The Interim Budget 2014-15 presented by Union Finance Minister P. Chidambaram in the Lok Sabha on February 17 has generated less-than-usual interest as the BE numbers for the next year are, obviously, tentative depending on the outcome of the General Elections due in April-May. Even then, to halt the economic sag, ostensibly, the finance minister has announced several changes in excise duty, customs duty and service tax, which has pleased significant sections of industry. With fiscal deficit placed below BE, the minister has managed to end the current year on a better-than-expected note going by RE data, whose accomplishment would probably be at the cost of rollover of some disbursements on subsidies to next year, and marshalling additional receipts from PSUs.

Given the “interim” nature of the budget, we have endeavoured to deal with broad contours of BE number for the next year 2014-15, which should hold good irrespective of the election result. Thus, the interim budget provides for plan expenditure of Rs.555,322 crore (+16.7 per cent) and non-plan expenditure of Rs.12,07,892 crore (+8.4 per cent) for 2014-15, taking the total expenditure to Rs.17,63,214 crore (+10.9 per cent) for the year. The plan budget allocations for the next fiscal include Rs.82,200 crore for Ministry of Rural Development; Rs.67,398 crore for Ministry of Human Resource Development; Rs.33,725 crore for Ministry of Health and Family Welfare; Rs.21,000 crore for Ministry of Women and Child Development and Rs.15,260 crore for Ministry of Drinking Water and Sanitation. Further, an allocation of Rs.48,638 crore has been made for the scheduled caste sub-plan and Rs.30,726 crore for the tribal sub-plan. Gender Budget gets Rs.97,533 crore and child budget Rs.81,024 crore.

Centrally sponsored plan schemes
In a major change in focus on plan budget allocations, the budget support for Central Plan has been cut down to Rs.216,760 crore in 2014-15 (BE), from Rs.304,739 crore in 2012-13 and Rs.356,493 crore in 2013-14 (RE), whereas that for state/UT plans has been hiked to Rs.338,562 crore, from Rs.108,886 crore in 2012-13 and Rs.119,039 crore in 2013-14 (RE).

Centrally sponsored schemes were restructured into 66 programmes for greater synergy from 126 such schemes currently in vogue under 17 flagship programmes. Funds under these programmes will be released as central assistance to state plans.

Accordingly, Rs.34,000 crore is proposed to be given towards state/UT plans for Mahatma Gandhi National Rural Employment Guarantee scheme; Rs.27,635 crore for Sarva Siksha Abhiyan; Rs.13,152 crore for National Programme for Mid-Day meals in schools; and Rs.4,965 crore for Rashtriya Madhyanik Shiksha Abhiyan. Further, for the Integrated Child Development Services a central assistance of Rs.18,691 crore will be provided to state/UT plans; Rs.16,000 crore would be for rural housing; Rs.13,000 crore for Pradhan Mantri Gram Sadak Yojna; Rs.11,000 crore for drinking water supply; Rs.4,260 crore for rural sanitation; Rs.2,200 crore for National Food Security Mission, and Rs.7,060 crore for Jawaharlal Nehru National Urban Renewal Mission.

As a result of this shift in focus from central to state plans, Ministry of Agriculture, Ministry of Health and Family Welfare, Ministry of Human Resource Development, Ministry of Rural Development, Ministry of Water Resources and Ministry of Women and Child Development, among several other ministries, would see routing of much more funds to the state plans, as compared to their spending on central plan schemes.

Total central plan outlay has been put at Rs.464,934 crore, a sharply reduced amount when compared to Rs.614,134 crore) for the current fiscal. Central plan outlay would comprise IEBR of Rs.248,174 crore (Rs.257,642 crore) of PSUs and budget support of Rs.216,760 crore (Rs.356,493 crore).

Budgetary support to railways has been increased from Rs.26,000 crore to Rs.29,000 crore. A modernisation plan at a cost of over Rs.11,000 crore has been made to strengthen the capacity of Central Armed Police Forces. A sum of Rs.11,200 crore has been provided for capital infusion in public sector banks.

The allocation for food subsidy has been raised to Rs.115,000 crore mainly for implementation of the National Food Security Act, from Rs.92,000 crore for 2013-14. Food subsidy seeks to meet the difference between the economic cost of food grains and their sales realisation at the Central Issue Price fixed under the public distribution system (PDS) and other welfare schemes. Total food, fertiliser and fuel subsidy would amount to Rs.246,397 crore (Rs.245,952 crore).

Rollovers: The current year’s budget data includes rollover of Rs.45,000 crore from the fourth quarter of 2012-13, whereas the next year’s budget would bear rollover of Rs.35,000 crore from the fourth quarter of the ongoing fiscal.

BUDGET AT A GLANCE (`CRORE)
 
2012-13
2013-14 (BE)
2012-14 (RE)
2014-15 (BE)
Net Tax Revenue
740,256
884,078
836,026
986,417
Non-tax Revenue
137,357
172,252
193,226
180,714
Recovery of loans
16,267
10,654
10,802
10,527
PSU equity disinvestment
25,890
55,814
25,841
56,925
Borrowings & other liabilities
490,597
542,499
524,539
528,631
Non-Plan Expenditure
996,742
11,09,975
11,14,902
12,07,892
Plan Expenditure
413,625
555,322
475,532
555,322
Budget Support for Central Plan
304,739
419,068
356,493
216,760
Central Assistance to States & Uts
108,886
136,254
119,039
338,562
Total Revenue Expenditure
12,43,509
14,36,169
13,99,540
15,50,054
Total Capital Expenditure
16,6858
229,129
190,894
213,160
Total Expenditure (Plan, No-Plan/Rev, Cap)
14,10,367
16,65,297
15,90,434
17,63,214
Revenue deficit
365,896
379,838
370,288
382,923
Fiscal deficit
490,597
542,499
524,539
528,631
Fiscal deficit/GDP at market prices (%)
4.9
4.8
4.6
4.1

Receipt
As per the budget documents, the government expects to get Rs.986,417 crore from tax revenue, showing 17 per cent increase over 2013-14; whereas at Rs.180,714 crore receipt from non-tax revenue would probably be lower by around 1.4 per cent. PSU equity disinvestment is likely to yield Rs.56,925 crore. The finance minister has assumed 13.4 per cent increase in GDPmp in the next year, against 11.9 per cent in the current year.

Budgeted receipt and expenditure for the next year will leave a fiscal deficit of Rs.528,631 crore (+0.8 per cent), equivalent to 4.1 per cent (4.6 per cent) of GDPmp and revenue deficit of Rs.382,923 crore (+3.4 per cent), 3 per cent (3.3 per cent) of GDPmp), The interim budget has pegged its net market borrowing for 2014-15 at Rs.457,321 crore, Rs.11,580 crore less than the revised estimates of the current fiscal.

Tax proposals
To stimulate growth in the capital goods and consumer durables, excise duty rate has been reduced from 12 per cent to 10 per cent on all goods falling under Chapter 84 and 85 of the schedule to the Central Excise Tariff Act for the period up to June 30, 2014. The chapters broadly include electrical and non-electrical machinery and consumer durables like refrigerators air conditioners etc.

To give relief to the automobile industry which is registering negative growth, excise duty has been brought down for the period up to June 30, 2014:

  • Small cars, motorcycles, scooters and commercial vehicles – from 12 per cent to 8 per cent
  • SUVs – from 30 per cent to 24 per cent
  • Large and mid-segment cars; from 27/24 per cent to 24/20 per cent

Accordingly, appropriate reductions would be effected in the excise duty on chassis and trailers.

Excise duties for all categories of mobile handsets have been restructured to encourage domestic production of mobile handsets and reduce the dependence on imports. The rates will be 6 per cent with CENVAT credit or 1 per cent without CENVAT credit.

Customs duty on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols has been restructured at 7.5 per cent to encourage domestic production of soaps and oleo chemicals.

Exemption from CVD is withdrawn on imported machinery to encourage domestic production of specified road construction machinery.

Concessional customs duty of 5 per cent on capital goods imported by the Bank Note Paper Mill India Pvt. Ltd has been proposed to encourage indigenous production of security paper for printing currency notes.

Loading, unloading, packing, storage and warehousing of rice have been exempted from service tax.

Services provided by Cord Blood Banks have been exempted from service tax.

Central Plan Outlay (` Crore)
 
2013-2014 (RE)
2014-2015 (BE)
Agriculture and Allied Activities
17,557
9,987
Rural Development*
50,646
2,902
Irrigation and Flood Control
464
1,444
Energy
158,287
178,776
Industry and Minerals
36,167
38,604
Transport**
109,029
111,031
Communications
9,333
13,020
Science Technology & Environment
13,575
17,420
General Economic Services
26,878
24,184
Social Services***
164,393
75,109
General Services
7,316
7,799
Total
614,134
464,934
* Includes the provision for rural housing but excludes provision for rural roads.
** Includes the provision for rural roads.
*** Excludes provision for rural housing.

Non-budget initiatives
The government has taken steps to set up the Cabinet Committee on Investment and the Project Monitoring Group to speed up the implementation of projects in the country. As a result, by the end of January 2014, the way was cleared for completing 296 projects with an estimated project cost of Rs.660,000 crore.

A Rs.8 lakh crore target for agriculture credit target has been fixed for the next year. Banks will extend Rs.7.35 lakh crore in agriculture credit, exceeding the target of Rs.7 lakh crore of agriculture credit fixed for the current year. Interest subvention scheme shall continue in the next year. Under this scheme, a subvention of 2 per cent and an incentive for 3 per cent for prompt payment is provided.


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