What can we expect from Budget 2009

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: The budget is expected to balance between social orientation and growth; as well as fiscal prudence. Greater allocation to infra, healthcare and education spending is likely to continue. Considering the large capital requirements going forward, opening up of several sectors to attract FDI / FII investment can be expected. 2% hike in excise and service tax is expected post 4% cut in excise through Stimulus I and II. Some benefits in personal income tax, increase in exemption limit of home loan interest and schemes to divert investment into infrastructure, are also expected. A tax amnesty scheme could be considered in the budget to address fiscal deficit. We anticipate the Finance Minister to indicate a clear way ahead that will lead to sustainable economic growth. The fiscal deficit is cause for concern and should be reigned in. While the Union Budget 2009 might appear to have several disappointments, it is expected to be a healthy one for the long term. Across the key sectors, our expectations are as follows:

Agriculture Revisions are expected in the urea policy to attract new investments. The government should increase focus on rural infrastructure by increasing RIDF corpus and other rural schemes. Focus on irrigation is likely to continue by bringing more land under irrigation and increasing outlay.

Auto Roll back of additional charge of Rs. 15,000 to Rs. 20,000 on utility vehicles/cars above 1500 cc. Some benefits are anticipated under income tax for product development/capex.

Cement Uniform excise duty should be levied on cement. Some changes have already been undertaken during last year and we expect the government to maintain status quo on other factors. Import duty on coal, pet coke and gypsum saw no change and continues to attract 5% duty which the industry wishes should be abolished.

Engineering & capital goods Easy access to fund, increase in import duties on equipments for the benefit of local players, faster implementation of ongoing projects and those in pipeline, tax incentives to private sector players to encourage private sector participation and an increase in the ad valorem rates from 8% to 10% with exceptions in generation and transmission equipment; are also very likely to be announced, in our opinion.

Financial services Exemptions are likely to be granted to bring down cost of fund for infrastructure projects, raising of agri-credit targets, measures to channelise credit to export oriented units should be undertaken.