Around noon today, you could get some good news from finance minister P Chidambaram, who is expected to raise the income tax exemption limit from the current level of Rs. 2 lakh.
The objective: put more money in the hands of people. The hope: they will spend more on goods and services. The desired result: rising sales will prompt companies to invest in creating capacities. And the spin-off: they will hire more, thus, creating more jobs across the country.
The last full budget of the second United Progressive Alliance (UPA) government before the 2014 Lok Sabha polls comes in the backdrop of a crippling economic slowdown and delicate public finances that have attracted scathing criticism from credit rating agencies.
However, the Economic Survey, released on Wednesday, hinted that the worst could be over for the Indian economy.
A weak government balance sheet is expected to limit Chidambaram’s ability to spend on existing populist welfare schemes ahead of the elections. Nursing the health of the broader economy appears to be a stronger priority at this point.
India’s economy, hit by an industrial deceleration that has crimped factory output and income, is set to grow at 5% in 2012-13 — the lowest growth rate in a decade.
But there were indications that the economy, which until recently was a global growth engine, could have turned the corner.
The Economic Survey, the government’s annual report card, projected India’s GDP — or the value of all goods and services produced in the country — to grow at 6.1-6.7% in 2013-14.
The survey, however, pointed out that the pace of economic expansion would be critically dependent on the speed at which some key policies, including those that can create jobs outside the farms, were implemented.
Chidambaram is widely expected to announce a roadmap on a proposed Food Security Bill - a grand welfare scheme, which, once voted into law, will offer subsidised food grains to nearly two out of every three Indians.
The Economic Survey said the government must reduce subsidies, especially those on fuel, by increasing prices of diesel and cooking gas.
"India is in a difficult but not impossible situation. We are at or beyond the turning point of the economy. With improved sentiments, we expect the outlook to improve and growth to remain in the range of 6.1 to 6.7%," the government's chief economic adviser, Raghuram Rajan, said in an introductory note to the Economic Survey, a first of its kind.
Chidambaram, who held road shows across Hong Kong, Singapore and Frankfurt last month to soothe the frayed nerves of global investors, is expected to lay down the roadmap to reduce the fiscal deficit to 4.8% of GDP in 2013-14, down from 5.3% at present.
The survey said there could be signs of economic revival globally but warned that it was unlikely that the support to domestic growth from the global economy will be significant.
"India cannot take the external environment for granted and has to move quickly to restore domestic balance," the survey said.