DECODING THE FINE PRINT

BUDGET Overview DECODING THE FINE PRINT To revive economic growth by encouraging investment Fiscal deficit in 2013/14 estimated at 4.8% Budget 2013/14 assumes the economy will perform better than in the previous year and tax administration will be much more efficient At an estimated 5per cent, economic growth in 2012/13 is the lowest in a decade THE TOOLS THE GOALS To send a signal, by lowering the fiscal deficit, that public finances are under control To attract foreign investors and thereby bridge the foreign exchange shortfall Improved tax administration efficiency India had to draw down forex reserves by $0.2 billion in Q2 of 2012/13 to bridge current account deficit PERFORMANCE BENCHMARKS SET Aggressive disinvestment, as well as sale of the government's stakes in companies where it has no management control. 18,000 cr Regular increases in the price of diesel (which will lower the fuel subsidy) Improve Tax/GDP ratio to 10.9 per cent in 2013/14 from 10.4 per cent to be raised through tax increases Disinvestment proceeds are to be used exclusively to capitalize banks and support railways If plans are followed, it will be first time in nine years that fuel subsidy year-on-year comes down BUDGET'S Investment POTENTIAL IMPACT may begin to revive, leading to economic Lower oil subsidy by a third to 765,000 crore Raise 755,814 crore by selling government equity stakes in companies RBI may continue to lower interest rates Revenue deficit may fall to 3.3 per cent in 2013/14 from 3.9 per cent growth above 6 per cent Subsidies in 2013-14 to fall to 2 per cent of GDP from 2.6 per cent Economy forecast to grow in 2013/14 between 6.1 per cent and 6.7 per cent Text by Sanjiv Shankaran Graphics by Santosh Kushwaha BUDGET Overview DECODING THE FINE PRINT To revive economic growth by encouraging investment Fiscal deficit in 2013/14 estimated at 4.8% Budget 2013/14 assumes the economy will perform better than in the previous year and tax administration will be much more efficient At an estimated 5per cent, economic growth in 2012/13 is the lowest in a decade THE TOOLS THE GOALS To send a signal, by lowering the fiscal deficit, that public finances are under control To attract foreign investors and thereby bridge the foreign exchange shortfall Improved tax administration efficiency India had to draw down forex reserves by $0.2 billion in Q2 of 2012/13 to bridge current account deficit PERFORMANCE BENCHMARKS SET Aggressive disinvestment, as well as sale of the government's stakes in companies where it has no management control. 18,000 cr Regular increases in the price of diesel (which will lower the fuel subsidy) Improve Tax/GDP ratio to 10.9 per cent in 2013/14 from 10.4 per cent to be raised through tax increases Disinvestment proceeds are to be used exclusively to capitalize banks and support railways If plans are followed, it will be first time in nine years that fuel subsidy year-on-year comes down BUDGET'S Investment POTENTIAL IMPACT may begin to revive, leading to economic Lower oil subsidy by a third to 765,000 crore Raise 755,814 crore by selling government equity stakes in companies RBI may continue to lower interest rates Revenue deficit may fall to 3.3 per cent in 2013/14 from 3.9 per cent growth above 6 per cent Subsidies in 2013-14 to fall to 2 per cent of GDP from 2.6 per cent Economy forecast to grow in 2013/14 between 6.1 per cent and 6.7 per cent Text by Sanjiv Shankaran Graphics by Santosh Kushwaha