If Budget 2012-13 was remembered for a high fiscal deficit and draconian tax proposals, Budget 2013-14 would focus on fiscal consolidation and cleaning up of tax laws.
The finance ministry is said to be readying a Budget that will stick to Finance Minister P Chidambaram’s promise of retaining the fiscal deficit at 5.3 per cent of the gross domestic product (GDP) this financial year and 4.8 per cent next year. The Budget for 2012-13 had earlier kept a deficit target of 5.1 per cent of GDP.
The ministry could also try to bring in more clarity with regard to retrospective taxation in cases such as Vodafone and General Anti-Avoidance Rules (GAAR).
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The Direct Taxes Code (DTC) and GAAR were scheduled to be implemented from April 2013, but the finance ministry may defer both to seek more time to go through these complex legislations.
The finance ministry will meet Vodafone officials next week for settling its Rs 14,000-crore tax issue. Officials, however, agreed the issue had to be addressed at a broader level, as there were many similar cases, some of which were pending before courts.
Though general elections are due in 2014, officials said the Budget was not likely to be populist, as the government had little cushion to splurge on big-bang schemes. They said the message from the top was clear — fiscal deficit targets were sacrosanct. “There is no chance (of significant populist measures in the Budget),” said a senior ministry official.
Another minister echoed similar views: “Fiscal consolidation will be the focus of the Budget. Some social sector spending has to be done wherever it is needed. But the current situation doesn’t leave much scope for a populist Budget.”
The official exuded confidence the fiscal deficit target of 5.3 per cent of GDP would be met despite a likely shortfall in indirect tax collections and proceeds from the auction of spectrum. He said the government would not take the short cut of rolling over a lot of current year’s liability to the next year. “If we shift the burden to next year, how can we reduce fiscal deficit to 4.8 per cent? Our cash position is comfortable. Disinvestment proceeds will be close to the target,” the official said.
Another official said the government expected to garner Rs 35,000 crore from stake sale in six public sector companies by March. The first to hit the markets would be Oil India later this month, followed by NTPC and Nalco next month, and four issues, comprising MMTC, SAIL and Rashtriya Chemicals and Fertilizers Ltd, in March.
To reduce the fuel subsidy bill, the methodology for calculating under-recoveries of oil marketing companies was being changed.
