Millennium Post

PC sings item numbers

PC sings item numbers
It was as if economics is about three things —numbers, numbers and numbers. In his Interim Budget speech for 2014-15 delivered on Monday, finance minister P Chidambaram loudly flaunted the large number of deficits his government has reduced. He completely overlooked the fact that the 10-year-old Manmohan Singh government has presided over a nagging economic slowdown coupled with one of the worst bouts of inflation in post-independence India.

The FM noted that the current financial year (April 2013- March 14) will end on a ‘satisfactory note’ with the fiscal deficit at 4.6 per cent of gross domestic product (GDP) — well below the ‘red line’ of 4.8 per cent that he had targeted in his February 2013 Budget statement — and the revenue deficit at 3.3 per cent of GDP.

But this result, which captains of corporate India and their collaborators in the political class, bureaucracy, media and academia were heartily eulogising all day on TV channels and in the cyber world, was ‘achieved’ by the government by spending Rs 79,790 crore less on Plan expenditure than the budgeted amount of Rs 5,55,532 crore. This means that the Centre deliberately spent less on India’s future — investment in infrastructure, bridges, roads, factories power plants etc — to please what seems to be its primary constituency — the considerably discredited private corporate sector.

The 1 per cent surcharge on ‘super-rich’ having income above Rs 1 crore in a year, and the 5 per cent surcharge on corporates imposed last year, have been allowed to lapse with the finance minister saying, ‘In keeping with the conventions, I do not propose to make any announcements regarding changes to the tax laws’. As if this is not bad enough, the Centre has ‘fixed’ Plan expenditure for the coming fiscal (2014-15) at Rs 555,322 crore, unchanged from the current year’s original target, and Non-Plan expenditure at Rs 12,07,892 crore, marginally higher than that for 2013-14.

Leaving direct taxes untouched, PC pegged the fiscal deficit for 2014-15 at 4.1 per cent of GDP, which will be below the target of 4.2 per cent set by the new fiscal consolidation path. The revenue deficit for the coming fiscal is estimated at 3 per cent. On the current account deficit (CAD), he said there is no room for any aversion to it since the country will run a CAD every year for some more years and it can be financed only by foreign investments — FDI, FII or ECBs or any other
foreign inflow.

Government nod for one rank, one pension for military personnel

In a last-ditch gambit to woo the defence community of 14 lakh serving and over 25 lakh retired military personnel, the government has yanked the long-demanded, much-promised but never-implemented one-rank, one-pension (OROP) rabbit out of its hat in the run-up to general elections. Finance minister P Chidambaram said the OROP decision will be ‘implemented prospectively’ for armed forces from 2014-2015, with the government transferring Rs 500 crore to the defence pension account in the current fiscal to ‘close the gap for all retirees (pre-2006 and post-2006) in all ranks’. This comes just after Congress vice-president Rahul Gandhi told a group of ex-servicemen last week he fully backed their OROP demand, in what now seems to be a scripted interaction. The defence community, after all, swells into a sizeable and vocal vote bank of close to two crore people if family members are also taken into account. OROP basically implies payment of uniform pension to personnel retiring in the same rank with the same length of service irrespective of their date of retirement.

Now, cars, SUVs, 2-wheelers, mobiles, soaps to get cheaper

Ahead of the upcoming general election, finance minister P Chidambaram on Monday sought to lighten the burden on the middle class by lowering excise duty on cars, SUVs and two-wheelers and proposed no increase in taxes on other products.

‘To give relief to the automobile industry which is registering unprecedented negative growth, I propose to reduce excise duty..,’ Chidambaram said while presenting the interim budget for 2014-15. As per his proposal, excise duty on small cars, motorcycles, scooters and commercial vehicles has been cut to 8 per cent from 12 per cent earlier.

Likewise, the sports utility vehicles will attract 24 per cent excise duty, down from 30 per cent earlier, while large cars that used to attract excise of 27 per cent will now be levied only 24 per cent. Moreover, the excise duty on mid-sized cars will be 20 per cent from 24 per cent earlier. While giving sops to the automobile sector, Chidambaram said: ‘I propose to make appropriate reductions in excise duty on chassis and trailers.’

Mobile phones manufactured in India could also see price moderation with the finance minister announcing a proposal to boost domestic manufacturing. However, a majority of mobile phones sold in India, even by domestic firms like Micromax, Lava and Karbonn, are imported. However, Samsung and Nokia have manufacturing facilities in the country and the excise duty rejig may lower their cost of production. ‘To encourage domestic production of mobile phones, which has declined, and reduce the dependence on imports, which have increased, I propose to restructure the excise duties for all categories of mobile phones. The rates will be 6 per cent with CENVAT credit or one per cent without CENVAT credit,’ he said.

Chidambaram rationalised customs duty structure on non-edible grade industrial oil and its fractions, fatty acids and fatty alcohols at 7.5 per cent.
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