Budget window-dressing makes market happy

New Delhi: The Indian economy got a window-dressing in the Interim Budget presented to Parliament on Monday.  

Finance Minister P Chidambaram said, “I can confidently assert that the economy is more stable today than what it was two years ago. The fiscal deficit is declining, the current account deficit has been constrained, inflation has moderated, the quarterly growth rate is on the rise, the exchange rate is stable, exports have increased and hundreds of projects have been unblocked.”

The announcement on fiscal deficit and government borrowing target for the next fiscal was the highlight of the budget. The government will curtail its 2013-14 fiscal deficit to 4.6 per cent of GDP, lower than the red line at 4.8 per cent he drew in the last budget, he said.

India’s deficit is the highest among the BRIC nations. The finance minister rolled over fuel subsidy worth Rs. 35,000 crore in 2014-15 to meet the deficit target. Gross market borrowing for 2014-15 is seen at Rs. 5.97 lakh crore, while net market borrowing is estimated at Rs. 4.57 lakh crore.

The spending is raised to Rs. 2.24 lakh crore in 2014-15, up 10 per cent year on year, but kept the plan expenditure for the next fiscal at Rs. 5.55 lakh crore, which is the same as current year. The non-plan spending is expected to rise to about Rs. 12.08 lakh crore in 2014-15.

Food, fertilizer and fuel subsidy for 2014-15 is seen at 2.46 lakh crore, slightly more than 2.45 lakh crore in 2013-14, Mr Chidambaram said. Food subsidy is seen at Rs. 1.15 lakh crore, while fertiliser subsidy is pegged at Rs. 67,971 crore for 2014-15. Fuel subsidy is estimated at 63,427 crore versus revised figure of Rs. 85,480 crore for 2013/14.

Cut in excise duty on small cars and two-wheelers from 12% to 8%. The cut in duty will be applicable up to June 20, 2014, when the new government is likely to present the full year budget. Duty on consumer durables is cut from 12% to 10%.

Mr Chidambaram also announced a subsidy scheme on education loans taken before March 31, 2009, a move which will help 9 lakh students.

The stock market closed high as traders were happy. The Sensex closed 97 points higher at 20,464, while the Nifty ended 25 points higher at 6,073. Banking stocks closed 1.2% higher, while auto stocks gained 0.8%.