Budget Reactions: Budget is wake-up call on fiscal prudence: Microsec

Microsec has come out with its report on Union Budget 2013-14.

Grounded in reality; Finance Minister paves way for a balancing budget!

The Union Budget 2013-14 is a more balancing budget in recent years. Wake up call to bring fiscal prudence back on track and boost inclusive growth were the key priorities that were addressed through some harsh and some soft measures. Call to Rationalize expenditure taking the bitter pill highlights the compulsions to take realistic measures.

The budget speech categorically mentions that the ballooning current account deficit is a worry, indicating more measures to boost exports and foreign investment. The higher allocation for rural development and continued focus on infrastructure development are long term positives for the economy. Oil & Gas, Coal, Textile and Infrastructure development have been mentioned with special thrust, which if implemented in totality may bring back high growth to the country. Domestic development of Oil & Gas and Coal will bring down our energy dependence from imports, not only helping narrow our current account deficit but also keeping a stable INR. The focus on the ailing Textile sector may not only boost our exports once again, it also is a major employment generator.

The Fiscal Deficit for 2013-14 has been pegged at Rs 5,42,499 Crore which is 4.8 percent of the GDP. The targets for 2016-17 fiscal deficit is set at 3 per cent, revenue deficit to 1.5 percent, which looks implementable, provided the reform measures are not scaled back.

Keeping up to the need to widen the tax base as mentioned in the Economic Survey, direct tax slabs have not been changed but a tax credit of Rs 2000 is provided to individuals having income of upto Rs 5lacs. However, surcharge of 10 percent on individuals, HUFs, firms and entities with similar tax status with taxable income above Rs 1 crore and increase in the surcharge from 5 percent to 10 percent on domestic companies whose taxable income exceeds Rs 10 crore per year for a period of one year looks realistic keeping in mind what fiscal profligacy can do to some of the erstwhile developed nations. Service tax and normal excise duty rates and peak customs duty has been kept unchanged. On the development front, Infrastructure continues to remain in focus as Infrastructure Debt funds will be encouraged and IIFCL in partnership with ADB will offer credit enhancement to infrastructure companies that wish to access the bond market to tap long term funds. A regulatory authority is being constituted to look into the bottlenecks of the road sector.

The need for energy security has a concrete mention as The Economic Survey and the Budget has taken it forward by announcing that the Oil & Gas exploration policy will be reviewed to move from profit sharing to revenue sharing. A policy to encourage exploration and production of shale gas will be announced. NELP blocks that were awarded but are stalled will be cleared. The need to expedite coal exploration through PPP model has been enunciated to bring down reliance on imported coal.

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Finally, the much awaited GST implementation still looks away from reality in the near term as the undertone of the Finance Minister indicates. Also, Investment allowance will not be as effective as it is presumed due to the application of MAT to the concerned companies. Never-the-less, the ending paragraph does send vibes that the government is committed to work its way forward to high, inclusive growth through bridging the gap of previous follies and continuing on the path of reforms.

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