With the possibility of reducing expenditure looking bleak, particularly because of the subsidies in food and fertilizer, the Finance Minister is left with little options but to increase revenues. In doing so, he is likely to provide very few benefits to the common man.
In fact, one can expect service tax and VAT to go up, making goods and services expensive for the aam admi, who is already grappling with an inflation rate of 7.16 per cent.
The only respite might come by way of increase in the personal income tax slabs, which has now become a routine with successive Finance Ministers. Last year, the then Finance Minister Pranab Mukherjee hiked the tax exemption limit from Rs 1.8 lakhs to Rs 2 lakhs and Chidambaram may now hike it to Rs 2.2 lakhs.
With savings rate in the economy reducing dramatically over the last one year, there are concerns that it could stall economic growth in the coming years. Chidambaram might look at encouraging savings through various avenues, which could provide some benefits for the layman. He might look at the possibility of raising the section 80C limit from the present limit of Rs 1 lakh. Last year Pranab Mukherjee had introduced the Rajiv Gandhi Equity Tax Savings Scheme, and Chidambaram might want to think of something more novel to encourage savings.
All in all the aam admi should not expect too much from the Union Budget 2013. In fact, if the Finance Minister goes ahead and increases VAT and service tax be rest assured that you would have lower savings in the year to come. One can just hope and pray that does not happen.