UNION BUDGET 2013-14 Impact Analysis

UNION BUDGET 2013-14: Impact Analysis

CONTENTS
BUDGET AT A GLANCE............................................................................................. 1 UNION BUDGET 2013-14 : A MACROECONOMIC PERSPECTIVE........................... 2-3 SECTORAL IMPACT.............................................................................................. 4-29 CHANGE IN CENTRAL PLAN OUTLAY...................................................................... 30 RECEIPTS........................................................................................................... 31-32 EXPENDITURE................................................................................................... 33-34 KEY ECONOMIC INDICATORS (Absolute Values).................................................... 35 KEY ECONOMIC INDICATORS (Percentage Change Over Previous Year)................ 36 GLOSSARY......................................................................................................... 37-38

UNION BUDGET 2013-14: Impact Analysis

BUDGET AT A GLANCE
(` bn) 2012-13 Revised Estimates 1) Revenue Receipts Tax Revenue (net to centre) Non-Tax Revenue 4) Capital Receipts (5+6+7)$ Recoveries of loans Other receipts Borrowings and other liabilities * 8) Total Receipts (1+4)$ 9) Non-Plan Expenditure On Revenue Account of which Interest Payments On Capital Account 13) Plan Expenditure On Revenue Account On Capital Account 16) Total Expenditure (9+13) Revenue Expenditure (10+14) Of which, Grants for creation of Capital Assets Capital Expenditure (12+15) 20) Revenue Deficit (17-1) % of GDP 21) Effective Revenue Deficit (20-18) % of GDP 22) Fiscal Deficit {16-(1+5+6)} % of GDP Primary Deficit (22-11) % of GDP 8,718.28 7,421.15 1,297.13 5,589.98 140.73 240.00 5,209.25 14,308.25 10,016.38 9,196.99 3,166.74 819.39 4,291.87 3,433.73 858.14 14,308.25 12,630.72 1,242.75 1,677.53 3,912.45 (3.9) 2,669.70 (2.7) 5,209.25 (5.2) 2,042.51 (2.0) 2013-14 Budget Estimates 10,563.31 8,840.78 1,722.52 6,089.67 106.54 558.14 5,424.99 16,652.97 11,099.75 9,929.08 3,706.84 1,170.67 5,553.22 4,432.60 1,120.62 16,652.97 14,361.69 1,746.56 2,291.29 3,798.38 (3.3) 2,051.82 (1.8) 5,424.99 (4.8) 1,718.14 (1.5)

$ Excluding receipts under Market Stabilisation Scheme. * Includes draw-down of Cash Balance. Note: 1) GDP for BE 2013-2014 has been projected at ` 113.7 trillion assuming 13.4% growth over the advance estimates of 2012-2013 (` 100.3 trillion) released by CSO. 2) Individual items in this document may not sum up to the totals due to rounding off.

UNION BUDGET 2013-14: Impact Analysis

UNION BUDGET 2013-14 : A MACROECONOMIC PERSPECTIVE

The Union Budget for FY14 is presented at a time when the Indian economy is faced with various challenges posed by domestic and global issues. The budget was expected to implement fiscal prudence on one hand and support growth on the other. The Finance minister has articulated a fiscal deficit (FD) target of 4.8% of GDP during FY14 with a commitment to bring down the FD, revenue deficit and the effective revenue deficit to 3.0%, 1.5% and zero, respectively by FY17. What is commendable is the fact that the fiscal deficit for FY13 at 5.2% has been marginally higher than the budgeted estimate of 5.1%. While fiscal deficit has been targeted to be lower than the previous year, total expenditure has been budgeted at ` 16,652.97 bn, a 16% increase as compared to the revised estimates (RE) of FY13. Besides, there has been a significant hike in plan expenditure which is likely to boost rural demand and support inclusive growth. Concerns do arise on whether the government would be able to generate the requisite revenue to finance the total expenditure laid out in the budget. If revenue generation falters owing to failure of revival of economic growth or due to difficulties in implementing the revenue generating measures, either fiscal consolidation will have to be foregone or expenditure will need to be curtailed. Even though moderation in growth might pose difficulties in revenue generation, the government is hopeful of raising adequate revenue through various measures. The budget estimates a higher collection of tax and non tax revenue. However, the disinvestment target for FY14 which has been more than doubled from the revised estimates in the current fiscal seems to be a tad ambitious. Besides reiterating its commitment towards fiscal consolidation, the budget has tried to address various crucial issues i.e. promoting investments, encouraging infrastructure activities, boosting rural demand through enhanced social sector spending, initiating measures to boost savings, besides giving a thrust to capital markets including developing the debt market and so on. The focus of the government towards increasing investment in infrastructure, creating a regulatory authority for the road sector, introducing investment allowance for attracting new high value investments, creating industrial corridors besides announcement of projects in National Waterways, Road and Ports sectors, devising a PPP policy framework in the coal sector to some extent would boost infrastructure activities. Besides, a number of initiatives in the Oil & Gas sector is also commendable. However, measures directed towards easing the structural bottlenecks needed more focus. Moreover, no specific action has been presented to curb the current account deficit which poses a significant downside risk to the overall growth. Though the measures announced are good on intent they would yield the desired results only on effective and timely execution. The policy initiatives that the government has been taking since Sept-12 has to continue in future and the allocation announced in the budget also needs to be effectively utilised to help the economy revive from the slowdown.

UNION BUDGET 2013-14: Impact Analysis

Fiscal Arithmetic for FY14 Reviving the economy on a sustainable growth path will remain a major challenge for the government during FY14. The government has thus, budgeted a higher expenditure to boost growth. For FY14, total expenditure is budgeted to increase by 16.4% to ` 16,652.97 bn as compared to the revised estimates (RE) of ` 14,308.25 bn for FY13. As in the last budget, the plan expenditure received a major boost with an allocation of ` 5,553.22 bn, an increase of 29.4% over FY13 (RE). Non-plan expenditure is also budgeted to increase by 10.8 % to ` 11,099.75 bn. The subsidy though budgeted to decrease by 10.3% during FY14 from the revised estimates of FY13; is budgeted to increase by over 21.6% over the budget estimates of FY13. For FY14, the gross tax receipts are budgeted to increase by 14.7% over FY13 (BE) and by 19.1% over FY13 (RE). On the direct tax front, revenue from corporate tax is budgeted to increase by 16.9% (RE). While there has been no change in the income tax slabs or rates, there has been a provision of a tax credit of ` 2,000 to every person who has a total income upto ` 0.5 mn. The personal income tax collection is budgeted to increase by 20.2% in FY14 over FY13 (RE). There has been no change in the normal rate of excise duty of 12% and the normal rate of service tax of 12%. However, revenue from Union excise duty is budgeted to increase by 14.9%. Services tax is budgeted to increase by a huge 35.8% by FY14 over FY13 (RE) and by 45.3% over FY13 (BE). Non-tax revenue is also budgeted to record a significant increase of 32.8% during FY14 as compared to (RE) of FY13. This would be achieved primarily owing to significant 45.0% increase in other non-tax revenue collections and 33.2% increase in dividend and profit even as external grants have been budgeted to register a decline. During this budget, the Government plans to generate ` 558.14 bn through disinvestments which is almost more than double the revised estimates of FY13 which is ` 240.00 bn. During the previous year the disinvestment target of the Government has been ` 300.00 bn. As a result of expected lower revenue generation as compared to higher expenditure, the Government has pegged the fiscal deficit target of 4.8% during FY14 as compared to an estimated 5.2% during FY13 (RE). Gross market borrowings are slated to increase by around 12.7% to around ` 6,290.09 bn as compared to ` 5,580.00 bn in FY13 (RE).

UNION BUDGET 2013-14: Impact Analysis

SECTORAL IMPACT
Sector 1. Agriculture 2. Social Sector 3. Infrastructure Services 4. Banking, Financial Services and Insurance (BFSI) 5. Hospitality 6. IT/ITeS 7. Media & Entertainment 8. Real Estate & Construction 9. Retail 10. Telecom Manufacturing 11. Automotive 12. Capital Goods & Engineering 13. Cement 14. Consumer Goods 15. Gems & Jewellery 16. Leather 17. Metals & Mining 18. MSMEs 19. Oil & Gas 20. Pharmaceuticals & Healthcare 21. Power 22. Textiles and Garments Ratings: Positive+ Positive Marginally Positive Neutral Negative Predominantly positive proposals Positive proposals Positive proposals but not upto industry expectations Negative proposals offsetting positive proposals Negative proposals impacting the sector Marginally Positive Positive Marginally Positive Marginally Positive Marginally Positive Marginally Positive Neutral Marginally Positive Marginally Positive Marginally Positive Positive Positive Positive+/Marginally Positive/Positive/Positive Neutral Marginally Positive Marginally Positive Marginally Positive Marginally Positive Negative Rating Positive+ Positive+ Positive

UNION BUDGET 2013-14: Impact Analysis

Agriculture
` 270.49 bn allocated to the Ministry of Agriculture, an increase of 22% over the RE of current fiscal year. Allocation of ` 34.15 bn for agricultural research. For FY14, target of agricultural credit kept at ` 7,000 bn. I nterest subvention scheme for short-term crop loans to be continued. Scheme extended for crop loans borrowed from private sector scheduled commercial banks. ` 10 bn allocated for bringing Green Revolution to eastern India. ` 5 bn allocated to start a programme of crop diversification that would promote technological innovation and encourage farmers to choose crop alternatives. R ashtriya Krishi Vikas Yojana and National Food Security Mission provided ` 99.54 bn and ` 22.50 bn respectively. A llocation for Integrated watershed programme increased from ` 30.50 bn in FY13 (BE) to ` 53.87 bn in FY14. A llocation made for pilot programme on Nutri-Farms for introducing new crop varieties that are rich in micro-nutrients. N ational Institute of Biotic Stress Management for addressing plant protection issues will be established at Raipur, Chhattisgarh. The Indian Institute of Agricultural Bio-technology will be established at Ranchi, Jharkhand. P ilot scheme to replant and rejuvenate coconut gardens implemented in some districts of Kerala and the Andaman & Nicobar Islands extended to the entire state of Kerala. M atching equity grants to registered Farmer Producer Organization (FPO) upto a maximum of ` 1 mn per FPO to enable them to leverage working capital from financial institutions. A Credit Guarantee Fund to be created in the Small Farmers Agri Business Corporation with an initial corpus of ` 1 bn. National Livestock Mission to be set up and a provision of ` 3.07 bn made for the Mission. Additional provision of ` 100 bn for National Food Security Act.

Positive+
In view of the sharp increase in prices of food articles, especially proteins, fruits and vegetables and the growing foodgrains stocks in public sector, the Government has maintained its focus on the agriculture sector through increased allocations and introducing initiatives for creating efficient agricultural market. The hike in farm credit limit and creation of a credit guarantee fund for Farmer Producer Organisations (FPOs) would provide some respite to small and marginal

UNION BUDGET 2013-14: Impact Analysis

farmers. The programme of crop diversification would be an effective measure to alleviate rural poverty and generate rural employment. While the measures announced in the Budget for the agriculture sector are positive, legal impediments restricting the entry of big private players to marketing, storage and processing facilities of agricultural commodities also need to be modified.

Social Sector
Human Resource Development and Social Justice
` 658.67 bn allocated to the Ministry of Human Resource Development, an increase of 17% over the RE of the current fiscal year. A llocations for Scheduled Caste Sub Plan and Tribal Sub Plan increased to ` 415.61 bn and ` 245.98 bn respectively. The total represents an increase of 12.5% over the BE and 31% over the RE of the current fiscal year. Funds allocated to these Sub Plans cannot be diverted. ` 971.34 bn allocated for programmes relating to women and ` 772.36 bn allocated for programmes relating to children. M inistry of Women and Child Development to design schemes that will address the concerns of women belonging to the most vulnerable groups, including single women and widows. An additional sum of ` 2 bn proposed to be provided to the Ministry to begin work. A n allocation of ` 35.11 bn to the Ministry of Minority Affairs, an increase of 12% over the BE and 60% over the RE of FY13. A llocation of ` 1.6 bn to the corpus of Maulana Azad Education Foundation to raise its corpus to ` 15 bn during the 12th Five Year Plan period. A sum of ` 1.10 bn to the Department of Disability Affairs for Assistance to Disabled Persons for Purchase/Fitting of Aids and Appliances (ADIP) scheme in FY14 as against RE FY13 of ` 0.75 bn.

Education
` 16.5 bn allocated for six All India Institute of Medical Sciences (AIIMS) - like institutions. ` 272.58 bn allocated for Sarva Shiksha Abhiyaan (SSA). A n increase of 25.6% over RE of the current fiscal year for investments in Rashtriya Madhyamik Shiksha Abhiyan (RMSA). ` 52.84 bn allocated to Ministries/Departments in FY14 for scholarships to students belonging to SC, ST, OBC, Minorities and girl children. Allocation of ` 132.15 bn for Mid-Day Meal Scheme (MDM).

UNION BUDGET 2013-14: Impact Analysis

Health & Sanitation

` 373.30 bn allocated to the Ministry of Health & Family Welfare. Of this, the new National Health Mission that combines the rural mission and the proposed urban mission will get ` 212.39 bn, an increase of 24.3% over the RE of current fiscal year. ` 47.27 bn allocated for medical education, training and research. ` 1.5 bn provided for National Programme for the Health Care of Elderly. Allocation of ` 10.69 bn to Department of AYUSH. ` 177 bn allocated for Integrated Child Development Scheme (ICDS) in FY14, representing an increase of 11.7% over FY13. A llocation of ` 3 bn in FY14 for a multi-sectoral programme aimed at overcoming maternal and child malnutrition. Programme to be implemented in 100 districts during FY14 to be scaled to cover 200 districts the year after. ` 152.60 bn allocated to Ministry of Drinking Water and Sanitation. ` 14 bn provided for setting up of water purification plants in 2,000 arsenic - and 12,000 fluoride-affected rural habitations.

Employment and Skill Development

N ational Skill Development Corporation to set the curriculum and standards for training in different skills; ` 10 bn set apart for this scheme. 5 % of the Border Area Development Programme Fund, 10% of the Special Central Assistance to the Scheduled Caste sub plan and the Tribal sub plan, and some other funds will also be used for skill development.

Rural Development
A llocation of ` 801.94 bn in FY14 for Ministry of Rural Development, marking an increase of 46% over FY13 (RE). P roposal to carve out Pradhan Mantri Gram Sadak Yojana (PMGSY) II and allocate a portion of the funds to the new programme that will benefit states such as Andhra Pradesh, Haryana, Karnataka, Maharashtra, Punjab and Rajasthan. ` 148.73 bn allocated for Jawaharlal Nehru National Urban Renewal Mission (JNNURM) in FY14 as against RE of ` 73.83 bn. Out of this, a significant portion will be used to support the purchase of upto 10,000 buses.

UNION BUDGET 2013-14: Impact Analysis

Positive+
Despite the constraints being faced on the fiscal front, the Government continued to increase the magnitude of budgetary support for social sectors. And rightly so, as social sectors include those sectors where Government interventions are expected to have a direct influence on human development. The Budget 2013-14 has allocated ` 2,067 bn to the social services sector, accounting for 30.4% of the total plan outlay. Among the various heads under the social sector, the Budget provides a significant boost for the health sector, with the allocations for Health and Family Welfare having increased by 31.5% in Budget 2013-14 over RE of FY14. Even as the 24.3% increase in allocation for the National Health Mission is a welcome move, the progress on health infrastructure remains far from satisfactory. The higher outlay for education is encouraging, given the significant challenges of achieving higher enrollment and enhancing the quality of education. The Budget also has several announcements that promote inclusive growth. However, a prime concern that persists across social sector programmes and schemes and which remains unaddressed in the Budget is that of under-utilisation of available budgetary resources. It is therefore imperative to improve the quality of spending on social sector schemes so as to get better outcomes for the money spent. However, the measures announced during the Budget have significant positive impact on social sector.

Infrastructure
Infrastructure Financing
I nfrastructure Debt Fund (IDF) to be encouraged. These funds will raise resources and provide long-term low-cost debt to infrastructure projects through take-out finance, credit enhancement and other innovative means. I ndia Infrastructure Finance Corporation Ltd (IIFCL) in partnership with the Asian Development Bank (ADB) will provide access to the bond markets for long term funds through credit enhancements to infrastructure companies. A llowed some institutions to issue tax free bonds up to ` 500 bn in FY14 strictly on capacity to raise funds from the market. W ith assistance from World Bank and the ADB, to build roads in the Northern Eastern states and connect them to Myanmar. I ncreased corpus of the Rural Infrastructure Development Fund (RIDF) operated by NABARD to ` 200 bn in FY14. A llocation of ` 50 bn to NABARD to finance construction of warehouses, godowns, silos and cold storage units designed to store agricultural produce.

UNION BUDGET 2013-14: Impact Analysis

R educed the rate of tax on interest paid to non-resident investors from 20% to 5% on long term infrastructure bonds in foreign currency and extended the same benefit to investments made through a designated bank account in rupee-denominated long term infrastructure bonds.

Roads and Highways

A regulatory authority for the road sector is proposed to be constituted to address the unattended challenges including financial stress, enhanced construction risk and contract management issues. 3,000 kms of road projects will be awarded in the first six months of FY14.

Rural Infrastructure
B udgetary allocation of ` 801.94 bn for rural development schemes in FY14, representing an increase of 46% over FY13 (RE). Allocation of ` 330 bn to Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), ` 217 bn to Pradhan Mantri Gram Sadak Yojana (PMGSY) and ` 151.84 bn to Indira Awaas Yojana (IAY). A llocation of a portion of funds to new programme PMGSY-II which will benefit states which have completed PMGSY; other states will continue with PMGSY.

Urban Infrastructure
A llocation of ` 148.73 bn for the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). A significant portion of this will be used to support the purchase of upto 10,000 buses.

Industrial Corridors
P lans for seven new cities finalised and work for two smart industrial cities at Dholera and Shendra Bidkin will start in FY14. Delhi Mumbai Industrial Corridor (DMIC) to be provided additional funds, if required. A comprehensive plan for the Chennai Bengaluru Industrial Corridor is being prepared by the DIPP and JICA. Preparatory work for the Bengaluru Mumbai Industrial Corridor has started.

UNION BUDGET 2013-14: Impact Analysis

Ports
T wo new major ports will be established in Sagar, West Bengal and in Andhra Pradesh which will add 100 mn tonnes of capacity. A new outer harbour will be developed at Thoothukkudi, Tamil Nadu at an estimated cost of ` 75 bn.

Positive
The Government has taken a number of measures such as encouragement to IDF, credit enhancement for long term funds, increased corpus of RIDF etc to mobilise funds in the infrastructure sector through innovative instruments. The Budget has also allowed some institutions to issue tax free bonds up to ` 500 bn in FY14. These measures are likely to provide some support to infrastructure financing going forward. The proposal to constitute a regulatory authority for the road sector to address some of the challenges faced by the sector is a good move. Also, awarding of 3,000 kms of road projects in the first six months of FY14 is expected to enhance road connectivity in India. Further, a 46% increase in budgetary allocation for rural development schemes is expected to improve overall rural infrastructure. Further, the new proposals for industrial corridors are welcome initiatives as they are expected to ease congestion and aid in the rapid development of the industry. Given the increased focus to revive growth in the infrastructure sector by boosting infrastructure financing coupled with the measures to increase thrust on rural infrastructure and urban infrastructure, the Budget is expected to have a positive impact on the infrastructure sector.

Services Banking, Financial Services and Insurance (BFSI)

Banking Agricultural and Rural Finance
The target for credit flow to farmers raised from ` 5,750 bn in FY13 to ` 7,000 bn in FY14. T he interest subvention scheme for short term crop loans to continue and farm loans repaid on time to get credit at 4% p.a. Scheme extended to crop loans borrowed from private sector Scheduled Commercial Banks (SCBs).

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UNION BUDGET 2013-14: Impact Analysis

Financial Inclusion
S CBs and all Regional Rural Banks (RRBs) are on core banking solution (CBS) and electronic payment systems (NEFT and RTGS). All other banks including some co-operative banks are to be on CBS and e-payment systems by December 31, 2013. All branches of Public Sector Banks (PSBs) to have ATMs by March 31, 2014. A n IT-based project to modernise the postal network at an expenditure of ` 49.09 bn has been initiated. Post offices will be on CBS and offer real-time banking services. Provision of ` 5.32 bn for the project in FY14 is proposed.

Housing Credit
The provision under Rural Housing Fund enhanced from ` 40 bn to ` 60 bn. A dditional deduction of interest up to ` 0.1 mn for a person taking first home loan up to ` 2.5 mn during the period April 1, 2013 to March 31, 2014.

Capital Support and Funding

A sum of ` 140 bn capital allocated to PSBs for FY14, keeping in view compliance of PSBs with Basel III norms. S etting up of Indias first Womens Bank as a PSB with a provision of ` 10 bn as initial capital is proposed. Necessary approvals and the banking license expected by October 2013. National Housing Bank to set up Urban Housing Fund with a provision of ` 20 bn to the fund. Infrastructure Debt Funds (IDF) to be encouraged. The corpus of the Rural Infrastructure Development Fund (RIDF) will be raised to ` 200 bn. ` 50 bn will be made available to NABARD to finance construction of warehouses and godowns. Issuance of infrastructure tax-free bonds up to ` 500 bn to be allowed during FY14. E nhancing the refinancing capability of SIDBI from the current level of ` 50 bn to ` 100 bn per year. Additional sum of ` 1 bn to be provided to India Microfinance Equity Fund. A corpus of ` 5 bn to SIDBI to set up a Credit Guarantee Fund for factoring.

Positive+
The Budget is expected to have a positive impact on the banking industry. Some of the growth drivers of the Indian banking sector include financial inclusion and enhanced payment systems which will help the banking sector to achieve its aim of expansion and growth. A number of

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UNION BUDGET 2013-14: Impact Analysis

measures have been announced towards enabling inclusive growth such as other banks including some co-operative banks adopting CBS and e-payment systems, all branches of PSBs having ATMs, post offices becoming a part of the core banking solution and offering real-time banking services and setting up of Indias first Womens Bank as a PSB. Measures have also been announced to enable better flow of credit to various sectors, including agriculture, housing, infrastructure and MSMEs which is expected to encourage overall credit growth. In addition, the Budget has emphasised on the financial strengthening of PSBs. The allocations made towards capital infusion in PSBs are expected to bring more stability to the sector. The Government aims to keep all the PSBs adequately capitalised for compliance with Basel III regulation. Overall, the Budget is likely to have a significant positive impact on the banking industry by focusing on financial inclusion, boosting credit growth and supporting capital base of banks.

Finance
A standing Council of Experts will be established in the Ministry of Finance to understand the international competitiveness of the Indian financial sector. I n cases of dividend distribution tax or tax on distributed income, current surcharge increased from 5% to 10%. P ermissible premium rate to be raised from 10% to 15% of the sum assured by relaxing eligibility conditions of life insurance policies for persons suffering from disability and certain ailments. C oncessional 15% tax rate on dividend received by an Indian company from its foreign subsidiary is proposed during FY14. T o increase investment in long term infrastructure bonds in foreign currency, tax rate on interest paid to non-resident investors declined in the prior year from 20% to 5%. Extending this same benefit to investment made through a designated bank account in rupee denominated long term infrastructure bonds is proposed. E xempt of Securitisation Trust from income tax. Levy of tax at certain rates during distribution of income for companies, individual or HUF etc. No additional tax on income received by investors from the Trust. Investor Protection Fund of depositories to be exempted from income tax in some situations. P arity in taxation between IDF-Mutual Fund and IDF-NBFC when the payment is made to a non-resident. A Category I Alternative Investment Funds (AIF) set up as Venture capital fund permitted pass through status as part of Income-tax Act.

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UNION BUDGET 2013-14: Impact Analysis

A final withholding tax at 20% on profits distributed by unlisted companies to shareholders through buyback of shares. M odification of provisions of General Anti Avoidance Rules (GAAR) will be in effect from April 1, 2016. A dministrative measures such as extension of refund banker system to refund more than ` 50,000; technology based processing, extension of e-payment through more banks and expansion in the scope of annual information returns by Income-tax Department.

Marginally Positive
The Budget has few announcements having a marginally positive impact on the financial sector. On the financial front, increased surcharge on the dividend distribution tax will impact earnings of corporates as well as investors. However, corporates are expected to marginally benefit by the reduced taxation on foreign dividends. Reducing tax rates on investments made through a designated bank account in rupee denominated long term infrastructure bonds will be benefitting. Securitisation Trust to be exempted from income tax will also benefit investors.

Capital Markets
R ajiv Gandhi Equity Savings Scheme (RGESS) to be liberalised. Income limit for RGESS eligibility to be raised from ` 1 mn to ` 1.2 mn. I nflation indexed instruments such as Inflation Indexed Bonds or Inflation Indexed National Security Certificates to be introduced. Proposal to amend the SEBI Act, to strengthen the regulator, being considered. D esignated depository participants, authorised by SEBI, will be free to register different classes of portfolio investors, subject to compliance with KYC guidelines. S EBI to simplify the procedures for entry of foreign portfolio investors. SEBI will converge the different KYC norms making it easy for foreign investors to invest in India. P roposal to follow international practice to differentiate between FII and FDI. An investor with a stake of 10% or less in a company, will be treated as FII and, where an investor with a stake of more than 10%, will be treated as FDI. FIIs will be allowed to participate in exchange traded currency derivative segment. F IIs will also be allowed to use their investment in corporate bonds and Government securities as collateral to meet their margin requirements. S EBI to prescribe requirements for angel investor pools to be recognised as Category I AIF venture capital funds.

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UNION BUDGET 2013-14: Impact Analysis

S mall and medium enterprises, to be permitted to list on the SME exchange without making an initial public offer (IPO). This is in addition to the existing SME platform in which listing can be done through an IPO. S tock exchanges to be allowed to introduce a dedicated debt segment. Insurance companies, provident funds and pension funds will be permitted to trade directly in the debt segment. M utual fund distributors will be allowed to become members in the mutual fund segment of stock exchanges. T he list of eligible securities in which Pension Funds and Provident Funds may invest will be enhanced to include exchange traded funds, debt mutual funds and asset backed securities. R eductions in Securities Transaction Tax on equity futures from 0.017% to 0.01%, on MF/ETF redemptions at fund counters from 0.25% to 0.001% and on MF/ETF purchase/sale from 0.1% to 0.001% but only on the seller. L evy Commodity Transaction Tax (CTT) on non-agricultural commodities futures contracts at the same rate as on equity futures, at 0.01% of the price of the trade. Agricultural commodities will be exempted.

Positive
The measures undertaken by the Government to boost the capital market are positive as they aim to enhance activity in the market. Reduction of STT will reduce transaction cost, revive intra-day trading, promote retail participation and boost the equity market. Further, levy of CTT on nonagricultural commodities to bring derivative trading in the securities market at par with derivative trading in the commodities market will further boost the equity market. To develop the debt market, stock exchanges will be allowed to introduce a dedicated debt segment on the exchange. Insurance companies, provident funds and pension funds will be permitted to trade directly in the debt segment. ETFs will be eligible for pension and insurance investment. Measures have been taken to boost greater foreign investments in the Indian capital market such as SEBI simplifying procedures for FIIs and unifying FII categories, allowing FIIs to participate in exchange traded currency derivative segment and to use their investment in corporate bonds and Government securities as collateral to meet their margin requirements. As part of efforts to attract more investments into the capital market, SEBI would prescribe requirements for angel investor pools by which they can be recognised as category I venture funds. Permission to list on the SME exchange without making an initial public offer will boost entrepreneurs and start-ups. The mutual fund industry will be benefitted by the liberalisation of RGESS. Mutual fund distributors will be allowed to become members in the Mutual Fund segment of stock exchanges so that they can leverage the stock exchange network to improve their reach and distribution.

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UNION BUDGET 2013-14: Impact Analysis

Insurance
I nsurance companies will be able to open branches in Tier II cities and below without prior approval of the IRDA. A ll towns in the country with a population of 10,000 or more will have an LIC office and an office of at least one public sector general insurance company by March 31, 2014. KYC of banks will suffice to acquire insurance policies. B anks will be allowed to act as insurance brokers for the entire network of bank branches to be utilised to enhance penetration. Banking correspondents will be allowed to sell micro-insurance products. G roup insurance products to be offered to similar groups such as SHGs, domestic workers associations, anganwadi workers, teachers in schools, nurses in hospitals etc. R ashtriya Swasthya Bima Yojana to be extended to other categories such as rickshaw, autorickshaw and taxi drivers, sanitation workers, rag pickers and mine workers. A comprehensive social security package to be developed for the unorganised sector by facilitating convergence among different schemes. Proposal to pass Insurance Laws (Amendment) Bill and the PFRDA Bill in the current session.

Positive
The announcements made in the Budget would have a positive impact on the insurance sector as measures have been initiated to increase penetration, thereby boosting investments and growth. Insurance companies opening branches in Tier II cities and below without IRDA approval, KYC of banks sufficient to acquire insurance policies, banks to act as insurance brokers and bank correspondents selling micro finance products are all efforts to increase penetration and distribution.

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UNION BUDGET 2013-14: Impact Analysis

Hospitality
Levy of service tax on all air conditioned restaurants. A llocation of ` 12.98 bn for the Ministry of Tourism, an increase of 34.6% over the RE of the current fiscal year.

Neutral
The levy of service tax on all air conditioned restaurants would increase the overall cost incurred by restaurant operators who will pass it on to customers. Consequently the cost of dining out for a customer would go up. Although there has been an increased allocation for the tourism sector, the quantum of allocation is expected to benefit the overall tourism sector only to a limited extent. Hence, the overall Budget announcements have a neutral impact on the hospitality sector.

IT & ITeS
Z ero customs duty for equipment required for setting up semi-conductor (electronic chips) plants. R angachary Committee has been formed to provide clarity on taxation matters related to research and development activities in the IT sector and for safe harbour.

Marginally Positive
The removal of customs duty on electronic chips would boost manufacturing of high tech electronic products in India. Moreover, the formation of the Rangachary Committee would help to solve issues pertaining to taxation of development centres, tax treatment of onsite services of domestic software firms and those related to finalising safe harbour. The initiatives taken in the Budget, thus, will have a marginal impact on the sector.

Media & Entertainment

Service tax exemption granted to films exhibited in cinema halls. C ities with population of more than one lakh will be covered by private FM channel providers. About 839 new FM radio channels to be auctioned in FY14. Hike in import duty on set-top boxes from 5% to 10%.

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UNION BUDGET 2013-14: Impact Analysis

Marginally Positive
Exemption of films exhibited in cinema halls from service tax is expected to help the industry. Also, the Governments initiative to expand private FM radio services to 294 more cities will provide more opportunities to the private FM radio operators and thereby impacting the industry positively. However, hike in import duty on set-top boxes to 10% is a negative announcement for the existing DTH players. This announcement is expected to safeguard the interest of domestic set-top box manufacturers; promoting production in home market.

Real Estate and Construction

National Housing Bank (NHB) to set up ` 20 bn Urban Housing Fund in FY14. P roposal to provide ` 60 bn to the Rural Housing Fund in 2013-14 through National Housing Bank for rural housing. F irst housing loan up to ` 2.5 mn would get additional deduction of interest up to ` 0.1 mn which will enhance the total deduction to ` 0.25 mn in FY14. Excise duty on marble slabs increased from ` 30 per sq. mtr to ` 60 per sq. mtr. R eduction in abatement rate on home and flat having a carpet area of more than 2,000 sq. ft. or costing more than ` 10 mn from 75% to 70%. T DS at the rate of 1% to be charged on the transfer of immovable property (which exclude agriculture property) where the consideration exceeds ` 5 mn.

Marginally Positive
With the NHB setting up an Urban Housing Fund and enhancing the fund allocation to Rural Housing Fund from ` 40 bn in FY13 to ` 60 bn in FY14, the Government is trying to focus on mitigating acute housing shortage by providing low cost affordable houses. Further, the extension of enhanced interest deduction granted on housing loan is expected to promote home ownership in tier-II and III cities and towns on one hand and encourage the growth in various other sectors like steel, cement, brick, wood, paint, glass etc. The increased fund allocation for the construction of urban and rural housing units is likely to have a multiplier effect on the economy via growth in downstream sectors and increase in employment. However, the reduction in abatement rate would result in increased service tax outflow and making the luxury house more expensive. Also, the hike in excise duty on marble would increase the development cost of the developer which may be passed on to the end customer. The introduction of TDS on transfer of high value immovable property which is generally charged on gross value of

17

UNION BUDGET 2013-14: Impact Analysis

the property is likely to have an unfavorable impact on the cash flow of the seller in a situation of distress property sales or on property sale making minimal gain. The various announcements by the Government during the Budget will have direct and indirect impact on the construction and real estate sector. Overall the Budget is marginally positive for the construction and real estate sector.

Retail
Reduction in customs duty on dehulled oat grains from 30% to 15%. ` 50 bn to be made available to the National Bank for Agriculture and Rural Development (NABARD) to finance construction of warehouses, godowns, silos and cold storage units. F und allocation of ` 200 bn to the Rural Infrastructure Development Fund (RIDF) operated by NABARD in FY14. Proposal to increase budgetary allocation by 46% for rural development schemes.

Marginally Positive
Reduction in the customs duty on dehulled oats is likely to have a favorable impact on the FMCG players. The Governments increased focus to finance the construction of warehouses, cold storage units etc and road infrastructure will help in improving the overall supply chain infrastructure on the one hand, and removing the supply side bottleneck on the other hand. This will further enable the reduction in overall wastage of foodgrains, vegetables and fruits which in turn willhelp to control the food inflation. Further, increased fund allocation towards rural infrastructure development will encourage the retail players to expand their reach to the under-penetrated rural segment in the country. Allocation to the MGNREGS would fuel the rural income growth and thereby creating more demand for various products among rural segment. Thus, the announcements in the Budget are expected to have a marginally positive impact on the sector.

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UNION BUDGET 2013-14: Impact Analysis

Telecom
Excise duty on mobile handsets costing more than ` 2,000 increased from 1% to 6%.

Negative
The telecom sector has been facing issues like high debt, pressurised margins and huge spectrum costs. The sector expected revisions in taxes and levies from this Budget. However, the consistent tax structure is a disappointment for the sector and is expected to have a negative impact. Moreover, increase in excise duty on high-end mobile handsets to 6% will negatively impact the mobile handset industry.

Manufacturing Automotive
I ncrease in the basic customs duty from 75% to 100% on new passenger cars and other motor vehicles (high-end cars) with cost, insurance and freight (CIF) value more than US$ 40,000 and/or engine capacity exceeding 3,000cc for petrol-run vehicles and exceeding 2,500cc for diesel-run vehicles. I ncrease in the basic customs duty on motorcycles with engine capacity of 800cc or more from 60% to 75%. Increase in the excise duty on sports utility vehicles (SUVs) from 27% to 30%. Reduction in the excise duty on truck chassis from 14% to 13%. P roposal to purchase up to 10,000 buses under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). E xtension of the time period of exemption (Nil basic customs duty, countervailing duty of 6% and Nil special additional duty) for the specified parts of electric and hybrid vehicles by two more years up to March 31, 2015. F ull exemption from basic customs duty to lithium ion automotive battery for manufacture of lithium ion battery packs for supply to the manufacturers of hybrid and electric vehicles.

Marginally Positive
A hike in the customs duty on high-end cars and motorcycles would lead to an increase in the prices of these vehicles. Further, increase in excise duty on sports utility vehicles would also be passed on to the consumers by way of increased vehicle prices. However, these announcements are not likely to have any adverse impact on demand as the price sensitivity in these segments is low.

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UNION BUDGET 2013-14: Impact Analysis

An extended time period of exemption for certain specified parts of electric and hybrid vehicles and full exemption from customs duty to lithium ion automotive battery are positive developments, in line with the Governments increased thrust on promoting green vehicles. However, from a shortto-medium term perspective, these announcements would have negligible impact on the overall automotive industry, given the meagre market share of such vehicles. Increased allocation to the infrastructure and defence sectors could indirectly benefit manufacturers of commercial vehicles such as Tata Motors and Ashok Leyland, among others. Similarly, an allocation of ` 148.7 bn under the JNNURM would boost demand and sale of buses. The Governments continued focus on rural development would have a positive impact on boosting demand for two-wheelers in the rural and semi-urban areas. Thus, the overall Budget announcements would have a marginally positive impact on the automotive industry.

Capital and Engineering Goods

A deduction of 15% will be allowed as investment allowance for companies investing ` 1 bn or more in plant and machinery during the period Apr 2013-Mar 2015. This will be in addition to the current rates of depreciation. I ncentives to semiconductor wafer fab manufacturing facilities, including zero customs duty for plant and machinery. B asic customs duty to be reduced from 7.5% to 5.0% on specified machinery for manufacture of leather and leather goods including footwear. F ull exemption from excise duty on ships and vessels. Consequently, there will be no countervailing duty on imported ships and vessels.

Positive
Investment allowance deduction for investment in plant and machinery over and above depreciation is likely to increase the capital expenditure especially by small and medium enterprises. This is likely to facilitate growth of the capital & engineering goods industry. Further, reduction of customs duty on plant and machinery for leather goods and water fab manufacturing should have positive impact on the capital & engineering goods industry. The Union Budget FY14 also outlines the importance of the infrastructure sector with emphasis on investment required in construction of roads. It is anticipated that 3,000 kms of road project will be awarded in H1FY14 which is likely to boost demand for construction equipment. Further, allocation of ` 867.41 bn for capital expenditure made in the defence services will also provide boost to the capital & engineering goods industry in FY14. Overall, the Budget is anticipated to have a positive impact on the capital & engineering goods sector.

20

UNION BUDGET 2013-14: Impact Analysis

Cement
A pproximately 3,000 kms of road projects in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh to be awarded in the first half of FY14. P roposal to provide ` 60 bn to the Rural Housing Fund in 2013-14 through National Housing Bank for rural housing. P roposal to start a fund for urban housing by providing ` 20 bn to set up a Urban Housing Fund through National Housing Bank. ` 50 bn to be made available to National Bank for Agriculture and Rural Development (NABARD) to finance construction of warehouses, godowns, silos and cold storage units.

Marginally Positive
The Budget has no announcements having a direct impact on the cement sector. But the Governments increased focus on infrastructure development and construction is expected to drive the demand for cement and thereby impacting the sector indirectly. The continued thrust on infrastructure is likely to provide support to the cement industry going forward. Overall, the announcements in the Budget are expected to have a marginally positive impact on the sector.

Consumer Goods
I ncrease in excise duty to 18% on cigarettes exceeding length of 65 mm. Duty on cigars and cigarillos also raised to 18%. Reduction in customs duty on dehulled oat grains to 15% from 30%. Customs duty on imported hazel nuts reduced to 10% from 30%. Excise duty on mobile phones of retail sale price exceeding ` 2,000 increased from 1% to 6%. Withdrawal of export duty on de-oiled rice bran oil cake. W ithdrawal of exemption of education cess and secondary & higher education cess on soyabean oil, olive oil, etc. F ull exemption from excise duty provided to intermediate goods manufactured and consumed captively by exempted units under Area-Based Exemption Scheme in Himachal Pradesh and Uttarakhand.

Marginally Positive
Withdrawal of exemption of education cess and secondary & higher education cess on soyabean products, soya oil and olive oil is likely to increase domestic production of these products. Moreover, reduction in both imported hazel nuts and dehulled oat grains is expected to boost domestic

21

UNION BUDGET 2013-14: Impact Analysis

production of the final products manufactured using these raw materials, thereby providing a boost to the domestic industry. Increase in excise duty on mobile phones will lead to increase in prices for the end customers. Further, the increase in excise duty on cigarettes will hit companies in the short-term as volumes are likely to get impacted. The consumer goods sector is expected to remain resilient on the backdrop of positive announcements in the Budget combined with strong domestic consumption. Increase in basic excise duty on cigarettes and cigars is likely to have a marginally negative impact on the sector. However, reduction/withdrawal of customs duty on soya product and hazel nut is likely to boost the FMCG sector. On the overall basis, the Budget is marginally positive for the consumer goods sector.

Gems & Jewellery

R eduction in the rate of customs duty on pre-forms of precious and semi-precious stones from 10% to 2%. L evy of 4% excise duty on silver manufactured from smelting zinc or lead, thereby bringing it at par with the excise duty applicable to silver obtained from copper ores and concentrates.

Marginally Positive
The Budget announcement to reduce the customs duty on precious and semi-precious stones is expected to boost exports and in turn benefit the diamond and gemstone industry. In addition, no further increase in the rate of import duty and excise duty has reduced the burden on the industry. The levy of 4% excise duty on silver manufactured from smelting zinc or lead might have a marginal negative impact on the sector. Overall, by not adding to the tax burden of the sector, the Union Budget 2013-2014 has a marginally positive impact on the gems & jewellery sector.

Leather
R eduction in customs duty on plant and machinery used in the leather sector and footwear industry from 7.5% to 5%. Refinancing capability of SIDBI doubled from ` 50 bn to ` 100 bn in a year. N on-tax benefits to be made available to the MSME units for a period of three years after they graduate to a higher category.

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UNION BUDGET 2013-14: Impact Analysis

Marginally Positive
Reduction in the customs duty on plant and machinery used in manufacturing leather and leather products is likely to facilitate the import of traditional as well as new technology in the sector at a lower cost and result in process innovation. Further, the doubling of the refinancing capabilities of SIDBI to ` 100 bn will enhance the availability of funds for the MSME players. Also, provision of non-tax benefits to MSME units for a period of three years after graduating to a higher level would attract the interest of many MSME players to scale up their operation and move up the value chain as against continuing to stay small in order to enjoy the various benefits applicable to MSMEs. As the leather sector occupies a prominent place among MSMEs, the above measures announced for the MSMEs are likely to have a favorable implication on the players in the leather industry as well. Overall, the announcements made in the Budget would have a marginally positive impact on the leather sector, particularly in the medium term.

Metals & Mining

Levy of export duty at the rate of 10% on bauxite. L evy of export duty at the rate of 10% on unprocessed ilmenite and at 5% on upgraded ilmenite. Levy of excise duty at the rate of 4% on silver manufactured from smelting zinc or lead. C ompounded levy on stainless steel Patta Patti increased from ` 30,000 to ` 40,000 per machine per month. R eduction of basic customs duty from 10% to 5% on stainless steel wire cloth stripe and from 7.5% to 5% on wash coat for use in the manufacture of catalytic convertors and their parts. F ull exemption from export duty to galvanized steel sheets falling under certain sub-headings, retrospectively with effect from March 1, 2011.

Neutral
The levy of export duty at the rate of 10% on bauxite is aimed at improving domestic availability and benefitting the domestic aluminium industry, which uses bauxite as a key raw material. However, it will have only a negligible impact since exports account for a small proportion of domestic production of bauxite. Further, the other Budget announcements made for the metals & mining industry are not likely to have any significant impact on the industry, mainly as there have been no major announcements for the key sectors such as steel or aluminium. Nevertheless, announcements pertaining to the infrastructure and housing sectors are expected to provide some fillip to the metals industry, particularly the steel industry. Hence, the overall impact of the Budget announcements on the metals and mining sector is neutral.

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UNION BUDGET 2013-14: Impact Analysis

MSMEs
Proposal to enhance the refinancing capability of SIDBI from the current level of ` 50 bn to ` 100 bn per year. Provide a corpus of ` 5 bn to SIDBI to set up a Credit Guarantee Fund for factoring. P rovide an additional sum of ` 1 bn to the India Microfinance Equity Fund that was set up by SIDBI in 2011-12. P rovide a sum of ` 22 bn during the 12th Five Year Plan period for the setting up of 15 additional Tool Room and Technology Development Centres. F unds provided to technology incubators located within academic institutions and approved by the Ministry of Science and Technology or the Ministry of MSME will qualify as Corporate Social Responsibility (CSR) expenditure. T he non-tax benefits to be made available to an MSME unit for three years after it graduates to a higher category.

Marginally Positive
The various Budget announcements mentioned above are aimed at enhancing the availability of funds to the MSMEs. These are positive moves for this sector, which has been struggling to raise funds at competitive rates. Apart from finance, technology upgradation is another major challenge faced by the MSME sector. An allocation of ` 22 bn for setting up Tool Room and Technology Development Centres could encourage technology adoption/upgradation among the MSMEs. In terms of specific sectors, the proposal to reduce duty on specified machinery for manufacture of leather and leather goods would encourage greater investment in plant & machinery, which is necessary to boost both quality and scale of production, and thereby increase exports. The proposal to provide working capital and term loans to handloom weavers at a concessional rate of 6% is aimed at improving the financial status of sector. Thus, the overall Budget announcements have marginally positive impact on the MSMEs.

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UNION BUDGET 2013-14: Impact Analysis

Oil & Gas

Oil and gas exploration policy will be reviewed and new contracts will be moved from profit sharing to revenue sharing model. Natural gas pricing policy will be reviewed. Policy to encourage the exploration and production of shale gas will be announced. Revenue sharing policy on shale gas exploration would be announced. O il and gas blocks awarded under the New Exploration Licensing Policy (NELP), but which are stalled will be cleared. P etroleum subsidy for FY14 is expected to be at ` 650 bn down from ` 960 bn incurred during FY13. 5 million tonne Dhabol LNG terminal will be operational in FY14.

Marginally Positive
Announcements outlined in the Budget are positive for the oil and gas sector as they are aimed at removing the prevailing ambiguity surrounding cost recovery during exploration and natural gas pricing. Further, the policy announcement surrounding NELP blocks and shale gas exploration is aimed at safeguarding the energy security of the country by increasing domestic production. The existing profit sharing model has delayed approvals in the oil and gas sector due to the involvement of the Government in day-to-day operations so as to monitor the cost of exploration. Shift from profit sharing to revenue sharing model would reduce the involvement of the Government in the day-to-day operations and is expected to remove delays in approvals. Proposed review of natural gas pricing would help to address the prevailing uncertainty regarding natural gas pricing. A liberal pricing policy would help in attracting fresh investments into oil and gas exploration from both private and overseas players. Further, clearing of blocks awarded under New Exploration Licensing policy (NELP) would encourage better participation in the coming rounds of auctions of oil and gas blocks. Focus on shale gas exploration and production is in line with the growing interest in shale gas exploration around the world. This type of policy would help improve the domestic energy production

25

UNION BUDGET 2013-14: Impact Analysis

Pharmaceuticals & Healthcare

P roposal to allocate ` 373.3 bn to the Ministry of Health and Family Welfare (MoHFW). Out of this, ` 212.39 bn will be allotted to the new National Health Mission (NHM), including the rural mission and the proposed urban mission. To provide ` 47.27 bn for medical education, training and research. P roposal to provide ` 1.5 bn to the national programme for the healthcare of elderly, which is being implemented in 100 selected districts across 21 Indian states. P roposal to allocate ` 10.69 bn to the department of AYUSH (Ayurveda, Unani, Siddha and Homoeopathy). P roposal to earmark ` 3,000 mn in FY14 for a multi-sectoral programme for maternal care and address child malnutrition problem. This programme will be executed across 100 districts in FY14 and is aimed to be scaled up to include 200 districts in the subsequent year. P rovision to offer MRP based assessment in respect of branded medicaments of AYUSH and bio-chemic systems of medicine with a reduction of 35%. Allocation of ` 177 bn in FY14 to Integrated Child Development Services (ICDS) scheme.

Marginally Positive
The Budget has focused towards improving the welfare and health of family. Allocation of ` 373.3 bn towards MoHFW and ` 177 bn towards ICDS scheme is expected to have a positive impact on the sector. Further, to integrate the department of AYUSH into the healthcare delivery system, ` 10.69 bn has been allocated to the same through the National Health Mission (NHM). The measures announced in the Budget are expected to have a marginally positive impact on the sector.

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UNION BUDGET 2013-14: Impact Analysis

Power
P roposal to construct a transmission system from Srinagar to Leh region in the state of Jammu and Kashmir at a cost of ` 18.4 bn, out of which ` 2.26 bn will be allocated for the project in 2013-14. A public-private partnership (PPP) policy framework with Coal India Limited (CIL) as one of the partners, to be devised to increase coal production. S tate Governments are asked to prepare financial restructuring plan for power distribution companies and sign the Memorandum of Understanding (MOU) at the earliest and take benefit of the approved financial restructuring scheme for DISCOMS (Distribution Company (India). B enefit for projects in the power sector under section 80-IA of the Income-tax Act is extended by an additional one year, from March 31, 2013 to March 31, 2014. C ustoms duty and countervailing duty (CVD) on imports of steam and bituminous coal is made uniform at 2% each. T o provide low-cost interest bearing funds, over a life span of five years, from National Clean Energy Fund (NCEF) to Indian Renewable Energy Development Agency (IREDA) to on-lend to viable renewable energy projects. T o reintroduce generation-based incentive for wind energy projects and offer ` 8,000 mn to the Ministry of Non Renewable Energy (MNRE). P roposed to encourage cities and municipalities to take up waste-energy projects through PPPs mode.

Positive
The proposed PPP policy framework along with CIL is expected to increase the domestic production of coal and reduce the countrys dependence on imported coal. The Government has continued to encourage and help companies generating power through renewable energy sources such as wind. With an aim to offer financial aid towards feasible renewable energy projects, the Government proposes to offer low-cost interest bearing funds through IREDA. This move is expected to encourage players to enter into renewable energy generation. Further, extension of tax benefits U/S 80-IA by another year is anticipated to encourage investments in power projects. These measures are expected to have a positive impact on the sector.

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UNION BUDGET 2013-14: Impact Analysis

Textile and Garments

T he Zero excise duty route, as existed prior to Budget FY12, is being re-established with respect to branded readymade garments and made-ups. Going by this, in the case of cotton, there will be zero duty at the fibre stage also and in the case of spun yarn, there will be a duty of 12% at the fibre stage. The zero excise duty route will be in addition to the CENVAT route now available. A llocation of ` 0.5 bn to the Ministry of Textiles for establishing apparel parks within the Scheme for Integrated Textile Parks (SITP). A llocation of ` 0.96 bn to the Ministry of Textiles to provide working capital and term loans at a concessional interest rate of 6%. T he existing Technology Upgradation Fund Scheme (TUFS) for the textiles sector to continue. Allocation of ` 24 bn for modernisation of the powerloom sector. T he Integrated Processing Development Scheme with plan disbursement of ` 5 bn would be implemented in the 12th Five Year Plan for addressing environmental issues faced by the textiles industry. It is proposed to provide ` 0.5 bn in FY14 for the scheme. F ull exemption is provided from excise duty on handmade carpets and textile floor coverings of coir or jute whether or not handmade. I n order to give a measure of protection to domestic sericulture, the rate of customs duty is increased on raw silk (not thrown) of all grades from existing 5% to 15%. Reduction of basic customs duty on textile machinery & parts from 7.5% to 5%. L everage aid from Multilateral Development Banks to extend the Scheme of Fund for Regeneration of Traditional Industries (SFURTI) in the 12th Five Year Plan covering 800 clusters including khadi, village and coir industry.

Positive
The restoration of zero excise duty route in addition to the present CENVAT route is one of the significant announcements for the textiles and readymade garments industry. The zero excise duty is going to moderate the cost pressure borne by the readymade garments sector amid sluggish demand. The move is expected to revive demand in the garment sector and improve the industrys performance in terms of higher revenue and improve profits. Another major incentive to the readymade garments industry is to house apparel manufacturing units in SITP. The home furnishing and dcor segment of the textile industry is also likely to benefit from excise duty exemption of handmade carpets and textile floor coverings of coir or jute. The proposed interest subvention scheme in the handloom sector is likely to benefit 150,000 individual weavers and 1,800 primary cooperative societies in FY14. Steps are also taken to protect the interest of domestic sericulture. Another positive incentive for the sector includes continuation of the TUFS and reduction of customs duty on textile machinery and parts for promoting technology upgradation.

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UNION BUDGET 2013-14: Impact Analysis

Thus, the measures announced covering every aspect of the textiles industry is going to revive the prospects of the textiles and readymade garments sector.

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UNION BUDGET 2013-14: Impact Analysis

CHANGE IN CENTRAL PLAN OUTLAY

(` bn) Ministry of Agriculture Ministry of Chemicals and Fertilisers Ministry of Civil Aviation Ministry of Coal Ministry of Commerce and Industry Ministry of Communications and Information Technology Ministry of Consumer Affairs, Food and Public Distribution Ministry of Corporate Affairs Ministry of Culture Ministry of Development of North Eastern Region Ministry of Drinking Water and Sanitation Ministry of Earth Sciences Ministry of Environment and Forests Ministry of External Affairs Ministry of Finance Ministry of Food Processing Industries Ministry of Health and Family Welfare Ministry of Heavy Industries and Public Enterprises Ministry of Home Affairs Ministry of Housing and Urban Poverty Alleviation Ministry of Human Resource Development Ministry of Information and Broadcasting Ministry of Labour and Employment Ministry of Law and Justice Ministry of Micro, Small and Medium Enterprises Ministry of Mines Ministry of Minority Affairs Ministry of New and Renewable Energy Ministry of Panchayati Raj Ministry of Personnel, Public Grievances and Pensions Ministry of Petroleum and Natural Gas Ministry of Planning Ministry of Power Ministry of Road Transport and Highways Ministry of Rural Development Ministry of Science and Technology Ministry of Shipping Ministry of Social Justice and Empowerment Ministry of Statistics and Programme Implementation Ministry of Steel Ministry of Textiles Ministry of Tourism Ministry of Tribal Affairs Ministry of Urban Development Ministry of Water Resources Ministry of Women and Child Development Ministry of Youth Affairs and Sports Ministry of Railways GRAND TOTAL 2012-13 Revised Estimates 137.87 47.04 92.88 95.19 30.00 112.48 3.62 0.28 8.64 1.47 130.00 8.20 18.00 16.20 178.15 6.60 248.94 18.44 68.28 152.43 562.23 8.76 20.33 8.25 28.83 16.54 22.00 42.32 2.66 1.67 768.50 15.42 546.96 289.33 550.00 50.30 55.58 50.12 4.86 163.87 45.00 9.64 14.27 83.59 6.50 171.80 8.90 511.63 5561.76 2013-14 Budget Estimates 170.95 44.28 88.65 117.54 37.27 167.83 6.58 0.34 14.35 2.26 152.60 12.81 24.30 30.00 201.32 7.08 327.45 23.89 105.00 148.29 658.69 11.05 25.24 11.03 32.85 29.19 35.11 39.15 5.00 2.79 790.52 80.00 593.29 375.00 801.94 62.75 70.87 66.25 6.31 197.31 46.31 12.98 17.62 100.21 15.00 203.50 10.93 622.61 6801.23 % Change 23.99 -5.87 -4.55 23.48 24.23 49.21 81.77 21.43 66.09 53.74 17.38 56.22 35.00 85.19 13.01 7.27 31.54 29.56 53.78 -2.72 17.16 26.14 24.15 33.70 13.94 76.48 59.59 -7.49 87.97 67.07 2.87 418.81 8.47 29.61 45.81 24.75 27.51 32.18 29.84 20.41 2.91 34.65 23.48 19.88 130.77 18.45 22.81 21.69 22.29

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UNION BUDGET 2013-14: Impact Analysis

RECEIPTS
(` bn) REVENUE RECEIPTS 1) Tax Revenue Gross Tax Revenue Corporation Tax Taxes on Income Wealth Tax Customs Union Excise Duties Service Tax Taxes on Union Territories Less - NCCD transferred to the National Calamity Contigency Fund/ National Disaster Response Fund Less States' Share 1 a) Centre's Net Tax Revenue 2) Non-Tax Revenue Interest receipts Dividend and Profits External Grants Other Non Tax Revenue Receipts of Union Territories Total Non-tax Revenue Total Revenue Receipts (1a+2) 165.95 554.43 27.62 537.90 11.23 1,297.13 8,718.28 177.64 738.66 14.56 780.00 11.66 1,722.52 10,563.31 10,380.37 3,588.74 2,060.95 8.66 1,648.53 1,719.96 1,326.97 26.56 43.75 2,915.47 7,421.15 12,358.70 4,195.20 2,476.39 9.50 1,873.08 1,975.54 1,801.41 27.58 48.00 3,469.92 8,840.78 2012-13 Revised Estimates 2013-14 Budget Estimates

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UNION BUDGET 2013-14: Impact Analysis

RECEIPTS (Contd...)
(` bn) 3) CAPITAL RECEIPTS A) Non-debt Receipts Recoveries of loans and advances@ Miscellaneous Capital Receipts Total B) Debt Receipts* Market Loans Short term borrowings External Assistance (Net) Securities issued against Small Savings State Provident Fund (Net) Other Receipts (Net) Total Total Capital Receipts (A+B) 4) DRAW-DOWN OF CASH BALANCE Total Receipts (1a+2+3+4) Financing of Fiscal Deficit (3B+4) Receipts under MSS (Net) @ excludes recoveries of short-term loans and advances from States, loans to Government servants, etc. * The receipts are net of repayments. 4,673.84 457.46 22.14 86.26 100.00 -78.95 5,260.75 5,641.48 -51.5 14,308.25 5,209.25 N.A 229.95 4,840.00 198.44 105.60 57.98 100.00 122.97 5,424.99 6,089.67 N.A 16,652.97 5,424.99 200.00 114.00 140.73 240.00 380.73 106.54 558.14 664.68 2012-13 Revised Estimates 2013-14 Budget Estimates

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UNION BUDGET 2013-14: Impact Analysis

EXPENDITURE
(` bn) 1. NON-PLAN EXPENDITURE 1 A. Revenue Expenditure 1 Interest Payments and Prepayment Premium 2 Defence Services 3 Subsidies 4 Grants to State and U.T. Governments 5 Pensions 6 Police 7 Assistance to States from National Calamity Contingecy Fund (NCCF)/NDRF 8 Other General Services (Organs of State, tax collection, external affairs etc.) 9 Social Services (Education, Health, Broadcasting etc.) 10 Economic Services (Agriculture,Industry, Power, Science & Technology, etc.) 11 Postal Deficit 12 Expenditure of U.T. without Legislature 13 Amount met from NCCF/NDRF 14 Grants to Foreign Govts. Total Revenue Non-Plan Expenditure 1 B. Capital Expenditure 1 Defence Services 2 Other Non-Plan Capital Outlay 3 Loans to Public Enterprises 4 Loans to State and U.T. Governments 5 Loans to Foreign Governments 6 Others Total Capital Non-Plan Expenditure Total Non-Plan Expenditure 695.79 81.02 4.69 34.07 7.00 -3.18 819.39 10,016.38 867.41 301.31 4.17 0.80 N.A -3.02 1,170.67 11,099.75 3,166.74 1,089.25 2,576.54 579.01 638.36 371.31 43.75 210.95 213.04 219.65 58.38 41.47 -43.75 32.29 9,196.99 3,706.84 1,169.31 2,310.84 769.81 707.26 408.95 48.00 229.03 231.14 243.34 67.17 43.95 -48.00 41.44 9,929.08 2012-13 Revised Estimates 2013-14 Budget Estimates

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UNION BUDGET 2013-14: Impact Analysis

EXPENDITURE (Contd...)
(` bn) 2. PLAN EXPENDITURE 2 A. Revenue Expenditure 1 Central Plan 2 Central Assistance for States & Union Territory Plans State Plan Union Territory Plan Total Revenue Plan Expenditure 2 B. Capital Expenditure 1 Central Plan 2 Central Assistance for State & Union Territory Plans State Plan Union Territory Plan Total Capital Plan Expenditure Total-Plan Expenditure Total Budget Support for Central Plan Total Central Assistance for State & UT Plans TOTAL EXPENDITURE* DEBT SERVICING 1 Repayment of Debt** 2 Total Interest Payments 3 Total Debt Servicing (1+2) 4 Revenue Receipts 5 Pecentage of 2 to 4 ** Excludes expenditure matched by receipts ** The figures exclude discharge of all Treasury bills, discharge of Cash Management Bills, discharge of Ways and Means Advances including Overdraft, repayment under MSS and all Public Account Disbursements (except discharge of Special Securities issued in lieu of Subsidies). 1,166.69 3,166.74 4,333.43 8,718.28 36.32% 1,670.72 3,706.84 5,377.56 10,563.31 35.09% 734.13 124.01 110.79 13.22 858.14 4,291.87 3,171.85 1,120.02 14,308.25 990.30 130.32 110.57 19.75 1,120.62 5,553.22 4,190.68 1,362.54 16,652.97 2,437.72 996.01 960.68 35.33 3,433.73 3,200.38 1,232.22 1,188.73 43.49 4,432.60 2012-13 Revised Estimates 2013-14 Budget Estimates

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UNION BUDGET 2013-14: Impact Analysis

KEY ECONOMIC INDICATORS (Absolute values)

2010-11 Gross Domestic Product at factor cost (` bn) At current market prices At 2004-05 prices Output Foodgrains (mn tonnes) Power generation ( by utilities) (bn kWh) Prices Wholesale Price Index (All commodities, average) CPI-IW (Average) External Sector (US$ mn) Exports Imports Current Account Balance (net) Foreign Direct Investment (net) Monetary and Finance Money Supply (M3) (` bn) Foreign Exchange Reserves (US$ bn) Exchange rate (`/US$) (Average) Source: RBI, CSO, Commerce Ministry, Economic Survey, 2012-13 Footnotes AE: Advance Estimates; R: Revised; PR : Provisionally Revised a: First Revised Estimates; b: Second Advance Estimates; c: Apr12-Jan13; e: Apr12-Dec-12; f: Apr-Sept-12; g: Outstanding as on 8-Feb-2013; h: As on 15-Feb-2013; i: Apr-12- 27 Feb-2013 65,041 304.82 45.58 73,577 294.40 47.92 81600 g 293.5 h 54.46 i 251,136 369,769 -45945 R 9,360 305,964 489,320 -78155 PR 22,060 239687 c 406855 c -38700 f 16246 f 143.32 179.8 156.1 194.8 166.9 c 213.5 c 244.8 811.1 259.3 876.9 250.14 AE 683.75 e 77953 b 49370 b 89749 a 52436 a 100281 AE 55035 AE 2011-12 2012-13

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UNION BUDGET 2013-14: Impact Analysis

KEY ECONOMIC INDICATORS (Percentage change over previous year)

2010-11 Gross Domestic Product at factor cost At current prices At 2004-05 prices Sectoral Growth Rates at Constant (2004-05) prices Agriculture & allied Industry Services Prices Wholesale Price Index e (All Commodities) CPI-IW f (Average) External Sector Export Import Foreign Direct Investment (net) Monetary and Finance Money Supply (M3) Foreign Exchange Reserves Exchange rate n (`/US$) (Average) Source: RBI, CSO, Commerce Ministry, Economic Survey, 2012-13 Footnotes AE: Advance Estimates; R: Revised; PR: Provisionally Revised; a: First Revised Estimates; b: Second Revised Estimates; c Apr12 -Jan13; e: Apr-12-Dec-12; f: Apr-Sept-12; g: Outstanding as on 8-Feb-2013; h: As on 15-Feb-2013; i:Apr-12- 27 Feb-2013 16.1 9.2 -3.9 13.1 -3.4 5.1 12.7 g 0.03 h 14.1 i 40.5 28.2 -47.9 R 21.8 32.3 135.7 PR -4.9 c 0.01 c -25.7 f 9.6 10.4 8.9 8.4 7.5 c 10.2 c 7.9 b 9.2 b 9.8 b 3.6 a 3.5 a 8.2 a 1.8 AE 3.1 AE 6.6 AE 20.3 b 9.3 b 15.1 a 6.2 a 11.7 AE 5.0 AE 2011-12 2012-13

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UNION BUDGET 2013-14: Impact Analysis

GLOSSARY
Appropriation Bill: This Bill entails the Parliaments approval for withdrawal of money from the Consolidated Fund to pay off expenses. After the Demands for Grants are voted by the Lok Sabha, theParliament approves this bill. Under Article 114(3) of the Constitution, no amount can be withdrawn from the Consolidated Fund without the enactment of such a law by the Parliament. Capital Expenditure: It is the expenditure incurred on acquisition of assets like land, buildings, machinery, equipment etc and also loans and advances granted by the Central Government to State and Union territories, Public sector enterprises and other parties. This expenditure is also categorised as plan and non-plan capital expenditure. Capital Receipts: Capital receipts include loans raised by the Government from public which are called Market Loans, borrowings by the Government from the Reserve Bank of India and other parties through sale of Treasury Bills, loans received from foreign Governments and bodies and recoveries of loans granted by Central Government to State and Union Territory Governments and other parties. Consolidated Fund: All revenues received by the Government, loans raised by it, and also its receipts from recoveries of loans granted by it, form the Consolidated Fund. All expenditure of the Government is incurred from the Consolidated Fund and no amount can be withdrawn from the Fund without authorisation from the Parliament. Contingency Fund: It is an imprest from the Consolidated Fund, and may be used by the Government without waiting for an appropriation bill to be passed by the Parliament. If it becomes necessary for the Government to incur expenditure not included in the budget, it can do so from the Contingency Fund. Customs Duties: Customs duty is a type of indirect tax levied on goods imported into India as well as on goods exported from India. Effective Revenue Deficit: Effective Revenue Deficit is the difference between revenue deficit and grants for creation of capital assets. Exceptional Grant: Through the Exceptional Grant the House of People can make provision for an exceptional grant that does not form part of the current service of any financial year. Excise Duties: Central excise duty is an indirect tax levied on those goods which are manufactured in India and are meant for home consumption. Finance Bill: At the time of presentation of the Annual Financial Statement before the Parliament, a Finance Bill is also presented in fulfilment of the requirement of Article 110(1) (a) of the Constitution, detailing the imposition, abolition, remission, alteration or regulation of taxes proposed in the Budget. A Finance Bill is a Money Bill as defined in Article 110 of the Constitution. Fiscal Deficit: The difference between the total expenditure of the Government by way of revenue, capital and loans net of repayments on the one hand and revenue receipts of the Government and capital receipts which are not in the nature of borrowing but which finally accrue to the Government on the other, constitutes fiscal deficit. Non-Plan Expenditure: It includes expenses that do not form a part of the Governments five year plan. These expenses consist of revenue and capital expenditure on defense, subsidies, interest payments, postal deficit, pensions, police, loans to public sector enterprises, economic services and loans as well as grants to State Governments, Union Territories and foreign Governments. Non-Tax Revenues: Revenues earned by the Government from sources other than taxes are termed as

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UNION BUDGET 2013-14: Impact Analysis

non-tax revenues. The sources of non-tax revenues may include; dividends and profits received from public sector companies, interest receipts, fines, penalties and fees for various services rendered by the Government. Plan Expenditure: It consists of both revenue expenditure and capital expenditure of the Centre on the Central Plan and Central Assistance to States and Union Territories. Plan expenditure reflects the Governments investment in enhancing the economys productive aptitude. It arises out of schemes freshly introduced in an ongoing Five Year Plan (FYP) period. Plan Outlay: Plan Outlay refers to the amount sanctioned for expenditure on projects, schemes and programmes announced in the Plan. The provision for this amount is made through extra budgetary resources and from provisions in the Demands for Grants. The budgetary support is also reflected as plan expenditure in Government accounts. Primary Deficit: The amount by which the Governments total expenditure exceeds its total revenue generated, excluding the interest payments on debt. It is primarily the difference between the gross fiscal deficit and gross interest payments. Public Account: Besides the normal receipts and expenditure of the Government which relate to the Consolidated Fund, certain other transactions enter Government accounts, in respect of which the Government acts more as a banker. For example, transactions relating to provident funds, small savings collections, other deposits, etc. The money thus received is kept in the Public Account and the connected disbursements are also made therefrom. Public Debt: It refers to the total debt of the central and the State Governments. Public debt can be classified into internal debt (comprising of money borrowed within the country) and external debt (comprising of funds borrowed from non-Indian sources). The net accretion to public debt is the difference in borrowing and repayments during a fiscal year. Revenue Deficit: Revenue Deficit is the excess of Governments revenue expenditure over revenue receipts. Revenue Expenditure: It is the expenditure incurred by the Government for running of Government departments and conducting various economic, social and general services, interest payments, subsidies, grants and assistance to State and Union territories etc. This expenditure is also categorised as plan and non-plan revenue expenditure. Revenue Receipts: It includes revenues garnered by the Government through taxes and other non-tax sources. Other receipts of the Government mainly consist of interest and dividend on investments made by the Government, fees, and other receipts for services rendered by it. Tax Revenues: It comprises of revenue receipts through taxes and other duties levied by the Government. Tax revenue includes revenue generated through both direct taxes (personal income tax, corporate tax, capital gain tax and wealth tax) and indirect taxes (central excise duty, customs duty, service tax and VAT). Vote on Account: It means a grant made in advance by the Parliament, in respect of the estimated expenditure for a part of the new financial year, pending the completion of the procedure relating to the voting of the demand for grants and the passing of the Appropriation Act. Vote of Credit: Through the Vote of Credit the House of People can approve grant for meeting an unexpected demand upon the resources of India when on account of the magnitude or the indefinite character of the service, the demand cannot be stated with the details ordinarily given in an annual financial statement.