The Finance Minister Pranab Mukherjee will present the Union Budget 2011 today. He has a tough role to play as the country is reeling under inflation and high crude price has been a dampener. The major focus areas of the budget are likely to be:
* Fiscal Deficit: The market is talking about FY12 deficit of 5-5.5% but watch out for absolute figure as gross domestic product (GDP) has been revised from Rs 60 lakh crore to Rs 90 lakh crore. Hence, fiscal deficit absolute number can come at Rs 4.5 lakh crore instead of Rs 3 lakh crore even if the fiscal deficit is at 5%.
* Market Borrowing: The government could announce market borrowings of around Rs3.8 trillion (USD80 bn) - 4.5% of GDP, compared to a projected Rs 3.45 trillion (USD76 billion) in FY11, as the one-off telecom receipts are not available in FY12. Revenue growth to slow on lower tax buoyancy and no asset sale windfall is expected.
* Clarity on GST and DTC
* On taxation side: Some broad basing of the service tax, higher income tax exemptions, and a possible increase in excise duties on autos is expected.
* Sectors: The metals and capital goods industry is looking for an increase in import duties to protect domestic manufacturers. IT has asked for continuation of the STPI benefits, while oil companies have asked for a reduction in excise and customs duties. Real-estate companies have asked for tax sops for low-cost housing. Except for the sop to low-cost housing, other measures seem unlikely. In an attempt to boost tax revenues the government may focus on:
1) Increasing taxes on its favourite targets - cigarettes, alcohol, high-end consumer durables
2) Widening the services tax net
3) Rationalising excise duties by reducing exemptions or carve-outs (eg, small cars)
4) Introduction of cess to fund social sector schemes can not be ruled out
* Market Borrowing: The government could announce market borrowings of around Rs3.8 trillion (USD80 bn) - 4.5% of GDP, compared to a projected Rs 3.45 trillion (USD76 billion) in FY11, as the one-off telecom receipts are not available in FY12. Revenue growth to slow on lower tax buoyancy and no asset sale windfall is expected.
* Clarity on GST and DTC
* On taxation side: Some broad basing of the service tax, higher income tax exemptions, and a possible increase in excise duties on autos is expected.
* Sectors: The metals and capital goods industry is looking for an increase in import duties to protect domestic manufacturers. IT has asked for continuation of the STPI benefits, while oil companies have asked for a reduction in excise and customs duties. Real-estate companies have asked for tax sops for low-cost housing. Except for the sop to low-cost housing, other measures seem unlikely. In an attempt to boost tax revenues the government may focus on:
1) Increasing taxes on its favourite targets - cigarettes, alcohol, high-end consumer durables
2) Widening the services tax net
3) Rationalising excise duties by reducing exemptions or carve-outs (eg, small cars)
4) Introduction of cess to fund social sector schemes can not be ruled out
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