Indian Economy, 5th edition (140 page)

•
Five fellowships in national universities to be instituted to motivate students to study and undertake research on IR related issues at M.Phil and Ph.D. levels

•
Setting up of a chair at TERI promoting railway related research to reduce
carbon footprint

Sports

•
Railway Teams won 9 National Championships in 2012

•
Railway Sports Promotion Board awarded the ‘Rashtriya Khel Protsahan Puraskar – 2012’
Concessions

•
Complimentary card passes to recipients of Rajiv Gandhi Khel Ratna & Dhyan Chand Awards to be valid for travel by 1st Class/2nd AC

•
Complimentary card passes to Olympic Medalists and Dronacharya Awardees for travel in Rajdhani/Shatabadi Trains

•
Travel by Duronto Trains permitted on all card passes issued to sportpersons having facility of travel by Rajdhani/Shatabadi Trains

•
Facility of complimentary card passes valid in 1st class/2nd AC extended to parents of posthumous unmarried awardees of Mahavir Chakra, Vir Chakra, Kirti Chakra, Shaurya Chakra, President’s Police Medal for Gallantry and Police Medal for Gallantry

•
Police Gallantry awardees to be granted one complimentary pass every year for travel along with one companion in 2nd AC in Rajdhani/Shatabadi Trains

•
Passes for freedom fighters to be renewed once in three years

Trains

•
67 new Express trains to be introduced

•
26 new passenger services, 8 DEMU services and 5 MEMU services to be introduced

•
Run of 57 trains to be extended

•
Frequency of 24 trains to be increased

Metropolitan Projects/Sub-urban Services

•
Introduction of first AC EMU rake on Mumbai suburban network in 2013-14

•
Introduction of 72 additional services in Mumbai and 18 in Kolkata

•
Rake length increased from 9 cars to 12 cars for 80 services in Kolkata and 30 services in Chennai

Tariff Proposals

•
Proposal for setting up of
RTRA
(Railway Tariff Regulatory Authority) formulated and at inter-ministerial consultation stage

•
Fuel Adjustment Component (FAC) linked revision for freight tariff to be implemented from 1st April 2013

•
Supplementary charges for super fast trains, reservation fee, clerkage charge, cancellation charge and tatkal charge marginally increased

•
Enhanced reservation fee abolished

COMMENTS & REACTIONS

Terming India’s 2013-14 Budget as fundamentally sound, the Washington based
USIBC
(United States India Business Council) lauded the government’s plan to accelerate public sector divestment, a move that will stimulate greater efficiencies and productivity. “The government of India recognises that a growth rate of 5 per cent will not run its economic engine fast enough to create the jobs necessary to put India’s young population to work,” the USIBC President Ron Somers said. “This government well remembers the under-employment so rampant at that time, and in this 2013 budget, the Finance Minister has taken some corrective steps necessary to revitalise investor enthusiasm, spur growth, and tame government spending,” Somers said, reflecting the views of the US corporate sector on the annual Budget.

USIBC reiterated its demand for increased liberalisation in the insurance, pension, defence, and retail sectors. These actions will attract capital and technology to India. Rather than the government resorting to out-dated “command-control” policies or mandates to require companies to manufacture locally, USIBC continues to press for market-based incentives for India to realise manufacturing goals, the statement said.

USIBC also said it is committed to support India in its USD 1 trillion dollar build-out of infrastructure, which will generate jobs and opportunities for both Indian and American companies. To mobilise the funds necessary for India to meet these mammoth targets, USIBC applauded India’s important expansion of the capital markets, including increased debt limits for infra tax-free bonds and allowance of FIIs for the first time to trade in foreign exchange.

The Economist
remarked – “It was hailed as India’s most important budget for at least a decade. The optimists hoped that it might show the Indian economic miracle was back on track. Pessimists feared it would show a country descending into wild populism ahead of a general election due by mid-2014. Being asleep on the job is what Mr Singh’s government is accused of over the last half decade and the economic statistics are certainly poor. GDP figures for the last quarter of calendar year 2012, released on the same day as the budget, show growth has slipped to 4.5%, a rate that would have been unimaginably low a couple of years ago. Inflation remains a problem. Indian firms are reluctant to invest. The current account deficit is worryingly large, meaning India is dependent on volatile capital flows. Although India’s stock market soared in the last few months of 2012 and in early January, it has been jittery in the last few weeks. In just over a year,
perhaps less
, a new government, and perhaps a new finance minister will be in place. And for all Mr Chidambaram’s efforts, the commitment to economic reform among the political class may be skin deep. As he spoke in the chamber, most spending rises were cheered and met with a thumping of desks, not least by Sonia Gandhi, the dynast who heads the ruling congress party. Mr Chidambaram’s pledges on improving the investment climate and attracting manufacturing investment, however, were met with icy silence.”

The
Reserve Bank of India
reacted optimistically and appreciated the Government’s attempts at checking the expanding fiscal deficit, which is supposed to give RBI a little bit space to go for a rate cut and ease the hardened interest rate regime. Showing confidence RBI announced a 25 basis point cut in the Repo Rate (to 7.50 per cent) by the mis-March, 2013. But the Central Banking body was not sure whether there will be any further such cut possible in future due to projected inflationary pressure.

Industry
and
trade
had a mixed reactions on the Budget though by and large there prevails an atmosphere of optimism among them. Most of the political parties sitting in the opposition viewed the Budget as an election budget.

BUDGET HIGHLIGHTS

•
The Union Budget for 2013-14 aims at higher growth rate leading to inclusive and sustainable development as ‘mool mantra’.

•
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
IDF
(Infrastructure Debt Fund) and allow some institutions to raise tax free bonds upto Rs. 50,000 crore which is 100 percent more than the current year.

•
IIFC
(India Infrastructure Finance Corporation), 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.

•
TUFS
(Technology Upgradation Fund Scheme ) for textile to continue in 12th Plan with an investment target of Rs. 1,51,000 crore.

•
For
Basel III
norms compliance, 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.

•
V
CES
(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.

SUMMARY OF THE BUDGET

The Union Budget for 2013-14 aims at
‘higher growth leading to inclusive and sustainable development.’
With this as
mool mantra
, the Finance Minister Shri 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 per cent of GDP.

Fiscal deficit for the current year contained at 5.2 per cent and for the year 2013-14 at 4.8 per cent. Revenue deficit for the current year at 3.9 per cent and for the year 2013-14 at 3.3 per cent. By 2016-17 fiscal deficit to be brought down to 3 per cent, revenue deficit to 1.5 per cent and
ERD
1
(Effective Revenue Deficit) to zero per cent.

The Finance Minister expressed the hope that 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
CAD
2
(current account deficit) 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. The Minister further said that he had no choice but to rationalise 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.”

Three Promises: To Women, Youth And The Poor

Shri 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 organisations. The Budget announced the setting up of a fund -
Nirbhaya Fund
– with the Government contributing Rs. 1000 crore.

The Budget 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
DBT
(Direct Benefit Transfer) schemes will be rolled out throughout the country during the term of the UPA Government. “We are redoubling out efforts to ensure that the digitised 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.

Rural Development, Agriculture And Food Security

The allocation for
Rural Development
Ministry has been raised by 46 percent to Rs 80,194 crore in 2013-14. Pradhan 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. 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. 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 Organisations (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 percent 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.