The budget analysis document provides a summary of key aspects of the 2013 Indian budget. It highlights that while the budget aimed to address certain sectors, it lacked a clear growth strategy and big reforms. It notes some positive steps like increased farm lending and fiscal deficit targets, but argues more could have been done to boost growth, investment and relieve inflation pressures. The summary critiques the budget for failing to meaningfully tax the rich or benefit the middle class.

1. EXCLUSIVE
Budget Analysis
Budget Analysis
2013
BudgetHighlights
2013
Missing the woods for
HAPPY LOT
Investors
the trees
The hike in income threshold to invest
in Rajiv Gandhi Equity Saving Scheme
(RGESS) is good news for new investors
to the stock market
Salaried Class
Middle Income Group earning upto 5 lakhs
will enjoy Income Tax credit of INR 2000 With probably the worst on SUVs or mobile phones were
possible economic backdrop mysterious considering these
Agriculture in recent years and an were two robust growth sectors
40% larger allocation at Rs 7,00,000 election round the corner, one could – and they affected domestic
crore has been provided for farm loans possibly argue that Chidambaram’s manufacturers and the middle
with interest discounts hands were a bit tied. But that is class too.
why he is Chidambaram, and the • Given the high interest environment
Real Estate
expectations were growth-oriented, if and the fact that banks have
Affordable house for buyers willing
to buy upto 25 lakhs will enjoy not Big Bang. actually been extending tenors of
tax benefits home loans to individuals to keep
Did he deliver? Maybe, when it came EMIs low, what was the harm of
Garments
to micro changes here and there, but extending the Rs 25 lacs limit to all
Apparel prices may be reduced or at least
will not be increased anytime soon, say there was really no big picture, no home loans?
retailers, as the Budget has announced a big impetus or intent towards growth • How could the FM ignore things
zero excise duty on cotton and yarn at the or big relief to citizens reeling under like the medical allowance limit of
garment stage
inflationary pressures. Yes, one can Rs 15,000 per month or the travel
Gems and Precious Stones argue that a lot is left to the Reserve allowance of Rs 800 per month in
Buying gems will become slightly cheaper, Bank of India, but a lot more could such inflationary healthcare and
as the duty on precious and semi-precious have been done to lift the sentiment transport environments? (Not to
stones has been cut from 10 to 2%
– one of the biggest drivers to mention the oil price hike again
Healthcare investments and growth. The oil price after the Budget).
The Ministry of Health and Family Welfare hike that followed could not have been • In short, what did he really take
has been allocated Rs 37,330 crore in the worse timed. away from the rich and what did
proposed Budget
he really give to the middle class,
With GDP dipping below 5% in several or, for that matter, the markets
UNHAPPY LOT quarters, people were looking out for or industry?
the growth signal. They were probably
Automobiles
looking out for some relief too. But Chidambaram says, “the key to start
High end automobiles will cost more
because of revised excise duty/custom then came a series of delicate jokes: the growth engine is to attract more
duty in SUVs, high end vehicles and investment both from domestic
motorcycles • A meagre 10% surcharge on the investors and foreign investors”. Yes,
super rich earning more than Rs understood, but how? This cannot
Cigarettes
Cigarettes, the staple item for duty hikes 1 crore a year was really more happen by throwing numbers or
every Budget, has not been spared this symbolic rather than impactful planning Budgets, it can only happen
time too, with the duty raised by 2% to considering if the government with real policy measures and an
18%
was really serious, they could impetus for growth. Has he missed the
Media have easily introduced another woods for the trees?
New cable connection may also 40% slab.
cost more as duty on imported set- • A paltry Rs 2,000 tax rebate to
top boxes, or STBs, has been raised
those earning up to Rs 5 lacs and
by 5%
more in the current inflationary
High Income Group environment was probably more of
Individuals with annual salary of more an insult than a gift.
than INR 1 crore will have to pay 10
• And what was the message to
percent additional surcharge
those sectors doing well during
the downturn? The higher duties

2. Budget Analysis 2013
Islands of happiness
Despite the lack of a big
picture, Chidambaram has
sent small signals with
respect to different avenues
to invite greater investments in these
areas and depict a healthier India. A
lot, however, will depend on the goals
versus the achievements.
Fiscal deficit
The biggest concern for foreign
investors looking at India apart from
the pace of policy reforms was the
country’s fiscal deficit. With credit
rating agencies closely watching
countries following the European
crisis, India had the task of reigning in
its fiscal deficit to remain an attractive
investment destination. The Budget
proposal to contain the FY’14 fiscal offers the Look East policy to provide Haldia Port to the Farakka Powerplant.
deficit to below 5% of the GDP (target connectivity for the North Eastern
is 4.8% of GDP) against 5.2% of GDP states to Myanmar. This will provide Taxation
in 2012-13 is a very brave and positive an impetus in economic growth of the There have been no major changes in
goal. This will involve a reduction in North Eastern states in view of the Direct or Indirect taxes in the Budget
non-plan expenditure from 12.3% easy accessibility to the mainland. The proposal, however, much awaited tax
to 10.8% while increasing the tax present proposal is to connect North reform measures like the Direct Tax
revenues from 16.7% to 19.1%. Eastern states to Myanmar, which is Code (DTC) and Goods and Service
Chidambaram expects a large portion a part of the grand India – Myanmar Tax (GST) has received an impetus.
of the revenues to come from the – Thailand highway connectivity plan The Finance Minister has proposed to
spectrum auctions (Rs 40,000 crore) for East Asia integration. This will introduce DTC and GST in this fiscal
and disinvestments (Rs 58,000 crore) require assistance of the World Bank itself which will be a major boost to
with a similar amount of Rs 100,000 and the Asian Development Bank industrial growth. In view of the
crore coming from an increase in which may encourage fund flow in the continuous opposition by some of
tax revenues. Infrastructure Sector. the states for introduction of GST,
the Finance Minister has agreed
However, with no major taxation The Budget also proposes the to compensate the affected states
proposed in the Budget, to increase development of two new ports – one in adequately for revised rate of Central
the tax revenue by Rs 100000 crore, Andhra Pradesh and the other in West Sales Tax (CST).
the growth should be in the range of Bengal, with capacity of 100 million ton
6.5% to 7%. Considering this fiscal’s cargo handling per annum. Further, a With regard to Income Tax, there
growth would not exceed 5.5%, it may new outer harbour will be developed has been no change in Tax slabs
be a major challenge to achieve 6.5- in Tamil Nadu. This development will and rates. For taxing the super rich,
7% growth in the next fiscal to earn involve Public-Private-Partnership 10% surcharge has been proposed
the additional tax revenue and thereby (PPP) with an estimated investment for income above Rs 1 crore. For the
reduce the fiscal deficit. of Rs 7,500 crore with an estimated middle class, a token tax relief has
capacity of 42 million tons. been extended in the form of tax credit
Infrastructure of Rs 2,000 for income up to Rs 5 lacs.
Under the current fiscal condition, Five inland waterways have been The FY’14 estimates peg income tax
considering the subdued demand for declared as national waterways. The growth at 16.9% as against 11.2% in
manufacturing goods as reflected by Haldia to Farakka stretch in West FY’13. The Service Tax revenue growth
sluggish growth in IIP data recently, Bengal has been awarded the first has been assumed at 36% of the gross
the next major growth area should be transport contract. This will help in tax revenue as against 13% in the
the Infrastructure Sector. This Budget transportation of imported coal from last fiscal.

3. Budget Analysis 2013
Agriculture textile manufacturing include the
The agricultural community constitutes establishment of textile parks under Key budget figures
a major part of our population. To Scheme for ‘Integrated Textile Parks’
cater to the requirements of this (SITP) which will house apparel FY13 (RE) FY14 (BE)
sector, a 40% larger allocation at Rs manufacturing units. An amount of Budget size 14,308 16,653
7,00,000 crore has been provided for Rs 50 crore has been allocated to the Gross tax-GDP ratio (%) 10.4 10.9
farm loans with interest discounts. Ministry of textiles in order to provide Receipt/expenditure
The growth in the agricultural sector supplementary funding of Rs 10 crore growth (%) 14.3 14.6
is of prime importance considering the for each textile park. Net govt. borrowing
fact that to achieve 9% growth; the (Rs bn) 4,674 4,840
farming sector needs to grow by 4%. Healthcare Fiscal deficit-GDP
Therefore, it may be considered as a India is steadily gaining importance as ratio (%) 5.2 4.8
move in the right direction. a medical tourism hub and is attracting
patients from all over the world for RE-Revised estimates, BE-Budget
Encouraged by the robust production inexpensive and effective treatments. estimates Source: Government of India
in cereal crops in the eastern states, Also, with higher disposable incomes
the Budget proposes a Second and the higher occurrence of lifestyle crore for the 6 AIIMS-like institutions
Green Revolution in these states to diseases the healthcare market in India that have already commenced their
encourage cash crops as alternatives is witnessing tremendous potential. academic session and are expected
to traditional crops like rice, wheat etc . This year, the Budget allocated Rs to initiate operations of the attached
Moreover, two National level institutes 66,165 crore to the Indian healthcare hospitals by 2013-14.
will be established at Chattishgarh space. The Ministry of Health and
and Jharkhand which will serve as Family Welfare has been allocated Education
centers for excellence in agricultural Rs 37,330 crore in the proposed A greater expenditure on education will
bio-technology. Budget; out of which the new National have a positive impact on companies
Health Mission that combines the providing education and IT related
Manufacturing and rural mission and proposed urban services such as Educomp, NIIT,
Construction mission will be allocated Rs 21,239 Aptech etc.
For an economy to be truly developed, crore. Medical education, training and
one of the prerequisites is a robust research have been considered for a The Budget proposes a 7% increase in
manufacturing sector. However, a proposed provision of Rs 4,727 crore. the allocation of Rs 27,258 crore for
sluggish manufacturing sector has The National Programme for Health education under the Right to Education
been weighing on the country’s Care of Elderly is set to be executed in Act and the Sarva Shikshya Abhiyaan
growth, as reflected by recent IIP data. 100 selected districts of 21 states. The (RTE-SSA). It also provides Rs 3,924
To provide a boost to the sector, the government has also shown interest crore for Rashtriya Madhyamik
Union Budget 2013-14 has proposed a to mainstream Ayurveda, Unani, Shikshya Abhiyaan (RMSA). A sum of
number of development measures for Siddha and Homoeopathy through Rs 1,000 crore has been allocated for
the manufacturing industry. National Health Mission for which Rs Nation Skill Development Corporation
1,069 crore is being allotted to the (NSDC) for attracting youth to job
Semiconductor wafer fab plays an Department of AYUSH. The Budget based vocational trainings.
important role in the eco-system of also declared allocation of Rs 1,650
electronics manufacturing. In order
to promote the manufacturing of
electronic goods, incentives will be Non-Plan Expenditure Estimates
provided to semiconductor wafer
fab manufacturing facilities which Non-Plan Expenditure
include zero customs duty for plant Rs Crores 2012-13 RE 2013-14 BE* Growth %
and machinery. A reduction in duty on
Interest Payments and Debt Servicing 319759 360000 13%
specified machinery for manufacture
Defense and service 193407 206000 7%
of leather and leather goods, including
footwear, from 7.5% to 5% has been Fertilizer Subsidy 100974 85000 -16%
announced in the Budget. Food Subsidy 100000 125000 25%
Petroleum Subsidy 72260 40000 -45%
Under the Budget for FY’14, Total Non Plan Expenditure 1063580 1111000 4%
the concession period has been
*Estimated
extended for the manufacturers
of environment friendly vehicles. Sources: MOF
Also, proposed measures to boost

4. Budget Analysis 2013
Key Economic Indicators
Real Estate
The Union Budget has given the
India Economic Data Latest Month Previous Month on Real Estate sector and the home
Month Month
change %
buyers something to look forward to.
Allocation of the rural housing fund
IIP growth % y-o-y -0.10% Nov-12 8.20% -2.22% has been raised to Rs 6,000 crore
Manufacturing % y-o-y 0.30% Nov-12 9.60% -2.14% along with an Urban housing fund of
WPI y-o-y* 7.18% Dec-12 7.24% -0.30% Rs 2,000 crore. First time home buyers
Exports USD billion 0.25 Dec-12 0.22 11.57%
will get an increased interest deduction
of Rs 1 lac for loans up to Rs 25 lacs.
Imports USD billion 0.43 Dec-12 0.42 2.19%
The Budget has introduced TDS at 1%
Trade Balance USD billion -0.18 Dec-12 -0.19 -8.66% on the value of immovable property
Bank deposit growth % y-o-y 11.10% Dec-12 12.80% 0.53% exceeding Rs 50 lacs. These measures
Bank credit growth % y-o-y 15.10% Dec-12 17.00% 1.37% are expected to boost demand for the
*Expected affordable housing segment.
Source: CSO, RBI, Government Automobiles
While the proposed Budget has had
a neutral impact on the Auto sector,
Energy and Utilities to significantly reduce the import manufacturers of sports utility vehicles
Keeping a focus on encouraging of electronics. Furthermore, the (SUVs) and high end automobiles are
alternative energy generation government has focused on the not happy. A negative has been the
methods, the Union Budget has promotion of the manufacturing of set increased excise duty levied on sports
proposed incentives for green energy top boxes in the nation itself. In this utility vehicles (SUVs) to 30% from the
and quite a few tax incentives for the financial year’s Budget, import duty existing 27%, on the grounds of higher
energy sector. The ‘generation based levied on set top boxes have been occupancy of parking and road space.
incentive’ for the wind energy sector has increased from 5% to 10%. Import duty on superbikes and high
been reintroduced with a reservation end cars has also been hiked, and now
of Rs 800 crore. Municipalities are Some of the other proposals from stands at 100% from 75% previously
encouraged to participate in the this year’s Budget include banking for fully built cars and 75% from 60%
Public-Private-Partnership (PPP) norms compliance, ATM expansion, earlier for motorcycles above 800cc.
model and generate power from urban transforming post offices and the
waste. The Government has also textile sector and rolling out Aadhaar Meanwhile, the Jawaharlal Nehru
removed customs duty on electrical enabled payments for several National Urban Renewal Mission
plant and machinery and plans to shift government schemes. (JnNURM) has been provided Rs
to the revenue sharing model from 14,873 crore. Of this amount, a
the profit sharing model in all oil and Media and Entertainment significant portion will be used for the
gas projects. The proposed Budget brings cheer to purchase of 10,000 buses especially
the FM broadcasting sector by adding for the hilly regions.
Telecom, IT and Electronics more cities under the government’s
This year, there were some significant initiative for expansion of the FM Social Sector
Budget announcements in this space. circle. The expansion of FM stations In the Social Sector, the Government
However, the telecom industry in 294 cities in the country has been has proposed some bold steps to
was largely disappointed due to the announced. As a reference to Phase III manage the fiscal deficit. The Budget
absence of any announcement related expansion of FM Radio for which the aims at reduction of subsidies in the
to tax relief. On the contrary, there Information and Broadcasting ministry area of petroleum, food and fertilizers.
will be 6% duty on all mobile phones is already working, the Finance As against the subsidy of 2.6% in the
priced above Rs 2,000 which adding to Minister has announced that 839 new last fiscal, the proposed subsidy for
the burden of the industry as well as FM radio channels will be auctioned. this fiscal stands at 2%. Nonetheless,
the consumers. considering the political scenario in
Last year witnessed full exemption the country, reduction of subsidy as
The Indian Finance Ministry has of service tax on copyright and proposed in the Budget may prove to
proposed some positive initiatives, cinematography, in line with the be a major challenge.
especially in the hardware industry demands. This year, the
manufacturing segment. As proposed FM gave in further to the demands In the area of National Rural
in the Union Budget, the government by exempting sector Service Tax on Employment Guarantee Act (NREGA)
will initiate the promotion of chip copyright on cinematography for the allocation remains unchanged.
manufacturing in India in order movies exhibited at theaters.

5. Budget Analysis 2013
During FY’14, the ministry will focus as a positive approach in this direction,
As against the ruling price in the world
on controlling food inflation and the Budget has proposed some market of around $14 per unit, the
augmenting the supply side to meet major reform measures to encourage current price for Indian producers is
the growing demand for food items. investment in the country in the form pegged at less than $5; this is drying
An amount of Rs 10,000 crore has of Domestic Investment (DI) and up investment in this crucial area both
been allocated as incremental cost for Foreign Direct Investment (FDI). Also, by domestic and foreign investors. The
National Food Security Bill. In order the advent of DTC and GST will have a current Budget proposes to review the
to attract investment and enhance very positive impact on the sentiment gas pricing and oil exploration policy.
productivity of livestock base, the of investors. Once that is done, it is expected to
‘National Livestock Mission’ will be attract more investment in areas like
launched for which an amount of In the past, the General Anti shale gas.
Rs 307 crore has been allocated. In Avoidance Rule (GAAR) has conveyed
addition, a financial support of Rs 5000 a wrong message to the international All in all, the Union Budget for FY’14
crore will be provided to NABARD for investor community. In this Budget, failed to receive a thumbs up from
construction of warehouses, godowns, it has been proposed that GAAR will the industry, especially since the
expectations were much higher from
silos and cold storage units for storage be postponed for implementation
Chidambaram after his big bang
of agricultural produce, both in public to 2016. The Government has also
reform announcements over the past
and private sectors. Moreover, a proposed to differentiate between several months. Experts opine that it
company will receive an investment Foreign Institutional Investment (FII) kept the macro promises such as the
allowance of 15%, if it invests Rs 100 and Foreign Direct Investment (FDI). one on fiscal deficit while some believe
crore or more in plant and machinery Holding stake of 10% or lower by a its outcome will be evident laterin the
during this period. Foreign Investor will be considered as year. No matter which side we take, a
FII and above 10% will be considered Budget is only as good as the last one
Potential for Growth as FDI. till it delivers what it sets out to do.
Although India is the 3rd economy in
Asia, the major challenge that faces In recent times, gas price fixation
the country today is to attain optimum has become a major deterrent for
GDP growth of 6.5% in 2014. However, investment in the Oil and Gas sector.