As Finance Minister Pranab Mukherjee rises in the Lok Sabha on Monday to present the Union Budget outlining the UPA government's annual balance-sheet and fiscal and policy initiatives planned for 2011-12, he is likely to spring a surprise or two, despite the fact that the measures likely to be announced have been anticipated, discussed and debated at great length for over a fortnight.
Considering the robust macroeconomic scenario projected by the Economic Survey 2010-11 even in the wake of an uncertain global environment, the budgetary surprises, if any, are expected to be on the positive side to catch the imagination of the people. For, barring the raging domestic inflationary pressures - especially the skyrocketing prices of food items which have been burning a hole in everyone's pocket - coupled with the recent spike in global crude oil prices owing to turmoil in the Arab world, all is reasonably well with the Indian economy.
According to the Survey as well as the Prime Minister's Economic Advisory Council (PMEAC), the country's GDP (gross domestic product) during the current fiscal is projected to grow by 8.6 per cent and go up further to 9 per cent in 2011-12. The downside risks that may affect the growth numbers are the evident spurt in global oil and commodity prices over which the government has no control.
In the event, to compensate the individual taxpayer who has been groaning under the burden of rising food prices, an increase in the basic income-tax exemption limit is in order. The general expectation, which has already been factored in by economic analysts and markets, is a hike in the basic exemption to Rs. 1.8 lakh from the existing Rs. 1.6 lakh.
The surprise element will be if the Finance Minister chooses to raise the exemption limit to Rs. 2 lakh, thus kicking in a year ahead of schedule a provision of the Direct Taxes Code (DTC) that is proposed for introduction in 2012-13.
Hike in excise duty
Mr. Mukherjee is expected to hike the excise duty by two percentage points across the board from the current 10 per cent to 12 per cent - a step the industry has opposed but accepted it as a fait accompli - to bring it to the pre-crisis levels.
Alongside, he may also opt for raising the service tax level from 10 per to 12 per cent and extend it to all services, considering that the services sector now accounts for about 57 per cent of the GDP.