UNION BUDGET 2013-14 -AN ANALYSIS

Manuel M.MathewIII DC Economics

ST.Thomas College Pala.

BACKDROP OF THE BUDGET

SLOWING GLOBAL ECONOMY INCREASING FISCAL DEFICIT & CAD DARK SHADOW OF INFLATION TIGHTENING MONETARY POLICY QUEST FOR SUSTAINABLE AND INCLUSIVE DEVELOPMENT IMPENDING GENERAL ELECTION

FOCUS AREAS

Additional Resource Mobilization Expenditure Compression Measures to Promote Socio-economic

Growth Relief and Welfare Measures Widening of Tax Base and Anti Tax

Avoidance Measures Rationalization Measures Fiscal Consolidation

FISCAL DEFICIT

STABILITY IN THE MACRO ECONOMIC POLICIES

ENHANCING THE CREDIBILITY OF THE ECONOMY

CURRENT ACCOUNT DEFICIT

CONTINUES TO BE HIGH……… Excessive dependence on oil Coal and gold imports Slowdown in exports MEASURES TO CONTAIN CAD…….. FII FDI ECB

TWO SURPRISING ELEMENTS…….1. Proposed borrowing is mild.

2. Increase in Expenditure.

THUMPS UP……

Fuel subsidy comes down to the third priority

THREE PROMISES…… TO WOMEN- NIRBHAYA, Women’s Bank YOUTH –Skill Development Mission

THE POOR-Direct Benefit Transfer(DBT)

MAJOR EMPHASIS ON…….

RURAL DEVELOPMENT

AGRICULTURE

FOOD SECURITY

TAX PROPOSALS

Particulars Existing Proposed

Individual /HUF/ Firm/ Co-op Soc./ Local Auth.

NA 10% If TI > 1 Cr.

Domestic Company 5% 10% If TI > 10 Cr 5% If TI > 1Cr

Other than Domestic Co. 2% 5% If TI > 10 Cr 2% If TI > 1Cr

Non-Resident Person NA 10% if TI > 1Cr

SUR CHRGE IN INCOME TAX

Rebate of Rs. 2000 for individuals having total income up to Rs 5 lakh

SOME APPREHENTIONS….. Is food security allocation adequate??

Is Disinvestment target of 55814 achievable??

Foreign funded Infrastructural Development

Neglected Higher Education

KEY RISKS TO INDIA'S MACRO STORY US policy: sequestration Euro-zone issues • Realization of Fiscal Union • support of the ECB Global oil prices • the correlation with Current Account Deficit (CAD) remains high.• Geo-political tensions can push oil prices higher.

Domestic issues • Politics outweighs economics; General elections in 2014 can create uncertainty • Reform progress to address India’s triple deficits (Fiscal, current account, governance) • Key constraints for infrastructure build-out: land, coal and declining domestic financial savings rate • Rising CAD and high gold imports weighing on external finances

WHAT THE BUDGET MISS……

An amnesty scheme allowing disclosure of illegal money…..of course with a penalty…..

Scope of injecting Rs.75000 crores into the economy and to survive fiscally.

EXPERIENCE OF 1996

TO SUM UP….. FINANCIAL DISCIPLINE FORWARD LOOKING REASONABLE AND REALISTIC