Amid high expectations from the middle class and and industry, Finance Minister Arun Jaitley presents his maiden budget on Thursday that may contain tax sops for the salaried, dumping of the controversial retrospective tax and spelling out of steps to revive investment and manufacturing for growth.
There are high hopes that the Budget for 2014-15 to be presented in Parliament may actually not tinker with the threshold limit or the other tax slabs but could provide reliefs by incentivising savings.
For boosting investment, Jaitley is expected to announce tax incentives for industry. As a prelude, the government has already extended the excise duty concessions for automobile and consumer durable sectors till December.
The Finance Minister is also expected to take a call on reducing duties on gold import, which were raised last year to check ballooning current account deficit.
He could also provide relief to farmers to help them tide over the impact of deficient monsoon which could lead to fall in agricultural output. The government may set up a price stabilisation fund, as promised in the BJP's manifesto.
The new minister may also outline the road map for roll out of the Good and Services Tax (GST) but it was not clear what will be his approach on the Direct Taxes Code (DTC) about which the Economic Survey makes a mention today.
In a bid to restore investor confidence, both domestic and foreign, Jaitley may announce scrapping of the provision of retrospective taxing of corporate mergers and acquisitions, a legacy of the UPA that was blamed on putting off foreign investors.
The survey has also called for tax reforms including raising the tax to GDP ratio that has fuelled whether he would choose to widen the base or withdraw exemptions.
Setting the tone for the Budget, the Survey underlined the essence of urgency to restore growth momentum and address the long-standing structural problems hurting economy.
The survey also made a strong case for "next wave" of economic reforms to meet the aspirations of the people and catch up with the rest of the world.
"The Economic Survey 2013-14 conveys a sense of urgency about the course the needs to undertake not only to recapture to the growth momentum fast, but to also ameliorate the long standing structural problem that undermines the economy's long term potential," Finance Secretary Arvind Mayaram said.
The pre-Budget document presented in Parliament today called for revamp of complex taxation system and said "bad taxes" like surcharges, cess and dividend distribution levy need to "eventually go" so as to boost investments as well as GDP growth, which has slipped to sub-5 per cent.
The BJP-led government rode to power on promises of providing relief to inflation-hit common man, amid falling growth, stagnating investments, high fiscal deficit and external crisis.
On the other hand, Jaitley, though not a hard-core economist, is expected to pursue the path of fiscal prudence and not sacrifice it at the altar of populism.
He has already indicated that the government will have to refrain from mindless populism.
"If you indulge in mindless populism you burden the exchequer...you convert yourself into a high taxation society. It does not work. Therefore, if you have to follow a path of fiscal prudence, (you should) have a certain amount of discipline," Jaitley had said recently.
The Survey has suggested a three-pronged strategy of containing inflation, pushing tax and expenditure reforms and legal and regulatory frameworks for market economy for achieving 7-8 per cent in coming years. Growth during the current fiscal is expected to improve to 5.4 to 5.9 per cent.
It also calls for fiscal discipline, rationalising subsidies and reforming the legal and taxation system.