Budget Impact: What Chidambaram hit & missed
Finance Minister disappoints the market, which expected another round of dream Budget which would propel investment and growth
 "Budget Impact: What Chidambaram hit & missed")
But the Finance Minister's Budget shattered all such expectations. There was some movement in the initial minutes of the Budget presentation when Chidambaram said he would better the fiscal deficit target set by Economic Survey at 5.3% and report 5.2%, and would target 4.8% next year.
But a closer look at the revenue and expenditure figures show that FM has been liberal in his revenue targets and conservative on expenditure. Chidambaram continues to assume that the sdale of spectrum will give the government Rs 40,000 crore, the same it did in FY13, despite recent auctions being a failure.
We take a re-look at how Chidambaram's Budget measured up against the expectations from him:
Expenditure control: Measures to reign in fiscal deficit, like subsidy reduction
Apart from a steady increase in diesel prices announced before the Budget, there were no measures announced on how petroleum and food subsidies will be reduced
Roadmap to key bills: GST, DTC, Land acquisition, Mining and Insurance Bill
FM spoke about introducing GST and DTC in the Budget session and requested support from the opposition, but in the run-up to the Budget, even the states ruled by the Congress and its allies were not comfortable with Chidambaram's proposal on compensation. It is unlikely there will be any headway in this direction soon. There was no mention on the crucial Land Acquisition and Mining Bill, both of which have made India Inc unhappy in the past.
Food Security Bill – even though the FM may be under political compulsion to announce it, size of the rollout is critical
FM did introduce the Food Security Bill, but thankfully the allocation was only Rs 10,000 crore against the expectation of Rs 25,000 crore. However, once introduced and given the political ramification, this subsidy has the potential to inflate going forward.
FDI in Pension and Insurance sector
Nothing announced
Taxes on the super-rich
A surcharge of 10% on income over Rs 1 crore announced
STT removal or a sharp reduction
Reduction announced from 0.17% to 0.1%. Unlikely to have much impact.
On the micro-level, following were the expectations and announcements
Auto: Increase in excise duties for diesel passenger cars
More taxes on SUVs have been introduced. This was the fastest moving segment which was driving auto sales. Even these will now be impacted.
Banks and Financial Services
Higher borrowing programme
Announced a higher borrowing program which has resulted in bond yields moving higher
Recapitalisation of PSU Banks
An amount of Rs 14,000 crore has been sanctioned
Higher agriculture loan growth target
Interest subvention has been announced for prompt payment
Increase in FDI limit for insurance to 49%
Not announced
Capital Goods
Import Duty hike on capital goods for power equipment
Not announced
Higher Depreciation rate on capex from 15% to 25%
Not announced
Restoration of subsidy for wind power
Pegged it to generation rather than depreciation as was the case earlier
Cement
Reshuffling of duties resulting in higher net duty
Not announced
FMCG
Raodmap for GST
No clarity in the speech
Increase in excise duty for cigarette
Increased marginally across the board, but will have little impact on the companies as they are passed on
Fertilisers
Regulation of DAP imports
Not announced
Clarity on subsidy
No such clarity was given
Infrastructure & Power
Increase in limits of tax free bond
Limits were increased
Media
Lower taxes on set-top boxes
Import duty was increase
Metals
Hike in import duty on steel
Not announced
Oil & Gas
Re-introduction of import duty on crude oil
Not announced
Realty
Increase in limit of income tax deduction
Not announced
Extension of interest subvention
Not annoucned
Telecom
Infra status to tower companies
No such status given
Reduction in taxes/levies
Not provided in the budget