New Delhi, Feb 17 (PTI) : In sops to middle-class ahead of the elections and to boost manufacturing, the Interim Budget Monday slashed excise duty on cars and two- wheelers, capital goods and consumer non durables and acceptance of long standing demand of one-rank-one-pension for ex-servicemen.
Presenting the Budget in the Lok Sabha, Indian Finance Minister P Chidambaram did not propose to make changes in the tax laws except to continue the 10 per cent income tax surcharge on ‘super-rich’ individuals and up to 5 per cent on corporates.
“In keeping with the conventions, I do not propose to make any announcements regarding changes to tax laws,” he said in UPA-II’s last budget that sought to provide sops in indirect taxes including reliefs in service tax to storage and warehousing of rice and blood banks.
The revenue sacrifice on account of indirect tax concessions would be Rs 300 to Rs 400 crore in the 40 days remaining in the current fiscal. But a pick up in the demand and sale of products in these sectors would make up for the loss of revenue, he said in his post-Budget press briefing.
On continuance of the tax on ‘super-rich’ and corporates, he said he has left it to the new government to review the impost that was slapped in the last budget.
The concessions will be valid up to June 30 and can be reviewed by the new Government.
In a major relief to ex-servicemen who have been demanding one-rank-one-pension for long, the Minister announced that the government has accepted it in principle for which an allocation of Rs 500 crore has been made.
The concessions aimed at the middle-class and to boost the automobile sector that has been registering a negative growth, include a slashing of excise duty from 12 to 8 per cent on small cars, motor cycles, scooters and commercial vehicles and 6 per cent cut to 24 per cent on SUVs.
Large and middle segment cars will attract an excise duty of 24/20 per cent, reduced from 27/24 per cent. Appropriate reductions will also be made in the excise duty on chassis and trailers.
To stimulate growth in capital goods and consumer non- durables, the Budget proposed to reduce the excise duty from 12 to 10 per cent on all goods falling under Chapter 84 and 85 of the Schedule to the Central Excise Tariff Act.
The other populist measures include continuation of interest subvention scheme for farm loans and a moratorium period for education loans taken before March 31, 2009 to benefit 9 lakh students. The interest moratorium for students will amount to Rs 2,600 crore.
Asked whether the sops were intended to be populist ahead of the elections, Chidambaram said, “My intention was not to please anyone. I wanted to talk to the people directly that we are going through a turbulent phase in the economy.”
Chidambaram said excise duty has been reduced from 12 to 10 per cent on capital goods and consumer non-durables falling under Chapter 84 and 85 of the Schedule to the Central Excise Tariff Act.
Small cars, motorcycles, scooters and commercial vehicles will attract a lower excise duty of 8 per cent from the current 12 per cent, while SUVs will see a 6 per cent reduction in duty from 30 to 24 per cent.
Large and middle segment cars will enjoy an excise duty of 24/20 per cent, down from 27/24 per cent.
Outlining a 10-point vision for the future, the Finance Minister said India must achieve the target of fiscal deficit of 3 per cent of GDP by 2016-17 and remain below that level always.
On Current Account Deficit, he said there is no room for any aversion for it since the country will run a CAD every year for some more years and it can be financed only by foreign investments – FDI, FII or ECBs or any other foreign inflow.
As part of the vision, he said a developing economy must accept that when the aim is high growth, there will be moderate level of inflation.
“RBI must strike a balance between price stability and growth while formulating monetary policy,” he said in his vision formula that included financial sector reforms, infrastructure, manufacturing, subsidies, urbanisation, skill development and sharing responsibilities between states and Centre.
Expressing disappointment over not being able to introduce Goods and Services Tax (GST), he said, “I leave it to you to answer the question who blocked the GST when an agreement on the game-changing tax reform was around the corner?”
He said the DTC, which will serve for the next 20 years, is ready and intents to place in on the website for public discussion.
“I appeal to all political parties to resolve to pass the GST laws and DTC in 2014-15,” he said.
Referring to the GDP growth rate, Chidambaram said the slowdown began in 2011-12 and in nine quarters it had declined from 7.5 per cent in Q1 of 2011-12 to 4.4 per cent in Q1 of 2013-14.
He said thanks to numerous measures taken, he was confident the decline will be arrested and the growth cycle will turn in the second quarter.
“I think I have been vindicated. Growth in Q2 of 2013-14 has been placed at 4.8 per cent and growth for the whole year has been estimated at 4.9 per cent. This means that growth in Q3 and Q4 of 2013-14 will be at least 5.2 per cent,” he said.
The Finance Minister said the economy is more stable today than what it was two years ago. “The fiscal deficit is declining, the current account deficit has been contained, inflation has been moderated, the quarterly growth rate is on the rise, the exchange rate is stable, exports have increased and hundreds of projects have been unlocked,” he said.
He said the current year will end with a merchandise exports of USD 326 billion, indicating a growth of 6.3 per cent.
The current account deficit that threatened to exceed last year’s CAD of USD 88 billion, will be contained at USD 45 billion, which will be USD 15 billion more than the foreign exchange reserves by the end of financial year.
Last year, WPI headline inflation stood at 7.3 per cent and core inflation at 4.2 per cent. At the end of January 2014, WPI was 5.05 per cent and core inflation at 3 per cent.
“While our efforts have not been in vain, there is still some distance to go. Food inflation is still the main worry, although it has declined sharply from a high of 13.6 per cent to 6.2 per cent,” he said.
Rejecting the argument of policy paralysis, he enumerated the pathbreaking decisions of the government in 2013-14 which included decontrol of sugar, gradual correction of diesel prices, rationalisation of railway fare, starting the process of issue of new bank licenses and restructuring of power distribution companies.
The Cabinet Committee on Investment (CCI) and the Project Monitoring Group were set up. Thanks to the swift decisions taken by them, by the end of January 2014, the way was cleared for completing 296 projects with an estimated project cost of Rs 6,60,000 crore.
On performance, Chidambaram gave examples of fast growth in various sectors in various sectors. India produced 263 million tons of foodgrains now as compared to 213 million tons 10 years ago.
Similar fast growths, the Minister said, have taken place in coal production, power capacity and roads.
Central Government’s expenditure on education has risen to Rs 79,451 crore as compared to Rs 10,145 crore 10 years ago.
Expenditure on health has risen to Rs 36,322 crore from Rs 7248 crore in a decade.
Agriculture sector has shown stellar performance in 2013-14. Foodgrain production is estimated at 263 million tons. Production of sugarcane, cotton, pulses, oilseeds and quality seeds has reached new records.
Agriculture exports are likely to cross USD 45 billion.
Agriculture credit is likely to touch Rs 7,35,000 crore, exceeding the target of Rs 7,00,000 crore. In the current year, agriculture growth is estimated at 4.6 per cent. For 2014-15, the target for agriculture credit has been fixed at Rs 8 lakh crore.
Chidambaram also announced that the interest subvention scheme shall continue in 2014-15. Under this scheme, a subvention of 2 per cent and an incentive of 3 per cent for prompt payment is provided, reducing the effective rate of interest for farm loan to 4 per cent.
Eight National Investment and Manufacturing Zones have been announced and another NIMZ approved in principle.
Infrastructure has grown by valuable addition to national highways, rural roads, railway tracks and port capacity.
Besides, 19 oil and gas blocks were given out for exploration in 2013-14 and 7 new airports are under consideration.
The government has accepted the principle of ‘one-rank- one-pension’ for defence forces for which Rs 500 crore has been allocated. Defence allocation has been enhanced by 10 per cent to Rs 2,24,000 crore.
A moratorium period for education loans taken up to March 31, 2009 has been proposed. It will benefit nearly 9 lakh student borrowers by way of reduced interest burden. Rs 2,600 crore has been allocated for it.
The government will contribute Rs 1000 crore to the Nirbhaya Fund on top of a similar grant provided last year.
The Fund has also been made non-lapsable.
Rs 1,200 crore has been set apart for additional central assistance to North-Eastern states, Himachal Pradesh and Uttarakhand. A venture capital fund for scheduled caste is proposed to be set up with an initial capital of Rs 200 crore.
The restructured Integrated Child Development Scheme, which is implemented in 400 districts, will be rolled out in the remaining districts.
Rs 1000 crore is being proposed for the National Skill Development Corporation in view of its success in providing skills to the youth.
The allocation for Defence for the coming year has been enhanced by 10 per cent from Rs 2,03,672 crore in Budget estimate of 2013-14 to Rs 2,24,000 crore in 2014-15.
Non-plan expenditure estimated at Rs 12,07,892 crore. Of this expenditure on food, fertiliser and fuel subsidy will be Rs 2,46,397 crore, which will be slightly more than the revised estimate of Rs 2,45,452 crore in 2013-14.
Giving Budget estimates, the Minister said the current financial year will end on a satisfactory note with the fiscal deficit at 4.6 per cent, below the red line of 4.8 per cent, and the revenue deficit at 3.3 per cent.
The fiscal deficit for 2014-15 has been pegged at 4.1 per cent, which will be below the target of 4.2 per cent set by the new fiscal consolidation path. Revenue deficit is estimated at 3 per cent.
With the economy reviving, Chidambaram expressed confidence of achieving a 6 per cent GDP growth next fiscal.
Justifying the excise duty reliefs, Chidambaram said, “The current economic situation demands some interventions that cannot wait for the regular Budget. In particular, the manufacturing sector needs an immediate boost.”
To encourage domestic production of mobile handsets, he restructured the excise duty for all categories fixing it at 6 per cent with CENVAT credit or 1 per cent without CENVAT credit.
Customs duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols has been pegged at 7.5 per cent to encourage to domestic production of soaps and oleo chemicals.