Budget 2013 will be a test of sorts for Finance Minister P Chidambaram. Despite a set of reforms announced since September 2012 and and the huge inflows from foreign institutional investors into the equity market this year, the benchmark equity indices have disappointed so far in 2013.
Several analysts are betting on Chidambaram to unveil a ‘dream budget’, on the lines of his famous 1997-98 budget, where he had set the stage for lower income tax rates, removed surcharge on corporate taxes and reduced corporate tax rates.However, the Dream Budget he presented turned out to be a nightmare for the economy, and things went out of control. This time, the external, fiscal and macro environments are already in bad shape, and the headwinds are for real. With the rating agencies breathing down his neck, one of P Chidambaram’s efforts would be a keep them in good humour even while trying to revive the dormant animal spirits of India’s businessmen.
Firstpost spoke to industry leaders and several economists to understand what are the right kind of expectations to nurture in the upcoming Budget given that it will be the last one presented before elections in 2014.
While most experts believe that reigning in the twin deficits will be the FM’s top priority, Chidambaram faces the challenges of trying to increase investments when domestic interest rates have to be cut and foreign funds have to be somehow enticed to bring in dollars.
On the fiscal front, the government needs to solve the problems of both revenue and expenditure. And this can only be done if the budget includes steps to raise government revenues from direct taxes as well as indirect taxes.
Watch the video above to see what they have to say...