Finance minister P Chidambaram will present the interim budget for 2014-15 on Monday, but will likely steer clear of making any pre-poll populist announcements. He could announce minor changes in indirect tax rates of a few goods and services, and also withdraw the so-called 'super-rich' tax of 10% surcharge imposed last year on those with annual taxable earnings of Rs. 1 crore.
Finance minister P Chidambaram speaks to industrialists and businessmen at a programme at Ahmedabad. (PTI Photo)
The finance minister could also announce a cut in customs duty on gold by two percentage points to 8%, signalling a staggered unwinding of the curbs on bullion imports imposed to contain a free-falling rupee and a widening current account deficit (CAD).
The finance minister is widely expected to articulate the need for unwavering focus on fiscal discipline even in a poll-bound year, given the delicate state of public finances.
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The UPA government's last budget comes at a time when the economy is struggling to claw out of a crippling slowdown. India's gross domestic product (GDP)—the total value of goods and services produced in the country—is set to record sub-5% growth for two consecutive years.
Finance ministers usually avoid making any big changes in income tax rates and slabs or announcing major programmes during an interim budget, leaving it to the Lok Sabha to ratify changes in tax laws.
What is 'interim budget', how is it different from 'full budget'
Along with the interim budget, which will likely list out details of the UPA regime's social and economic achievements, the finance minister will also present a vote-on-account to enable carrying out regular expenses till a new government assumes office after the general elections.
Earlier this month, Chidambaram indicated that he may tweak excise duties and service tax rates in the interim budget, but may stay away from key reform legislation due to lack of political consensus.
Chidambaram's speech is also likely to contain a roadmap for the future, including two critical tax reform initiatives — the Direct Taxes Code and the Goods and Services Tax (GST). Both the DTC, which seeks to overhaul India's archaic income tax laws, and the GST, which will stitch together a common national market by replacing a web of state levies with a single sales tax, could not be passed during this Lok Sabha's tenure due of lack of consensus.
P Chidambaram is also likely to unveil the progress on the medium-term roadmap to reduce India's fiscal deficit to 3% of the GDP by 2016-17. The plan draws from the recommendations that a committee headed by former finance secretary Vijay Kelkar had laid out in a recent report.
No room for populism? Govt likely to tighten spending in interim budget