Budget 2012-13 With the money being an important part of a person life, something such as the Union budget

has always proved to be of much interest to both the common man and the industry. The debates and the discussions in the run up to the Union Budget are always focused on what the government is likely to do to raise revenues, reduce the fiscal deficit and simultaneously spur economic growth and these reforms will ultimately affect their job, their family and ultimately themselves. Bills and taxes are paid with the sole expectation that the government will take care of the nation and its citizens, but with all the scams and sky-high prices its time for the government to gain the faith of people of India by presenting a solution with an impeccable budget. In that context, we take a look at how Indians from various strata of life voice their anxieties and expectations of the Annual Budget for 2012-13, which will be presented by Finance Minister Pranab Mukherjee on March 16th. The Common Man There is a sense that the income tax exemption limit will go up from the Rs 1.8 lakh to about Rs 2.5 lakh. This could be significant because when a consumer feels that there is a significant amount of money left in his hands at the end of the month, he tends to spend more. So, any reforms that give more in the hands of the consumer would be a welcome step for consumption. The tax payers would like to see a progress to the proposals of the new taxes code which envisage raising the first slab (10%) to Rs 10 lakh instead of the current 1.6-5 Lakh slab. This would be beneficial to a big chunk of the working populace as most people in the middle-middle class and upper middle class have an income in excess of 5 lakhs per annum. Coming to the Indian Household, its clear that families would want the FM to do something to ensure that the prices of basic foods and vegetables do not go high as they had in the last few months. Onions literally caused tears in most households and there is a great expectation that the FM would come up with some good ideas to curb the rising prices. Many housewives would also be eagerly hoping that the price of Domestic LPG remains untouched. There is constant pressure on the FM to reduce the burden of subsidy on LPG and he could look at increasing prices of domestic LPG cylinders. The elder males of the family would be keenly looking at any reforms that make the prices of Petrol and Diesel will come down. With prices being at an all-time high, any measures taken to control the prices will be met with cheers. However, it is expected that the government will raise taxes on cars since it wants to reduce its citizens consumption of such fossil fuels. Although it is a highly taxed product and still considered to be an item of luxury, people from the middle class are the largest buyers. Hence its expected that there will be additional tax on cars driven by diesel engines, along with a small hike in the existing excise duty on all cars. The students of the family expect that the FM will declare a loan waiver for Educational Loans, or at the very least reduce interest rates even further People who want to buy homes are keenly looking at the FMs actions in the infrastructure sector. Its no secret that a middle class person wanting to buy a house finds it extremely difficult to carry the burden of such a liability long term. The aam aadmi expects the FM to reduce interest rates on Home loans. The recent spate of mis-dealings by employees of Banks and Financial services has created quite a fear in the minds of the common man about the safety of his investments and finances while dealing with the zillions of companies which have flooded the financial services domain. It is expected that the FM will come up with a long term strategy to ensure that there is stability and a stronger sense of safety prevailing in the Financial Services and Capital Markets domain. India Inc.

One of the most anticipated topics of discussion for India Inc. is the introduction of two taxes -Goods and Services Tax or GST and The new Direct Tax Code or the DTC. GST basically is a comprehensive tax levy on manufacture, sale and consumption of goods and services at a national level and DTC is tax code done by the Indian Government to replace the existing Indian Income Tax Act, 1961. Through a tax credit mechanism, these taxes will be collected on value-added goods and services at each stage of sale or purchase in the supply chain. With services accounting for 57 per cent of Indias GDP, more services need to be brought under the tax net. Its key because if implemented correctly they could integrate State economies and boost overall growth leading to a single, unified Indian market that will make the economy stronger. The shortfall in resources with the government and the 400 bps increase in interest rate on private debt combined to reduce investment in the economy. In the fourth quarter of 2011, investment dropped from 30 to 28 per cent of GDP. Industry is not inclined to add to capacity because demand for homes, for white goods, automobiles, and so on which are purchased on credit has shrunk. The result was that the GDP growth fell down to 6.1 % Since there is an immediate need of course correction, it is not unreasonable for industry to expect that the Finance Minister will budget for investment-linked incentives like an increase in the rate of depreciation, reduction of Minimum Alternative Tax (MAT), cut in corporate tax and Securities Transaction Tax (STT), which together can pep up capital market, investment and growth. Expectations are high for reforms since this budget may be the last opportunity for the UPA government before the next general elections. The Finance Minister may also bring back FDI in multi-brand retail and allow private airlines to go in for foreign equity. With that in mind, we take a look at a few key sectors: Infrastructure: Without a doubt the future growth prospects of the Indian economy lingers primarily on the infrastructure investment and timely execution of the projects. Thus, one such initiative would be to develop a huge amount of long-term corpus towards infrastructure development through dedicated debt funds (the most recent example being tax-saving infra bonds).According to RICS India, in order for India to achieve its envisaged 10% growth during the coming financial year, the requirement for sustainable infrastructure development is crucial to provide impetus to the economic activities and achieve optimum resource utilization. One can also expect some announcements to come through, viz. higher allocation to flagship programs of Bharat Nirman, JNNURM etc. Land acquisition and environment clearance are the two major bottlenecks hampering the timely execution of projects. Hence, roll out of policies to expedite these procedures would lend a stimulus to the sector. Retail: In retail, most of the recent surge in food prices is either on account of supply crunch in the farm production or hoarding of stock by intermediaries. To deal with the latter case of price manipulation, FDI in multi-brand retail segment could go a long way in supporting the governments initiatives to de-clutter the supply chain hindered by ineffective distribution channel. Banking, Financial Services and Insurance: Favourable policy reforms for financial sector are expected from this budget. Furthermore, the FM must also emphasize on re-capitalization of banks, increase in FDI limit for insurance and development of bond market. If there is fiscal consolidation and if there is a positive surplus (fiscal deficit lower than expected 4.5), state owned banking (SOB) stocks could rally else one can expect correction across the sector in the immediate term. One expects a budget proposal for re-capitalization of SOBs will be passed to strengthen the banks with adequate capital base, particularly SBI. Auto: The automotive sector, which has emerged stronger post-recession, continued its growth momentum in the current fiscal year with almost 30 % growth in volumes. However, with short term setbacks such as higher raw-material prices, increasing fuel costs and rising interest rates, Society of

Indian Automobile Manufacturers (SIAM) has urged the government to retain excise duty at the existing levels. Other than increase of excise duties as mentioned earlier, rates on large cars and utility vehicles are expected to be raised on account of concerns raised by the environment ministry. Further, the sector stands to benefit from indirect sops such as higher outlay for the rural sector (driving expected consumer spending) and increased budgetary allocation for infrastructure spending (leading to increased road freight). Overall, we expect the Union Budget 2011-12 to be slightly more taxing for the automobile sector. Power and Capital Goods: Government has revised its target of power generation capacity addition to roughly 62,000 MW from 78,000 MW during the current financial year. Although, one can realistically only expect capacity addition to be as low as somewhere around 54,000 MW on account of various execution hurdles like delay in environmental clearance, land acquisition and fuel linkages continue to key issues faced by the power sector. Going forward, Import of BTG equipment from China will help the private players in setting up the capacities at the faster pace. Investment for the sector will continue to be strong for the next six to seven years on account of structural demand supply imbalance and continued government focus to address it. A huge investment pipeline in power sector and investment in core industries could present the industry with a sustainable revenue visibility on a medium and long term. Oil & Gas: Rising crude prices have resulted in mounting under recoveries for the oil marketing companies (OMCs), which is expected to be almost Rs. 70,000cr in FY2011. The burden on OMCs could be higher in FY2012 if the crude stabilises at current levels. One can expect the budgetary measures to be focused on addressing these burdens by way of reducing duties on crude oil and petrol products and allocating higher amount of cash compensation. Overall, the budget is expected to be neutral for the sector. Information Technology: The information technology (IT) sector has largely outperformed the broader market over the last few months on the back of a strong revival in the sectors fundamentals, especially on the demand side. For the upcoming Union Budget FY2011- 12, one can remain optimistic about the extension of the Software Technology Parks of India (STPI) benefits for another year till the time the DTC comes into force. However, in the event of non-extension of the STPI benefits, do not expect much impact on investor sentiments as IT companies have already factored in a higher tax rate for FY2012 and hence one can remain positive on the IT sector with a longer-term perspective. The top choices from this sector are Infosys Technologies, HCL Technologies.