Despite the lack of a bigpicture, Chidambaram hassent small signals withrespect to different avenuesto invite greater investments in theseareas and depict a healthier India. Alot, however, will depend on the goalsversus the achievements.
The biggest concern for foreigninvestors looking at India apart fromthe pace of policy reforms was the
country’s scal decit. With credit
rating agencies closely watchingcountries following the Europeancrisis, India had the task of reigning in
its scal decit to remain an attractive
investment destination. The Budget
proposal to contain the FY’14 scaldecit to below 5% of the GDP (target
is 4.8% of GDP) against 5.2% of GDPin 2012-13 is a very brave and positivegoal. This will involve a reduction innon-plan expenditure from 12.3%to 10.8% while increasing the taxrevenues from 16.7% to 19.1%.Chidambaram expects a large portionof the revenues to come from thespectrum auctions (Rs 40,000 crore)and disinvestments (Rs 58,000 crore)with a similar amount of Rs 100,000crore coming from an increase intax revenues.However, with no major taxationproposed in the Budget, to increasethe tax revenue by Rs 100000 crore,the growth should be in the range of
6.5% to 7%. Considering this scal’s
growth would not exceed 5.5%, it maybe a major challenge to achieve 6.5-
7% growth in the next scal to earn
the additional tax revenue and thereby
reduce the scal decit.
Under the current scal condition,
considering the subdued demand for
manufacturing goods as reected by
sluggish growth in IIP data recently,the next major growth area should bethe Infrastructure Sector. This Budgetoffers the Look East policy to provideconnectivity for the North Easternstates to Myanmar. This will providean impetus in economic growth of theNorth Eastern states in view of theeasy accessibility to the mainland. Thepresent proposal is to connect NorthEastern states to Myanmar, which isa part of the grand India – Myanmar– Thailand highway connectivity planfor East Asia integration. This willrequire assistance of the World Bankand the Asian Development Bank
which may encourage fund ow in the
Infrastructure Sector.The Budget also proposes thedevelopment of two new ports – one inAndhra Pradesh and the other in WestBengal, with capacity of 100 million toncargo handling per annum. Further, anew outer harbour will be developedin Tamil Nadu. This development willinvolve Public-Private-Partnership(PPP) with an estimated investmentof Rs 7,500 crore with an estimatedcapacity of 42 million tons.Five inland waterways have beendeclared as national waterways. TheHaldia to Farakka stretch in West
Bengal has been awarded the rst
transport contract. This will help intransportation of imported coal fromHaldia Port to the Farakka Powerplant.
There have been no major changes inDirect or Indirect taxes in the Budgetproposal, however, much awaited taxreform measures like the Direct TaxCode (DTC) and Goods and ServiceTax (GST) has received an impetus.The Finance Minister has proposed to
introduce DTC and GST in this scal
itself which will be a major boost toindustrial growth. In view of thecontinuous opposition by some of the states for introduction of GST,the Finance Minister has agreedto compensate the affected statesadequately for revised rate of CentralSales Tax (CST).With regard to Income Tax, therehas been no change in Tax slabsand rates. For taxing the super rich,10% surcharge has been proposedfor income above Rs 1 crore. For themiddle class, a token tax relief hasbeen extended in the form of tax creditof Rs 2,000 for income up to Rs 5 lacs.
The FY’14 estimates peg income tax
growth at 16.9% as against 11.2% in
FY’13. The Service Tax revenue growth
has been assumed at 36% of the grosstax revenue as against 13% in the
Islands of happiness