Finance Minister P Chidambaram on Monday took refuge in financial jugglery to present a rosy picture of the economy which otherwise is in tatters. Presenting the UPA II’s last and the most insipid Budget, Chidambaram patted his back by stating that he managed to arrest the fiscal deficit at 4.6 per cent. However, this is not the true picture.
Here are the reasons. Rs 35,000 crore oil subsidy, which should have been paid this year, has been pushed onto the next year. In addition, he added Rs 37,000 crore in non-tax revenues — Rs 18,000 crore from 2G spectrum auction and stripping coal India of whopping Rs 19,000 crore special dividend. Thus showing a total saving of Rs 72,000 crore.
For these measures, the fiscal deficit would have been 5.2 per cent of the GDP. But by taking credit for Rs 72,000 crore, he hoodwinked Parliament into believing that the deficit is 4.6 per cent. Now, he has passed on the next Government a debt burden of Rs 65 lakh crore, up by Rs 30 lakh crore when the UPA II took over in 2009.
The only saving grace for the beleaguered economy was in the agriculture sector which grew by 4.6 per cent. Manufacturing, however, remained very sluggish and stood at a decade low. In order to please the corporate sector, he reduced excise duty across the board. He also reduced excise on cars but left the income tax rates unchanged.
The biggest take away, however, is “one rank one pension” for ex-servicemen. A long pending demand from all political parties was accepted and would cost the exchequer Rs 2,500 crore a year but would also open a Pandora’s box with other Government employees asking for the same sop.
Waxing eloquent about the achievements of the UPA II, the FM left no stone unturned in highlighting UPA’s efforts in creating as many as 100 million jobs in the next 10 years despite a general despondency on the declining investments in the manufacturing sector.
However, even as there was no increase in plan expenditure for 2014-15 which was pegged at Rs 5,55,322 crore, non-plan expenditure has been set at Rs 12,07,892 crore. He set a revenue collection target of Rs 11,67,131 crore and estimated total expenditure at Rs 17,63,214 crore in the financial year starting April 1. Chidambaram expects to mobilise Rs 9,86,417 crore from tax revenue and Rs 1,80,714 crore from non-tax revenue in 2014-15 but seems to be based on a higher economic growth. But given the latest reports of a lack of any major turnaround in the economy to the levels claimed by the UPA II this seems to far fetched.
He has also pegged net borrowings for 2014-15 at Rs 4.57 lakh crore which is substantially lower at Rs 11,580 crore less than the revised estimates of the current fiscal. It may be recalled that in the current fiscal the Government had borrowed Rs 4,68,901.87 crore from the market.
Even as Chidambaram was expecting a pat on his back in this regard, but whether lower government borrowings will have a positive impact on the corporate and boost investors’ sentiments is yet to be seen. Chidambaram has dangled several vote-bank lures wooing the Indian middle class by making cheaper cars, SUVs, bikes, scooters, Indian mobile phones, education loans.
While he did not touch the direct taxes, the ‘super rich tax’ of 10 per cent surcharge on individual income tax over Rs 1 crore as well as on corporate at 5 per cent would continue. On the indirect tax front, the FM has slashed excise duty on small cars, bikes, scooters, commercial vehicles and SUVs have been slashed between 4-6 percentage points. “We will definitely be passing the cuts to the customers,” RC Bhargava, Chairman, MSIl told The Pioneer. India-made mobile phones are also set to be cheaper as excise duty of 6 per cent was announced in the budget.
Interest on education loans taken up to March 31, 2009 and outstanding till December, 31 2013 will now be borne by the Government under the Central Scheme for Interest Subsidy. However, interest component after January 1, 2014 will have to be borne by the borrower himself. For the banking sector, FM has proposed to infuse Rs 11,200 crore in public sector banks to enhance their capital in the next financial year, in order to give a push to the sector.
Markets, however, reacted with a subdued note recovering after an initial slip, following the claims of consolidation on the fiscal front which the FM has claimed to be reduced to 4.6 per cent. He also indicated that the Government would ensure that the Rs 5,600 crore payment crisis at NSEl does not spill over to other regulated segments of the financial market. In this regard he said that the Forward Contracts (Regulation) Act would be amended to strengthen the regulatory framework of the commodity derivatives market.