Indian Economy, 5th edition (141 page)

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.

Other Major Allocations

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.

Health and Family Welfare
has been allocated Rs. 37,330 crore. Of this, the new
NHM
(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.

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.

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.

Women, Children, Minorities
- 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 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 begin work in this regard. Ministry of Minority affairs has been allocated Rs. 3,511 crore and the Department of Disability Affairs, Rs. 110 crore.

Investment And Infrastructure

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 mobilise investment have been announced in the Budget keeping in view that as per 12th Plan 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 upto 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.

The Minister 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. Bottle – necks 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 01.04.2013 to 31.03.2015 will be entitled to deduct an
investment allowance
of 15 percent of the investment (in addition to depreciation).

Industrial Sector

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,
IPDS
(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.

Savings

The Budget proposes three measures to promote household savings. One, the income limit for
RGESS
(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.

Financial Sector

The Budget has 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.

India’s
first women’s bank
is proposed to be set up with Rs. 1,000 crore as initial capital.

The government has finalised 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 taxidrivers, sanitation workers, rag pickers and mine workers. The Budget 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 finalised in consultation with SEBI. These include simplification of procedure and uniform norms for foreign portfolio investors, clarity relating to FDI investment, allowing FIIs to participate in new areas, etc.

Budget Estimates

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. 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. 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.

Taxes

The Budget reiterates that clarity in tax laws, a stable tax regime, a nonadversarial tax administration, a fair mechanism for dispute resolution and independent judiciary for greater assurance is
underlying theme
of tax proposals. It is proposed to set up the
TARC
(Tax Administration Reforms Commission).

As regards
Direct Taxes
, a relief of Rs. 2000 for the Tax Payers in the first bracket of Rs. 2 lakhs to Rs. 5 lakhs have been proposed. A surcharge of 10 percent on persons (other than companies) whose taxable income exceeds Rs.1 crore have been levied. Surcharge has been increased from 5 to 10 percent on domestic companies whose taxable income exceed Rs. 10 crore. In case of foreign companies, surcharge will increase from 2 to 5 percent, if the taxable income exceeds Rs. 10 crore. Additional surcharges to be in force for only one year. Mr. Chidambaram said, education cess to continue at 3 percent.

The Budget has announced the grant of
investment allowance
at the rate of 15 percent to manufacturing companies that invest more than Rs. 100 crore in plant and machinery during the period 01.04.2013 to 31.03.2015. Concessional rate of tax of 15 per cent on dividend received by the Indian companies from its foreign subsidiary proposed to continue for one more year. It is proposed that TDS at the rate of one percent on the value of the transfer of immovable property where the consideration exceeds Rs. 50 lakhs to be levied. Agricultural land to be exempted from TDS.

Modified provisions of
GAAR
will come into effect from 1st April, 2016. It is also proposed to increase the rate of tax on payments by way of royalty and fees for technical services to non-residents from 10 percent to 25 percent.

The Budget proposes to introduce
CTT
(Commodities Transaction Tax) in a limited way. However, agricultural commodities will be exempted. A number of administrative measures such as extension of refund banker system to refund more than Rs. 50,000, technology based processing, extension of e-payment through more banks and expansion of in the scope of annual information returns by Income-tax Department.

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.