Finance Minister P Chidambaram managed to keep the ‘twin deficits’ — fiscal and current account — below the target, even as he made televisions, refrigerators, cars and two-wheelers cheaper, and provided relief to students and retired defence personnel.
Chidambaram reduced the excise duty on automobiles and consumer electronics. The changes will come into effect from tonight as they do not require any legislative amendments.
The funds for the sops given to students and retired defence personnel will be provided for in the current financial year ending March 31, as well.
Presenting an interim Budget, Chidambaram also drew a 10-point action plan for the new Government to take the country to the third spot in the global economic rankings, behind the US and China. Despite handing out some sops, Chidambaram followed convention and left the revision in income-tax provisions to the new Government.
Lower deficits Highlighting the Government’s achievements, the Finance Minister said: “The fiscal deficit for 2013-14 will be contained at 4.6 per cent of GDP, well below the red line that I had drawn last year.”
The red line was 4.8 per cent and the Government has managed to keep it under control by cutting Plan expenditure by ₹75,000 crore.
Chidambaram, however, refused to acknowledge this as ‘pruning’ but termed it as ‘savings’.
Last year, Plan expenditure was cut by ₹1-lakh crore to check the deficit at 4.9 per cent against the Budget target of 5.1 per cent.
Similarly, he claimed the current account deficit would be contained at $45 billion against the earlier target of $70 billion; in 2012-13 the CAD had touched an all-time high of $88 billion.
The reduction has largely been possible due to strong curbs on gold imports and an increase in exports.
The Government is expecting to “add about $15 billion to foreign exchange reserves by the end of the financial year”, Chidambaram said.
The two announcements are expected to quell the threat of a downgrade by rating agencies.
Though industrial associations hailed the tone of the interim Budget, the stock market did not seem to be very upbeat as was reflected in the moderate increase in the indices. The BSE Sensex inched up 0.48 per cent to close at 20,464 while the NSE Nifty rose 0.41 per cent to close at 6,073 points.
Auto stimulus Heeding the demand from the sagging automobile sector, and to boost consumer demand, Chidambaram has provided relief in excise duty (levied on the manufactured items at the factory gate) for small cars, motorcycles, scooters, commercial vehicles, sports utility vehicles, and large and mid-segment cars.
This duty cut will be available up to June 30, 2014.
Industry was seeking a duty cut as car sales were down by around 7.5 per cent and commercial vehicles sales had declined by 21 per cent in January.
Considering this is an election year, the Finance Minister did not miss the opportunity to provide some sops.
Populism He has granted relief on education loans for nearly nine lakh students and a ‘one rank, one pension’ scheme for retired defence personnel. Chidambaram has tried to please the youth by removing the ‘sense of discrimination’ among students who had borrowed before March 31, 2009, struggled to pay interest during the period of study, and continued to service loans afterwards.
The Finance Minister expressed confidence that the next two quarters would see at least 5.2 per cent growth, taking overall growth to 4.9 per cent in 2013-14.
Auto, bank stocks lift Sensex 75 points
In conversation with Jaswant Singh after the Interim Budget 2014
Chidambaram's Budget speech [ PDF ]:
Key Features of Interim Budget 2014-2015
High allocation for food subsidy to enable roll out of the Food Security Act. [ Food inflation still remains a worry: Chidambaram ]