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    Weekly Bits 01-09-14
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    Finance Minister P. Chidambaram cut indirect taxes on cars and mobile phones in an effort to revive growth in an interim budget presented to parliament on 17th February for the fiscal year 2014/15. The government's term ends in May and the measure was necessary to cover expenditure until a national election is completed and a new administration installed.
    Chidambaram said India's economy, the 11th largest in the world, had stabilised and was showing signs of turnaround. His speech was marred by protests over the proposed division of a southern state.

    Growth GDP expansion in third and fourth quarters of 2013/14 estimated at 5.2 percent. Growth for the whole year expected at 4.9 percent.

    Fiscal Deficit

    • Fiscal deficit seen at 4.6 percent of GDP in 2013/14, below target of 4.8 percent.
    • Fiscal deficit projected at 4.1 percent of GDP in 2014/15
    • Says need to bring down the deficit to 3 percent of GDP by 2016/17

    When a government's total expenditures exceed the revenue that it generates (excluding money from borrowings). Deficit differs from debt, which is an accumulation of yearly deficits.

    Current Account Deficit

    • Current account deficit for 2013/14 estimated at $45 billion from last fiscal year's $88 billion.
    • Forex reserves to rise by $15 billion by end of 2013/14

    A measurement of a country's trade in which the value of goods and services it imports exceeds the value of goods and services it exports. The current account also includes net income, such as interest and dividends, as well as transfers, such as foreign aid, though these components tend to make up a smaller percentage of the current account than exports and imports. The current account is a calculation of a country's foreign transactions, and along with the capital account is a component of a country's balance of payment.

    Borrowing / Debt Servicing

    • Gross market borrowing for 2014/15 seen at 5.97 trillion rupees, net market borrowing at 4.57 trillion rupees.
    • Government plans to buy back/switch bonds of 500 billion rupees in 2014/15.
    • Ways and Means advances for 2014/15 estimated at 100 billion rupees
    • Debt repayment in 2014/15 seen at 1.397 trillion rupees
    • Interest payments seen rising to 4.27 trillion rupees in 2014/15 from a revised estimate of 3.8 trillion rupees for the current fiscal year.


    • Target from stake sale in state run firms for 2013/14 revised to 258.41 billion rupees
    • Target for 2014/15 increased to 569.25 billion rupees


    • Plan expenditure for 2014/15 seen at 5.55 trillion rupees, the same level as the previous fiscal year
    • Non plan spending estimated at about 12.08 trillion rupees in 2014/15


    • Total spending on food, fertilisers and fuel at 2.5 trillion rupees in 2014/15
    • Food subsidy estimated at 1.15 trillion rupees, fertiliser subsidy at 679.71 billion rupees. Petroleum subsidy seen at 634.27 billion rupees versus revised figure of 854.8 billion rupees for 2013/14.


    • Spending raised to 2.24 trillion rupees in 2014/15, up 10 percent year on year.


    • Merchandise exports seen at $326 billion in 2013/14, up 6.3 percent year on year.
    • Agriculture exports expected to touch $45 billion in 2013/14, up from $41 billion in 2012/13

    Tax Proposals

    • No major change in tax rates
    • Factory gate tax to be reduced to 10 percent from 12 percent on some capital goods, consumer durables
    • Cut excise duty on small cars, two wheelers, commercial vehicles to 8 percent from 12 percent
    • Recommends excise duty reductions on larger vehicles
    • Restructure of factory gate tax for mobile handsets

    Banks Restructuring

    • Govt to provide 112 billion rupees capital infusion in state run banks in 2014/15
    • Propose to set up public debt management office to start5 work from 2014/15

    Spending on Social Sector DIPS 15% It may tom-tom its achievements on improving the lot of the poor before it heads for the general elections, but the UPA-II Government spent about 15 per cent less on the social sector than it had budgeted for, it appears. Against the Budget estimates of ₹1,93,043 crore for 2013-14 on the social sector, the Government spent ₹1,64,393 crore, according to the revised estimates for the year. The figures do not include rural housing.
    At a macro level, the interim budget 2014-15 projected revised estimates of Plan expenditure at ₹4,75,532 crore for 2013-14. For the next financial year starting April 1, it kept the Budget estimates of Plan expenditure unchanged at ₹5,55,322 crore.

    Capital Infusion of Rs 11,200CR in PSU Banks While making provision of Rs 11,200 crore for infusing capital in public sector banks (PSBs), Union Finance Minister PChidambaram said their directors and employees must recognise the need to retain a significant portion of profits for capital.
    Banks, unlike other sectors, require capital every year, for business growth and to make provision (for non-performing assets, NPAs), Chidambaram noted at a press conference after presenting the interim Budget. On government plans for capital infusion, the finance minister said this was interim (Rs 11,200 crore); the regular Budget would give a full picture. He also urged banks to raise capital (Tier-I and Tier-II) from the market, through various instruments.
    The government has put Rs 14,000 crore in PSBs this financial year (2013-14). It infused Rs 62,234 crore in PSBs between 2005-06 and 2013-14. CRISIL Research said the Rs 11,200 crore for PSB capital support in 2014-15 seemed inadequate.

    Rice Exempted from Service Tax Finance Minister P Chidambaram, in the interim budget 2014-15, has exempted loading, unloading and storage of rice from service tax. Rice was originally exempted from service tax as it was classified as agriculture produce. However, the Finance Ministry later said that only paddy was agriculture produce, while rice was a processed item.

    AGRI-Exports to cross $ 45B in Current Fiscal Finance Minister P Chidambaram said agriculture exports for 2013-14 were likely to cross $45 billion. This represents a growth of about 10 per cent over last year's exports of $41 billion. Presenting his interim budget for 2014-15, Chidambaram highlighted the 'stellar performance' of the agriculture sector and estimated agriculture growth for the current year at 4.6 per cent.
    The agricultural credit for the current year was likely to touch ₹7.35 lakh crore, exceeding the target of ₹7 lakh crore. Chidambaram has set agricultural credit target of ₹8 lakh crore for 2014-15. Foodgrain production in the current year is estimated at 263 million tonnes, up from last year's 255.36 million tonnes.