FM may continue tax reforms

Chidambaram is likely to raise the IT exemption limit to Rs 1 lakh in Budget presentation on Monday.

Armed with the reforms commended in the Economic Survey, Finance Minister P Chidambaram is widely expected to carry forward tax and expenditure reforms with moderation in a pro-poor Budget for 2005-06 on Monday keeping in mind the demands from Left parties and compulsions of coalition politics.

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Cutting down subsidies, lowering customs duty to move towards ASEAN levels, phasing out tax exemptions, widening of service tax net to rein-in on fiscal deficit are likely to be some of the priority areas but it is to be seen how far he goes on these reform agenda, official sources said.

Rural Development, Agriculture, health care and education are some of major big ticket expenditure items and President A P J Abdul Kalam has already said the budget will announce a major plan to rebuild rural India.

Called 'Bharat Nirman', the plan will be a time-bound business programme for building infrastructure in irrigation, roads, housing, water supply, electrification and telecom connectivity.

In a bid to move on to 7-8 per cent growth, budget may contain measures to spur investment particularly in infrastructure sector which has potential to attract 150 billion dollars foreign direct investment in net 4-5 years.

To transform Indian manufacturing into globally competitive units, the survey said there was a strong case to revisit the issue of FDI caps in sectors like coal, mining, insurance, real estate and retail trade.