The nuts and bolts of Interim Budget
The fiscal deficit for 2013-14 will be contained at 4.6% of GDP, well below the red line drawn last year.
The fiscal deficit for 2013-14 will be contained at 4.6% of
GDP,
well below the red line drawn last year. The Current Account Deficit,
which threatened to exceed last year’s CAD of $88 billion, will be
contained at $45 billion, and about $15 billion is expected to be added
to the foreign exchange reserves by the end of FY14. Analysts and rating
agencies no longer speak about a downgrade.
Both WPI and core inflation fall
Wholesale Price Index (WPI) headline inflation stood and core inflation
declined from 7.3% and 4.2% respectively on Budget Day 2013 to 5.05% and
three% at the end of January 2014. However, there is still some
distance to go. Food inflation is still the main worry, although it has
declined sharply from a high of 13.6% to 6.2%.
Agriculture GDP growth 4.6%
Foodgrain production in 2012-13 was 255.36 million tonnes and the
estimate for the current year is 263 million tonnes. Agricultural GDP
growth is estimated at 4.6%. Estimates of the output of sugarcane,
cotton, pulses, oilseeds and quality seeds point to new records.
Agricultural GDP growth increased to 3.1% during the five years of UPA-I
and further to four% in the first four years of UPA-II.
No steep decline in investment rate
The savings rate was 31.3% in 2011-12 and 30.1% in 2012-13. The
corresponding investment rate was 35.5% and 34.8%, respectively,
indicating there was no steep decline in investment, except in mining
and manufacturing. The Cabinet Committee on Investment cleared a number
of stalled projects, and by the end of January, 2014, the way was
cleared for completing 296 projects with an estimated project cost of
'660,000 crore.
Exports on the uptrend
Merchandise exports were $300.4 billion in 2012-13 – a fall of 1.8% over
the previous year. The year 2013-14 is expected to end with estimated
merchandise exports of $326 billion, indicating a growth rate of 6.3%.
However, imports are down, and this does not augur well for either
manufacturing or domestic trade.
8 NIMZs along DMIC approved
Eight National Investment and Manufacturing Zones (NIMZ) have been
announced along the Delhi-Mumbai Industrial Corridor and nine projects
have been approved by the DMIC Trust. Five NIMZs outside DMIC have also
been given in-principle approval. Three more corridors connecting
Chennai and Bengaluru, Bengaluru and Mumbai, and Amritsar and Kolkata
are under different stages of preparatory work.
Infrastructure gets big push
Infrastructure and capacity addition in infrastructure industries have
received a big push. In 2012-13 and in the first nine months of 2013-14,
we have added 29,350 Mw of power capacity; 3,928 km of national
highways; 39,144 km of rural roads under PMGSY, 3,343 km of new railway
track, and 217.5 million tonnes of capacity per annum in the ports.
Besides, 19 oil and gas blocks were given out for exploration and seven
new airports are under construction.
GDP growth to recover in FY14
In nine quarters, the GDP growth rate declined from 7.5% in Q1 of
2011-12 to 4.4% in Q1 of 2013-14. However, growth in Q2 of 2013-14 is
4.8% and growth for the whole year has been estimated at 4.9%. Thus,
growth in the third and fourth quarters of 2013-14 will be at least
5.2%.
All growth parameters up under UPA
Under ten years of UPA, foodgrain output is up from from 213 million
tonnes to 263 million tonnes of food grains; installed power capacity
rose from 112,700 Mw; to 234,600 Mw; coal production rose from 361
million tonnes per year to 554 million tonnes; rural roads went up from
51,511 km to 389,578 km; Central government expenditure on education
rose from '10,145 crore to '79,451 crore; and spending on health rose
from '7,248 crore to '36,322 crore.
UPA delivers 7.5% average growth
Over a period of 33 years, the trend growth rate in India has been 6.2%.
Average annual GDP growth during the period 1999-2004 was 5.9%, or
below the trend rate. In 2004-2009 it was 8.4% and, in the period
2009-2014, the CSO has estimated it to be 6.6%. UPA-I and UPA-II have
delivered above the trend growth rate.
12.8 land titles distributed
As many as 12.8 lakh land titles covering 18.80 lakh hectares were
distributed under the Scheduled Tribes and Other Traditional Forest
Dwellers Act.
Land Acquisition Act notified
The Right to Fair Compensation and Transparency in Land Acquisition,
Rehabilitation and Resettlement Act was notified on 1.1.2014, finally
putting to rest an oppressive colonial law of 1894.
Food security law passed
The National Food Security Act was passed during the current financial year, assuring foodgrain to 67% of the population.
New Companies Act comes into being. Parliament enacted a new Companies Act, which replaced a law of 1956 vintage.
NPS given statutory basis
The PFRDA Act was passed placing the New Pension System on a statutory basis and establishing a statutory regulator.
Centrally sponsored schemes restructured.
Centrally Sponsored Schemes were restructured into 66 programmes for
greater synergy. Funds under these programmes will be released as
Central assistance to state plans, thus giving states greater authority
and responsibility. As a result, Central assistance to plans of states
and Union Territories will rise from '136,254 crore in 2013-14 to
'338,562 crore in 2014-15.
PSUs to set record in capex
Public sector enterprises will achieve a new record in capital expenditure of '257,641 crore in 2013-14.
50,000 Mw capacity being created.
About 50,000 Mw of thermal and hydel power capacity is under
construction after receiving all clearances and approvals. About 78,000
MW of power capacity has been assured coal supply.
FDI policy was liberalised
The FDI policy was liberalised to attract larger investments in
telecommunication, pharmaceuticals, civil aviation, power trading
exchanges and multi-brand retail.
2 semi-conductor units approved
Approval was granted to establish two semi-conductor wafer fabrication
units, which will be the bedrock of the electronics hardware industry.
DoP IT upgrade to be ready in 2015
The IT modernisation project of the Department of Posts, with an outlay
of '4,909 crore, will be operational by 2015 in all 155,000 locations.
Seven new nuclear reactors by end of Twelfth Plan
Seven nuclear power reactors are under construction, with the aim of
achieving an installed capacity of 10,080 Mw by the end of the Twelfth
Plan. The Kudankulam Nuclear Power Plant Unit I achieved criticality and
is generating 180 million units of power. The 500 Mw prototype fast
breeder reactor at Kalpakkam is nearing completion.
Thrust on solar power
Four ultra mega solar power projects each with a capacity of over 500 MW
are proposed to be taken up in 2014-15.After exceeding the target and
achieving 1,684 Mw of grid-connected solar power, the National Solar
Mission entered the second phase on April 1, 2013.
New fund to support grassroots innovations
The Ministry of micro, small and medium enterprises (MSME) will create
the ‘India Inclusive Innovation Fund’ to promote grassroots innovations
with social returns to support enterprises in the MSME sector. An
initial contribution of Rs100 crore has been made to the corpus of the
Fund.
Boost for SC entrepreneurship
In order to promote entrepreneurship among the scheduled castes and to
provide concessional finance to them, IFCI will set up a Venture Capital
Fund for Scheduled Castes, with initial capital of Rs 200 crore.
Push for agro forestry
The government has approved the National Agro-Forestry Policy 2014,
which has multiple objectives, including employment, productivity,
conservation and adaptation. A mechanism for marketing minor forest
produce has been introduced, with a budget allocation of Rs 444.59
crore, to continue the scheme in 2014-15.
Scheme to encourage community radio stations
A new plan scheme with an allocation of Rs 100 crore has been approved to promote community radio stations.
Mars Orbiter Mission launched.
India joined a handful of countries when it launched the Mars Orbiter
Mission. India now has capabilities in launch vehicle technology,
cryogenics, and navigation, meteorological and communication satellites,
and is largely self-reliant. Several flight tests, navigational
satellites and space missions are planned for 2014-15.
Money for Nirbhaya Fund
In order to make it clear that the Nirbhaya Fund is a permanent one,
government proposes to declare the grant of Rs 1000 crore as
non-lapsable. And in order to support more proposals, it will contribute
to the Fund another sum of Rs 1000 crore next year. So far, the
government has approved two proposals that will receive support from the
Fund.
More money for skill development programme
Rs 1000 crore allocated to the National Skill Monetary Reward Scheme
will be transferred to the NSD Trust and another sum of Rs 1,000 crore
will be given next year to enable the Trust to scale up the programme of
NSDC rapidly. The National Skill Certification and Monetary Reward
Scheme was launched in August 2013. At last count, 204 job roles had
been finalised, 168,043 youth had enrolled and 77,710 have completed
their training.
Taking care of gender and child budget
Rs 48,638 crore has been proposed to be allocated to the scheduled caste
sub-plan and Rs 30,726 crore to the tribal sub-plan. The gender budget
has Rs 97,533 crore and the child budget has Rs 81,024 crore.
‘One rank, one pension’ in the defence services
The government has accepted the principle of ‘one rank, one pension’ for
the defence forces. This decision will be implemented prospectively
from 2014-15. The requirement for 2014-15 is estimated at Rs 500 crore
and the government will transfer a sum of Rs 500 crore to the Defence
Pension Account in the current financial year itself.
Funds for the central armed police forces
A modernisation plan at a cost of Rs 11,009 crore has been approved to
strengthen the capacity of the Central Armed Police Forces and to
provide them state-of-the-art equipment and technology. Funds have been
provided in the current financial year and for next year.
Credit expansion for minority communities
The number of bank accounts held by the minorities, in 121 districts of
India where there is a concentration of minorities, increased from
14,15,000 ten years ago to 43,52,000 at the end of March 2013, and the
volume of lending jumped from Rs 4,000 crore to Rs 66,500 crore. Loans
to minority communities in the whole country stood at Rs 211,451 crore
at the end of December 2013. The number of women’s Self-Help Groups
provided credit by banks increased from 971,182 ten years ago, to
4,116,000 at the end of December 2013.
Bonanza for students with loans
A moratorium period has been proposed for for all education loans taken
up to March 31, 2009 and outstanding on December 31, 2013. The
government will take over the liability for outstanding interest as on
December 31, 2013, but the borrower will have to pay interest for the
period after January 1, 2014. It is estimated that nearly nine lakh
student-borrowers will benefit to the tune of approximately Rs 2,600
crore.
Public Debt Management Agency on the anvil
Following the announcement in the Budget speech of 2011-12, the
government is ready with the Public Debt Management Agency Bill.
Following precedent, it is proposed to establish a non-statutory PDMA
that can begin work in 2014-15.
Funding scientific research
The government proposes to set up a Research Funding Organisation that
will fund research projects selected through a competitive process.
Contributions to the organisation will be eligible for tax benefits.
This will require legislative changes which will need to be introduced
at the time of the regular Budget. Currently the Income-tax Act allows
deductions for expenditure on scientific research, but it is limited to
direct funding.
Action on tax evasion on off-shore accounts
The Government has succeeded in obtaining information in 67 cases of tax
evasion on off-shore accounts, and action is underway to determine the
tax liability as well as impose penalty. Prosecutions for wilful tax
evasion have been launched in 17 other cases. More enquiries have been
initiated into accounts reportedly held by Indian entities in no-tax or
low-tax jurisdictions.
Cord blood banks exempt from service tax
The government proposes to exempt loading, unloading, packing, storage
and warehousing of rice from service tax. A ministry of health and
family welfare request that services provided by cord blood banks are
also healthcare services and should be exempt from service tax has been
accepted.
SOURCE:http://www.business-standard.com/article/interim-budget-2014/the-nuts-and-bolts-of-interim-budget-114021701076_1.html