New Delhi: So much for wishlists. Every company and industrial association worth its salt is telling you what they want the Finance Minister to announce on 29 February. Here is some insight on what he is likely to announce that day, given the plethora of demands from the commercial world and the common citizenry.
Investment management firm, Religare Securities Ltd, expects Budget 2008 to focus on sustained balanced growth, while addressing the short-term challenges of inflation, the slowdown in the GDP and the impending elections.
In a detailed report on Budget expectations, Religare says tax reforms and fiscal discipline are likely to be addressed in this budget also. For the stock markets, it does not foresee negative announcements, save for a hike in STT rates.
This will be the last budget to be presented by the current government before it faces the general elections next year. Therefore, it will inevitably be targeted at getting votes. This means that it could well be a ’populist‘ budget with pay-offs for voters in terms of lower taxes.
Says Sangeeta Purushottam, head-institutional business, Religare Enterprises Ltd, in the introduction to the report: ”Another possibility is that tax rates are left unchanged for corporates, but there are a host of announcements on increased outlays to social sectors like education and health.
The key challenges that this budget also needs to address are:
(ii) Slowdown in the GDP, particularly in the manufacturing sector,
(iii) A much tougher global environment and its impact on growth through the external sector in the months ahead and
(iv) a rising subsidy burden, which does not fully reflect in the fiscal deficit.
Therefore, on balance, Religare believes that the key features of this budget will be as given below:
• Reduction in direct tax rates for individuals but NOT for corporates
• Some reduction or elimination of dividend distribution tax
• Rationalization of excise duties, including the auto sector
• Rationalization of exemptions for corporates
• Lower customs duties for commodities to contain inflation and rationalization of inconsistencies
• Enhanced credit availability for the agriculture sector
• Some relief in FBT
• A sharp increase in the outlays for social sectors like health and education
The report has also measured the likely impact of the Finance Minister’s 29 February announcement on as many as 14 sectors, and has provided a list of top picks in each.
The views and analysis expressed are not the website’s opinion and are provided for information purposes by Religare Securities. Readers are requested to do their own research before participating in the stock market and should not base their decisions on the content of the Religare report. Neither the website nor the information provider will be responsible for any outcome based on the information provided here.