Former finance minister P Chidambaram stirred expectations of tax breaks in the interim Budget on February 16, which had so far been seen as tax-neutral.

Speaking to reporters after a Cabinet meeting, Chidambaram, who now heads the home ministry, said the government is not restrained from announcing tax and policy changes in a vote- on-account. ?Constitutionally, there is no bar. But what the finance minister would do, I cannot say.?

External affairs minister Pranab Mukherjee, who holds the additional charge of the finance ministry, is scheduled to make a speech on the economic situation while presenting the vote-on-account in Parliament. Though the weakening economic trends call for urgent measures, since the general elections are due in April, dramatic policy changes in the interim Budget are not expected, especially in income tax as these need detailed Parliament examination.

But Chidambaram?s comments have now created a sense of expectation of sector-specific tax concessions in the interim Budget. On Tuesday, Ajay Shankar, secretary of the department of industrial policy and promotion, too, hinted at policy changes. ?The Planning Commission deputy chairman has said the economy will need a fiscal stimulus in 2009-10 as well to maintain the growth momentum. The Budget would signal the details of the stimulus package?, he said.

According to him, the sector that would benefit is housing. ?There is discussion amongst all stakeholders on how to increase the supply of affordable housing. The sector is likely to get a further push in the stimulus,? Shankar said.

On Wednesday, Planning Commission deputy chairperson Montek Singh Ahluwalia had said, ?Despite dwindling revenue, there is a case for another stimulus package. The Plan expenditure would part-finance the next stimulus package.?

For the government, despite the elections, the timing of the package could be significant. The economy has already received a boost of Rs 50,000 crore as additional spends since the global economic crisis broke out in September 2008. In addition, RBI has pumped in Rs 4,28,000 crore through cuts in benchmark interest rates and release of impounded cash reserves.

The minister of state for industry, Ashwani Kumar, said there would be a very calibrated policy prescription. ?It is in the process of being formulated. We are coming up with sector-specific areas that need to be kick-started, particularly those which are labour-intensive. You will see some indications in the interim Budget.?

The industry secretary said the first two stimulus packages have already shown results. ?The auto sector is showing encouraging signs. Hero Honda has reported higher than expected production and sales for January, and so has Maruti. So we can be a little optimistic.?

Commerce secretary GK Pillai too said he expects to see the impact of the stimulus packages on the economy by the next quarter. ?In the department of commerce, we are quite confident that by June, we would turn the corner and start to improve (though it) may not be at the same pace as we did between 2004 and 2008.?