budget 2013-14 - Snapshot Key takeouts from the Budget Budget raises spending for 2013/14 (~16% increase from 2012-13 RE) Fiscal deficit at % of GDP estimated at 4.8% (2012-13 was @5.3%) It has taken small steps to address infrastructure bottlenecks, stalled investments and fuel supply issues, and also stressed sector like capital goods, housing, etc. Few popular moves Direct Cash transfer Scheme, Food Security Bill, Indias first Womens Bank, etc. No changes either in the slabs or the rates of Personal Income Tax; surcharge levied for super rich India faces challenge of getting back to its potential growth rate of 8 point Fiscal Deficit & CAD 2012-13 2013-14 Fiscal Deficit 5.2% 4.8% Revenue Deficit 3.9% 3.3% By 2016-17 fiscal deficit to be brought down to 3%, revenue deficit to 1.5% and effective revenue deficit to zero per cent Current account deficit continues to be high due to excessive dependence on oil, coal and gold imports and slowdown in exports Three ways to reduce CAD (current account deficit) - FDI, FII or external borrowings

Budgetary Allocations Rs in Cr 14,30,825 16,65,297 Comments

Revised Expenditure Target for 2012-13 Budget Estimate 2013-14

Rural Development Healthcare

Drinking Water JNNRUM

Plan Expenditure Rs 5,55,322 Cr Non Plan Expenditure Rs 11,09,975 Cr Key Budgetary Allocations 2013-14 80,194 Allocated for Ministry of Rural Development (Increase of 46% over revised estimate 2012-13) 37,330 Allocated to Ministry of Health & Family Welfare. Apart from this, New National Health Mission will get an allocation of Rs21,238 Cr; other healthcare schemes would get allocation of Rs 13,365 Cr 15,260 Allocated to Ministry of Drinking Water & Sanitation 14,873 Allocation for Urban Transportation

Agriculture Budget Allocations Rs 27,049 crore allocated to Ministry of Agriculture, an increase of 22% over the revised estimate of current year Rs 7 lakh crore target fixed for agriculture credit for 2013-14 compared to Rs 5.75 lakh crore in the current year Rs in Cr 10,000 307 5,000 5,387 1000 Comments Provision for National Food Security Act National Livestock Mission to be set up This will be made available to NABARD to finance agriculture produce storage Allocated for integrated watershed programme for farmers in 2013-14 Allocation for improving agricultural production

Food Security National Livestock Mission Agriculture Produce Storage Watershed Programmes Agriculture Production Infrastructure, Investment & Industry Infrastructure Housing Road Sector Ports Industrial Corridors

Oil & Gas

Power

Renewable Energy Coal

Comments Rs 2,000 crore to be allocated for a new Urban Housing Fund Rs 6,000 crore for rural housing fund 3000 kms of road projects in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh will be awarded in the first six months of 2013-14 Two new major ports will be established in West Bengal and in Andhra Pradesh to add 100 million tones of capacity Plans for 7 new cities have been finalized Additional funds to Delhi Mumbai Industrial Corridor (DMIC) Chennai Bengaluru Industrial Corridor to be developed Preparatory work has started for Bengaluru Mumbai Industrial Corridor Oil and Gas Exploration Policy might move from profit sharing to revenue sharing The 5 MMTPA LNG terminal in Dabhol, Maharashtra will be fully operational in 201314 Oil and Natural Gas Blocks under NELP to be cleared this fiscal year Tax holiday for power plants extended to March 2014 Government to construct power transmission system from Srinagar to Leh at the cost of Rs 1,840 crore Generation based incentives for Wind energy Rs 800 crore for non-renewable energy ministry Reduction of Coal Imports in long term & to encourage PPP with coal India Limited

Budgetary Benefits in Key Sectors Industry Manufacturing Comments A company investing Rs 100 crore or more in plant and machinery in April 1, 2013 to March 31, 2015 will be allowed 15% investment deduction allowance apart from depreciation Allocation of 2,400 crore towards Textile Technology Up-gradation Allocation of Rs 50 crore to Ministry of Textile to incentivize setting up Apparel Parks Concessional 6% interest on loans to weavers

Textiles

Banking & Financial

Defence Broadcasting Education MSME

Rs 14,000 crore provided in 2013-14 for infusing capital First Womens Bank as Public sector Bank Rs 1,000 Cr Provision Insurance companies will be empowered to open branches in tier II cities without prior IRDA approval Investor with less than 10% in a company will be treated as FII; Investor with more than 10% in a company will be treated as FDI Allocation for Defence increased to Rs 2,03,672 crore including Rs 86,741 crore for capital expenditure 294 more cities to be connected by FM Radio; 289 FM radio channels to be auctioned Allocation of Rs 65,867 crore to the Ministry of Human Resource Development Rs 1,650 crore allocated for six AIIMS-like institutions Small and medium companies to be allowed to listed on MSME exchange without making a public offer 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. Another sum of Rs 100 crore provided to India Microfinance Equity Fund

Tax Proposals Direct Taxes No changes in personal Income Tax slabs Tax credit of Rs 2000 on incomes between Rs2-5 lakh Surcharge of 10% for income of Rs 1 cr or more per annum for one year Increase surcharge from 5 to 10 percent on domestic companies whose taxable income exceed Rs 10 crore 1% TDS for property sale worth more than Rs 50 lakh - agri land exempt First time loan takers of up to Rs 25 lakh would get additional deduction of interest of up to Rs 1 lakh in 2013-14 The additional exemption would mean tax benefit gets raised from Rs 1.5 lakh to Rs 2.5 lakh Educational Cess to continue at 3 % Tax on Royalty for services provided abroad increased by 10% Indirect Taxes No change in peak rate for CD non-agri products Leather and goods duty reduced to 5% Luxury cars import duty at 100% Yachts duty at 25% Luxury motorcycle duty at 75% Tax on SUVs increased from 27% to 30%; taxis exempt Baggage rules to permit bringing jewellery duty free limit raised to Rs 50000 for males and Rs 1 lakh for females Excise duty on set top box increased 6% duty on mobiles costing more than Rs 2000 Increase in excise duty on cigarettes by 18% Excise on readymade garments reduced Goods & Service Tax A sum of Rs 9,000 crore towards the first installment of the balance of CST compensation provided in the budget

Market Reactions Sensex plunges 220 points. All the major sectoral indices, barring IT and consumer durables, ended in the red. Realty and infrastructure stocks gained because of planned target of $1 trillion in infrastructure in the 12th plan declared Education stocks rallied after allocation to the education sector was increased by 17%

Few verbatim of experts: "Overall, it is a good budget. We are unlikely to see a very strong inflationary trend because of the proposed tax structure. Coming out of a difficult year, it is not an over ambitious budget, and it is do-able." Shubhada Rao, Chief Economist, Yes Bank "There will be upward pressure on yields. However, interest rate cuts by the Reserve Bank of India need not be related to market borrowing. They will focus on the quality of the fiscal consolidation." Nagaraj Kulkarni, South Asia Senior Rates Strategist, Standard Chartered Bank, Singapore "Total expenditure for FY14 is higher than revised estimate for the current fiscal year. Fiscal prudence would now be dependent on the quality checks on the non-plan expenditure side, especially the subsidy front." Shakti Satapathy, FI Strategist, AK Capital, Mumbai STT has been reduced for mutual funds, although I do not quite agree with his logic on the introduction of the commodities transaction tax. Dinesh Kanabar, Deputy CEO, KPMG Budget 2013-14 creates a feel good atmosphere. If industrialists do not do investments after this budget, they might have to re-look at their animal spirits. KV Kamath, Chairman, Infosys

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