Here's what to watch out for in Chidambaram's last budget

by Senthil Chengalvarayan What will I be watching out for? The first thing I will be is if we can hear the speech, or is it going to be drowned in the noise of protest of MP s like the railway budget was on Thursday! But that apart here’s what I will be watching out for: The fiscal deficit: Has the finance minister been able to meet his 4.8% target? A line drawn in red, he’s said repeatedly. Yes he will. [caption id=“attachment_1393363” align=“alignleft” width=“380”] What can we expect from the Finance Minister today? PTI[/caption] Yes he will say tax revenues are lower than budgeted last year because growth has been slower than expected. Subsidies will be higher, partly because of the currency. A fall in the rupee has meant a higher oil bill  and the rupee is down 15 per cent since the budget last year. But he will be aided by the dividends he got from PSUs, Rs 30,000 crore from Coal India alone and the blow out success of the 2G auctions. That’s on the revenue side. He is also likely to announce a cut in plan expenditure. Last year, he surprised us all by telling us that he had cut plan expenditure by Rs 90,000 crore in the last four months of the year. This year he is expected to trim expenditure by .55 percent of the GDP, and he will most likely push some of his subsidy obligations to the next finance ministers books. Expect about Rs 30,000 crore to be carried over to next year. So yes, the fiscal deficit  target will be met.  But if it is only because of one time revenues and cuts in investment expenditure. You could argue that growth next year could be hurt but it may be too early to get disheartened by that falling growth  assumption because we will have a new government in three months. So when he announces a fiscal deficit of 4.8 or possibly 4.7 or 4.6, and a FY 15 target of 4.2 we could see a brief cheer from the markets. We have a sense of where the current account deficit will be. Nowhere near the shocking  $ 88.2 billion that was announced last year, thanks to the clamping down on gold imports. Tax cuts? He  is unlikely to make changes in  direct taxes, that is income and corporate tax. But he can cut  indirect taxes. The last two vote on accounts, saw Jaswant Singh and Pranab Mukherjee cut indirect taxes. So expect that. Spreading a little cheer before elections doesn’t hurt the party in power, and the resultant shortfall is really for the next FM’s look out! He could also announce some clarification on some tax issues, leading to some more short lived cheer for the market. The FM can make statements on economic policy and put out economic forecasts. This may not mean much coming from the FM of an outgoing government, but why miss this opportunity. So expect a GDP estimate, a road map to meet FY15 fiscal deficits and the likely borrowing by government. My colleague, Latha Venkatesh, will know better, but it could be in the region of Rs 6.5 lakh crore or Rs 6.5 trillion rupees if the fiscal deficit is pegged at 4.2 percent.  Why 4.2 per cent? That is the FY15 target  as per the Fiscal Responsibility Act. Finally I will be watching for how long the Finance Minister will speak. He has hinted that he has a speech between  12 and 18 pages long , so 45 minutes! The writer is the President and Editorial Director of Network18’s Business Media