2. What is a Budget ?
Budget is Estimate of inflows and outflows of the
Government during a year. Budget is presented for the
ensuing Financial year.
Every budget consists of actual figures for preceding year
,budget and revised figures for current year, budget
estimates for following year.
3. Main aspects of budget:
Government Spending
Tax revenue or receipts
Budget deficit
4. Government spending:
• Government purchases : government
expenditures on currently produced goods and
services, Including capital goods.
•Transfer payments: are payments made to
individual for which the government does not
receive current goods or services in exchange.
•Net interest payments: are interested paid to the
holders of government bonds less the interest
received by government.
5. Tax revenue or receipts:
•Personal tax : collected from personal income
tax and property tax .
•Contribution for social insurance: it is
deducted in employee personal income.
•Taxes on production and imports : this are
mainly sales tax
•Cooperate taxes: cooperate profit taxes.
6. Budget deficit :
Deficit =outlays – tax revenues
=(govt.purchases +transfer net interest) –
tax revenue .
Primary deficit = Out lays – net interest-
tax revenue
Current deficit: primary deficit + interest
payments.
7. BUDGET AND IT’S IMPACT ON VARIOUS SECTORS
Automobile Sector
Measures
1. Rs 14883 crores allocated to JNNURM
2. Excise duty on SUV’s hiked from 27% to 30%
3. Tax concession on spare parts of environmental friendly vehicles extended till March,
2015.
Impact
1. A big positive for the heavy commercial vehicle industry
2. Excise duty on SUV, a jolt to the industry as it is the only
segment showing encouraging sales
3. Extension of Tax concession marginally positive for M&M
8. Media & Entertainment
Measures
1. Last year the Budget had accepted full exemption of service tax on copyright on
cinematography. This year, Budget has accepted the industry's request to
exempt service tax on films exhibited in cinema halls
2. Increase in custom duty of imported Set top boxes to 10% from 5%
Impact
1. Long term benefit for production houses
2. Marginal impact on DTH and cable companies that import set-top
boxes
9. Banks & Financial Institutions
Measures
1. Rs 14000 crores for capital infusion in Public sector banks to meet
Basel III requirements
2. Proposed to provide an additional deduction of interest of up to Rs
1 lakh on housing loans of up to Rs 25 lakh for the first time buyers
in addition to the current exemption of Rs 1.5 lakh
3. Rs 6000 crore and Rs 2000 crore to rural and urban housing fund
4. Increase corpus to SIDBI’s India Microfinance Equity by 100 crore
Impact
1. A big positive to Public sector banks as Basel III norms are to be
implemented
2. Increase in demand for house loans
3. Additional corpus will help small and mid-sized Micro lenders,
who find it hard getting loans from banks
10. FMCG Sector
Measure
Rate of tax on payments by way of royalty and fees for technical
services to non-residents or foreign company has been
increased from 10% to 25%
Impact
Will raise tax outgo and consequently impact the bottom-line of
listed MNC FMCG companies
Measure
Excise duty on cigarettes has been increased by 18%
Impact
Limited implications on cigarette companies
11. Cement Industry
Measures
1. Awarding of 3000 km of road projects in first half of FY 2014
2. Boost to housing segment by giving tax deductions and allocating funds
Impact
1. Will help assured off-take of cement by giving importance to
infrastructure and housing
2. Boost to construction activity
3. The much anticipated hike in excise duty of cement was not
announced
Negative side- The railway budget hiked freight-rates by 5.8%
Overall, positive for the cement sector
12. Real Estate
Measure
1. Interest deduction raised to 2.5 lakh for loan up to 25 lakhs
2. Again, increase in rural housing fund to Rs 6000 crore and the
setting up of an urban fund of Rs 2000 crore
Impact
1. Boost demand for houses in Tier II and tier III cities
2. Increases home ownership
3. Projects in Tier II and Tier III cities
Chemical and Agrochemicals
Measure
1. Extension and expansion of a number of agriculture focused schemes
2. Schemes include extension of agricultural credit, interest subvention etc
Impact
A positive for companies such as Rallis India, United Phosphorus
13. Hospitality
Measure
Levy service tax on all air-conditioned restaurants
Impact
Net profit margins have risen to 11.4%(listed restaurants)
The total income of such restaurants have risen by 16.4%
Service tax levied will affect the revenue in the coming
quarters
Textile
Measure
Excise duty on cotton and manmade sector to be done away
with
Impact
Earlier , there was an excise duty of 3.6%. With excise duty
gone, it is estimated that these companies could save 2% on
sales
Garments may cost cheaper
The demand in the value chain may go up by 3-4%
14. Highlights
FISCAL DEFICIT
1. Fiscal deficit seen at 5.2 % of GDP in 2012/13
2. Fiscal deficit seen at 4.8 % of GDP in 2013/14
CURRENT ACCOUNT DEFICIT
1. India's greater worry is current account deficit
2. Will need more than $75 billion this year and next year
to fund current account deficit
INFLATION
1. Food inflation worrying, will take all steps to augment
supply side
15. Highlights
BORROWING
1. Gross market borrowing seen at 6.29 trillion rupees in 13/14
2. Net market borrowing seen at 4.84 trillion rupees in 13/14
3. Net short-term borrowing seen at 198.44 billion rupees in13/14
4. To buy back 500 billion rupees worth of bonds in13/14
Spending
1. Total budget expenditure seen at 16.65 trillion rupees in13/14
2. Non-plan expenditure estimated at about 11.1 trillion rupees in
13/14
3. India's 13/14 plan expenditure seen at 5.55 trillion rupees
4. Revised estimate for total expenditure is 14.3 trillion rupees in
12/13, which is 96 % of budget estimate
16. Highlights
SUBSIDIES
1. 2013/14 major subsidies bill estimated at 2.48 trillion
rupees from 1.82 trillion rupees
2. Petroleum subsidy seen at 650 billion rupees in 2013/14
3. Petroleum subsidy assumes crude oil price at
$110/barrel
4. Revised petroleum subsidy for 2012/13 at 968.8 billion
rupees
5. Estimated 900 billion rupees spending on food subsidies
in 2013/14
6. Revised food subsidies at 850 billion rupees in 2012/13
7. Revised 2012/13 fertilizer subsidy at 659.7 billion rupees
17. Highlights
TAX
1. Propose surcharge of 10 % on rich taxpayers with annual
income of more than 10 million rupees a year
2. To increase surcharge to 10 % on domestic companies with
annual income of more than 100 million rupees
3. For foreign companies, who pay the higher rate of corporate
tax, the surcharge will increase from 2 % to 5 %
4. To continue 15 % tax concession on dividend received by
India companies from foreign units for one more year
5. To impose withholding tax of 20 % on profit distribution to
shareholders
6. 10 billion rupees for first installment of balance of GST
(Goods and Services Tax) payment
7. To introduce commodities transaction tax (CTT)
8. CTT on non-agriculture futures contracts at 0.01 %
18. What's getting costlier & what's cheaper
for consumer
Source - economictimes.indiatimes.com
Consumer Items Impact (Positive or Negative)
Television set-top boxes Negative
Mobile Phones worth more Rs 2000 Negative
Cigarettes and tobacco products Negative
Branded Non-Allopathic medicines Positive
Imported Jewellery Positive
Ready-made Garments Positive
Eating Out Negative
Sports Utility Vehicles (except taxis) Negative
Environment-friendly vehicles Positive
Imported Luxury Vehicles Negative
Silk and Silk products Negative
Home Furnishing and Decor Positive
Housing Construction Negative