Top ministry officials told FE that Mr Singh is expected to only spell out broad policy initiatives for expediting economic recovery. They added the minister will not go into the specifics, especially those relating to taxation.
Mr Singh’s statement will outline the direction in which the government will be moving in coming months on the economic front, officials said. The minister is also likely to announce the policy direction on critical issues such as Unit Trust of India restructuring and improving the health of financial institutions including the Industrial Development Bank of India (IDBI).
They said bringing in changes in the direct tax measures, accommodated in the Finance Act 2002, at this juncture would be difficult. For changing the direct tax proposals he would have to introduce amendments to the Finance Act which was passed by Parliament two months ago.
Also, in view of impending drought, it would be difficult for the government to forego revenue. On the other hand, finance ministry may have to step up assistance to state governments to help them expand programmes like food for work to deal with monsoon crisis.
The only area where some relief is expected from finance minister is imposing service tax on life insurance premia. The ministry officials, however, said that a final decision on this issue is yet to be taken.
Mr Singh, soon after taking over the charge of finance ministry from Mr Yashwant Sinha, had announced that he would endeavour to change perception about functioning of the finance ministry. The ministry, according to him, would not act like a “policeman”. He had also underlined the need for putting more money in the purses of housewives and consumers which gave rise to the speculation that the new minister might announce tax benefits.
The minister, however, had clarified later that he did not intend to come out with an “interim budget” changing the proposals introduced by his predecessor for the current fiscal. The ministry officials said that major changes in tax proposals can only be considered in the next budget.
Mr Singh’s primary task at this juncture is to restore confidence of investors and general public in the economy and keep the momentum of recovery intact, said officials. In addition to drought, the major problems which have to be addressed by the finance minister are critical state finances, growing fiscal deficit, irregularities in the financial sector and fallout of accounting scandals.