There was little anticipated on policy changes from the Vote-on-Account as it is normally understood as an expenditure Budget for an intermittent period until the formation of the new government.
The interest in the Vote-on-Account was primarily around macroeconomic indicators and indirect tax sops, which are released as part of interim Budget exercise.
The projected GDP growth of 4.9 per cent for FY14 relies heavily on a 5.2 per cent projection for Q3 and Q4 of FY14.
On the fiscal deficit front, the finance minister reeled out numbers to report a figure of 4.6 per cent of the GDP, below the year?s target of 4.8 per cent. It is, however, important to scrutinise the financial statements to arrive at the target. The total revenue marks a marginal increase of 1.7 per cent over FY13. This is largely supported by a windfall gain on auction of telecom spectrum and a whopping 44 per cent increase in dividend payout by PSUs in addition to non-tax revenues.
Deferral of plan and non-planned expenditure together with fuel and fertiliser subsidies also contributed to lower the deficit.
This did not have a silver lining as corporate tax collections reported a 10 per cent increase, while excise duty was almost flat. Nonetheless, the next year?s projections on tax collections reflect a buoyancy of 20 per cent, an ambitious target given an optimistic GDP estimate of 6 per cent.
On the expenditure side, the planned expenditure has been kept at the same level as for FY14 and the finance minister admitted to marginal shooting in non-plan expenditure. Overall, the economic situation continues to be worrisome, which is accentuated by low investor sentiment.
While, the government claimed that it has worked hard to clear new projects, vital infrastructure sectors of the economy like power, coal, highways, petroleum and textiles, remain under stress.
I agree that the legislative agenda has moved ahead, though, decision making is subdued. A boost to indigenous manufacturing by slashing excise duty rates in select industries ? notably the automobile industry, where excise duty cuts were made across all vehicle segments. Other key beneficiaries were a 2 per cent excise duty reduction for capital goods and consumer non-durables. Service tax exemption from the negative list was preferred to a small class of agricultural and health services.
From a direct tax standpoint, while no policy initiatives was expected, tax payers continue to be aggrieved as finance minister?s promise of non-adversarial tax administration, is far from realisation. Tax payers will eagerly await suggestions on administrative and procedural reforms from the Tax Administration Reform Commission (TARC). Lastly, the finance minister wisely resisted the temptation to dole out social schemes which would have only added to the burgeoning challenges.
Mukesh Butani is Managing Partner, BMR Legal. The views are personal.
