Given the expectations running ahead of the 2013-14 budget, the finance minister cannot fail to present a Dream Budget. But the definition of “Dream” in nightmarish times for the economy has to be different. Moreover, there is a need to figure out whose Dream the finance minister is trying to make a reality.The first and most important Dream relates to foreign investors. They are not dreaming about tax benefits – since Chidambaram has already granted them their wishes in advance by postponing GAAR (the General Anti Avoidance Rules) to 2016. Their remaining Dream relates to the fiscal deficit. This is the Dream Chidambaram cannot afford to disappoint anybody on – so one can say if he meets the 5.3 percent fiscal deficit target for 2012-13, or even show it as 5.2 percent, the FIIs will see it as a Dream come true.Next, we have the domestic jholawala lobby – and the resident “tax-GDP ratio” economists. Their Dream is that the rich must pay more. It does not matter if the rich actually do not pay more tax even after the budget, but they must be told to pay more. Chidambaram is likely to make this Dream also come true by either raising the surcharge on the upper income brackets – those earning above Rs 20-30 lakh – or by actually creating a higher bracket for the super rich (those earning, say, more than Rs 50 lakh-Rs 1 crore). A soft estate duty may also be part of the package. This will send the NGOs and the Left into raptures, while leaving the rich a bit grumpy, but they know how to hide their riches from the FM. They won’t lose any sleep over estate duty.Next, he will have to deliver the Congress’ election Dreams. Here he will use sleight of hand. He will make some promises about Food Security, and claim that Direct Cash Transfers for the poor will be a game-changer. But this part is Chidambaram’s own Dream. He will make lower allocations and yet claim that all the poor will be served since bogus beneficiaries will be eliminated.Next, and this is where the real Dreams will have to be met – those of the markets and the middle class. For the middle class, the FM will raise the tax-free salary limit and the tax deduction on home EMIs. This will be widely seen as pro-middle class and a Dream-enabler. This is the core Dream Chidambaram will try to address.For the markets, the Dreams, as we noted, have been given in advance – GAAR relief, free lunch on P-Notes, and no changes in capital gains taxes. Some sops for corporates in terms of an investment allowance will enable Chidambaram to claim that he needs to boost investment – and this is something corporate will welcome. It will also neutralise their estate duty angst.Dreams in 2013 will not be big. The market is not expecting a Level Five Dream budget this time. The new Dream is about making sure nobody gets whacked too much by Chidambaram. This Dream he is sure to deliver.
P Chidambaram's 'Dream Budgets' have a record of giving investors nightmares - once the momentary euphoria inspired by the headline announcement gives way to the cold light of dawn. That's because his budgets typically come embedded with sleights of hand trickery that sneak past the radar of real-time analyses but come back to bite people on their backside once the celebrations have wound down.On that count, investors and taxpayers should perhaps hope that this won’t be a 'Dream Budget'.In any case, given the government's fiscal deficit and huge subsidies bill, there's very little latitude for Chidambaram this time to present a giveaway budget. He might still surprise investors with some market-friendly measures, because keeping markets happy is a critical consideration if he hopes to avoid being squeezed by the fiscal and current account deficits and raise revenue through the disinvestment route. But the left hand will probably take away what the right hand gives.Chidambaram is a pretty savvy - some would say 'smooth' - operator. But it may be beyond his capability to present anything like a Dream Budget this time. And that's probably a good thing.