UNION BUDGET FY2014 - First cut

· Revised Estimates (RE) of the expenditure in 2012-13 at 96% of the Budget Estimates (BE) due to slowdown and austerity measures. During 2013-14, BE of total expenditure of `16,65,297 crore and of Plan Expenditure at

` 5,55,322 crore; Plan Expenditure in 2013-14 to grow at 29.4% over Revised Estimates for the current year; Non Plan Expenditure is estimated at ` 11,09,975 crore.

· Fiscal deficit for the current year contained at 5.2% and for the year 2013-14 at 4.8 %.

· Rural development - Allocation of ` 80,194 crore in 2013-14 for Ministry of Rural Development marking an increase of 46% over RE 2012-13;

· ` 14,873 crore for JNNURM in BE 13-14 as against RE of ` 7,383 crore…..(this would benefit players like Ashok Leyland)

· 3000 kms of road projects in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh will be awarded in the first six months of 2013-14.

· Additional deduction of interest upto ` 1 lakh for a person taking first home loan upto ` 25 lakh during period 1.4.2013 to 31.3.2014 ( this would benefit players like LIC Housing finances, Gruh finance & Dewan housing)

· Surcharge of 10% on persons (other than companies) whose taxable income exceed `1 crore to augment revenues.

· No change in rate of excise and service tax

· Increase surcharge from 5 to 10% on domestic companies whose taxable income exceed `10 crore; In case of foreign companies who pay a higher rate of corporate tax, surcharge to increase from 2 to 5%, if the taxabale income exceeds `10 crore.

· Dividend distribution tax or tax on distributed income, current surcharge is increased from 5 to 10%.

· Investment allowance at the rate of 15% to manufacturing companies that invest more than `100 crore in plant and machinery during the period 1.4.2013 to 31.3.2015.

· ‘Eligible date’ for projects in the power sector to avail benefit under Section 80-IA extended from 31.3.2013 to 31.3.2014.

· Small moderation in the rate of STT to `1700 from `1000 / crore in derivative segment; same amount levied in commodities derivative(non agricultural commodities only)

· ~18% hike in excise for cigarette….hike is very steep

· Relief to readymade garment industry - In case of cotton, zero excise duty on yarns and at fibre stage also…..this would benefit players like Arvind and Vardhaman

· Excise duty on SUVs increased from 27 to 30%. Not applicable for SUVs registered as taxies.

Our view : The budget is largely neutral from medium term as there are no populist measures (lower allocation to Food security bill, etc.) However there were expectations from the current FM on measures to boost investments, which did not happen thus disappointed the markets. Now that budget has been presented the markets will move focus on the monetary policy on the 19^th of March.