>BUDGET EXPECTATION (SMC)

Finance Minister is expected to present the union budget on 6th July 2009.

Expected Key Highlights of the Union Budget :
1) Listing, Divesting of Government holdings in public sector undertakings (PSUs).
2) Investment- friendly regulatory and legal framework for public private partnership.
3) Recapitalise banks to boost their financial position.
4) Post offices will be leveraged to deliver more services.
5) Focus on small enterprises, textiles, export etc.
6) At least 13,000 MW additions every year envisaged.
7) Rural health institutions are expected to be recognised.
8) Autonomy in education through an independent regulatory authority.
9) SEZs: Land Acquisition and Resettlement and rehabilitation (R&R) bills to be reintroduced.
10) Infrastructure spending to be centerpiece of growth.
11) There will be an additional spending of Rs. 500 bn in social sector in rural and urban area.
12) Reform will be introduced in insurance, Special economic zone (SEZ), disinvesment, power and education sector.
13) The tax stimulus will have to come through a reduction in excise duties.
14) Tax Reform - Implementation of the goods and service tax (GST) will be pushed forward.
14) Reforms in Coal sector - PSU dilution.
15) Policy changes to reorient subsidies.
16) Reforms to empower panchayats.

The budget is expected to focus on the following sectors:

• Infrastructure sector
• Agriculture sector
• Commercial vehicles sector
• Textile industry

Following are the sectors where government is expected to take reformist path:

Disinvestments in PSUs

• Publicly listed PSUs saw a revival of interest after the 2009 election as disinvestments may unlock hidden wealth in those PSUs. The UPA Government is expected to sell its stake in central PSUs. Divestment is expected to improve the fiscal deficit.
  

• IPOs from government owned companies could also help revive the IPO market and boost the stock market. PSUs, where the government stake is much higher than 51%, may be the first where stake sales will be pushed through.

Banking sector

• Reduce the long-term deposit's tenure from 5 years to 3 years, in order to bring the investments at par with ELSS. Loans against these fixed deposits should also be allowed.
  

• Interest income of overseas lenders on external commercial borrowings should be made tax-free. The banks get loans at higher rates of interest, as foreign lenders gross up the tax liability to the interest rate.
  

• Inter bank transactions of purchase and sale of foreign currency should be made tax-free.

• Banks should be allowed to claim full deduction on the interest earned on long term lending to the infrastructure sector.
  

• Banks are expected to be guided to lend at lower rates.

• Process of consolidation of banks will be hastened.

Infrastructure Industry

• The government is expected to give highest priority for infrastructure spending. The Government of India has planned infrastructure spending of US $550 billion during 11th five-year plan. Project like Bharat Nirman scheme aimed at strengthening the country's rural infrastructure including water supply, power, housing and roads, and proposed a `specific financing window' for Rs 1,740 bn programme, to provide a boost to the infrastructure sector.
  

• ·Road projects are expected to launch on annuity-based BOT schemes rather than tollbased BOT schemes to a certain extent.
  

• ·Part guarantee of debt for major infrastructure projects is expected.

To see full report: BUDGET EXPECTATION