4Jul

Budget 2014-15 : National Food Security Act

As we all knew that Mr. Arun Jaitley, Finance Minister of the newly formed government will present their first maiden budget on July 10, 2014. While talking about the present economy, he has to face multiple challenges while presenting the budget in the parliament. As the BJP promised to the voters before elections, the budget must be growth supportive and should be acceptable by the majority of the people. This might be the test for the government to answer on the question of living on the expectations of the supporters.

His first task as a representative of the policies of the government is,to contain the fiscal deficit for 2014-15 fiscal within 4.1% of GDP. Kelkar Committee outlined the strategic graph of the economy, according to that, fiscal deficit may brought down to 3% of the GDP in the coming financial year 2016-17. Unlike, in the financial year, 2013-14 India’s fiscal deficit was 4.5% of the GDP.

The economists assuming that, Mr Jaitley have an option to bring down the subsidies, which are accounted for 2.2% of the GDP in the year 2013-14, in order to attain the required fiscal consolidation. Moreover, the government has to uphold the Food Security Bill passed by the previous government to maintain the positive image among people, there is little scope for the finance ministry to reduce the subsidy on food items.

Ashok Gulati, ICRIER in an interview stated that, “Currently the public distribution system has a leakage rate of 40%,” said Mr Gulati. “If government wants to implement NFSA (National Food Security Act) through the public distribution system, unfortunately it will drill holes into the budget and not solve the purpose of tackling poverty and hunger”. He also added that, the government can save Rs. 50,000 crore to Rs. 60,000 crore annually by making subsidies more targeted and by plugging the leakages present in the system.

Mr. Gulati’s suggestion to our finance minister is to simplify the subsidy on the fertilizers which cost the government Rs. 68,000 crore in this fiscal. If government straightly distribute to the farmers on per hectre basis then we can again save 20-25% easily from that. This money can be saved and invested in other segments in optimum way for the growth of our country like, in infrastructure development, education, creating employment, armed forces and many other sectors. As expectations are more with the government, people as well as investors are eagerly waiting for budget announcement day.

2Jul

Sensex, Nifty Hit Record Highs Amid Pre-budget Rally

BSE Sensex and Nifty rose over 1 per cent today to set new all-time highs. Strong global markets, easing of global oil prices and expectations of reform measures in the Budget spurred a rally in Indian markets.

Brent crude, extending its decline, lost 12 cents to $112.17 a barrel. Brent crude had hit $115 a barrel last month as Iraq crisis flared up.

Finance Minister Arun Jaitley’s comment on Tuesday that “mindless populism” in policymaking needed to be checked stoked expectations of a pragmatic budget on July 10.

The rupee also rose to nearly 3-week high of 59.75 against the dollar, boosting the sentiment.

Sensex rose over 300 points nearly 280 points to an all-time high of 25,828, breaching its earlier high of 25,731. The 50-share Nifty jumped nearly 90 points to post a new high of 7,723.55. Analysts remain positive on Indian markets ahead of the Budget.

Metal stocks Sesa Sterlite, NMDC, JSPL and Tata Steel were up between 1.5 per cent and 2.7 per cent. Among the banks, Bank of Baroda, Kotak Mahindra Bank and ICICI Bank rose over 1 per cent. Oil & gas heavyweight Reliance Industries advanced nearly 1.5 per cent.

At 1:45 p.m., the Nifty was up 82 points to 7,717 while Sensex rose 287 points to 25,804.

In other global markets, Asian stocks were at a three-year peak on Wednesday after a round of upbeat global economic data whetted risk appetites and helped Wall Street taste all-time highs.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1 per cent to 499.15, ground not visited since May, 2011. Japan’s Nikkei added 0.3 percent and notched up its loftiest level in more than five months.

Most of the European markets were also in the green in early trade. Overnight, on the Wall Street, the Dow and S&P 500 had both scored record closing highs, as did the MSCI world equity index. The Dow gained 0.77 per cent and the S&P 500 0.67 per cent, while the Nasdaq put on 1.14 per cent.

2Jul

Budget 2014: Finance Ministry may double tax exemption limit under 80C to Rs 2 lakh

Seeking to boost household savings, the Finance Ministry is considering doubling the exemption limit for investments by individuals in financial instruments to Rs 2 lakh.

Presently the investments and expenditures up to a combined limit of Rs 1 lakh get exemptions under Sections 80C, 80CC and 80 CCC of the Income Tax Act.

Sources said the revenue department is assessing the burden on the exchequer in case of increase in the benefit limit. The announcement is expected in the Budget.

The Budget for 2014-15 will be presented by Finance Minister Arun Jaitley in the Lok Sabha on July 10.

There have been demands from bankers and insurers to hike the tax exemption limit from Rs 1 lakh per annum to encourage household savings.

The savings rate has come down from over 38 per cent of GDP in 2008 to 30 per cent in 2012-13.

The hike in the exemption limit, sources said, would provide much needed relief to the salary earners who are reeling under the impact of high inflation.

The Direct Taxes Code (DTC) too has recommended that the combined ceiling for investments and expenditures be raised to Rs 1.5 lakh per annum.

The financial instruments which enjoy exemption include life insurance premium, public provident fund, employees provident fund, National Savings Certificates, repayment of capital on home loan, equity linked saving schemes sold by mutual funds and bank FDs of five year maturity.

1Jul

Rollovers soar, hint market may gain 5-6% in the run-up to Budget 2014

Traders carried forward bullish futures bets to the July series on expiry of the June contracts on Monday on expectations the market could rebound in the run-up to the Union Budget on July 10. Fresh buildup of positions in Nifty options suggests the benchmark index could gain about 5-6% by the Budget day from the current levels. Rollover in Nifty futures from June series to July was 71% against the three-month average of 59%.

Open interest — outstanding market positions for July series — was around Rs11,000 crore on Thursday, which is almost similar to the build-up when the May series expired. “Traders have carried forward long positions despite the market remaining range-bound for the past three weeks on expectations of reform-oriented budget,” said Amit Gupta head of derivatives research at ICICI Securities.

 

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