Contrary to the pre-budget talk by the Finance Minister, no major reform initiatives have been undertaken. Macro-economic framework is not supportive for growth prospects in India. While, the finance minister promised a fiscal deficit target of 4.8% for the next year, how he achieves that in the slowing economic conditions will be the key. During the budget session he identified the current account deficit was a bigger problem than fiscal deficit. But the budget failed to take any necessary steps to curb the current account deficit. Reviving the investment cycle to kick start economy growth was very important, but no major reform level announcements were made.
Impact of the Union Budget 2013-14 on personal finance of Individuals and their families would be minimal. The savings rates have declined considerable from their peak in 2007, no major steps were announced to increase savings rate from the current levels. The rising concerns over lesser participation of retail investors should have been addressed more effectively. Though some tweaks were done to RGESS, they are not game changers.
On the tax front, first time home buyers taking loans less than 25 lakhs home loan, get a significant 1 lakh additional deduction on the interest being paid. This could result in higher amount of savings for the middle income population who aspire to buy a home this financial year. The high interest regime that exists today is resulting in higher interest payouts for home owners. The problem exists for all salary brackets. The tax slab remain the same, however, taxpayers with taxable income slab between 2 – 5 lakhs per annum get an additional tax credit of INR 2000.
Finance Minister was faced with the daunting task of curbing the government expenditure and keeping the coalition happy. Any stringent reforms to control the government expenditure would have a negative effect on the impending elections. In the Income side, the fiscal deficit meant that the revenue inflow had to increase.Given these constraints, the budget can be termed as the best possible outcome.