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When Finance Minister P Chidambaram rises to present his first interim Budget on February 17, he might not have any big-bang announcements to make. However, he could promise several small measures as the country heads for the Lok Sabha polls. While the Budget is not likely to have any major tax proposals, there might be minor restructuring here and there to benefit some sectors and states. Some tweaking might come before the Budget through sector-separate notifications.
“We cannot propose amendments to the Income Tax Act, Customs Act or the Excise Act. But any proposal short of amending a law can be made,” Chidambaram said in response to a question at a press conference on Monday. “We can also outline vision for the future... We have made a couple of changes (in taxes) last week. We will continue to make those changes until the term of this government if they do not require Parliamentary legislation or sanction.”
Interim Budget 2014-15 might be loaded with some strong statements highlighting the government’s focus on the social sector marked by increased allocation for some of the schemes related to education, health, food, rural population and women, among others.
“This is merely a vote-on-account. So, there won’t be any major decisions,” said a finance ministry official, admitting the announcements would mainly be symbolic in nature, with higher allocations to some sectors, but in line with the road map laid down for fiscal consolidation.
According to the road map, the fiscal deficit would be brought down to 4.8 per cent of gross domestic product by FY14, 4.2 per cent by FY15, 3.6 per cent by FY16 and three per cent by FY17. Chidambaram is likely to report a fiscal deficit of about 4.7 per cent this year.
Since the fiscal deficit will be controlled, the finance minister might have cushion to give away some extra funds for bank recapitalisation and to compensate oil marketing companies for selling fuel below market prices. The government had recently raised the quota of subsidised cooking gas from nine cylinders a household a year to 12 cylinders, entailing higher burden. Chidambaram is also under pressure from party colleagues to offer pre-poll sops. A lower fiscal deficit might help loosen the purse strings to some extent.
Earlier this week, the finance ministry had imposed a five per cent export duty on iron ore pellets to help the domestic steel industry. Exports of iron ore pellets have risen sharply, causing an apprehension of shortage of iron ore — a critical raw material required for production of steel. It also increased the duty on sin goods such as pan masala and tobacco products.
The Constitution does not bar the government from making any tax changes or announcing any schemes till the election code of conduct is in place. However, an outgoing government usually refrains from making any major changes. In an interview to a television channel in December 2013, Chidambaram had said tax changes were Constitutional and there were precedents, too.
“In 2004, Mr Jaswant Singh made an 12-page speech. In 2009, Mr Mukherjee made an 18-page speech. So, I have two numbers to choose from, 12 and 18,” he said.
Former finance minister Jaswant Singh, while presenting the interim Budget for 2004-05 under the National Democratic Alliance government, had proposed a few changes in taxation for sectors such as power and shipping, capital gains tax, and stamp duty. He had also increased free baggage allowance from Rs 12,000 to Rs 25,000 and announced extension of some schemes.
