As the government gears up for the general elections scheduled to be held in April-May 2014 in India, a ‘vote-on-account’ would be presented in Parliament for FY15, in lieu of the regular and rather comprehensive annual budget. Finance Minister P Chidambaram will present the interim and final budget of the UPA-2 government to Parliament on February 17, 2014, to seek approval for expenditures proposed, to ensure that sufficient funds are at the disposal of the central government for administrative purposes until the new government is able to present a full budget for FY15.
Chidambaram may be tempted to present his party’s outlook on the reforms agenda if the UPA is voted back to power. He may also take this opportunity to highlight the key achievements of the UPA government during the past decade.
Vote-on-account relates to the expenditure side of the government's budget. Typically, the government put forth an estimate of funds it would require to meet the expenditure that it incurs during the first three to four months of the election financial year. Possibly, the vote-on-account will seek Parliament’s nod for expenditure for the full year, however the incoming government will then update the estimates on presenting its regular budget expected in July 2014.
The Finance Minister is expected to announce the fiscal deficit for FY14. The proceeds from divestment and from the auction of 2G spectrum could help the government in reducing the fiscal deficit. This shall provide the much needed cushion to the Finance Minister to compensate for the subsidy bill of oil marketing companies, specifically considering the government’s recent announcement of raising the quota of subsidised cooking gas cylinders. Similarly, as a pre-poll sop, the government has announced 10% hike in dearness allowance which is expected to benefit approximately 8 million employees in the country.
Electoral politics could evoke expectations of certain pre-poll sops; however, as the vote-on-account generally deals with the expenditure side of the budget, it is unlikely that there will be any major announcement in economic policy involving direct tax rates. The service tax rate is also unlikely to see a change in the upcoming interim budget, however, certain end-use specific exemptions in service tax are expected. Region-specific indirect tax breaks such as excise duty exemption in hill states, expiring in May 2014, may see a further extension. On the indirect tax rates front, viz. customs and excise duties, the government can