Current Economic Situation and Challenges
The world economy has been witnessing a sliding trend in growth, from 3.9 percent in 2011 to 3.1 percent in 2012 and 3 percent in 2013.
The economic situation of major trading partners of India, who are also the major source of our foreign capital inflows, continues to be under stress. United States has just recovered from long recession, Euro zone, as a whole, is reporting a growth of 0.2 per cent, and China’s growth has also slowed down.
State of Economy
- The fiscal deficit for 2013-14 contained at 4.6 percent .
- Foreign exchange reserve to grow by US$ 15 billion in this financial year.
- Fiscal stability at the top of agenda.
- WPI inflation down to 5.05 percent and core inflation down to 3.0 percent in January 2014.
Key Highlights
- Growth in the third and fourth quarter of the current year is expected to be 5.2 percent and that for the whole year has been estimated at 4.9 percent.
- Agricultural GDP growth for the current year estimated at 4.6 percent compared to 4.0 percent in the last four years.
- Government set up a Cabinet Committee on investment and the Project Monitoring Group to boost investment.
- The estimated merchandise export is estimated to indicate a growth rate of 6.3 percent in comparison to the previous year.
- 8 National Investment and Manufacturing Zones (NIMZ) along Delhi Mumbai Industrial Corridor (DMIC) have been announced. 9 Projects had been approved by the DMIC trust.
- 3 more Industrial Corridors connecting Chennai and Bengaluru, Bengaluru and Mumbai & Amritsar and Kolkata are under different stages of preparatory works.
- Notification of a public procurement policy, establishing technology and common facility centres, and launching the Khadi Mark are steps taken to promote Micro Small and Medium Enterprises.
- 19 Oil and Gas blocks were given out for exploration and 7 new Air ports are under construction.
- Approval of IT modernization project of Department of Post.
Overview of the Interim Budget
- In order to sustain the pace of plan expenditure, it has been kept at the same level in 2014-15 at which, it was budgeted in 2013-14.
- Bhartia Mahila Bank has been established.
- ADR/GDR Scheme revamp
- To create one record for all financial assets of every individual
- It is proposed to set up a Research Funding Orgnaisation that will fund Research Projects selected through a competitive process. Contribution to that organisation will be eligible for tax benefits. The required legislative changes can be introduced at the time of regular Budget.
Changes in Tax Rates
- By virtue of the definition of ‘agricultural produce’ in Finance Act 2012, read with the Negative List, storage or warehousing of paddy was excluded from the levy of service tax. Rice was not. The distinction is held to be artificial. Hence, exemption is given to loading, unloading, packing, storage and warehousing of rice from service tax.
- The services provided by cord blood banks are exempted from Service Tax.
- The Excise Duty on all goods falling under Chapter 84 & 85 of the Schedule to the Central Excise Tariff Act is reduced from 12 percent to 10 percent for the period upto 30.06.2014. The rates can be reviewed at the time of regular Budget.
- To give relief to the Automobile Industry, the excise duty is reduced for the period up to 30.06.2014 as follows:
- Small Cars, Motorcycle, Scooters and Commercial Vehicles- from 12% to 8%
- SUVs - from 30% to 24%
- Large and Mid-segment Cars - from 27/24% to 24/20%
- To encourage domestic production of mobile handsets, the excise duties for all categories of mobile handsets is restructured. The rates will be 6% with CENVAT credit or 1 percent without CENVAT credit.
- To encourage domestic production of soaps and oleo chemicals, the custom duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols is rationalized at 7.5 percent.
Budget Estimate
The current financial year will end on a satisfactory note with the fiscal deficit at 4.6percent (below the red line of 4.8 percent) and the revenue deficit at 3.3 percent.
Fiscal Deficit in 2014-15 estimated to be 4.1 percent which will be below the target set by new Fiscal Consolidation Path and Revenue Deficit is estimated at 3.0 percent.
The estimate of Plan Expenditure is Rs. 555,322 crores . Non Plan expenditure is
estimated at Rs. 12,07,892 crores.
