After taking over as Finance Minister in August 2012, Chidambaram had drawn up a financial amalgamation road map to lower the fiscal deficit to 4.8 per cent of GDP in 2013-14, 4.2 per cent in 2014-15 and 3.6 per cent in 2015-16. He said the government’s objectives included fiscal consolidation, reviving the growth cycle and enhancing manufacturing. The Minister had on several occasions said he had drawn a red line for the fiscal deficit and it would not be breached. As per current indications, the fiscal deficit has come down mainly on account of expenditure compression and higher realisation from the 2G spectrum auction. GDP growth has improved and will be 4.9 per cent for the current financial year.
Economic growth had slowed to a decade’s low of 4.5 per cent in 2012-13. Congratulations to Finance Minister for controlling fiscal deficit and lowering it down by 0.3 per cent than the previous financial year. It is the notable achievement of UPA Government. Many such things are said and done but after this interim budget people are confused, they don’t know whether to congratulate UPA or just see the fun of postponing all responsibilities to the new government to be formed in 2014.
In these nine years, UPA has taken the country to a primitive state, giving too many subsidies, paying less attention to education and health sectors. The next government will have to do something to reduce or do away with these freebies. No one can deny that Congress Party has got great economist minds like P. Chidambaram, Manmohan Singh and Montek Singh Ahluwalia but they are surrounded by dirty minds which has disease of corruption. I don’t think, currently any other party in India have talented economists like them. However, why they are not leaving corruption and working for the progress of the country? One cannot be 100 per cent corruption free. We Indians are still good if you eat 20 per cent and develop with remaining 80 per cent but today, the trend is going in reverse direction; we see 80 per cent corruption and 20 per cent development. Political parties should forget its differences and think for the progress of the country and its people. Manmohan Singh and P. Chidambaram never had free hand to frame the budget as they might have wanted. And it is a fact, a very bitter fact. Cars should be made costlier by increasing taxes and reduce the direct tax on income. Honestly, people will not be impacted as they do not buy a car every year. Increase in car cost will be set off by rebate on tax on income. Finance minister himself said luxury car sales (more than 50 lacs) is more than people declaring income above 1 crore. Congress is making auto and real estate a hub of black money.
Indirectly, it will lead to more pollution, more traffic on roads and more burdens due to fuel import cost. People with black money are rewarded. Only 2 per cent people pay tax on income in India. Increasing the lowest tax slab to 5 lacs and increasing the tax on cars by 1% is a win win situation for all honest people.
Leaving direct taxes untouched, Finance Minister P Chidambaram on Monday slashed excise duty on cars, SUVs and two-wheelers, and capital goods and consumer durables to boost manufacturing and growth. Presenting the interim Union Budget for 2014-15, he also provided service tax exemption for storage and warehousing of rice like it was done in case of paddy last year. Also, blood banks have been exempted from its purview. 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, has been allowed to lapse . The budget document does not give figures of the indirect tax concessions, which are valid up to June 30, 2014 and could be reviewed later. They will be notified later in the day.
He justified the excise duty relief saying, “However, the current economic situation demands some interventions that cannot wait for the regular Budget. In particular, the manufacturing sector needs an immediate boost. To encourage domestic production of mobile handsets, he restructured the excise duty for all categories fixing it at 6 per cent with CENVAT credit or 1 per cent without CENVAT credit. Customs duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols has been pegged at 7.5 per cent to encourage to domestic production of soaps and oleo chemicals. Similarly, a concessional customs duty of 5 per cent on capital goods imported by Bank Note Paper Mill India Pvt Ltd has been provided to encourage to indigenous production of security paper for printing currency notes. Giving budget estimates, the minister said the current financial year will end on a satisfactory note with the fiscal deficit at 4.6 per cent; below redline of 4.8 per cent, and the revenue deficit at 3.3 per cent. The fiscal deficit for 2014-15 has been pegged at 4.1 per cent, which will be below the target of 4.2 per cent set by the new fiscal consolidation path. Revenue deficit is estimated at 3 per cent.
Plan expenditure for the coming fiscal has been fixed at Rs. 555,322 crore, unchanged from current year, and non-Plan expenditure at Rs. 12,07,892 crore, marginally higher than 2013-14. Chidambaram said excise duty has been reduced from 12 to 10 per cent on capital goods and consumer non-durables falling under Chapter 84 and 85 of the Schedule to the Central Excise Tariff Act. Small cars, motorcycles, scooters and commercial vehicles will attract a lower excise duty of 8 per cent from the current 12 per cent, while SUVs will see a 6 per cent reduction in duty from 30 to 24 per cent. Large and middle segment cars will enjoy an excise duty of 24/20 per cent, down from 27/24 per cent. Outlining a 10-point vision for the future, the finance minister said India must achieve the target of fiscal deficit of 3 per cent of GDP by 2016-17 and remain below that level always. On current account deficit, he said there is no room for any aversion for 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. As a part of the vision, he said a developing economy must accept that when the aim is high growth, there will be moderate level of inflation.
Chidambaram always says the right things rightly and then goes on to take the wrong decisions, wrongly. They are sure, they will not be elected this time. In order to contain the fiscal deficit within the budgeted 4.8 per cent of the GDP, you are leaving a huge burden of unpaid bills for the next government.