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Union Budget 2013-14: FM’s Math worked; will the Economy follow suit?
As promised, the Finance Minister has confined the fiscal deficit to 5.2 per cent in FY13 and as expected, this arithmetic achievement is in line with his topmost agenda of averting a country rating downgrade. This transient appeasement of rating agencies, however, is the result of substantial Plan expenditure cuts across ministries in the last few months, a by-product of which is slower GDP growth in H2 FY13. No wonder, the Q3 FY13 GDP growth figure just released stands at a dismal 4.5%. While many of our expectations were met (read our pre-Budget note), one can’t help feel that the Budget has missed out on several counts. For one, it failed to address the problem of the Current Account Deficit, which admittedly was a bigger worry for the FM compared to fiscal deficit. Secondly, the FM’s steps to encourage financial savings left a lot to be desired. In times of falling savings rate, the need was a substantial increase to Section 80C. This would have also made gold relatively unattractive. Instead, he’s only offered an additional interest deduction up to Rs1 lac for those first-time home loan takers up to Rs25 lacs, besides Rs2,000 tax credit to income brackets up to Rs5 lacs. Not much was done for equity investments either. Rather than simplifying the Rajiv Gandhi Equity Savings Scheme (RGESS) for the debutante retail investor community, he’s merely increased the investment amount and time under the said scheme. Sure, Securities Transaction Tax was reduced but was accompanied by introduction of Commodity Transaction Tax.
Further, the FM’s blind eye to expenditure cuts has justifiably not gone well with the market. The FM projects total expenditure to rise by 16.4% yoy in FY14 (compared to 9.7% in FY13) which means he’s banking on higher tax revenues and asset sales to achieve the fiscal deficit of 4.8%. Through this ambitious stance, obviously the result of political pressure from his government ahead of the forthcoming general elections, he’s only risked a slippage in the said fiscal deficit target. A more credible strategy would have been to keep non-Plan expenditure under check. It is also interesting to note that the non-Plan expenditure is most likely to balloon on account of under-reported subsidies. The target of a 10.3% yoy fall in subsidies looks far-fetched in a pre-election year. The assumed drop in petroleum subsidy depends on wishful eventualities – crude oil price levels remain unchanged, INR doesn’t depreciate and gradual diesel prices deregulation continues. Despite the imminent implementation of the food security bill, the government has budgeted for a mere Rs100bn increase in food subsidy. Furthermore, rise in diesel will inflate food costs, procurement will be higher in the election year and minimum support prices can go up as well. Assumption on flat fertiliser subsidy also looks unrealistic and prone to slippage especially in the event of good monsoons...Read More
Highlights of the Union Budget 2013-14
Finance Minister P Chidambaram is presenting the Union Budget 2013-14 in the Lok Sabha.
Chidambaram's budget speech
I rise to present the Budget for the year 2013-14.
I recall my last tenure as Finance Minister and acknowledge with gratitude the splendid support that I received from all sections of the House as well as the people of India. Today, more than ever, I seek the same support as we navigate the Indian economy through a crisis that has enveloped the whole world and spared none.
I intend to keep my speech simple, straight forward and reasonably short.
I. THE ECONOMY AND THE CHALLENGES
I shall begin by setting the context. Global economic growth slowed from 3.9 percent in 2011 to 3.2 percent in 2012. India is part of the global economy: our exports and imports amount to 43 percent of GDP and two-way external sector transactions have risen to 108 percent of GDP. We are not unaffected by what happens in the rest of the world and our economy too has slowed after 2010-11. In the current year, the CSO has estimated growth at 5 percent while the RBI has estimated growth at 5.5 percent. Whatever may be the final estimate, it will be below India’s potential growth rate of 8 percent. Getting back to that growth rate is the challenge that faces the country.
Let me say, however, there is no reason for gloom or pessimism. Even now, of the large countries of the world, only China and Indonesia are growing faster than India in 2012-13. And in 2013-14, if we grow at the rate projected by many forecasters, only China will grow faster than India. Between 2004 and 2008, and again in 2009-10 and 2010-11, the growth rate was over 8 percent and, in fact, crossed 9 percent in four of those six years. The average for the 11th Plan period, entirely under the UPA Government, was 8 percent, the highest ever in any Plan period. Achieving high growth, therefore, is not a novelty or beyond our capacity. We have done it before and we can do it again.
I acknowledge that the Indian economy is challenged, but I am absolutely confident that, with your cooperation, we will get out of the trough and get on to the high growth path. I shall now outline our plans and priorities.
Our goal is ‘higher growth leading to inclusive and sustainable development’. That is the mool mantra...Read Entire Speech
Union Budget: What’s in for aam janata
Finance Minister P Chidambaram unveiled the Union Budget 2013-14 in Parliament today. While the 1 hour and 45 minute speech highlighting the expenditures and revenues was a massive task, we cut through the business jargon to help you understand in simple terms what the Budget has for you.
Income slabs remain same
Income tax slabs have been left untouched this year in view of the objective of widening tax base and increasing tax compliance. The income tax slabs remain the same as FY12-13. The same tax slab rates for taxpayers this year, implies zero savings as far as the basic payment of income tax is concerned.
The prices of commodities have been rising constantly but there has been no rise in the income tax slab. Real tax payers are the salaried class and the middle class people. An increase in the tax slab would have at least mitigated their hardships and benefitted them.
However, tax relief of Rs. 2,000 tax credit has been given to individuals with income between Rs. 2 lakh to Rs. 5 lakh. About 1.8 crore tax payers are expected to benefit to the value of Rs. 3,600 crore because of this announcement. However, the amount of Rs. 2,000 tax credit is almost negligible considering the very high inflation.
On the other hand, a surcharge of 10% has been imposed on the super-rich with annual incomes of Rs. 1 crore or more per annum. The surcharge will cover individuals, HUFs, firms and all entities with similar tax status and would be valid for FY13-14 only. Surcharge of 10% on super-rich is not going to affect large numbers as only 42,800 persons in the whole country admitted to a taxable income of exceeding Rs. 1 crore per year. However, it will add substantial amount to the government revenues.
Education Cess & Tax free bonds
Education cess for all tax payers would continue at 3%. But tax-free infrastructure bonds of Rs. 50,000 crore would be allowed to be disbursed in 2013-14.
Tax-free bonds are secured, redeemable, non-convertible debentures issued by government entities to individuals and institutional investors to mobilize funds needed for projects in the infrastructure development sector. The Budget announced the intention to introduce inflation-indexed bonds or certificates. The details of these financial instruments will be announced later...Read More
FY13 Q3 GDP grows at decade low of 4.5%
The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation has released the estimates of Gross Domestic Product (GDP) for the third quarter (October-December) Q3 of 2012-13, both at constant (2004-05) and current prices, alongwith the corresponding quarterly estimates of Expenditure components of the GDP. The details of the estimates are presented below.
ESTIMATES OF GDP BY ECONOMIC ACTIVITY
At constant (2004-05) prices
Quarterly GDP at factor cost at constant (2004-05) prices for Q3 of 2012-13 is estimated at Rs. 14,11,594 crore, as against Rs. 13,51,252 crore in Q3 of 2011-12, showing a growth rate of 4.5 per cent over the corresponding quarter of previous year. Quarterly estimates and growth rates of 2011-12 have undergone revision on account of revision in annual estimates of 2010-11 and 2011-12. The revision in annual estimate of 2010-11 is mainly on account of using ASI data for 2010-11 and the new series of IIP for 2011-12 in the manufacturing sector. These changes have also resulted in changes in estimates of ‘trade, hotels and restaurants’ sector. The economic activities which registered significant growth in Q3 of 2012-13 over Q3 of 2011-12 are, ‘financing, insurance, real estate and business services’ at 7.9 per cent, ‘construction’ at 5.8 percent, ‘community, social & personal services’ at 5.4 per cent, ‘trade, hotels, transport and communication’ at 5.1 per cent and ‘electricity, gas & water supply’ at 4.5 per cent. The growth rate in ‘agriculture, forestry & fishing’, ‘mining and quarrying’ and ‘manufacturing’ is estimated at 1.1 per cent, (-) 1.4 per cent and 2.5 per cent, respectively in this period...Read More
Union Budget 2013-14 is a balanced one with no major surprises: Max Life Insurance
Given the current fiscal and economic constraints the Finance Minister was facing this Union Budget 2013-14 is a balanced one with no major surprises. The fiscal deficit of 5.2% of GDP in the current financial year is in line with his promise and market expectations. The Finance Minister has also announced his intent to further reduce fiscal deficit to 4.8% by Financial Year 2014 which indicates the government’s commitment towards greater fiscal discipline. With respect to financial inclusion and increasing insurance penetration the Union Budget has disappointed the life insurance industry with no measures taken to incentivise long-term savings and protection. The budget has not provided a separate limit for tax exemption for life insurance and pension or increased the exemption limits under section 80C. Life Insurance plays a critical role in providing long-term funds for infrastructure development by channelising domestic savings and could have helped in funding Rs.1 trillion planned to be invested in infrastructure during the 12th 5 year plan. However, the Finance Minister''s assurance that Insurance Amendment, and PFRDA Bills will be presented in this session, and the proposal to set up Standing Council of experts for reforms in Financial sector to compete internationally, shows his commitment towards the financial services sector. The budget proposal to allow Insurance and Pension companies to directly trade in debt segment is a welcome move. This will allow institutional participation in the exchange traded bond market...Read More
Budget has balanced near term priorities and long term growth drivers: ICICI Bank
The budget has balanced near term priorities and long term growth drivers. The progress in fiscal consolidation is indeed welcome. At the same time, the budget has articulated various measures to facilitate and boost investment in the country, such as the investment allowance deduction and ensuring fuel supply for thermal power plants. Measures for further expanding and deepening financial markets and facilitating foreign participation have also been announced. The budget is one part of overall economic policymaking and the budget presented today is a certainly a step forward in the series of initiatives announced by the government in recent months...Read More
Budget 2013 is about stability, positivity: HCL Infosystems
"Budget 2013 is about stability, positivity and I believe is a better budget then last year. This budget has stressed on some vital areas such as youth, education and skill development. Infusion of funds in the education sector without change in education cess, certainly is a step towards the nation's development. Furthermore, employment and productivity were well addressed too, as government plans to promote youth skill development for jobs; exemption of service tax will continue to encourage human development. There was not much spotlight on IT and technology as such but, it’s good to see the serious intent of the government to pass a GST law. Moreover, the government’s move to modernise and develop infrastructure will be much appreciated by the industry. "
Click here to read all......Budget Reactions 2013-14
Indian economy likely to grow between 6.1% to 6.7%: Economic Survey
Indian economy is likely to grow between 6.1% to 6.7% in 2013-14 as the downturn is more or less over and the economy is looking up. Following the slowdown induced by the global financial crisis in 2008-09, the Indian economy responded strongly to fiscal and monetary stimulus and achieved a growth rate of 8.6 per cent and 9.3 per cent respectively in 2009-10 and 2010-11, but due to a combination of both external and domestic factors, the economy decelerated growing at 6.2% and an estimated 5% in 2011-12 and 2012-13 respectively. The Economic Survey 2012-13, presented by the Finance Minister P. Chidambaram in the Lok Sabha predicts that the global economy is also likely to recover in 2013 and various government measures will help in improving the Indian economy’s outlook for 2013-14. While India’s recent slowdown is partly rooted in external causes, domestic causes are also important.
The slowdown in the rate of growth of services in 2011-12 at 8.2%, and particularly in 2012-13 to 6.6 percent from the double-digit growth of the previous six years, contributed significantly to slowdown in the overall growth of the economy, while some slowdown could also be attributed to the lower growth in agriculture and industrial activities. But despite the slowdown, the services sector has shown more resilience to worsening external conditions than agriculture and industry. For improved agricultural growth, the survey underlines the need for stable and consistent policies where markets play an appropriate role, private investment in infrastructure is stepped up, food price, food stock management and food distribution improves, and a predictable trade policy is adopted for agriculture. FDI in retail allowed by the government can pave the way for investment in new technology and marketing of agricultural produce in India. Fast agricultural growth remains vital for jobs, incomes and food security.
The survey points out that the priority for the Government will be to fight high inflation by reducing the fiscal impetus to demand as well as by focusing on incentivizing food production through measures other than price supports. But unlike the previous year, when food inflation was mainly driven by higher protein food prices, this year the pressure has been coming mainly from cereals. On the Balance of Payments and External Position, the survey highlights that with net exports declining, India’s balance of payments has come under pressure. Moreover, in the current fiscal, foreign exchange reserves have fluctuated between US$ 286 billion and US$ 295.6 billion, while the rupee remained volatile in the range of Rs 53.02 to Rs 54.78 per US dollar during October 2012 to January 2013...Read More
Railway Budget 2013-14…Read Pawan Kumar Bansal’s full speech
Speech of Pawan Kumar Bansal introducing the Railway Budget, 2013-14 26th February 2013
Madam Speaker, I rise to present before this august House the Revised Estimates for 2012-13 and a statement of estimated receipts and expenditure for 2013-14. I do so with mixed feelings crossing my mind. While I have a feeling of a colossus today, it is only ephemeral and is instantaneously overtaken by a sense of humility. Democracy gives wings to the wingless, cautioning us all the while, that howsoever high or wide our flight may be, we must remain connected to the ground. For giving me this opportunity, I am grateful to the Hon’ble Prime Minister Dr. Manmohan Singh and the UPA Chairperson, Sonia Gandhi and pay my homage to the sacred memory of Sh. Rajiv Gandhi who introduced me to the portals of this highest Temple of Indian democracy.
Madam Speaker, as I proceed, my thought goes to a particularly severe cold spell during the recent winter, when it was snowing heavily in Kashmir valley, and suspension of road and air services had brought life to a grinding halt. Photographs in Newspapers showing a train covered with snow emerging from a similar white background, carrying passengers travelling over the recently commissioned Qazigund -Baramulla section instilled in me a sense of immense pride.
I recall here the inspirational words of Christine Weatherly:
"When you travel on the railway,
And the line goes up a hill,
Just listen to the engine
As it pulls you with a will.
Though it goes very slowly
It sings this little song
'I think I can, I think I can,'
And so it goes along."
That is the strength of this organization, supported by determination, commitment and dedication to duty demonstrated by each member of the 14 lakh strong Rail Parivar...Read More
Highlights of Railway Budget 2013-14
Railways minister Pawan Kumar Bansal on Tuesday steered clear from hiking passenger fares in his maiden rail budget, hike in tatkal reservation scheme. Bansal presented the rail budget for 2013-14 in the Lok Sabha, informing the House that losses of Indian Railways is mounting. Stressing on financial sustainability of the Indian Railways, Bansal said the loss amounted to Rs. 225 hundred crores. "The growth of Indian Railways is inextricably linked with the growth of the country," Bansal said in his budget speech in the Lok Sabha, the lower house of parliament. "It must remain financially sustainable. Resources generated must be ploughed back." The minister said railways remained the single most important catalyst in India's growth story and was a vital organisation integrating the nation from Baramulla in the north to Kanyamumari in the south. Bansal expressed grief over the loss lives due to the recent stampede at the Allahabad station and said a concrete safety plan would ensure that travel on Indian Railways is hassel free.
Here are the Highlights of the Rail Budget 2013-14:
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