As it happened: Chidambaram focuses on fiscal deficit

16:32 PM Addressing the media today after presenting the Union Budget 2013, Finance Minister P Chidambaram today said it is important to read the Budget along with the Economic Survey as the budget takes some of the steps mentioned in the survey to address the economy's concerns.

Given the constraints of the economy, the Budget did not want to surprise markets by spooking investors or burdening a certain class of society, said Chidambaram. And why would he? After all, he had merely promised attaining his fiscal deficit target, which he seems to have accomplished.

Admitting that the government could have done more, Chidambaram said measures can only be taken once the wheels have turned. "The main message to give out is that India is following a path of fiscal prudence."

Moving on to UPA's biggest problem, inflation, the FM noted that blaming the RBI is not a solution, even though he was confident that the RBI will do its part. Is he hinting at a rate cut in the next monetary policy? After all even the RBI today seemed impressed with the government's borrowing plans and lauded its efforts to reduce subsidy.

And Chidambaram made sure the press noted this. "Fuel subsidy bill will also be lower in 2013-2014 due to cap on subsidised cylinders and correction of diesel prices," he said.

On Direct Tax Code, the FM will try and bring back the Bill by the end of the Budget Session of Parliament. On GST, however, he said the ball is in the state government's court as he has already set aside Rs 9000 cr as balance for first installment of compensation.

"We are committed to goods and services tax, the ball is with the state governments."

He also clarified that the uncertainty over 2G auctions will be resolved as spectrum will be sold, unlike what was witnessed in the past auctions.

The FM was also confident of achieving his growth target of 4.9 percent. After all he is advised by the Prime Minister's Economic Advisory Council, which changed its growth estimate more than three times last year!

Chidambaram also felt that despite the expenditure cuts, he had allocated enough to ministries. Aggregate demand is boosted by government expenditure which can also result in inflation, while too little expenditure will harm growth. "The skill is finding in the right amount of expenditure," said Chidambaram.

Defending the setting up of an All-women' bank, he said there is a bias to lend towards men against women, which is why this bank will address their concerns. It will employ predominately women and lend mostly to women. It will not only address self-help group issues along with encourage gender equality.

Moreover, the surcharge on the rich is not likely to lead to tax evasion since it is only a token cost that someone has to pay who already makes a profit of Rs 10 crore annually.

'Taxes from rich will go to poor through social schemes'

15:42 Facing the ire of rating agencies and investors alike, the finance minister delivered his promise of fiscal consolidation through a combination of a higher tax revenues and increased asset sales, but lacked expenditure control, said brokerage Nomura. Since, budgeted expenditure is set to rise by 16.4 percent in FY14 and food subsidies shooting up to Rs 90000 crore- a prelude to elections- there is doubt on whether his growth numbers are achievable.

" Higher taxes are intended to redistribute income from the rich to the poor through the government?s social sector schemes, likely with an eye on elections. Fiscal consolidation ought to be attained through a combination of higher taxes and lower spending, but the budget uses only the higher revenue route. Further, the delayed payment on FY13 subsides will mean the subsidy burden carries into FY14. As such, we believe slippage in the budgeted fiscal deficit of 4.8% of GDP may be unavoidable," it said.

Mulayam, Mayawati, Karat agree Budget 2013 only for corporates

15:17 pm Samajwadi Party leader Mulayam Singh Yadav termed the budget as "anti-poor" and "anti-farmer" and vowed to oppose it in Parliament. "This budget is only for 10 percent population of the country. What kind of budget is this which ignores 65 percent people who are engaged in farming," he said.

BSP leader Mayawati, whose party has extended support to the UPA, criticised the budget saying it was drafted to "confuse" the common man and there was nothing new in it. She said all the announcements seem lofty and "in the air".

"There is nothing new in this budget and there nothing for farmers, employees and the middle class," she said, adding that the policies of the central government are not in the interest of the common man and are "anti-people".

Criticising the budget, CPI (M) leader Brinda Karat said "this budget is really promoting that particular factor of growth which has marked the UPA regimes, which is the growth determined by the interests of the corporates."

"It is a pro-corporate budget. It is a budget which once again is finding ways to give tax exemptions and also this budget shows manipulation of figures by Chidambaram in his presentation. If you look at the Revised Estimates, you will find there has been a huge cut in the expenditure, compared to what previous budget estimates are," she said.

2:13 pm M&M bears brunt of SUV excise increase

The auto sector's worst fear has come alive. The FM increased excise duty on sports utility vehicles, except those run as taxis, from 27 percent to 30 percent.

The fear was always there, ever since Jairam Ramesh, when he was Union environment minister, said using diesel-guzzling SUVs was "criminal". That was in 2010. And the auto sector always thought the government has something against the segment.

And with the latest move by Finance Minister P Chidambaram, it has become real.

"SUVs occupy greater road and parking space and ought to bear a higher tax. I propose to increase the excise duty on SUVs from 27 percent to 30 percent. However, the increase will not apply to SUVs registered as taxis," Chidambaram said in the budget speech.

According to Deloitte Haskins & Sells, this would hit the passenger automobile sector on the fastest growing product portfolio which is SUV.

"Consequential price increase could be higher than 3 percent because of consequential implications of VAT and entry tax or octroi, it said. Further, this would discourage usage of diesel as most of SUVs run on diesel. However, the demand of the SUV sector is generally seen as price inelastic, it said.

And naturally, the stock market has not taken it lightly.

Shares of Mahindra & Mahindra, the biggest player in the utility vehicles segment, are down 2 percent and that of Maruti Suzuki 3.3 percent. Tata Motors was flat. While Pawan Goenka of M&M is happy that the government did not introduce a diesel tax, the excise duty on SUVs was a sure dampener.

RBI happy with government's efforts to reduce subsidies

The Reserve Bank too seemed impressed with the government's efforts to reduce subsidies. "Budget creates fiscal space for private borrowing and has set the stage for lowering the twin deficits, " it said in a statement.

The central bank also felt inflation-indexed bonds will increase options for savers.

1:50 pm Budget 2013 is a disappointed for women, children and the poor.

Terming the Budget as a disappointed, BJP said women children and the poor have been neglected.

There were no avenues for creating employment opportunities for the youth , while women were given only a 'cosmetic promise of an all-women's bank, while the poor for also neglected, said senior BJP leader Sushma Swaraj.

Even Leader of Opposition in Rajya Sabha Arun Jaitley said the Budget is verbose but on substance is it is low.

According to Jaitley, finance minister P Chidambaram had very little elbow room to bring about significant reforms given the mess the economy is in, which is why he only "made cosmetic changes in different heads of expenditure and direct taxes." He added that the minister had indulged in a "little bit of jugglery, by marginally increasing taxes in certain ministries and substantially reduces expenditure".

Jaitley said the budget contained little to offer a boost to agriculture or manufacturing sectors, which are vital for sustainable growth.

While no meaningful changes were made to taxes, expenditure was reduced substantially so that optically the high target of fiscal deficit remains.

1:42 pm Budget has done a great job of addressing the nation's priorities: Chanda Kocchar

Despite banking stocks tanking post the Budget announcement, Chanda Kocchar, MD at ICICI Bank felt that the budget had done a great job of addressing the nation's priorities of fiscal consolidation and bringing back investment.

Even Naina Lal Kidwali praised the Budget for not being a populist, pre-election budget. While expenditure allocations have gone up, the level of populism has not been that significant.

Meanwhile, C Rangarajan says Budget focuses on investor confidence

Budget should bee seen in context of measures taken since September. The focus of the Budget is clearly on inviting more investment, said C Rangarajan, chairman of the Prime Minister's Economic Advisory. Rangarajan termed it as a balanced budget as it aims at fiscal consolidation and the expenditure pattern of the current budget was aimed at stimulating investment.

1:36 pm 1% TDS will curb speculation, undervaluation of property deals

Anuj Puri, Chairman & Country Head, of real estate firm Jones Lang LaSalle India, termed the Budget as realistic but said it did not have any implications for real estate.

"This was a moderately encouraging Budget in general, but tepid for the Indian real estate sector," said Puri.

The TDS of 1% to be charged on the transfer of immovable property is an obvious move to curb speculation and bring about improved reporting and accountability in high-value immovable property transactions. Considering that the TDS is to be charged on the gross transaction value rather than net gains, sellers will have a cash-flow impact in situations where the sales are at a loss or at zero/negligible gains.

The rate of abatement on homes and flats of above 2000 square feet or costing Rs. 1 crore and above has been reduced from 75% to 70%. Effectively, this translates into an increase in service tax outflow, which means that luxury housing will now become even more expensive.

For Chandrajit Banderjee, Director General CII, the budget managed to address critical issues even though no big bang reforms were announced. "We are looking at controlling the fiscal deficit and promoting SMEs," said Banerjee.

Rahid Bilimoria, CEO BlueFin said the Budget was populist because of the overall increase in subsidies, including food subsidies.

"Disappointment at the 5-10 percent surcharge on local companies with income above 10 crores that will not be growth spurring. However there were positive elements around widening participation in financial markets including proposed cut in STT".

1:31 pm There's not one thing we can fault the finance minister for: Adi Godrej

Adi Godrej, President CII and Chairman, Godrej Group welcomed the Budget and said the finance minister has done a good job by suggesting tax administrative reforms that GAAR will be made law.

"There's not one thing we can fault the finance minister for. We welcome his budget and feel that it will add to growth -- the GDP will be better the next year. I congratulate him, as he was in a very difficult conditions," said Godrej.

S Gopalakrishnan, Executive co-chairman, Infosys said the budget was good for the IT sector as it encourages innovators, incubators and creation of companies. "His being specific that GAAR will be implemented are all very good," said Gopalakrishnan.

10 mn jobs need to be created to achieve 8% GDP growth, says PM

1:12: Prime Minister Manmohan Singh too congratulated the finance minister for presenting a ' commendable job' by containing deficit while simultaneously addressing the growth imperatives. He, however, cautioned that an 8 percent growth cannot be achieved in one year and will take at least two to three years.

"We need to create 10 million jobs a year for the duration of the 12th Plan which can be achieved only if we reach 8% GDP growth level," the PM said.

On allocations for various ministries, PM said that Budget 2013 has provided plenty for every ministry. "It is upto the collective wisdom of my ministers to convert challenges into opportunities to make growth more inclusive and sustainable."

He also said that India needs to get its act together and get on the growth path of 8 percent.

He lauded the finance minister for charting out the path to reign in fiscal deficit and create a better climate for investment and moderation inflation.

" If fiscal deficit is under control we can moderate the pace of inflation," said Singh.

1:10 pm Budget 2013 is a classic Chidambaram Budget

MS Unnikrishnan, MD and CEO Thermax, also felt that Union Budget 2013 was balanced, and a classic Chidambaram budget.

"I don't think the economy is going to tank after the budget. His emphasis on addressing CAD is a very positive move. Chidambaram has understood the difficult scenario and has allocated specific funds where it is most needed," he said.

FM takes easy way out with super-rich tax, says Deepak Parekh

1:pm Even though markets declined post the Union Budget, HDFC's Deepak Parekh however seemed optimistic and termed the budget as a realistic one and also congratulated finance minister P Chidambaram for achieving the fiscal deficit target of 5.2 percent.

While he said the surcharge on the super rich and corporates is a deterrent , he said it must be accepted as it is only a marginal surcharge. As compared to other countries, "tax rates in India are one of the lowest globally."

He also said that by this marginal 10 percent surcharge the government has taken an easier way out as he has not introduced regressive taxes like an inheritance tax, estate duties etc.

And rather than worrying about these taxes, large investors can now kickstart the growth process by investing in infrastructure.

He also praised Chidambaram for being brutally honest about the current account deficit being the biggest worry, even bigger than the fiscal deficit. " The only way to correct this is through FII, FDI and ECB, and Chidambaram has acknowledged that," said Parekh in an interview with CNBC-TV19.

Parekh, however, did express his disappointment with the FM not announcing any sops for retail investors since the absence of domestic investors implies Indian markets will continue to remain hostage to FIIs.

1oo : pm S. Sandilya, Chairman, Eicher Motors too felt Chidambaram has done a good job.

" It is an extremely positive budget and taxing the super rich was important. He made a request in good faith and considering that it's only for one year, I'm sure people will not mind."

RC Bhargava, Chairman, Maruti Suzuki, however was disappointed since there was nothing for the auto sector.

"There is nothing about the auto sector that has made me happy or unhappy. Stability is a good thing and so I'm happy."

As expected, ITC gets an excise rise of 18% in Budget 2013

12:44 pm Shares of cigarette-hotels major ITC extended the decline to 1.12 percent after the finance minister increased SED on cigarettes by 18 percent.

TDS of 1 percent imposed on value of property (other than land) exceeding Rs 50 lakhs is likely to be negative for the real estate sector, said Deloitte.

Further, extension of sunset clause for profit-linked incentive by one year is likely to be a positive for the power sector, it said.

12:29 pm The disappointment of the market was clear. Even a cut in Securities Transaction Tax failed to enthuse the investors.

The finance minister's proposal to increase the surcharge for foreign companies from 2 percent to 5 percent and that for Indian companies from 5 percent to 10 percent is a negative for the corporate sector, Deloitte said.

The benchmark indices Sensex and Nifty were down 0.4 percent.

12:07 pm: The benchmark indices further came off highs and were as up just 0.16 percent as the unfolding Budget 2013 had nothing much for the stock markets or the economy in general.

Pre-budget, there were hopes that the finance minister will do nothing to damage the applecart of stock market on which he is hugely dependent on for divestment revenue.

But all may not be all lost, as FM is yet to start tax proposals. If he indeed cuts or even do away with the STT, it will be a windfall

11:57 am A Rs 14,000 crore recapitalisation proposal failed to enthuse public sector bank shares. The stocks were largely unmoved after the proposal.

Recapitalisation is a given for PSBs. Investor sentiment for banks will change only if the government announces steps to boost the economy in general.

11:47 am Capital goods index held on to gains after the govenrment unveiled a few steps to increase credit flow into the sector.

Regulatory authority for road construction sector may not be viewed positively by small and medium enterprises.....as it could be perceived as 'license raj'....however, it may be good for large sectorial players, Deloitte said.

The proposal to revival of investment in the manufacturing sector by removing bottlenecks, is positive for the sector.

Shares of L&T was up 1.4 percent, IRB Infra was up 3 percent, GMR 2 percent.

11:38 am The benchmark indices came off even as the finance minister continued wooing voters with more sops.

Increase, if any, in minimum purchase price for food / crop for farmers could fuel food inflation rate which is already alarming and worrisome, Deloitte said.

Positive proposals on Food security could boost the logistics sector, companies invovled in storage, warehousing and transportation, Deloitte said.

However, this is liekly to increase the government spending for subsidies.

11:26 am: Education related shares rose afger the finance minister proposed a 17 percent increase in allocation to the sector to Rs 65,877 crore.

Huge thrust to education is positve for the sector, Deloitte said. Rs 27,258 crore has been allocated to Sarva Siksha Abhiyan. Allocations to provide scholarships was Rs 5284 crores

Aptech was up 6 percent, Treehouse 3 percent, NIIT 2 percent.

Reuters

Aptech was up 6 percent, Treehouse 3 percent, NIIT 2 percent. Reuters

11:20 am: The benchmark indices held the grounds and remained stable after the finance minster started the budget speech. The Sensex and Nifty were both up 0.6 percent.

Finance Minister has proposed a total budget estimate for FY14 at Rs 16.55 lakh crore. Plan expenditure for the year has been estiamted 29.4% hihger than that of FY13.

According to Deloitte Haskins & Sells the finance minsiter is creating the right sentiment.

10:56 am: The BSE Realty Index and the Capital Goods Index were top giners among sectoral indices on expctation that the govenrment is likely to propose measures to boost invetment in these these sectors.

Both the indeces were up 1.8 percent. There is wide expectation that the finance minister is liekly to accord infratructure status to affordable housing. This is will big boost to the much-battered real estate sector.

Infrastructure status will boost the affordable housing segment as such a move will help developers get clearances and finance santions easier, Axis Capital had said in a pre-budget note.

As far as capital goods sector is concerned, the govenrment likely to announce concrete steps to boost invesmtents in the infrastructure sector.

10:32 am Shares of Jet Airways extended gains and rose more than 6 percent on expectation that the company is now nearing a deal with Abudhabi-based Etihad Ariways.

Etihad said on Wednesday that the company has bought Jet Airways' slots in the Heathrow Airport for $70 million and also that it is in discussions for making further investment in the Indian company.

Investors see Etihad's move as a positive step towards the closure of the equity deal.

10:11 am Tax expert HP Ranina told CNBC TV18 that securites transaction tax may be reduced and the govenrment's thrust on creating the right environment for investor. He also expects the finance minister to tinker with the sort-term capitla gains tax. The marklet is anyways not doing any great, so this is a viable thing he could do, Ranina said.

As far as the roll-out of the Goods and Services Tax is concerned, Chidambaram is liekly to only reiterate the earlier stance that the govenrment is on course to inctroduce it in after the election, said Dinesh Kanabar of KPMG.

The sensex, meanwhile, was stable with a 0.5 percent rise.

9:42 am Of the 30 Sensex consituents, 28 advanced and 2 declined. ONGC, up 2.6 percent, and Coal India up 2.2 percent were the top gainers The BSE Midcap Index, which was on a roallercoster ride over the last few days, was up 0.5 percent. Of the 250 constituents, 170 advanced, 43 declined, one remained unchanged and 36 were not traded, accordign to the data on the BSE website.

Pankaj Vaish of Citibank told CNBC TV18 that the slowdown is major worry and the need of the hour is a revival in the investment. The only way out for the government is to add capacity massively, he said. He expects the market To consolidate around current levels for now and hit new high before 2014 general elections. The government should also look at providing domestic investors options besides gold.

9:19 am Sensex opens at 19290.32 , up 0.72 percent and the Nifty opened at 5836.45, up 0.68 percent, triggered by positive global cues as Asian shares and other risk assets rose as sentiment improved after US Federal Reserve Chairman Ben Bernanke reaffirmed his commitment to strong stimulus, while a smooth debt sale calmed fears over Italy's political turmoil.

The Indian equity markets are likely to open flat with a positive bias as investors await the Budget for taking positions, while global cues provide support.

Asian shares and other risk assets rose on Thursday as sentiment improved after US Federal Reserve Chairman Ben Bernanke reaffirmed his commitment to strong stimulus, a Reuters report said.

AFP

Worries about the eco-political situation in Italy also receded after a debt sale there sailed through, it said. AFP

Worries about the eco-political situation in Italy also receded after a debt sale there sailed through, it said.

The yen was defensive, with Japanese Prime Minister Shinzo Abe nominating Asian Development Bank President Haruhiko Kuroda as Bank of Japan governor, and academic Kikuo Iwata as one of the two deputy governors. Both are seen by markets to support Abe's call for unconventional reflationary stimulus measures, and that view has underpinned yen selling, the report said.

Domestically, investors are pinning hopes on a budget that will be prudential and responsible, with proposals to cut unproductive expenditures, which will help the government rein in its fiscal deficit.

They also hope Finance Minister P Chidambaram will not resort to steps that will damage the prevailing positive sentiment in the market.

However, there have been reports that the finance minister is likely to introduce new taxes in order to increase its revenue. Any increase in taxes or introduction of new tax is likely to the impact the market sentiment negatively.

On the positive side, any concrete measure to push investment in the infrastructure sector is likely to be a big boost for the market.

Investors have also been gunning for a cut or complete repeal of the securities transaction tax, which they think has been a big drag on the trading volumes on the bourses.

If the FM manages to do this, it will be a windfall for the markets.