People watch a display screen on the facade of the the Bombay Stock Exchange (BSE) building in Mumbai on Monday Feb. 17. India’s Finance Minister P. Chidambaram has unveiled a conservative budget for the government’s remaining time in office through May in parliament. (AP Photo)
Chidambaram rejects the argument of policy paralysis
New Delhi, February 17 (AFP): India’s embattled government said on Monday it had lifted tens of millions out of poverty as it trumpeted its record in the last budget before elections it is widely tipped to lose.
Finance Minister P. Chidambaram talked up his government’s achievements over the past decade and announced a package of cuts in indirect taxes in the budget for the next financial year starting April 1. Struggling to be heard above protesting lawmakers, Chidambaram steered clear of a populist spending spree to win over voters, despite the Congress-led government’s almost certain defeat at the polls due by May.
Chidambaram said the fiscal deficit would be contained at 4.6 percent of gross domestic product in the current financial year. “I can confidently assert that the economy is more stable today than what it was two years ago,” Chidambaram told parliament. “The fiscal deficit is declining, the current account deficit has been contained, inflation has moderated, the quarterly growth rate is on the rise, the exchange rate is stable.” “I reject the argument of policy paralysis,” he added.
Chidambaram outlined the budget for the full year even though the new government, to be formed after elections due by May, will draw up its own spending and tax plans. Asia’s third-largest economy is facing the worst slowdown in a decade, with shrinking manufacturing, poor jobs growth and stubbornly high inflation. Opinion polls show Congress headed for defeat at the elections, with voters disenchanted by a string of corruption scandals as well as perceived mismanagement of the economy and policy paralysis.
But Chidambaram said the government had successfully steered India through the global economic slowdown. He listed a string of domestic achievements, including helping the poor and raising food production. “Our greatest achievement is lifting 140 million people out of poverty,” he told lawmakers.
The budget envisages total spending of 17.6 trillion rupees ($284 billion) in the next fiscal year, higher than the 15.9 trillion in the current year. Analysts said the budget was unlikely to stimulate economic growth but the tax changes would create a “feel good factor” and some superficial demand. The minister on Monday forecast growth of 4.9 percent in the current financial year which ends March 31.
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Budget Highlights
No change in income tax rates
Allocation of Rs.115,000 crore for food subsidy
Rs.65,000 crore for fuel subsidies
Defence expenditure enhanced 10 percent to Rs.224,000 crore
Excise on small cars/two-wheelers lowered to 8 percent, on SUVs to 24 percent, on large cars to 20 percent
Excise duty on mobile handsets to be restructured
Plan expenditure in 2014-15 at Rs.555,322 crore; non-plan expenditure at Rs.12,07,892 crore.
Fiscal deficit at 4.6 percent in 2013-14, to be at 4.1 percent in 2014-15
Current account deficit at $45 billion
Growth estimated at 4.9 percent in 2013-14
India’s economy at 11th globally; aiming to be third
100 million jobs to be created in a decade India not unaffected by events in global economy.
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Cars, SUVs, two-wheelers, mobiles, soaps to be cheaper
NEW DELHI, February 17 (PTI): Ahead of the upcoming general election, finance minister P Chidambaram on Monday sought to lighten the burden on the middle class by lowering excise duty on cars, SUVs and two-wheelers and proposed no increase in taxes on other products.
“To give relief to the automobile industry which is registering unprecedented negative growth, I propose to reduce excise duty..,” Chidambaram said while presenting the interim budget for 2014-15. As per his proposal, excise duty on small cars, motorcycles, scooters and commercial vehicles has been cut to 8 per cent from 12 per cent earlier.
Likewise, the sports utility vehicles will attract 24 per cent excise duty, down from 30 per cent earlier, while large cars that used to attract excise of 27 per cent will now be levied only 24 per cent. Moreover, the excise duty on mid-sized cars will be 20 per cent from 24 per cent earlier. While giving sops to the automobile sector, Chidambaram said: “I propose to make appropriate reductions in excise duty on chassis and trailers.”
Mobile phones manufactured in India could also see price moderation with the finance minister announcing a proposal to boost domestic manufacturing. However, a majority of mobile phones sold in India, even by domestic firms like Micromax, Lava and Karbonn, are imported. However, Samsung and Nokia have manufacturing facilities in the country and the excise duty rejig may lower their cost of production.
Another daily use item, soaps that are manufactured in India can also witness a softening of prices. Chidambaram rationalized customs duty structure on non-edible grade industrial oil and its fractions, fatty acids and fatty alcohols at 7.5 per cent. Rice can also be expected to be cheaper with the finance minister exempting service tax on loading, unloading, packing, storage and warehousing of the commodity.
