The much-hyped pre-election Budget turned out to be too superficial. What the minister did not say was more important than what he did. A confused stock market, unable to add up the contradictory facts highlighted by the FM, did the best thing it could under the available circumstance: sell
P Chidambaram, the finance minister (FM) was not only trending on social networking site Twitter, but almost everybody interested in money and finance was glued to his Budget speech. Not just taxpayers, but analysts and economists were expecting a bonanza from the FM ahead of the general election. In the end, however, it turned out to be short on facts, leaving everyone confused as to how he will add up the giveaways while creating growth.
“While the finance minister has, we believe, presented a prudent budget, the question is whether the numbers are achievable. Expenditure growth is budgeted to rise 16.4% year-on-year in FY14, from 9.7% in FY13, with a steep rise in plan expenditure. Government expenditure will rise to 14.7% of GDP from 14.3% in FY13. Food subsidies have shot up to Rs90,000 crore due to the Food Security Bill—a prelude to elections, which the government expects to be financed by keeping the oil and fertiliser subsidy burden under check,” said Nomura Financial Advisory and Securities (India) Pvt Ltd, in a note.
Kunj Bansal, chief investment officer of SANLAM India, said, “There are no path-breaking measures in the Budget to push the economic growth of the country and to take it out of its present state of slumber. There has been more focus than expected on populism. The fine-print has created more confusion. It is a missed opportunity which could have been used to present the India story to the world. The positive thing is continuation of taxes without too much tinkering, but some measures to curb parallel economy transactions would have been revenue generating.”
For the SC and ST sub-plans, the FM allocated Rs41,516 crore and Rs24,598 crore, respectively. This represents an increase of 12.5% over the Budget estimate and 31% over the revenue estimate of the current year. “I reiterate the rule that the funds allocated to the sub-plans cannot be diverted and must be spent for the purposes of the sub plans,” the finance minister said.
While allocating Rs3,511 crore for the ministry of minority affairs, the FM also allocated Rs160 crore to Maulana Azad Education Foundation to increase its corpus to Rs1,500 crore during the 12th plan. He also allocated Rs150 crore to launch medical facilities like an infirmary or a resident doctor in educational institutions run by the Foundation.
Chidambaram, in his Budget speech, tried to woo women as well. “Women are at the head of many banks today, including two public sector banks, but there is no bank that exclusively serves women. Can we have a bank that lends mostly to women and women-run businesses, that supports women SHGs and women’s livelihood, that employs predominantly women, and that addresses gender-related aspects of empowerment and financial inclusion?” he asked. The FM then announced of setting up India's first women's bank as a public sector bank and provided Rs1,000 crore as initial capital.
The FM said he hopes to obtain necessary approvals and the banking licence for the women's bank before October 2013. The question is what will a women’s bank achieve? If it was more money to support women through social services, policing and judicial system, it would have made sense. But a bank for and by women? Bizarre idea.
No change in tax slabs
Chidambaram, while keeping the personal income tax rates or slabs unchanged, said, “The rates of personal income tax have survived four finance ministers and four governments. The current slabs were introduced only last year. Hence, I am afraid; there is no case to revise either the slabs or the rates. Nevertheless, I am inclined to give some relief to the tax payers in the first bracket of Rs2 lakh to Rs5 lakh. Assuming an inflation rate of 10% and a notional rise in the threshold exemption from Rs2 lakh to Rs2.20 lakh, I propose to provide a tax credit of Rs2,000 to every person who has a total income up to Rs5 lakh.”
This move is likely to benefit 1.8 crore tax payers to the value of Rs3,600 crore.
Kuldip Kumar, executive director for tax & regulatory services at PwC India, said, “Granting tax rebate of Rs2000 to those earning less than Rs5 lakh hardly means anything, keeping in view the current inflationary environment. Those earning more than Rs1 crore would also get irked as levy of surcharge of 10% on them is just a counter balancing measure without any specific purpose.”
Besides announcing a tax credit, the FM also tried to boost the housing sector. He provided an additional interest benefit of Rs1 lakh on first-time home loans for up to Rs25 lakh.
Calling the Budget as tepid for Indian real estate sector, Anuj Puri, chairman and country head, Jones Lang LaSalle India, said, “...this (Rs1 lakh additional interest benefit) provision is only for the first year and with a carry-forward benefit of the unutilised deduction to the second year. This will help boost housing sales in tier II and III cities and peripheral areas and distant suburbs of metros, but not within the metros, where housing is more targeted towards the mid and upper income segments.”
Gagan Banga, chief executive of Indiabulls, feels that this budget will provide a big relief for affordable home seekers and will be a boon for the housing industry. “The proposal to offer an additional interest deduction of Rs1 lakh on housing loans of up to Rs25 lakh for first-time home buyers will not only help housing as such, but will also lead to an increase in demand for steel, glass, cement and several other industries,” he said.
“While steps like Rs2,000, relief to taxpayers in the Rs2-Rs5 lakh bracket and Rs1 lakh additional relief on home loans of up to Rs25 lakh would certainly put more disposable income—howsoever little—in the pockets of the common man, these were much less than expected. Given continued inflation, there is very little real relief and cheer for the common man,” said Sunil Duggal, chief executive, Dabur India.
Rajiv Gandhi Equity Savings Scheme (RGESS)
In order to incentivise the household sector to save in financial instruments instead of buying gold, the FM allowed first-time investors to invest in mutual funds as well as in listed shares for three consecutive years. He also raised the income limit for RGESS to Rs12 lakh from Rs10 lakh per year.
While the Reserve Bank of India is trying to woo people away from buying gold, the FM increased the duty-free limit for the precious metal. He said, “Gold prices have risen since, and passengers have complained of harassment. Hence, I propose to raise the duty-free limit to Rs50,000 in the case of a male passenger and Rs1 lakh in the case of a female passenger, subject to the usual conditions.”
The baggage rules permitting eligible passengers to bring jewellery was last amended in 1991.
1% TDS on transfer of immovable property
Chidambaram also proposed to levy additional 1% tax deducted at source (TDS) on transfer of immovable property. He said, “Transactions in immovable properties are usually undervalued and underreported. One half of the transactions do not carry PANs of the parties concerned. With a view to improve the reporting of such transactions and the taxation of capital gains, I propose to apply TDS at the rate of 1% on the value of the transfer of immovable property where the consideration exceeds Rs50 lakh. However, agricultural land will be exempt.”
However, according to Mr Puri, charging TDS on gross transaction value instead of net gains would affect sellers. “The TDS of 1%, to be charged on the transfer of immovable property, is an obvious move to curb speculation and bring about improved reporting and accountability in high-value immovable property transactions. Considering that the TDS is to be charged on the gross transaction value rather than net gains, sellers will have a cash-flow impact in situations where the sales are at a loss or at zero or negligible gains,” he said.
Taking note of the changes and shifts in the market regarding Securities Transaction Tax (STT), the finance minister, while reducing the STT, decided to impose transaction tax on commodities trading, except agricultural products. The STT on equity futures is now reduced to 0.01% from 0.017%, mutual fund (MF) and exchange traded fund (ETF) redemptions at fund counters to 0.001% from 0.25% and for MF, ETF purchase or sale on exchanges to 0.001% from 0.1% only on the seller. In other words, STT in derivative segment would be now charged at Rs1,000 per transaction of Rs1 crore, from Rs1720 earlier.
He also proposed to levy Commodities Transaction Tax (CTT) on non-agricultural commodities futures contracts at 0.01% of the price of the trade. He said, “Trading in commodity derivatives will not be considered as a ‘speculative transaction’ and CTT shall be allowed as deduction if the income from such transaction forms part of business income. As I said, agricultural commodities will be exempt.”
While welcoming the step to introduce transaction tax on commodities trading, DK Aggarwal, chairman and managing director of SMC Investments & Advisors, said, “Imposition of CTT on commodity non-agri futures will be a detrimental step for the growing popularity of commodity future as hedging instrument. However, the decision to consider commodity derivative profit and loss as business income against speculative income is a welcome step.”
SUVs to become costlier
Sports utility vehicles (SUVs), the hot favourite, did not find favour with Chidambaram. He said, “SUVs occupy greater road and parking space and ought to bear a higher tax. I propose to increase the excise duty on SUVs to 30% from 27%. However, the increase will not apply to SUVs registered as taxis.”
Indian automakers, especially SUV producers are not happy with the decision. S Sandilya, president of Society of Indian Automobile Manufacturers said, “This is the only segment in the industry which has been doing well this year and increasing price of these vehicles would dampen sales and impact market sentiments further.”
Chidambaram said there is an affluent class in India that consumes imported luxury goods such as high-end motor vehicles, motorcycles, yachts and similar vessels and he was sure that they will not mind paying a little more. He increased the duty on such motor vehicles to 100% from 75%; on motorcycles with engine capacity of 800cc or more to 75% from 60% and on yachts and similar vessels to 25% from 10%.
Welcoming the finance minister's decision to increase duty on imported vehicles, Mr Shandilya, said, “The increase in customs duty for luxury cars and motorbikes seems to be an effort to raise more revenue and to encourage local manufacturing, value addition and employment. The proposal to increase duty on second-hand vehicles to 125% from 100% is the right step. It clearly conveys that India is not ready to accept old vehicles from other countries.”
Naresh Kevalramani, a passport applicant from Pune has been seeking appointment online for the last whole week but did not get it. He has been assured an appointment by a passport agent. Will TCS and the Regional Passport Office still blink despite this evidence?
The trauma of getting an online appointment after an applicant has filled his online application form for getting his new passport or renewing passport continues to haunt citizens in Pune.
While the efforts of the Pune Passport Grievance Forum (PPGF) has resulted in sporadic efficiency, the overall dismal picture of online appointments evading the applicant for weeks, the pre- and post-police verification issues continue. Similarly, the “hell care” attitude of citizens at the Passport offices run by the ministry of external affairs and the Tata Consultancy Services (TCS) respectively has also been reported.
Following is an example of a forthright citizen Naresh Kevalramani, who has applied for renewal of the passports of his wife and son, but has not been able to get his appointment online since the past week. Finally, a passport agent assured him an appointment. Kevalramani has shown guts as a citizen to come out in the open and forward the email of the passport agent, instead of keeping quiet and getting his personal work done through these means. If many more Kevalramanis come out in the open, exposing passport agents, it could make a difference.
Kevalramani has been writing these emails to me in my capacity as the Convener of Pune Passport Grievance Forum. Reply to his emails and subsequently his emails to me have been copied to senior officers of TCS—Tanmoy Chakrabarty, Pradipta Bagchi, Ashis Babu and Manoj Raghav, as also to Muktesh Pardeshi, Chief Passport Officer; Shakuntala Rane and Regional Passport Officer. However, none of them have had the courtesy to reply.
Finally Kevalramani wrote to a passport agent called Sahil:
“On 2/26/13, Naresh Kevalramani <[email protected]> wrote: Hi Salil, Can you help me to book appointment for PSK Pune.
Kindly inform the charges.
Sahil writes: From: SahiL <[email protected]>Date: Tuesday, February 26, 2013 11:29 PM
To: Naresh Kevalramani <[email protected]>
Subject: Re: PSK Appointment
Thanks for your mail. Sir i can book an appointment for you at Pune PSK, for this the charges shall be Rs200, and you have to pay this amount after the booking of appointment, payment options:-
SBI & AXIS BANK, by net banking or directly deposit to these banks account.Plz. Reply ASAP”
I have forwarded this mail to the TCS and MEA’s passport authorities stating: “Oh my God—this is shocking Nareshji. Mr Raghav and Ms Rane could you please take immediate action on this agent? If not, it means there is a nexus between your employees and agents who are TOTALLY ILLEGAL!
The following mail trail between Kevalramani and me reveals the trauma passport applicants face:
“From: Naresh Kevalramani <[email protected]>
Date: Monday, February 25, 2013 3:26 PM
For the last one week, I am trying to get the appointment for passport application filled in for my wife and son (case of passport expiry). I find that the appointment are begun to be allotted around 3 pm and within 4 to 5 minutes all slots become full and the system is shut down.
I do not understand as to how I can get an appointment. I am trying for the last one week but unable to get the appointment. Twice I was successful but as soon as I selected the timing, I was logged out. Kindly help.
My reply/forwarded to Regional Passport Officer, Shakuntala Rane and Kevalramani:
“Dear Mrs Rane,
Please find below a complaint by Mr Naresh Kevalramamani who is not getting his online appointment. I am asking him to ‘walk-in’ at your office. Please do the needful
cheers and warm rgds
Dear Mr Kevalramani
Please visit the Passport Office, Senapati Bapat Road, during working hours of any working day and get your appointment there. I suggest you visit the passport office and meet Ms Rane, Regional Passport Officer or Ms Arora, Assistant Passport Officer, both of whom are very open to addressing complaints and will surely give you an appointment immediately. You may call Ms Rane or Ms Arora on 020-25675419. If you don't get thru her landline no. you may call Ms Rane on her cell no 08xxxxxx2.
All the best,
Kevalramani’s response to me:
Thanks for your prompt response and support.
I again tried today to get the online appointment. I was online since 2.45 pm on my broadband connection at home which is a AIRTEL 2 MBPS speed connected to my computer (Apple Mac Book Air) so no hardware or software issues. Only one laptop connected to the connection.
Today, I selected the time of 12.30 to 12.45 pm for 05 March and when asked to put in the confirmation code I put in the same and waited for the appointment confirmation. Instead of getting the confirmation I was logged out of the system. The system closed at 3.04 pm saying that all appointments are full today. So in effect one gets only 4 minutes to book the appointment which is impractical and unrealistic.
The same thing has happened twice before and I do not understand what type of a system this is built by TCS.
In fact when the application form is submitted on line the appointment should be given, the appointment can be for a later date say 15 or even 20 days later. Trying to get the appointment is becoming a daily ritual with no success.
I see a number of people who have been marked a copy of this mail. Can we citizens of India expect a realistic and practical system of working rather than this 4 minute slot everyday.
Await response from any one of the above people who have been marked copies and are part of the system.
My appeal to TCS officials since e-governance is their responsibility:
“Dear Mr Bagchi and Mr Raghav
This is a very serious problem and common occurrence. Pl immediately address this problem. Please treat this as SOS
Kevalramani writes to TCS officials with cc to me:
“Dear Mr Bagchi and Mr Raghav,
Though I am not a software engineer but an avid user of Internet since the last 15 years and use the net extensively for banking, online air and rail ticket booking, bill payments, etc.
Nowhere, I have seen such a system wherein the user makes the selection (in this case the appointment time) and is immediately logged out or that slot taken by some other individual. Even for airlines/ trains/ cinema tickets, I recollect that the slot (reservation) is available for 5 minutes for the user to confirm and proceed ahead with the payment.
Anyway, I am an individual and will somehow manage to get the appointment by personally meeting the passport officers but as a system, this needs a drastic improvement to make it user friendly and instill confidence in the citizens that passport application process is an easy process and not a pain, as currently it is.
My reply with cc to TCS officials addressed in Kevalramani’s mail:
“Yes, many passport applicants are frustrated at this inability to get appointments. I urge the RPO and TCS officials to check whether there is an alleged nexus between the agents and employees of the Passport office. How is it that agents can assure appointment and get it done immediately? I am sure this is not rocket science and if TCS has the will, it can immediately solve the problem. This is sheer citizen harassment.
Please take action, Sirs.
Kevalramani after trying for an appointment again, writes a mail to me:
“The same sequence of events happened today….
I selected a time slot of late noon hours and filled in the security code (the alpha numeric code seen on the captcha), immediately after this the system logged me out and on the second attempt to login and get the appointment, all appointments are booked.
The system was open for exactly 4 minutes.
Can somebody from TCS advise and tip me on the trick to get the appointment ???????
Finally Kevalramani writes to a passport agent called Sahil
Pasted below the correspondence I had with one of the agent who has openly posted on a website saying that he can manage appointment for any PSK in India.
I asked him his charges and sent him a mail yesterday evening which was promptly replied by him confirming the charges at Rs 200 for each appointment made by him. Payment to be made after the appointment is booked.
You can also send him a mail and ask him his charges.
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(Vinita Deshmukh is the consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte” with Vinita Kamte and is the author of “The Mighty Fall”.)
To meet the projected 5.3% fiscal deficit, North Block has forced other ministries to cut down their planned expenditure by around 10% on an average. So far this fiscal, the government has spent only 96% of its budgeted expenditure
The Reserve Bank of India said the government’s cash balance with it will cross the Rs1 trillion- mark this fiscal, with the finance ministry likely to save an additional Rs5,000 crore through the remaining part of this financial year.
“The government’s cash balance is quite comfortable and as per the Budget estimate, it will increase by additional Rs5,000 crore over the last year’s closing balance. They will be building a slightly higher cash balance. Current level is around Rs1 trillion,” RBI deputy governor HR Khan, who is in charge of the government finances department at Mint Road, told reporters at the post-Budget press meet.
The cash balance numbers are interesting as normally the government and the RBI do not officially share the cash balance of the government parked with the central bank.
It can be noted that to meet the projected 5.3% fiscal deficit, North Block has forced other ministries to cut down their planned expenditure by around 10% on an average. So far this fiscal, the government has spent only 96% of its budgeted expenditure.
RBI deputy governor says the government will manage FY14 government borrowing
Finance minister P Chidambaram pegged the fiscal deficit at 5.2% for this financial year and 4.8% for the next fiscal.
Another deputy governor Urjit Patel, while hailing the Budget as offering “a credible roadmap for fiscal consolidation and lowering inflation,” said the fiscal deficit measures will go a long way in fighting inflation as well as fiscal correction.
In this regard he also welcomed the proposal to launch inflation-indexed bonds, which will help fight inflation. The press briefing was also attended by another deputy governor Anand Sinha.