Budgets of the governments are a reflection of the society's

aspirations. It becomes even truer in a democracy. India's economic

and political system is going through a metamorphosis and therefore a
General Budget in an election year holds significance.
As expected, the interim general budget had some sops to offer. But as
far as tax slabs are concerned, the Finance Ministry had given clear
indications even before the budget that tax slabs will not be changed
and that there was likely to be only minor tinkering with excise
duties.
But on indirect tax front, FM has gone for excise duty cuts,
particularly related to the auto sector. The slab for small cars has
been slashed from 12% to 8%, medium cars from 24% to 20%, large cars
from 27% to 24% and on SUVs from 30% to 24%.
Mobiles are likely to be cheaper with the now standard 6% duty; and
capital and consumer durable goods industries would also benefit with
a 2% duty cut. FM made an attempt to spur local manufacturing of 'Made
in India' cell phones by cutting excise duty on mobile phones
manufactured in India.
Prices of air conditioners, washing machines, small-screen LED TVs,
digital cameras, laptops, kitchen appliances, microwave ovens and
electronic personal care gadgets will come down by a marginal 1-2%
with the interim budget announcing a cut in excise duty from 12% to
10%.
It is a welcome change since the market has been impacted with
recurrent price increases last year due to rupee depreciation and
increase in commodity prices.
Despite water purifiers, air purifiers and vacuum cleaners qualifying
for an excise duty cut, there will be no change in pricing since
market leaders like Eureka Forbes and Kent have their plants in
no-excise zone.
The finance minister has retained the super rich surcharge for now,
but held out hope that it would be dropped when the new government
presents the full budget a few months from now. Last year, Chidambaram
had imposed 10% surcharge on those with taxable income in excess of
Rs1 crore and said it would be in force only for a year.
But the surcharge has been retained for now as the finance minister
has chosen to follow the convention of outgoing governments not
tinkering with direct taxes.
The government in budget accepted the long-standing demand of
ex-servicemen for 'one-rank, one-pension' and allocated Rs 500 crores
for the fund, a decision that is expected to benefit around 30 lakh
retired personnel of the Armed forces.
Students from economically weak section of society who borrowed prior
to 2009 will benefit as government announced in budget to pay interest
component for a period up to December 31, 2013 on loans taken prior to
2009 by a section of borrowers. The centre would allocate Rs 2600
crores and about 9 lakh students would benefit with this move.
What is worrying is that the FM has overstated the revenues and
understated the costs. He had deferred revenue expenditure and cut
capital expenditure. He over-booked revenue, only to 'revise' it
downward. This year, he cut capital expenditure by Rs 91,000 crores,
which would have disastrous long-term consequences for the investment
cycle and job-creation.
The budget documents reveal that the Drinking Water and Sanitation
budget would be slashed from Rs 12,000 crores this year to Rs 231
crores next year which is very surprising in a country like India
which needs funds in these areas.
On reforms front, the FM announced in budget to introduce a single
data point that will track all financial records, like investments, of
an individual to simplify record keeping and ensure greater tax
compliance. This is among the five steps that Finance Minister P
Chidambaram has outlined in interim Budget 2014-15 to deepen the
financial market.
The steps include comprehensively revamp the ADR, GDR scheme and
enlarge the scope of depository receipts, liberalize the rupee
denominated corporate bond market and deepen and strengthen the
currency derivatives market to enable Indian companies to fully hedge
against foreign currency risks.
The Budget has announced further measures to improve financial
efficiency and financial stability. The fiscal deficit target has not
only been maintained within 4.8 per cent of GDP, but has actually been
lowered to 4.6 per cent of GDP. For the coming year, the target of 4.1
per cent of GDP is in line with medium term goals.
Overall, Fiscal prudence was something FM has taken care of in his