Vote-on-Account 2014 (Interim Budget)

                Finance Minister Palaniappan Chidambaram presented the Vote-on-Account today in the Parliament. For starters, the Vote on Account is the Interim Budget for the incumbent Government which will be followed till the new Government takes over post elections and presents an annual budget. A few key takeaways of the Interim Budget are as follows:

1. The Current Account Deficit is estimated to be controlled at $45 billion from last fiscal year’s $88 billion.
2. Fiscal Deficit is estimated at 4.6% of GDP, below the target of 4.8%. This has largely been possible due to the interim dividends by PSUs such as Coal India, divestment schemes in PSUs and rolling over Rs 35,000 crore of fuel subsidies to the next year. This would possibly make it difficult for the next Government too, to control the Fiscal Deficit.
3. However, the Revenue Deficit is estimated at 3.3%, same as last year, which points to a failure of the incumbent Government.
4. Perhaps the biggest gainer from the Interim Budget is the Automobile Sector and Consumer Durables Industry. Vehicle excise duty has been reduced from 12% to 8%, the sedan segment excise duty has been reduced from 24-27% to 20-24% and the excise duty on SUVs has been reduced from 30% to 24%. The car prices would go down by Rs 20,000 for small cars and up to 1,80,000 for SUVs.
5. Excise Duty on Consumer durables has been cut from 12% to 10%. This includes TV sets, refrigerators and Air Conditioners.
6. GDP expansion in 2013/14 third and fourth quarters will be at least 5.2 per cent. The GDP growth for the FY13-14 is pegged at 4.9%.
7. Food subsidy estimated at Rs 1.15 lakh crore.
8. Defence Spending raised to Rs 2.24 lakh crore in 2014/15, up 10 per cent year on year.

Overall, the budget neither delighted nor disappointed. Most importantly, it is not a populist budget, since it is the last budget, and opportunity for the incumbent UPA to make an impact. The markets too have not been swayed much by the Interim Budget, with the Sensex closing 97 (0.48%) points up at 20,464.

-          By Sufiyan Sarguroh

SIMSREE Finance Forum

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