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Web Special: FY14 Budget team ready for tightrope walk

Tough balancing act in the offing in the last budget of UPA-II

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With tax scholar joining finance ministry as advisor to finance minister , the core team for crucial Budget 2013-14, which is set to play a defining role in the fiscal and tax policy of the government, is complete.

His inclusion will play a balancing role between the old (2012-13 Budget) and the new thought process in the finance ministry, especially on the controversial tax issues such as application of retrospective amendments and General Ant-avoidance Rules (GAAR).

, who has joined in place of Kaushik Basu, as chief economic advisor (CEA) has the responsibility of suggesting innovative ways to the finance minister in juxtaposing fiscal requirements and political needs of a government presenting the last budget before going to next Lok Sabha elections, which is due in 2014.

Expenditure and Finance Secretary , though, in-charge of the spending side this time, will certainly share his experiences and also the crux of the deliberations on tax policies during the budget-making process last year.

Similary, revenue secretary , who has exchanged portfolio with Gujral, will present the tax aspects this year, and his inputs from the discussions on the expenditure side of the budget 2012-13, will help in learning from the mistakes of the past.

Economic affairs secretary , who has also worked with Chidambaram in his earlier stint as finance minister, has the critical job of pushing policy measures to boost infrastructure and foreign direct investment.

Department of financial services secretary , who is also holding the additional charge of disinvestment at present, is the only secretary holding the same charge this year also.

The message from the prime minister’s office (PMO) to the is loud and clear – 2013-14 budget should be a tight pragmatic budget which should address the fiscal concerns and keep adequate resources for the flagship schemes.

Shome’s presence means that on the tax side, treatment of indirect transfers and GAAR, would be as desired by Prime Minister Manmohan Singh, who had set up the committee under him to give suggestions on the two issues.

The fiscal tightening would depend on the roadmap fixed by Chidambaram for shifting to the Aadhaar-based cash transfer system in case of subsidies.

It is expected that the budget would outline the government’s plan to extend the ambit of January 1 launch of the direct cash transfer mode beginning with mostly pension and scholarships to the subsidies payment.

The initial results of cash transfers in the 51 districts planned will be a deciding factor for this exercise.

The government is set to bring LPG and kerosene under the system to begin with, in the case of subsidies, and then to fertiliser and food.

Fertiliser and food, however, are tricky areas and it will not be surprising if the government avoids these segments for implementing cash transfers till the next Lok Sabha polls.

Another significant step to watch in this year’s budget would be measures to garner additional revenue, especially through the income tax window. Those who can pay more are certainly on the radar of the finance minister.

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