23
“Compared to expectations, FM has delivered a mouse”
Key Takeaways
Surcharge of 10 percent on those with a taxable income of over Rs 1 crore. Surcharge on corporates with income over Rs 10 crore raised to 10 percent from 5 percent.
Additional investment allowance of 15 per cent (over and above depreciation) for corporates investing over Rs 100 crore in plant and machinery.
Amnesty scheme for those who have not been paying service tax. Of the 17 lakh service tax assesses, only 7 lakh have been paying taxes.
Government to borrow Rs 6.3 lakh crore from the market, while most players were expecting this figure to be around Rs 5.2 lakh crore.
TDS of 1 percent on sale of immovable property valued over Rs 50 lakh.
Rupee denominated bonds introduced for NRIs to attract investments from this segment.
Fiscal deficit for FY13 at 5.2 percent and FY14 fiscal deficit seen at 4.8 percent.
Commodity transaction tax of 0.01 percent on non-agricultural commodities.
For full article, Click here
How the Sensex moved to major announcements on Budget Day
Sensex at open: 19264.80, up 112.39 points Sensex at 11 am: FM begins Budget speech. 19286.72, up 134.31 points.
Sensex at 11.46am: Extra investment allowance of 15% for corporates investing over Rs 100 crore in plant and machinery.
Sensex at 12pm: Entry norms for FIIs to be eased further.
Sensex at 12.11pm: Additional tax deduction of Rs 1 lakh for first time buyers of houses valued up to Rs 25 lakh
Sensex at 12.16pm: Fiscal deficit for FY13 at 5.2 percent and FY14 fiscal deficit seen at 4.8 percent.
Sensex at 12.21pm: Super Rich Tax - Surcharge of 10 percent on those with a taxable income of over Rs 1 crore
Sensex at 12.30pm: TDS of 1 percent on sale of immovable property valued over Rs 50 lakh.
Sensex at 12.43pm: Government to borrow Rs 6.3 lakh crore from the market.
Sensex at 01.18pm: Disappointment from the Budget led to sell-off.
Sensex at 02.59pm: Fresh bout of selling drifts Sensex to fresh 3-month low
Sensex at 3.30pm: Highest ever turnover of Rs 4.39 lakh crore, 18861.54, down 290 pts
Market Commentary: Sensex nosedives 290 pts as Budget 2013 flops
Top Gainers I Top Losers I Most Active I Commodities I Global Indices
Sector: Auto
Sector: FMCG
Sector: Oil & Gas
Expectations
Levy of additional duty of Rs
80,000
Extension of Countervailing duty at 6%, customs duty 0%
Maintain customs duty of 75% on luxury vehicles.
Expectations
Increase in excise duty on
cigarettes. Expect the general excise duty
rate to be maintained at 12%. Clarity on implementation and
timelines of GST will be positive.
Expectations
NELP blocks will be cleared.
Shale gas exploration policy to
be formulated. New oil and gas exploration
policy will be formulated on revenue sharing.
Proposals
Excise duty on SUVs up from
27% to 30%.
Customs duty on luxury vehicles hiked to 100%.
Higher allocation to JNNURM leading to additional demand of 10,000 buses augurs well for all commercial vehicle manufacturers.
Proposals
Specific Excise Duty on
cigarettes increased by 18%.
Tax on royalty increased from 10% to 25%.
Proposals
Import duty on crude oil might
be re-imposed.
Cess on crude oil production might be increased from current levels of Rs 4,500/MT.
Removal of 5% customs duty on LNG and natural gas.
Impact Negative for M&M and Tata
Motors. Higher allocation to JNNURM positive for all commercial vehicle manufacturers.
Impact Cigarette companies will pass
on the increase to the customers. This could marginally impact volume growth.
Impact Positive for the upstream
companies like Reliance, ONGC.
Sector: Banks/Financials
Sector: Infra
Sector: Pharma
Expectations
Expects capital infusion of
around Rs 20,000 crore. Easing of investment norms,
deepening of bond markets.
Reduction in STT
Expectations
Higher allocation to
infrastructure spending. Elimination of hurdles for roads
and highways. Higher allocation to
infrastructure tax free bonds.
Expectations
Exempt all life-saving
medicines from proposed GST.
Increase the list of life-saving drugs to 5% concessional duty
New oil and gas exploration policy will be formulated on revenue sharing.
Proposals
Extension of 4% farm loans to
private banks.
Additional deduction of Rs1 lakh interest on housing loans of up to Rs25 lakh.
Reduction in STT. Introduction of commodity transaction tax on non-agri contracts
Proposals
Constitution of a regulatory
authority for road sector.
3000 km of road projects to be awarded in first 6 months of FY14.
IDFs will be encouraged to provide long-term low-cost debt
Proposals
Royalty/technical fees paid to
NRIs increased to 25%.
To allot Rs 37333 crore for healthcare, family welfare in FY14.
Impact
Negative for private sector
banks. Positive for PSU banks. Introduction of CTT negative for broking companies.
Impact Positive for the sector. It will
boost infrastructure development in roads, ports, housing and railways.
Impact Higher allocation is positive for
the sector. Increase in royalty fees marginally negative for Ranbaxy
UDAY KOTAK Kotak Mahindra Bank
SAMIR ARORA Helios Capital
MADHU KELA Reliance Capital
The Finance Minister has lived up to his promise on fiscal deficit. The Budget 2013-14 is good for capital markets and investments.
The Budget 2013-14 turned out to be unexciting for equity markets. No direction changing moves announced to revive markets.
The Budget is encouraging as FM has not thrown any negative surprises. Fiscal deficit projection of 4.8% looks credible.
NILESH SHAH Axis Direct
VALLABH BHANSHALI Enam Securities
VIBHAV KAPOOR IL&FS
The RBI's next step potentially could be towards rate cut because now they have been given a space on the fiscal deficit side.
FM has done more good than bad. He did not speak on how the current account deficit will be handled.
With the limited options FM has done a decent job. The market will resume downtrend from now onwards.
DEEPAK PAREKH HDFC
CHANDA KOCHHAR ICICI Bank
R SHANKAR RAMAN L&T
It is a very realistic, balanced, and pragmatic Budget. We have had one of the worst years in a decade and one cannot expect miracles from him.
Private sector banks have been given a level-playing field vis-a-vis the public sector banks.
The challenge always has been to convert some of these targets like 3000 kms of new roads into implemental plans.
PAWAN GOENKA M&M
KOUSHIK CHATTERJEE Tata Steel
ADI GODREJ Godrej Industries
Don't agree with excise duty hike on SUVs. Diesel tax not being implemented is very good news for the sector. I would rate budget as 7.5/10.
The focus would be on how more efficiently coal can be mined. Our aim is to increase mining with available reserves.
FY14 Budget is a growth oriented one and the emphasis remains on inclusiveness. Expenditure and execution is important.
ITC
Coal India
ONGC
Proposal: SED on cigarettes hiked by 18%. Negative for ITC.
Proposal: To encourage PPP projects for coal. Positive for Coal India.
Proposal: To announce policy on Shale gas based on revenue sharing, Blocked NELP blocks will be cleared. Positive for Reliance Inds, ONGC.
ICICI Bank
Tata Motors
DLF
Proposal: 4% farm loan scheme extended to private sector banks. Negative for private sector banks.
Proposal: Excise duty on SUV upped to 30% from 27. Negative for M&M, Tata Motors.
Proposal: House loans up to Rs 25 lakh will be allowed an additional deduction of interest of Rs 1 lakh. Positive for realty.
SBI
Sun Pharma
Jain
Irrigation
Proposal: To provide Rs 14,000 crore for public sector banks recapitalisation. All Women’s Bank to be set up via public sector. Positive for public sector banks.
Proposal: To allot Rs 37333 crore for healthcare, family welfare in FY14: Positive for pharma stocks.
Proposal: Rs 27,049 crore allocated to Ministry of Agriculture, up 22%. Positive for Jain Irrigation, Monsanto, fertilisers and pesticides.
Educomp
Solutions
NTPC
Century
Textiles
Proposal: Rs 65,877 Cr has been allocated to education, up 17% from FY13. Positive for education stocks.
Proposal: Extension of sunset clause for profit-linked incentive by one year: Positive for the power sector.
Proposal: Propose technology upgrade scheme for textile sector to Rs 2400 crore in FY14. Positive for Century Textiles, Alok, Arvind.
Suzlon
Energy
SKS Micro
Sadbhav
Engineering
Proposal: Higher allocation for wind energy. Positive for Suzlon.
Proposal: Bank correspondents can sell micro finance products. Positive for SKS Micro.
Proposal: 3000 km of road projects will be awarded in first 6 months of FY14. Positive for Sadbhav Engineering, construction companies.
Triveni
Engineering
Moschip
Speciality
Restaurants
Proposal: Allocation of Rs 15,260 crore towards clean drinking water & sanitation. Positive for Triveni Engineering, Va Tech Wabag.
Proposal: No custom duty for plant, machinery for semi-conductors. Positive for Moschip, SPEL.
Proposal: Finance Minister to impose service tax on all AC restaurants. Negative for Speciality Restaurants.
Super Rich Tax: 10% Surcharge on income above Rs 1 crore. Tax credit of Rs 2000 for income between Rs 2-5 lakh.
MALE: No change in tax slabs. TAX RATE NOW POST BUDGET
Nil 2 lakh 2 lakh
10% 2-5 Lakh 2-5 Lakh
20% 5-10 lakh 5-10 lakh
30% Above 10 lakh Above 10 lakh
FEMALE: No change in tax slabs. TAX RATE NOW POST BUDGET
Nil 2 lakh 2 lakh
10% 2-5 lakh 2-5 lakh
20% 5-10 lakh 5-10 lakh
30% Above 10 lakh Above 10 lakh
SENIOR CITIZEN: No change in tax slabs. TAX RATE NOW POST BUDGET
Nil 2.5 lakh 2.5 lakh
10% 2.5-5 lakh 2.5-5 lakh
20% 5-10 lakh 5-10 lakh
30% Above 10 lakh Above 10 lakh
VERY SENIOR CITIZEN: No change in tax slabs. TAX RATE NOW POST BUDGET
Nil 5 lakh 5 lakh
20% 5-10 lakh 5-10 lakh
30% Above 10 lakh Above 10 lakh
Click here to use our tax calculator to find out your new
tax structure.
Cigarettes
SUVs
Set Top Boxes
Mobile phones (GSM)
Yachts
Marble
MP3 Players
Passenger cars
Silk
MUVS
Diamonds
Imported Jewellery
Leather Goods
Electrical plants
Readymade Garments
Handmade carpets
GDP Trend & Forecast
Key Takeaways
The government expects GDP to grow in 6.1-6.7 percent range next year.
Wholesale price inflation is seen between 6.2-6.6 percent by March this year.
Revival of investment in infrastructure is one of the key challenges before the
government.
The Survey based on developments of FY13, draws out a rather cautious picture of the
year gone by, emphasizing the continued need for reforms in the coming months with an
outlook for the next fiscal pointing towards gradual improvements.
9.6%9.3%
6.7%
8.6%
9.3%
6.2%
5.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
GDP Growth Rate%
Fiscal Deficit
Key Takeaways
The Government will be able to achieve its fiscal deficit target of 5.3 percent for the
current year.
Revenue collection target for FY13 is likely to be significantly below target.
The Survey sees oil subsidies as a key fiscal risk, and that the government needs to
raise diesel and LPG prices in line with global rates.
There is limited room to grow exports, given adverse local and global factors
The only way current account deficit can be kept in check is by reducing imports of gold
and oil.
3.3%
2.5%
6.0%
6.5%
4.8%
5.7%5.3%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Fiscal Deficit as % of GDP
Current Account Deficit Foreign Exchange Reserves
Average Exchange Rate Savings Rate as % of GDP
Inflation Rate FDI & FII Flows
-2.8 -2.8
-4.2-4.6-5
-4
-3
-2
-1
0
% to GDP
279.1
304.8
294.4 295.5
260
270
280
290
300
310
Reserves (in USD Bn)
47.4445.56
47.92
54.47
39
42
45
48
51
54
57
USDINR
32.0
33.7 34.0
30.8
29
30
31
32
33
34
35
Savings Rate %
3.8
9.68.9
7.6
0
3
6
9
12
Inflation%
17.9
11.8
22.1
12.8
32.430.3
17.2
5.8
0
5
10
15
20
25
30
35
FDI FII (USD Bn)
“No hike in passenger fares; freight revenues eyed”
Key Takeaways
No hike in passenger fares. Railways propose no hike in Reservation fee, tatkal charge.
Freight charges on diesel, LPG, steel, iron ore, cement, urea up by 5.8%.
Railways to launch 67 new express trains, 26 new passenger trains.
Railways to introduce AC coaches for Mumbai suburban network in FY14.
New system to enable booking of 7,200 tickets per minute versus 2,000 now.
FY13 railway losses seen at Rs 24,600 crore versus Rs 22,500 crore year ago.
Railways to raise Rs 95,000 crore for the next 4 years.
Rail Budget – Full Speech I Analysis I Rail Budget Highlights – Full article
Coal India
Bhel
ACC
Proposal: Rs 4,000 crore has been allotted for coal mine connectivity projects.
Proposal: Railways to set up electromotive unit in Rajasthan in joint venture with BHEL.
Proposal: Freight rates to go up by 5.8%, Negative for cement, steel, iron ore and urea companies.
Titagarh Wagons
Texmaco Rail
Gammon Infra
Proposal: To introduce AC
coaches for Mumbai suburban coaches. Positive for Titagrah Wagons, Texmaco Rail.
Proposal: Railways to set up coach manufacturing facility at Haryana; Positive for Texmaco, Titagarh, BEML.
Proposal: Rs 9,000 crore has been allocated for port and mine connectivity. Positive for Gammon Infra, L&T, NCC.
Suzlon
KEC International
Siemens
Proposal: Railways to set up 75 MW windmill plants.
Proposal: Railways to set up equipment signaling plant at Chandigarh via PPP.
Proposal: Railways to complete electrification of 1,200 km.
Verdict
Railway Budget turned out to be a non-event. Railway Minister P K Bansal failed to deliver some big
ticket announcements. Major railway stocks like Kalindee Rail, Kernex, Titagarh Wagons, Texmaco Rail
saw a huge sell-off in trade.
Investors to face some small changes following Budget
- Arnav Pandya, Financial Planner Investors will witness some incremental changes as far as their
investment plans are concerned in the coming financial year following the announcement of the Union Budget 2013-14. These will not mean a major deviation from their existing plans though they will be able to make use of some additional options in their investment mix.
One bit of good news is that the investors will have a choice of tax
free infrastructure bonds for one more year as there has been a permission given for the issuance of
these bonds. The individual can choose this as a long term option for parking their funds for 10 to 15
years and this will not have an adverse tax impact because of the fact that the income will be tax free in
their hands.
The Rajiv Gandhi Equity Savings Scheme (RGESS) has also witnessed some small changes wherein the
income limit for being eligible for the scheme has been raised to Rs 12 lakh. At the same time the benefit
can be claimed over a period of three years as compared to the one year time period that exists currently
which means that the investor can actually phase out their investments to suit their requirements. The
choice of instruments in the scheme has also been increased as equity oriented funds have been
included in the eligible list of investments which will help the investor to choose a fund as per their liking.
On the house property front there is an attempt to encourage first time investors through a higher
deduction that will be available for repayment of interest on housing loans. For a first time buyer if the
value of the property is Rs 40 lakh or less and if the housing loan is Rs 25 lakh or lower then an additional
deduction of Rs 1 lakh would be available over and above the existing Rs 1.5 lakh deduction. Once again
this can be easily claimed because of the fact that is can be taken over a two year time period.
However the provision for a tax deducted at source at the time of sale of the house property if the value of
this is Rs 50 lakh or higher would be a negative. This would increase the burden on the individual in terms
of compliance and effort in deducting and depositing the tax with the government.
There will also be a better option available for those who want to protect their real rate of return because
there will be the introduction of inflation linked bonds and inflation linked National Savings Certificates.
Conservative investors as well as senior citizens can make use of this opportunity when it becomes
available. This will ensure that the interest rates earned by the investor moves along with the changes in
the overall interest rates and hence there is protection in times when inflation rises in the economy.
Why Chidu's Lo-Cal budget is a flop-show -R. Jagannathan Editor, Firstpost at Network 18 If Palaniappan Chidambaram’s eighth Budget has not set the markets on fire, it can be easily explained: his first goal was to avoid doing damage to investor confidence, which is what his predecessor managed to do. And unlike his own 2008 budget, which set the stage for the economy’s long-term slide and made inflation intractable, Budget 2013-14 has taken the middle path of low ambition and low risk. There is thus nothing in it to excite anybody, not even his
own party. He has delivered on his promise of providing a “responsible” budget, which the markets misunderstood to mean something that will send the adrenalin pumping. That was not on, and the FM restrained himself from any dose of excess populism. A lo-calorie budget is not meant to energise anybody. It is meant to get the fat down. If the markets are moping right now, with the Sensex and Nifty heading south, it’s because Chidambaram has already given them enough room for optimism before the budget. The markets wanted more of the same, but he could not oblige. A lo-calorie budget is not meant to energise anybody. It is meant to get the fat down. Before we rush to condole those left out of accessing the meagre basket of goodies, it is worth summarising the core proposals made in the budget. Chidambaram has raised Rs 18,000 crore of additional revenue through direct and indirect taxes, the former mostly by taxing companies more. Excise and customs remain more or less the same, with no changes in base rates. The concessions, both to populism and the middle classes, are minor: there is a token Rs 10,000 crore additional provision for Sonia Gandhi’s Food Security Bill, some very small personal income tax reliefs, and an additional deduction of Rs 1 lakh for interest paid on first home loans (over and above existing Rs 1.5 lakh). Plus there are promises on new savings instruments sold through post offices that will be inflation-indexed. But these will not be more than sideshows to the main avenues currently available for savings.
For full article, Click here
Budget: Chidambaram plays safe; market disappointed
-Santosh Nair Editor, Moneycontrol at Network 18
Much was expected of Finance Minister P Chidambaram in Budget
2013 considering that he had marketed it aggressively to foreign institutional investors in the last few ways. To be fair, he has delivered on two key parameters: fiscal consolidation and a stable tax regime. But what the market was hoping from the architect of the Dream Budget was some kind of a road map on how growth and the investment cycle could be revived in the near future. Also, on how
subsidies could be meaningfully lowered. And that is where he appears to have fallen short. It was never easy going to be raise taxes in a slowing economy, and to that extent, the status quo on key tax rates should come as a relief even if was only to be expected. The only other way out for the Finance Minister has been to cut back on expenditure, which has been doing aggressively over the past few months. But investors and the industry are questioning the wisdom of achieving fiscal targets through cost-cutting. At a time when private investments have dried up, a cutback in government spending could further crimp growth near term. While he has promised on a fiscal deficit target of 4.8 percent for next year, how he achieves that will be the key. The current year’s target was achieved by trimming Plan Expenditure by around Rs 1 lakh crore.
On the positive side, the FM has not slashed Plan Expenditure for FY14 in a big way as many had feared.
The estimate of Rs 5.5 lakh crore is about 29 percent higher than the revised estimate of Rs 4.29 lakh
crore for FY13.
Additional provision for the Food Security Bill at Rs 10,000 crore was much lower than what the market
had feared. The subsidy bill for fuel, fertiliser and food together for FY14 is estimated at Rs 2.31 lakh
crore, lower than the revised subsidy bill of Rs 2.57 lakh crore for FY13. But market may take the subsidy
estimate for FY14 with a pinch of salt, considering that the revised estimate for FY13 was about 35
percent higher than the initial estimate.
The FM said that current account deficit was a bigger problem than fiscal deficit. But the Budget did not
have anything specific on how oil and gold imports will be curbed.
There has been a sharp increase (46 percent) in allocation to the Rural Development ministry, and that
was only to be expected considering that general elections are due in barely a year. The FMCG industry
must be hoping that a pickup in rural consumption should add to their bottomlines.
For full article, Click here
February 28th: History repeats itself?
Menaka Doshi Corporate Editor, CNBC-TV18
"I have been at pains to state over and over again that India, at the
present juncture, does not have the choice between welcoming and spurning foreign investment. If I may be frank, foreign investment is an imperative." - P Chidambaram, Finance Minister
That’s how Finance Minister P Chidambaram opened his Budget speech on Thursday, striking the right note in a country starved of investments and faced with declining growth. He must have put a smile on the faces of foreign investors...only to wipe it off an hour later.
"In order to remove the ambiguity that prevails on what is Foreign Direct Investment (FDI) and what is Foreign Institutional Investment (FII), I propose to follow the international practice and lay down a broad principle that, where an investor has a stake of 10 percent or less in a company, it will be treated as FII and, where an investor has a stake of more than 10 percent, it will be treated as FDI. A committee will be constituted to examine the application of the principle and to work out the details expeditiously.” - P Chidambaram, Finance Minister
That was the first surprise. Till here the speech was going fairly well. He announced bits and bobs of infrastructure investments, put in an aggressive 4.8% fiscal deficit target, spoke of capital market reform and then suddenly threw in this half baked idea. Half baked because there are no details forthcoming. Indian budgets are high profile events...this one watched even more closely as it comes in an environment of declining growth and follows an epoch-making budget that include 24 retroactive amendments. High profile events are not the place to showcase meagrely worded ideas, being introduced for the first time. In a country home to complex, sectoral, foreign investment caps and confusing tax treatments for different classes of foreign investors, to suddenly tell a foreign investor his category might change without his will, is not a good idea. I just wish this had been eased in via a separate discussion paper, put through several rounds of debate and then proposed! But if think this is bad...think again.
"Some tax avoidance arrangements have come to notice, and I propose to plug the loopholes. Some unlisted companies have avoided dividend distribution tax by arrangements involving buyback of shares. I propose to levy a final withholding tax at the rate of 20 percent on profits distributed by unlisted companies to shareholders through buyback of shares.” - P Chidambaram, Finance Minister
There's no denying that some MNC structures have used this loophole so the FM's misgivings are justified as is his desire to plug the loophole. I could say the same about his next proposal.
For full article, Click here
The Twitterati gloss over Chidambaram’s Budget
# Dr Manmohan Singh @PMOIndia
“Given the challenges facing our economy, the Finance Minister has done a commendable
job.”
# Narendra Modi @narendramodi
“Budget 2013-14 showcases UPA's disconnect with the people! Unemployment & inflation
will continue to bother common man.”
# Kiran Mazumdar Shaw @kiranshaw
“Women have certainly occupied center stage in Budget 2013. I welcome all the women
oriented schemes announced by the FM.”
# Pritish Nandy
"Wonderful. We can’t stop rapes, crimes against women. But we want to open a bank for
women. As if women can’t use normal banks!”
# Amitabh Bachchan @SrBachchan
“Ama yaar, jise apne ghar ke Budget ke bare mein pata nahin, woh desh ke Budget pe kya
bolega!”
# Anand Mahindra
"No quarrel if ALL large cars taxed. Singling out SUV's destroys a level field. Sad, one has to
fight harder to succeed in one's own country"
# @Trendulkar
“Keeping money in the blouse is the original women's bank.”
# @kunalrao
“Women's bank? Will they be closed once a month for 4 days?”
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