Mr Sandip Sabharwal, CEO - Portfolio Management Services, Prabhudas Lilladher

Although the budget by definition is supposed to be just a statement of the income and expenditure of the government, in India, specifically, it carries a greater weightage mainly due to the fact that it actually ends up being a policy statement of the government for all segments of the economy and is also an indicator of the direction of government policy. The current budget is one of the most expected budgets in recent times and is also one from which the expectations are pretty muted at best. The biggest takeaway that most investors are looking at from the budget is the roll back measures as far as the fiscal stimulus is concerned, the mode and speed of withdrawal as well as the fiscal deficit projections that the finance minister provides. The statements coming out of various policy makers on the monetary and fiscal side over the last few weeks clearly indicates that they now believe that the growth in India is sustainable, however they also recognize that the growth in most countries ex of India, China and a few other emerging economies is still fragile and as such India cannot become very aggressive about its acts of stimulus withdrawal. To that extent it will be interesting to see what the Finance minister projects on GDP growth and his revenue growth projections. The other key expectations are: Some clarity on GST and the Direct Tax Code as both of them are very significant tax reforms that are happening in India after a period of nearly 15-20 years. The stock markets will essentially be looking at the emphasis that the government provides on growth. Over the next one year, given the revival in economic growth the tax revenues are expected to be strong, however the markets will also be looking at what the government is targeting in terms of revenues from other sources like disinvestments, 3 G auction etc. The markets will also be interested in looking at whether the corporate surcharge is removed as that will boost corporate profitability. Given the large government borrowing programme for the next financial year, fiscal discipline will be of utmost importance and the markets are likely to be very pleased if next years deficit is in the range of 5-5.5%. The budget should focus on investments required for boosting agricultural as well as the entire agri supply chain productivity and should give infrastructure status to such investments. A greater emphasis on urban renewal programmes with incentives for carrying out stamp duty reforms for the states. I believe there is today a clear-cut requirement to move towards a low stamp duty regime that is stable across states. Urban centers in India have been ignored over years (not that rural have got attention) and the infrastructure across most key cities is pathetic. There is a clear need to set up statutory body which monitors urban renewal programmes. Elimination of double taxation on dividends on infrastructure SPV’s will be a booster to returns and investments by the private sector on infrastructure projects. Any moves on strategic disinvestments vis a vis the financial disinvestment being carrier our presently will be taken positively. The budget should come out with strong fiscal benefits for investments into various kinds of renewal energy projects as well as bio-fuels so as to ensure energy security in the future. Learning from the impact of just a single poor monsoon on agricultural production, water availability as well as food inflation there needs to be a focus on water storage and conservation through fiscal benefits in these investments. There are lots of other things which the government can do for a strong and sustainable growth of the economy but those are for a discussion at a later date.

Mr Sandip Sabharwal