Keeping an eye on several major states heading for assembly polls this year, and Lok Sabha election due in May next year, Finance Minister P Chidambaram is unlikely to take any harsh measures when he presents the Union Budget for 2008-09 in the Lok Sabha on Friday.

Since for all practical purposes the Budget 2008-09 will be the last full budget of the Congress-led UPA government, which will be completing its five year term by May, 2009, Mr Chidambaram is widely expected to promote “Aam Admi” plank of the ruling alliance by announcing a number of budgetary goodies that will placate the common man.

With the Railway Minister Lalu Prasad Yadav already presenting a populist Railway Budget in the backdrop of election year Chidambaram is also likely to be under “peer pressure” to present a “please all” Budget virtually including all segments of the society ranging from lowly-paid salaried class to Indian Inc.

In the run-up to the Budget 2008-09 the Congress President and UPA Chairperson Sonia Gandhi has already urged the government that the Budget should keep the “interests” of common man and farmers in mind.

While the Budget is widely expected to give enhanced focus on farming sector by allocating massive funds to boost agricultural growth rate, which is now stagnating at a meager little over two per cent, Chidambaram is likely to unveil a big welfare package for small and marginal farmers.

Loans waiver

In view of intense political sensitivity over farmers committing suicide the Budget is also likely to unveil a scheme aimed at waiving of loans taken by small farmers.

Amidst growing expectation of Sixth Pay Commission recommending higher pay scales for central government employees the Budget is likely to effect a “modest” hike in the  existing Income Tax exemption limit.

The existing Income Tax exemption limit, which is now pegged at Rs 1,10,000, is likely to be increased in the “modest” range of Rs 10,000 and Rs 15,000, sources close to Budget making exercise said.

Such a measure apart from giving relief to lowly-paid salaried class will leave a little extra money in the pockets of average middle class to spend, which in turn will spur more demand in the economy thus sustaining growth momentum.     

Mr Chidambaram is likely to enhance the existing standard deduction limit of Rs 1 Lakh to enable Income Tax payers to get more tax relief on investments made under various tax saving instruments.

But the Budget is unlikely to make any change either in the existing Income Tax slab or in the tax rate.

Mr Chidambaram is likely to propose duty reductions on wide range of consumer durable goods including white goods like washing machines, air conditioners and refrigerators  to spur demand cycle to sustain growth momentum.