It's that time of the year again, and everyone begins to wonder what Finance Minister P Chidambaram will do in the budget he unveils on Feb 29: Will he cut taxes? Will cars and scooters be made cheaper? What about the troubled exporters of garments and leather goods? …
Expectations are high, so are the stakes.
This will be the last regular budget of the UPA government -- its tenure ends in May next year, but elections might be held much earlier. Members of the ruling coalition would want Chidambaram to do all he can to win votes, and the minister may well play to gallery.
He has the comfort that few of his predecessors ever had. The economy is growing close to 9 per cent for the fourth straight year; tax collections have been robust; and the government’s fiscal deficit is well under control.
All of these give him the much-needed leeway to make the budget offer something to cheer everyone.
A cut in the tax burden of both individuals and companies will likely top the highlights of this year’s budget as much as increased allocations for agriculture, health and education. There will be a plethora of schemes, including a big-bang debt relief package for farmers, intended to boost incomes of people living in the countryside -- some will dub them as populist, but these apparently bring votes.
Subsidies on food, fertilizer and fuel will increase, but the numbers will show up as only off-budget commitments so to camouflage any slippage in fiscal deficit.
Chances are that the minister may either raise the floor for individual taxpayers from the existing Rs 100,000 or increase the ceiling of Rs 100,000 on savings that can be deducted from taxable income under the so-called Section 80 C. He might do a bit of both.
For companies, there are expectations of a cut in the 10 percent surcharge on tax.
The case for tax giveaways is rather strong, given that direct tax collections have surged 40 percent in the first ninth months of the current fiscal year, much higher than targets set in the previous budget.
Also, this is the least that the finance minister can do to bring relief to hundreds of thousands of middle class families battling a sharp increase in cost of home loans in the past two years.