Assignment: Union Budget

Jash Shah (A27) Impact on the Social Sector: The 2013-2014 Union Budget will have a largely positive impact on the Social Sector, which has allocated around Rs. 2,067 billion or 30.4% of the total planned expenditure. SC, ST, Women and Children: An allocation of Rs. 41,561 crore and Rs. 24,598 crore has been made to the scheduled cast sub plan and to the tribal sub plan respectively. Thus making efforts for the empowerment of the backward classes of the society. The Ministry of Women and Child Development has been provided with Rs. 200 crore in order to design schemes that will work towards removing gender discrimination against young women in all walks of life particularly at the work place as well as for allowing widows and single women to live with self esteem and dignity. This allotment is in addition to the Rs. 97,134 crore and Rs 77,236 crore made for women and children respectively. Minorities: Rs. 160 crore has been added to the corpus fund of the Maulana Azad Education Foundation for providing small scale medical services at its education institutions. This would allow minorities to avail of healthcare at a lower cost along with being available even in the remotest corners of the country. Health and Education: The union budget of 2013-2014 has been viewed as one that has given a huge impetus to the development of the health care sector with large allocations to the Ministry of Health and Family Welfare, encouragement of alternative medicine such as Ayurveda, Unani, Siddha and Homoeopathy and providing additional funds to the hospitals attached to the AIIMS like institutes. An allocation of Rs 27,258 crore has been made for the Sarva Shiksha Abhiyan along with Rs. 3,983 crore being set aside for investment in the Rashtriya Madhyamik Shiksha Abhiyan. Other notable proposals include additional funding for scholarships to be given to students belonging to Scheduled Castes, Scheduled Tribes, Other Backward Classes and Minorities girl children and for the mid-day meal scheme. This would help the government to move a step closer in achieving its objectives of universal education, higher secondary and primary school enrollment as well help ameliorate the quality of education in the country.
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Integrated Child Development Services: Along with an allocation of Rs 17,700 crore for early childhood care and promotion of education, an allocation of Rs. 300 crore has also been made for combating maternal and child malnutrition. This would be a major step in the battle against high maternal and child mortality and it is expected to cover about 200 districts all over the country. Drinking Water: The plan to allot Rs 1,400 crore for establishment of water purification plants in the arsenal and fluoride affected rural areas of the country will ensure that lakhs of people will get access to safe and unpolluted water. Rural Development: The union budget dispenses Rs. 21,700 crore to the Pradhan Mantri Gram Sadak Yojana thus ensuring that villages and towns all over the country enjoy improved connectivity as well as better quality roads. This has far reaching effects for the social and economic development of all the people of the country. The Jawaharlal Nehru National Urban Renewal Mission: The assignment of funds for the purchase of 10,000 buses in the hilly states would make travel in these states more affordable as well as improve connectivity, reduce travel time and make the journey more comfortable. However numerous concerns arise over under utilization of funds in the social sector, and it is only with an improvement in efficiency of spending would these measures have a commendable impact and achieve their intended targets. Thus the Budget is concentrating on inclusive growth of the citizens of India. Impact on Macroeconomic Variables: One of the major challenges facing the Indian economy is the slowing down of economic growth from its potential of 8% to 5.5% and 5% as forecasted by the Reserve Bank of India and the Central Statistical Organization respectively. According to the Finance Minister, economic growth is very important; as it is only with growth that inclusive economic development would take place. Thus this Budget was put forth with a view towards achieving inclusive growth and improving the countrys HDI indicators. Fiscal Deficit, Current Account Deficit and Inflation: The 2013-2014 Union Budget explains numerous initiatives to tackle the problems of high fiscal deficit; reliance on foreign inflows to finance the current account deficit; lower savings and lower investment; a tight monetary policy to contain inflation; and strong external headwinds.

According to the recommendations of the Dr. Vijay Kelkar Committee, the fiscal deficit limit was reduced to 4.8% of the GDP from 5.3% in the year before that. To combat the burgeoning current account deficit it recommends that it is imperative to attract capital into the country either through Foreign Direct Investment, Foreign Institutional Investment or External Credit Borrowings or a combination of all three. The policies of the government have also managed to bring down headline WPI inflation to about 7.0 percent and core inflation to about 4.2 percent and is pulling out all its guns in tackling food inflation by augment[ing] the supply side to tackle the demand supply mismatch and is one of the primary areas of concern. The Union Budget also plans to rationalize government expenditure in order to keep a check on the expanding fiscal deficit. However numerous questions do arise on the tax and non-tax revenues of the government that would fund this spending. Impact on the agriculture sector: The Union Budget of 2013-2014 is expected to have a significantly positive impact on the agriculture sector. Green Revolution: The budget allocates Rs. 500 crore for a program involving the diversification of crops in states where yields have stagnated and water resources are misused. This program would promote technological innovation and encourage farmers to choose crop alternatives along with creating employment opportunities in the rural areas which would help in the alleviation of poverty. Provisions of Rs 9,954 crore and Rs 2,250 crore for the Rashtriya Krishi Vikas Yojana and National Food Security Mission respectively will help to mobilize higher investment in agriculture and bridge yield gaps. Farmer Producer Organizations (FPO): The union budget intends to provide matching equity grants to registered FPOs up to a maximum of Rs 10 lakh per FPO along with creation of a Credit Guarantee Fund with an initial corpus of 100 crore. These projects would aid such organizations in leveraging working capital from financial institutions as well as giving some degree of relief to small farmers. National Livestock Mission: Rs. 307 crore has been set-aside for this mission that will be launched in 2013-14. This proposal will look to attract investment and enhance productivity along with increasing the availability of food and fodder in the agriculture sector.

As a whole in the agriculture sector the government has not shifted its focus on the development of the agriculture sector in spite of rising prices of food articles but has instead looked to raise allocations and introduced numerous schemes for creating an efficient market. Impact on the infrastructure sector: The budget intends to encourage Infrastructure Debt Funds (IDF). This proposal will raise resources and through take-out finance, credit enhancement and other innovative means will provide long-term low-cost debt for infrastructure projects. The partnership of India Infrastructure Finance Corporation Ltd and Asian Development Bank along with allowing some institutions to raise tax-free bonds up to 50,000 crore and the above mentioned IDFs will help the infrastructure sector in raising capital. Road Construction: The decision to form a regulatory authority for the road sector will have far reaching effects. Problems long troubling the sector such as financial stress, enhanced construction risk and contract management issues will be addressed. Numerous bottlenecks providing a hindrance to the development of road projects have been eliminated and 3,000 kms of road projects in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh will begin being conceptualized. This proposal also seeks to improve road connectivity in the country. Industrial Corridors: The proposed industrial corridors between Delhi and Mumbai, ChennaiBengaluru and Mumbai-Bengaluru would significantly reduce the travel time between the major metros and would thus help in the progress of the country. Ports: The construction of two major ports in West Bengal and Andhra Pradesh that would 100 million tons would encourage international trade and would decongest busy ports like Mumbai and Chennai. Impact on Banking, Capital Markets and Insurance: Banking: The Union Budget of 2013-2014 will have a highly positive impact on the banking sector. It proposes Rs. 14,000 crore to ensure that Public Sector Banks (PSB) are adequately capitalized and also guarantees that steps will be taken to make sure that all PSBs meet Basel III regulations. This would ensure that these banks from turning into sick units. The idea of establishing a Womens Bank would empower women financially and would have far reaching

positive effects on the rural household. With an allotment of Rs 4,000 crore to the Rural Housing Fund, numerous people will now have a roof over their heads. Thus these measures as well as others such as all banks adopting CBS and e-payment systems and every PSB to have ATMs in all their branches are important steps for enabling inclusive growth. Capital Markets: There will be a positive impact of the Union Budget on the capital markets of India. The definition of FII and FDI for the Indian context has been explicitly stated and brought to par with international definitions. Other measures such as allowing FIIs to participate in the exchange traded currency derivative segment and permitting them to use their investment in corporate bonds and Government securities as collateral to meet their margin requirements will encourage foreign investment into India. The budget also allows small and medium enterprises to be listed on the SME exchange without making an Initial Public Offering; this would stimulate and promote small start-ups and entrepreneurs. It also allows mutual fund distributors to become members in the Mutual Fund segment of stock exchanges. This would allow them to leverage the stock exchange network to improve their reach and distribution. In order to further develop the debt market the union budget makes provisions for stock exchanges to introduce a dedicated debt segment. Insurance: The insurance sector would see a relatively positive impact as a result of the 20132014 Union Budget. Measures such as opening up of branches in Tier II cities without approval of the IRDA, provision of an LIC office in all towns of India with a population of more than 10,000, allowing banks to act as insurance brokers and sell micro insurance products would ensure penetration of insurance among most towns and villages of the country and thus give a boost to investment and economic development. The proposal to settle pending claims would provide relief to numerous customers. An expansion of the Rashtriya Swasthiya Bima Yojana to cover other categories such as rickshaw, auto-rickshaw and taxi drivers, sanitation workers, rag pickers and mine workers will also increase penetration of insurance in the economy. Impact on Power, Coal, Oil and Gas: The Union Budget is also expected to have a positive impact on the power sector. The proposal to encourage exploration and production of shale gas will reduce our reliance on oil imports from the Middle Eastern countries. The proposed PPP partnership with Coal India would increase production of coal used for the generation of power. In order to encourage renewable sources of energy like wind energy, the budget puts forth Rs.
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800 crore for generation-based incentive for wind energy projects and would provide funds at low interest rate from the National Clean Energy Fund to viable renewable energy projects. Also extension of tax benefits under section 80-IA of the Income-tax Act by a year would also contribute to the positive impact in the power sector. Impact on Capital and Engineering Goods Sector: The Union Budget of 2013-2014 is will have a positive impact on the capital and engineering goods sector. It calls for a 15% deduction as investment allowance for companies investing Rs. 100 crore or more in plant and machinery. This would encourage small and medium enterprises to invest more in capital goods. A waiver on payment of custom duties on semiconductor wafer fab manufacturing facilities will encourage its production in the country. Also a reduction of custom duties on leather manufacturing machines would further encourage its exports and make them more competitive in the international market.

References 1. India. Ministry of Finance. Budget 2013-2014. N.p., 28 Feb. 2013. Web. 2 Apr. 2013. <http://indiabudget.nic.in/ub2013-14/bs/bs.pdf>. 2. Union Budget 2013-2014: Impact Analysis. Rep. D&B, 29 Feb. 2013. Web. 2 Apr. 2013. <http://www.dnb.co.in/Union_Budget_2013_14/D&B_Union_Budget_2013_14_Impact_ Analysis.pdf>.