Union Budget 2013 - 14: Hoping for revival in growth, says P Lilladher
BUDGET 2013-14: Walking a tight rope amidst uncertain global environment and hoping for revival in growth, says Prabhudas Lilladher.
March 01, 2013 / 17:51 IST
Prabhudas Lilladher has come out with its report on Union Budget 2013-14.
Get full Budget coverageBUDGET 2013-14- Walking a tight rope amidst uncertain global environment and hoping for revival in growth
- Tax collections building in an economic recovery
- Non-Tax revenues to grow at 32.8%
- An aggressive disinvestment target
- Savage cuts in plan expenditure in FY13 vis-à-vis budgeted estimates
- Non-plan expenditure shows a sedate growth of 10.8%
- Fiscal deficit target a tad optimistic
- Key reforms still hostage to achievement of legislative consensus
- CAD a clear and present danger to the BOP and macro-economic stability
- Markets to remain hostage to global events
- FII flows to determine the course of the market
- Market to trade within 5500-6000 range
Tax collections building in an economic recovery: The budget has made no change significant change in Income Tax rates and slabs. Income tax is budgeted to go up by 20.2% in line with similar growth last year. On the corporate tax front surcharge on companies with incomes above Rs 100 mn has been doubled from 5% to 10%. The corporate tax collections are budgeted to increase by 16.9% on the expectation of revival in the economy and the doubling of surcharge. Growth in excise and service tax collections at 18.1% and 36.1 respectively in FY13 were led by increase in the peak rate from 10% in FY12 to 12% in FY13. With the peak slabs remaining at 12% and no more services coming under the ambit of service tax, it looks that the FM is banking on the Amnesty scheme for service tax evaders to boost service tax collections in FY14. FM has budgeted a rise of 35.8% increase in service tax for FY14 while assuming a more modest 14.9% increase in excise. Customs collections would rise by 13.6% in FY14 and total net tax revenues would move up by 19.1%.Non-Tax revenues to grow at 32.8%: FY13 saw a massive underachievement in proceeds from telecom sector from a budgeted Rs 582 bn to Rs 194 bn due to failure of 2G spectrum auction yet still the government has built in a target of Rs 408 bn in FY 14 . There is also a stretched target incremental revenues of Rs 200 bn built in as dividends from RBI/Public sector banks/Financial Institutions like LIC.An aggressive disinvestment target: After a relatively better achievement on the divestment front in FY13 ( as against a budget estimate of Rs 300 bn, the government has managed to raise Rs 240 bn), it has set an ambitious target of Rs 400 bn alongwith a further inflow from sale of stakes in non-government companies of Rs 158 bn. This figure of Rs 558 bn looks a tall task to reach and is predicated upon the market remaining buoyant amidst continued surge of FII inflows.Savage cuts in plan expenditure in FY13 vis-à-vis budgeted estimates: Having effected deep cuts in plan expenditure from a budgeted Rs 5210 bn to Rs 4292 bn, the government is projecting a strong 29.4% increase in plan expenditure in FY14 to Rs 5553 bn. The allocations to flagship schemes like Sarva Shiksha Abhiyan (for education), Gram Sadak Yojana (Rural roads), JNNURM (urban renewal), National Health Mission , Integrated Child development etc have seen generous increase in allocations spelling out clearly government’s priorities. Plan expenditure constitutes 33.3% of total expenditure vis-à-vis 30% in FY13.Non-plan expenditure shows a sedate growth of 10.8%: Defence expenditure is set to rise by 14% in FY14 to Rs 2036 bn. The total provision for subsidies is pegged at 2311 bn, a drop of 10.3% versus FY13. This is mainly driven by a 32.9% plunge in fuel subsidies. Subsidy provisioning in FY13 at Rs 969 bn looks more realistic assuming an under recovery of about Rs 1600 bn and 60% share being borne by the government. The provision for FY14 at rs 650 bn too looks realistic especially in the context of phased increase in diesel prices every month by Rs 0.50/litre to eventually bridge the current under-recovery of Rs 10/litre, permission to oil marketing companies to sell bulk diesel at market prices and capping of subsidised cylinders to 9 per household per year. Food subsidy has been pegged at Rs 900 bn with an assumption of Rs 100 bn increase vis-à-vis last year due to implementation of Food Security Act. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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