INTRODUCTION

Market gave its verdict on Budget 2013-14, leading to 1.5 percent fall in stock indices on Thursday. Corporate India will have to bear the cross of higher taxes and certain surcharges. However, 2013-14 Budget also presented few positive initiatives like a road regulator, faster production of coal through public-private partnership (PPP) projects and lowered borrowing by the government.

Lata Venkatesh of CNBC TV18 in discussion with an eminent panel comprising of finest minds in the corporate world, focuses on their verdict on the Budget 2013. The panel comprises Shikha Sharma, managing director and chief executive officer, Axis Bank; Shankar Raman, group chief financial officer of Larsen and Toubro (L&T); M Lakshminarayanan, partner at Deloitte Haskins & Sells and expert on direct or indirect taxes and Dev Bhattacharya, group executive vice president and head of corporate strategy and business planning at Aditya Birla Group.

THE ECONOMY AND THE CHALLENGES

Getting back to potential growth rate of 8 percent is the challenge facing the country. Slowdown in Indian economy has to be seen in the context of slowing global economic growth from 3.9 per cent in 2011 to 3.2 per cent in 2012. However, no reason for gloom or pessimism. Of the large countries of the world only China and Indonesia growing faster than India in 2012-13. In 2013-14, only China projected to grow faster than India. Between 2004 and 2008, and again in 2009-10 and 2010-11 the growth rate was over 8 per cent and crossed 9 per cent in four of those six years. 11th Plan period had average growth rate of 8 percent, highest during any Plan period, entirely under the UPA Government. High growth rate can again be achieved through cooperation. Higher growth leading to inclusive and sustainable development to be the mool mantra. Government believes in inclusive development with emphasis on improving human development indicators specially of women, the scheduled castes, the scheduled tribes, the minorities and some backward classes. This Budget to be a testimony to that commitment.
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THE PLAN AND BUDGETARYALLOCATIONS

Revised Estimates (RE) of the expenditure in 2012-13 at 96 per cent of the Budget Estimates (BE) due to slowdown and austerity measures. During 2013-14, BE of total expenditure of ` 16,65,297 crore and of Plan Expenditure at ` 5,55,322 crore. Plan Expenditure in 2013-14 to grow at 29.4 per cent over Revised Estimates for the current year. All flagship programmes fully and adequately funded and sufficient funds provided to each Ministry or Department consistent with their capacity to spend funds. Budget for 2013-14 to have one overarching goal of creating opportunities for our youth to acquire education and skills that will get them decent jobs or selfemployment.

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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

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Budget highlights
The Union finance minister today presented the Budget for the year 2013-14. Some of the key points that were highlighted by Chidambaram in the Budget are:

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.

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.

Fiscal deficit for FY13 at 5.2 percent and FY14 fiscal deficit seen at 4.8 percent.

Rajiv Gandhi Equity Savings Scheme to be liberalised.

Additional deduction of interest up to Rs 1 lakh for a person taking first home loan up to Rs 25 lakh during period 1.4.2013 to 31.3.2014

A tax credit of Rs 2000 to every person with total income in the first bracket of Rs 2 lakhs to Rs 5 lakhs.

Foreign portfolio investment in excess of 10 percent in an Indian company will be classified as foreign direct investment. Entry norms for FIIs to be eased further.

Duty on imported luxury goods such as high end motor vehicles, motor cycles, yachts and similar vessels increased.

No change in slabs and rate for personal income tax.

Tax credit of Rs 2000 to be provided to every person to having income of up to Rs 5 lakh, this will benefit 1.8 crore people.

5 to 10 per cent surcharge on domestic companies whose taxable income exceeds Rs 10 crore.
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Commodities transaction tax levied on non-agriculture commodities futures contracts at 0.01 per cent.

Modified GAAR norms to be introduced from April 1, 2016.

No change in peak rate of customs duty for non-agriculture products.

Direct Taxes Code (DTC) bill to be introduced in current Parliament session.

No change in basic customs duty rate of ten per cent and service tax rate of 12 per cent.

Import duty on rice bran oilcake withdrawn. Series of concessions granted to Maintenance, Repair and Overhaul (MRO) business in the aviation sector.

Import duty raised on set-top boxes from 5 to 10 per cent to safeguard interest of domestic producers.

10 per cent customs duty to be levied on unprocessed illuminate.

Import duty raised from 75 to 100 per cent on luxury vehicles.

Duty free limit on gold raised to Rs 50,000 in case of male and Rs 100,000 in case of female.

No countervailing duty on ships and vessels.

Specific excise duty on cigarettes and cigars raised by 18 per cent.

Excise duty on SUVs to be increased to 30 per cent from 27 per cent, SUVs registered as taxis exempted.

Vocational courses offered by state-affiliated institutes to be exempted from services tax.

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Duty on mobiles above Rs 2,000 raised from one to six per cent, based on their maximum retail prices.

Service tax to be levied on all a/c restaurants.

One time voluntary compliance scheme for service tax defaulters to be introduced. Interest and penalties to be waived.

Direct tax proposals to yield Rs 13,300 crore, indirect tax proposal to give Rs 4,700 crore.

Education cess to continue at 3 per cent.

Contributions made to central and state government health scheme eligible to tax benefit.

Eligibility conditions for life insurance policies of persons suffering disabilities to be liberalised.

Investor Protection Fund set up by depositories will be exempt from tax.

Transactions on immovable properties usually undervalued.

TDS of one per cent on value of properties above Rs 50 lakh. Agriculture land exempted.

Securities Transaction Tax (STT) reduced on equity future, mutual fund.

Fiscal deficit will be 5.2 per cent in current year and 4.8 per cent in the next fiscal.

Will redeem our pledge to reduce fiscal deficit to 3 per cent by 2016-17 and revenue deficit to 1.5 per cent of GDP. Tax Administration Reform Commission to be set up to regularly review tax law applications.

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In 2011-12, tax-GDP ratio was 5.5 per cent for direct taxes and 4.6 per cent for indirect taxes.

Surcharge of 10 per cent for individuals whose taxable income is over Rs 1 crore.

Plan expenditure pegged at Rs 555,322 crore.

Non plan expenditure pegged at Rs 11,09,975 crore for 2013-14.

Low interest rate funds to be provided from Clean Energy Fund for green projects for a period of five years.

Generation-based incentives to wind energy projects reintroduced, Rs 800 crore provided for the purpose to Ministry of New & Renewable Energy.

Constraints will not come in the way for providing additional funds for security of the nation.

Rs 2,03,672 crore, including Rs 86,741 crore capital expenditure to Defence in 2013-14.

Grant of Rs 100 crore each to AMU (Aligarh), BHU (Varanasi) and TISS (Guwahati) and INTACH.

National Institute for Sports to train coaches to be set up at Patiala at a cost of Rs 250 crore.

Rs 532 crore to make post offices part of core banking.

Rs 5,87,082 crore to be transferred to states under share of taxes and non plan grants in 2013-14.

Comprehensive social security package being evolved by convergence of several schemes run by various ministries.

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Investor with stake of 10 per cent or less will be treated as FII; any stake more than 10 per cent will be treated as FDI.

FIIs will be allowed to participate in exchange traded currency derivatives.

We will evolve schemes for cities to take up waste to energy projects.

Small and medium companies to be allowed to listed on MSME exchange without making a public offer.

Concessional six per cent interest on loans to weavers.

Financial Sector Legislative Reforms Commission (FSLRC) to submit its report next month.

Govt to construct power transmission system from Srinagar to Leh at the cost of Rs 1,840 crore, Rs 226 crore provided in current Budget. Faced with huge fiscal deficit, I have no choice but to rationalise expenditure

We have brought down headline WPI inflation to 7 per cent and core inflation to 4.2 per cent. Food inflation is worrying

Plan expenditure in 12th Five Year Plan revised to Rs 14,30,825 crore or 96 per cent of budgeted expenditure.

Budget expenditure is Rs 16,65,297 crore and Plan expenditure Rs 5,55, 322 crore

The revised expenditure target is Rs 14,30,825 crore or 96 per cent of Budget estimate for this fiscal. In 2013-14, the budget estimate is Rs 6,65,297 crore.

One overarching goal to provide education and skills to youth for securing jobs in the 201314.

FM allocates Rs 41,561 crore for SC sub-plan; Rs 24,598 crore for tribal sub plan.
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Additional sum of Rs 200 crore to Women and Child Welfare Ministry to address issues of vulnerable women.

Rs 3511 crore allocated to Minority Affairs Ministry which is 60 per cent of the revised estimates.

CFM allocates Rs 41,561 crore for SC sub-plan; Rs 24,598 crore for tribal sub plan.

Rs 3511 crore allocated to Minority Affairs Ministry which is 60 per cent of the revised estimates.

Rs 110 crore to be allocated to the department of disability affairs.

Rs 37,330 crore allocated for Ministry of Health & Family Welfare.

Rs 1069 crore allocated to Department of Aryush.

Rs 4,727 crore to be allocated for medical education and research. Rs 1,069 crore to be given to Department of Ayush.

In the Budget Rs 65,867 crore allocated to Ministry of HRD in 2013-14.

Medical colleges in six more AIIMS-like institutions to start functioning this year; Rs 1650 crore allocated for the purpose.

Rs 5,284 crore to various Ministries for scholarships for SC/ST, OBC and minority students.

Rs 13,215 crore to be provided for mid-day meal scheme.

Rs 17,700 crore provided for Integrated Child Development Scheme.

Rs 15,260 crore to be allocated to Ministry of Drinking Water and Sanitation.

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Rs 17,700 crore to be allocated for Integrated Child Development Scheme (ICDS).

Rs 80,194 crore allocation for Ministry of Rural Development in 2013-14. About Rs 33,000 crore for MGNREGA.

Rs 80,194 crore allocated for rural development schemes.

States which have completed Pradhan Mantri Gramin Sadak Yojana will be eligible for PMGSY-II, others will continue with PMGSY-I.

Rs 14,873 crore for JNNURM for urban transportation in 2013-14 against Rs 7,880 crore in the current fiscal.

Foodgrain production in 2012-13 will be over 250 million tons.

Average annual growth rate of agriculture and allied services estimated at 3.6 per cent in 2012-13 when 250 MT foodgrains was produced.

Rs 27,049 crore allocation to the Agriculture Ministry in 2013-14.

Rs 7 lakh crore target fixed for agriculture credit for 2013-14 compared to Rs 5.75 lakh crore in the current year.

Eastern Indian states to get Rs 1,000 crore allocation for improving agricultural production.

Additional sum of Rs 200 crore to Women and Child Welfare Ministry to address issues of vulnerable women.

Green revolution in east India significant. Rice output increased in Assam, Odisha, Jharkhand and West Bengal; Rs 1,000 crore allocated for eastern states.

Rs 5,387 crore to be allocated for integrated watershed programme for farmers in 2013-14, an increase from Rs 3,050 crore in the current fiscal.

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Indian Institute of Biotechnology will be set up at Ranchi.

Rs 10,000 crore set aside for incremental cost for National Food Security Bill over and above food subsidy.

Four Infrastructure debt fund have been registered.

Tax free bonds issue to be allowed up to Rs 50,000 crore in 2013-14 strictly on capacity to raise funds from the market.

Rs 5,000 crore will be made available to NABARD to finance construction of godowns and warehouses.

Government has decided to constitute a regulatory authority for the road sector.

Many manufacturing projects stalled due to regulatory process.

A company investing Rs 100 crore or more in plant and machinery in April 1, 2013 to March 31, 2015 will be allowed 15 per cent investment deduction allowance apart from depreciation.

Rajiv Gandhi Equity Scheme will be liberalised to allow first time investor to invest in Mutal Fund and equity.

First housing loan up to Rs 25 lakh would get additional deduction of interest of up to Rs 1 lakh in 2013-14.

Govt to construct power transmission system from Srinagar to Leh at the cost of Rs 1,840 crore, Rs 226 crore provided in current Budget.

Current account deficit continues to be high due to excessive dependence on oil, coal and gold imports and slowdown in exports.

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India does not have choice between welcoming and spurning foreign investment; it is an imperative.

Battle against inflation must be fought at all fronts.

DIPP and Japan's JICA preparing plan for Chennai-Bengaluru Industrial corridor.

Two new major ports to be set up in West Bengal and Andhra Pradesh.

Oil and gas exploration policy will be reviewed and moved from profit sharing to revenue sharing.

Policy on exploration of shale gas on the anvil; natural gas pricing policy will be reviewed and uncertainty removed.

Govt to set up India's first women's bank as a public sector bank by October.

Coal imports during Apr-Dec 2012 crossed 100 million tonnes and expected to go up to 185 million tonnes in 2016-17.

5 million tons Dabhol LNG import terminal to be operate at full capacity in 2013-14.

FM asks state governments to prepare financial restructuring plan for power distribution companies at the earliest.

SIDBI's re-financing facility to MSMEs to be doubled to Rs 10,000 crore.

Incubators set up by companies in academic institutions will qualify for Corporate Social Responsibility (CSR) activities.

Rs 500 crore would be allocated for addressing environmental issues faced by textile industry.

Concessional six per cent interest on loans to weavers.

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Financial Sector Legislative Reforms Commission (FSLRC) to submit its report next month.

Standing Council of Experts in Ministry of Finance to examine transaction cost of doing business in India.

Rs 14,000 crore capital infusion into public sector banks in 2013-14.

PSU banks to have ATMs at all their branches by March 31, 2014.

Rs 6,000 crore to be allocated for rural housing fund in 2013-14.

All Regional Rural Banks and cooperative banks to be e-linked by this year-end.

Insurance companies will be empowered to open branches in Tier-II cities with approval of IRDA.

National Housing Bank (NHB) to set up urban housing bank fund and Rs 2,000 crore will be allocated in this regard.

Public sector general insurance companies to set up adalts to clear disputes related to claims.

Rashtriya Swasthya Bima Yojana benefit will be extended to rickshaw pullers, auto and taxi drivers and sanitation workers.

Comprehensive social security package being evolved by convergence of several schemes run by various ministries.

Investor with stake of 10 per cent or less will be treated as FII; any stake more than 10 per cent will be treated as FDI.

FIIs will be allowed to participate in exchange traded currency derivatives.

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We will evolve schemes for cities to take up waste to energy projects.

Small and medium companies to be allowed to listed on MSME exchange without making a public offer.

Sector impact

Sector: Auto
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

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. Impact Negative for M&M and Tata Motors. Higher allocation to JNNURM positive for all commercial vehicle manufacturers.

Sector: FMCG
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.
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Proposals Specific Excise Duty on cigarettes increased by 18%. Tax on royalty increased from 10% to 25%.

Impact Cigarette companies will pass on the increase to the customers. This could marginally impact volume growth.

Sector: Oil & Gas

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 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 Positive for the upstream companies like Reliance, ONGC.

Sector: Banks/Financials
Expectations Expects capital infusion of around Rs 20,000 crore. Easing of investment norms, deepening of bond markets. Reduction in STT

Proposals Extension of 4% farm loans to private banks.

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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

Impact Negative for private sector banks. Positive for PSU banks. Introduction of CTT negative for broking companies.

Sector: Infra
Expectations Higher allocation to infrastructure spending. Elimination of hurdles for roads and highways. Higher allocation to infrastructure tax free bonds.

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

Impact Positive for the sector. It will boost infrastructure development in roads, ports, housing and railways.

Sector: Pharma
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 Royalty/technical fees paid to NRIs increased to 25%. To allot Rs 37333 crore for healthcare, family welfare in FY14.
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Impact Higher allocation is positive for the sector. Increase in royalty fees marginally negative for Ranbaxy

Stock to watch out for: ITC

Proposal: SED on cigarettes hiked by 18%. Negative for ITC.

Coal India
Proposal: To encourage PPP projects for coal. Positive for Coal India.

ONGC
Proposal: To announce policy on Shale gas based on revenue sharing, Blocked NELP blocks will be cleared. Positive for Reliance Inds, ONGC.

ICICI Bank Proposal: 4% farm loan scheme extended to private sector banks. Negative for private sector banks.

Tata Motors
Proposal: Excise duty on SUV upped to 30% from 27. Negative for M&M, Tata Motors.

DLF
Proposal: House loans up to Rs 25 lakh will be allowed an additional deduction of interest of Rs 1 lakh. Positive for realty.

SBI
Proposal: To provide Rs 14,000 crore for public sector banks recapitalisation. All Womens Bank to be set up via public sector. Positive for public sector banks.

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 Sun Pharma
Proposal: To allot Rs 37333 crore for healthcare, family welfare in FY14: Positive for pharma stocks.

Jain Irrigation
Proposal: Rs 27,049 crore allocated to Ministry of Agriculture, up 22%. Positive for Jain Irrigation, Monsanto, fertilisers and pesticides.

Educomp Solutions
Proposal: Rs 65,877 Cr has been allocated to education, up 17% from FY13. Positive for education stocks.

NTPC
Proposal: Extension of sunset clause for profit-linked incentive by one year: Positive for the power sector.

Century Textiles
Proposal: Propose technology upgrade scheme for textile sector to Rs 2400 crore in FY14. Positive for Century Textiles, Alok, Arvind.

Suzlon Energy
Proposal: Higher allocation for wind energy. Positive for Suzlon.

SKS Micro
Proposal: Bank correspondents can sell micro finance products. Positive for SKS Micro.

Sadbhav Engineering
Proposal: 3000 km of road projects will be awarded in first 6 months of FY14. Positive for Sadbhav Engineering, construction companies.

Triveni Engineering
Proposal: Allocation of Rs 15,260 crore towards clean drinking water & sanitation.
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Positive for Triveni Engineering, Va Tech Wabag.

Moschip
Proposal: No custom duty for plant, machinery for semiconductors. Positive for Moschip, SPEL.

Speciality Restaurants Proposal: Finance Minister to impose service tax on all AC restaurants. Negative for Speciality Restaurants.

NEW TAX SLABS

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.

FEMALE: No change in tax slabs.

SENIOR CITIZEN: No change in tax slabs.

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VERY SENIOR CITIZEN: No change in tax slabs.NOW POST BUDGET

WHATS COSTLIER?
Cigarettes SUVs Set Top Boxes Mobile phones (GSM) Yachts Marble MP3 Players Passenger cars Silk MUVS

WHATS CHEAPER?
Diamonds Imported Jewellery Leather Goods Electrical plants Readymade Garments Handmade carpets

GDP Trend & Forecast

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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.

Fiscal Deficit

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.

Current Account Deficit

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Foreign Exchange Reserves

Average Exchange Rate

Savings Rate as % of GDP

Inflation Rate

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FDI & FII Flows

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