India's Interim Budget 2014-15 - Reviving Growth

Posted in Finance Articles, Total Reads: 1942 , Published on 04 March 2014
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With the sliding growth of world as well as our economy coupled with high inflation, falling rupee, widening external deficit and diminishing business confidence the last few years have been painful for the Indian economy.


Finance Minister P. Chidambaram presented his first-ever interim budget, for the fiscal year 2014-15, to cover expenditure until a new government is formed after elections in May.

The Harvard educated Chettiar was optimistic on the Indian Economy pointing out that resurgence in exports, global economic revival and moderation in inflation point to better outlook for the economy in 2014-15.



While industry expectations were limited from the interim budget, the emphasis laid on turning around the growth trajectory and reviving the manufacturing sector in particular were well received.


Going forward the government has to focus on fighting inflation, strengthening fiscal balances, boosting infrastructure and improving agricultural growth.

 

Following are the key highlights:-

 

Economic Indicators

The fiscal deficit for 2013-14 contained at 4.6 percent of GDP

Foreign exchange reserve to grow by USD 15 billion in this Financial Year

WPI inflation down to 5.05 percent and core inflation down to 3.0 percent in January 2014

Growth in GDP for the whole year has been estimated at 4.9 percent

Mixed performance- agriculture improved, industry and services recorded jaded growth

Political uncertainty, policy paralysis and high interest cost have adversely impacted investment and consumption


Direct Tax

With the domestic economic constraints, taxation slabs and rates have been kept unchanged.


Indirect Tax

Reduction in excise duty rates up to 30th June 2014 ranging from 2 percent to 6 percent across automobiles, television sets, refrigerators, washing machines, personal computers & mobile handsets.


While the period of relief is small, this move could provide some reprieve to the industries.

 

To conclude, positive developments during last two quarters indicate an improved economic performance going forward, with reduced inflation and deficits (trade, current and fiscal) and improved GDP growth. Some measures, such as reduction in excise duties, have been announced to boost selected industries. Besides, several infrastructure projects are also underway, which are likely to provide stimulus to the economy.


Globally, things are encouraging and a stable government at the centre will lift business confidence among investors and also boost external demand for India.

 

This article has been authored by Bhavin Chotai, Chartered Accountant



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