Expectations from India's 2013/14 budget

  • Reuters
  • |
  • Updated: Feb 26, 2013 11:22 IST

India will deliver on Thursday its federal budget for the 2013/14 fiscal year that starts on April.

1. Finance Minister P Chidambaram is expected to push fiscal consolidation through spending cuts while looking to increase revenues to ward off the threat of a credit rating downgrade. Following are expectations from economists, analysts, investors and companies from the budget.
   
Fiscal Deficit
* Government target seen at 4.8 percent of gross domestic
product for 2013/14
* Government has revised 2012/13 target to 5.3 percent of
gross domestic product, compared with 5.1 percent estimated in
the budget in March.
       
GROWTH
* Government's GDP growth forecast for 2013/14 seen at 6 to 6.5 percent, compared with a decade-low of 5 percent in 2012/13 according to estimates released by the ministry of statistics. The finance minister has said the economy should expand 5.5 percent in 2012/13.
   
BORROWING
* Analysts expect net government borrowing below 5 trillion rupees ($92.4 billion) in FY14, little changed from 4.67 trillion rupees in FY13
 
    
Subsidies   
* Total subsidy burden seen falling by 400 billion-500 billion rupees from estimated 2.6 trillion rupees in FY13 * Ratio of subsidy payments to GDP seen below 2 percent by the end of 2013/14, compared with preliminary expectations of about 2.5 percent in 2012/13

* FY14 food subsidy bill seen between 850 billion and 1 trillion rupees versus 750 billion rupees budget estimates for current year

* Likely to cut fertiliser subsidy by at least 15 percent for 2013/14
   
SPENDING
* Finance minister plans to cut FY14 public spending target by up to 10 percent from FY13's original target Of 14.9 trillion rupees

* Spending on defence, rail, other development and welfare projects to be cut, according to Reuters sources

* FY13 public expenditure already reduced by 9 percent from original target
  
DIVESTMENT
    * Likely to target 400 billion rupees via stake sales in FY14 in state-run companies versus estimated 300 billion rupees in FY13
   
TAXES
    * Likely to lay out roadmap for implementation of goods and services tax (GST)
    * Low expectations for increase in headline corporate tax rates
    * Income tax slabs may be increased
   
MARKETS
* May remove cap on foreign institutional investments in rupee-denominated corporate bonds, or at least in infrastructure bonds
* May expand definition of term "infrastructure" to include companies that develop affordable housing
* May simplify processes for foreign investors
* Seen removing withholding tax on corporate bonds that have no restrictions on maturity or lock-in periods, or bring it down substantially
* May abolish or reduce securities transaction tax on equity investments
   
COMMODITIES
* May remove import duty on iron ore or raise duty on some steel imports to support domestic steel industry; could reduce iron ore export duty at behest of mines ministry

* May cap imports or cut number of companies authorised to import gold if purchases have not slowed by Feb. 28

* Production tax on jewellery and unveiling of gold saving schemes with some tax breaks seen

* May raise import tax to cut rising purchases of vegetable oils from Malaysia and Indonesia

* May levy transaction tax on commodity futures
* May give tax breaks to new LNG terminals, could also remove customs duty on LNG imports
* May extend tax breaks for new oil refineries and projects
* May implement export tax on value-added oilmeal products
   
COMPANIES
* Auto industry hopes for excise duty cut on small cars to 10 percent from 12 percent

* Budget may impose additional duty on diesel cars and utility vehicles

* Roadmap expected for capital infusion into state-owned banks

* IT services providers hope for clarity around transfer pricing norms, foreign tax credit and refund of service tax claims

* Telecommunications companies lobby for reduction in levies and tax breaks

* Real estate sector wants tax concessions and other fiscal benefits to builders, financiers and buyers of affordable housing

* Retail and consumer goods companies want industry status and an independent ministry set up for retail as well as a cut in rate of service tax on commercial property rent

* Budget may propose increase in excise duty for cement makers

* May remove import duty on thermal coal and introduce tax-free bonds for power sector ($1 = 54.1 Indian rupees)

 

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