In an election year, Finance Minister P Chidambaram presented an Interim Budget shorn of rhetoric and stuck to highlighting the Congress-led UPA Government's achievements of the last 10 years. Faced with a massive economic slowdown and staring at prospects of a Congress rout in the Lok Sabha elections, the Finance Minister tinkered with excise duty to make cars, two-wheelers and mobiles cheaper, announced the implementation of the long standing One Rank, One Pension for defence forces and expressed hope that the worst of the slowdown is over.

The excise duty cut on vehicles, capital goods and consumer durables is expected to boost manufacturing and growth. "Thanks to the numerous measures, I was confident that the decline will be arrested and growth cycles will turn in the second quarter. I believe, I have been vindicated, second quarter at 4.8 per cent and growth for whole year has been estimated at 4.9 per cent. This means that growth in Q3 and Q4 of 2013-14 will be at least 5.2 per cent," he said in the interim budget.

ALSO SEE Budget 2014: Watch P Chidambaram's full speech on vote on account

Chidambaram delivered the speech amidst sloganeering by Congress MPs from Seemandhra and also provided service tax exemption for storage and warehousing of rice like it was done in case of paddy in 2013-14. He also exempted blood banks from the service tax purview.
With an eye on retired defence personnel Chidambaram announced that One Rank, One Pension will be implemented from the fiscal 2014-15. It will benefit over 25 lakh retired defence personnel. He also lured the young generation by announcing a moratorium on interest on educational loans taken before March 31, 2009 which will benefit over 9 lakh borrowers.

ALSO SEE No eNo policy paralysis, Indian economy better placed today: Chidambaram

The 1 per cent surcharge on 'super-rich' having income above Rs 1 crore in a year, and the 5 per cent surcharge on corporate entities imposed in 2013-14, has been allowed to lapse with the Finance Minister saying, "In keeping with the conventions I do not propose to make any announcements regarding changes to the tax laws."
The Budget document does not give figures of the indirect tax concessions, which are valid up to June 30, 2014 and could be reviewed later. They will be notified later in the day.

ALSO SEE Food inflation still remains a worry, says Chidambaram

He justified the excise duty relief saying, "However, the current economic situation demands some interventions that cannot wait for the regular Budget. In particular, the manufacturing sector needs an immediate boost."

To encourage domestic production of mobile handsets, he restructured the excise duty for all categories fixing it at 6 per cent with CENVAT credit or 1 per cent without CENVAT credit.

Customs duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols has been pegged at 7.5 per cent to encourage to domestic production of soaps and oleo chemicals.

Similarly, a concessional customs duty of 5 per cent on capital goods imported by Bank Note Paper Mill India Pvt Ltd has been provided to encourage to indigenous production of security paper for printing currency notes.

Giving Budget estimates, the Minister said the current financial year will end on a satisfactory note with the fiscal deficit at 4.6 per cent, below the red line of 4.8 per cent, and the revenue deficit at 3.3 per cent.

The fiscal deficit for 2014-15 has been pegged at 4.1 per cent, which will be below the target of 4.2 per cent set by the new fiscal consolidation path. Revenue deficit is estimated at 3 per cent.

Plan expenditure for the coming fiscal has been fixed at Rs 555,322 crore, unchanged from current year, and non-Plan expenditure at Rs 12,07,892 crore, marginally higher than 2013-14.

Chidambaram said excise duty has been reduced from 12 to 10 per cent on capital goods and consumer non-durables falling under Chapter 84 and 85 of the Schedule to the Central Excise Tariff Act.

Small cars, motorcycles, scooters and commercial vehicles will attract a lower excise duty of 8 per cent from the current 12 per cent, while SUVs will see a 6 per cent reduction in duty from 30 to 24 per cent. Large and middle segment cars will enjoy an excise duty of 24/20 per cent, down from 27/24 per cent.
Outlining a 10-point vision for the future, the Finance Minister said India must achieve the target of fiscal deficit of 3 per cent of GDP by 2016-17 and remain below that level always.

On Current Account Deficit, he said there is no room for any aversion for it since the country will run a CAD every year for some more years and it can be financed only by foreign investments - FDI, FII or ECBs or any other foreign inflow. As part of the vision, he said a developing economy must accept that when the aim is high growth, there will be moderate level of inflation.

"RBI must strike a balance between price stability and growth while formulating monetary policy," he said in his vision formula that included financial sector reforms, infrastructure, manufacturing, subsidies, urbanisation, skill development and sharing responsibilities between states and Centre.

Expressing disappointment over not being able to introduce Goods and Services Tax (GST), he said, "I leave it to you to answer the question who blocked the GST when an agreement on the game-changing tax reform was around the corner?"

He said the DTC, which will serve for the next 20 years, is ready and intents to place in on the website for public discussion. "I appeal to all political parties to resolve to pass the GST laws and DTC in 2014-15," he said.

Referring to the GDP growth rate, Chidambaram said the slowdown began in 2011-12 and in nine quarters it had declined from 7.5 per cent in Q1 of 2011-12 to 4.4 per cent in Q1 of 2013-14. He said thanks to numerous measures taken, he was confident the decline will be arrested and the growth cycle will turn in the second quarter.

"I think I have been vindicated. Growth in Q2 of 2013-14 has been placed at 4.8 per cent and growth for the whole year has been estimated at 4.9 per cent. This means that growth in Q3 and Q4 of 2013-14 will be at least 5.2 per cent," he said.

The Finance Minister said the economy is more stable today than what it was two years ago. "The fiscal deficit is declining, the current account deficit has been contained, inflation has been moderated, the quarterly growth rate is on the rise, the exchange rate is stable, exports have increased and hundreds of projects have been unlocked," he said.

He said the current year will end with a merchandise exports of USD 326 billion, indicating a growth of 6.3 per cent. The current account deficit that threatened to exceed last year's CAD of $88 billion, will be contained at $45 billion, which will be $15 billion more than the foreign exchange reserves by the end of financial year.
In 2013, WPI headline inflation stood at 7.3 per cent and core inflation at 4.2 per cent. At the end of January 2014, WPI was 5.05 per cent and core inflation at 3 per cent.
"While our efforts have not been in vain, there is still some distance to go. Food inflation is still the main worry, although it has declined sharply from a high of 13.6 per cent to 6.2 per cent," he said.

Rejecting the argument of policy paralysis, he enumerated the pathbreaking decisions of the government in 2013-14 which included decontrol of sugar, gradual correction of diesel prices, rationalisation of railway fare, starting the process of issue of new bank licenses and restructuring of power distribution companies.

The Cabinet Committee on Investment (CCI) and the Project Monitoring Group were set up. Thanks to the swift decisions taken by them, by the end of January 2014, the way was cleared for completing 296 projects with an estimated project cost of Rs 6,60,000 crore.

On performance, Chidambaram gave examples of fast growth in various sectors in various sectors. India produced 263 million tons of foodgrains now as compared to 213 million tons 10 years ago.