India's finance minister unveils tax cuts in budget

Finance Minister P Chidambaram (C) along with MoS for Finance Namo Narain Meena (R) and J.D. Seelam (L) and others giving final touches to the interim budget for 2014-15 before its presentation in the Lok Sabha, on February 16, 2014 in New Delhi, India.
Sanjeev Verma | Hindustan Times | Getty Images

The Indian government announced a package of indirect tax cuts on Monday to breathe life into spending and investment, and trumpeted its record of growth and reform over the past decade in its last budget before an election it looks set to lose.

Amid uproar in parliament as lawmakers shouted him down, Finance Minister P. Chidambaram also announced that he would contain the fiscal deficit for 2013/13 (April-March) at 4.6 percent of gross domestic product (GDP), below his target of 4.8 percent.

Indian businessmen watching the speech were further cheered by his estimate that the fiscal deficit would shrink further to 4.1 percent in 2014/15.

Monday's budget was an interim exercise ahead of the election due by May.

Opinion polls predict voters will oust the government led by the Nehru-Gandhi dynasty's Congress party amid widespread discontent with its mismanagement of the economy, high inflation and corruption scandals.

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Chidambaram, struggling to deliver his speech above the din of lawmakers angry over a plan to divide a southern state, announced no major changes in tax rates.

However, he said factory-gate taxes on some capital goods and consumer durables would be reduced to 10 percent from 12 percent, and excise duties on small cars, two-wheel and commercial vehicles would be cut to 8 percent from 12 percent.

He also announced small-bore measures to soften student loans and help retired members of the armed forces.

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Asia's third-largest economy is facing its worst slowdown in nearly a decade, with shrinking manufacturing, slower jobs growth and high inflation.

Chidambaram said, however, that growth would recover to at least 5.2 percent in the second half of 2013/14 from 4.6 percent in the first half.

Looking back at the two terms of rule under a Congress-led coalition, Chidambaram said there had been an unprecedented growth trend of 6.2 percent over the past decade and - rejecting charges that the government was mired in a policy paralysis - laid out a raft of reform steps it has taken.

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