As on every Budget Eve, Common Man this year is again resting his hopes on Finance Minister with a muted expectation of some form of economic relief. As commoner’s wallet is stretched to the hilt this year with raging inflation, monthly fuel price hikes and forever impending slowdown of economy, some economic relief in the budget is expected and sought for.
However year’s budget is set to be a duly political piece, with one eye on next year’s election and several state elections scheduled this year itself. Let’s have a look at what are the key expectations from the budget and how common man, his wallet and his stock investments may get affected.
1. Commoner’s Craze for Gold:
Indian investors’ fondness for Gold is not willing to relent, however huge imports of Gold adds onto our Current Account Deficit (CAD) and hurts overall economy. Budget is expected to boost some form of alternate investment channels to divert India’s attention to Gold. With Indian Gold imports soaring each year, which strongly signals commoner’s loss of faith in our national currency (INR), other investment instruments such as stocks, Insurance and Mutual funds should receive some boost in Budget to arrest this craze. Gold Schemes and Bank’s Gold deposits would see introduction of new processes for their Gold stock utilization lying idle.
2. Housing
With an eye towards elections, FM would be forced to declare goodies in the affordable real estate space. Budget may bring additional tax deductions and relaxations for Home Loan customers, increase the income tax deduction limits for home loans, and bring in policy benefits for real estate players in low income housing as well. Long pending announcements on realty bills like Land Acquisition Bills can hope to benefit players in this space.
3. Income Tax Slab
Income Tax slabs have the trend to relax with each year’s budget. However, this year, with the fiscal deficit and widening gaps, do not expect any significant relaxation for the working class population. The much debated Rich-Tax would definitely appear which would start a long trend of taxing India’s riches differently and with great prejudice. This is a trend which would last for long time and may get worse with each populist coalition government. Just to take an example, in some socialist European countries, rich citizens at taxed at enormous slabs ending at 70% or so.
4. Farming and Agriculture
With about 50% of Indian population being in rural India or Bharat, as it is fondly called, expect blockbuster announcements to benefit farmer and agriculture community in this budget. Loan write-offs, Warehousing loans, SME loans and interest free schemes would definitely find their place in this year’s budget on the eve of General election. Agro processing firms might find themselves in the right place at the right time with some of these schemes. Farmer and rural community would definitely benefit from this year’s budget.
5. Infrastructure:
With new Infrastructure projects and policy announcements beings in limbo for most of 2011 and 2012, this year’s populist budget could focus on reviving some of these schemes to attract investment and provide relief to India’s overloaded metros and Tier-I cities. Infra Companies could see some form of Taxation relief and most of the firms struggling with slowdown in government spending and policy indecision for past 2 years would benefit from pickup in decision making for this financial year.
6. Goods and Services Tax (GST):
GST has been forever coming for Indian consumer and business community. With each state running its own fiefdom in taxation space, common consolidated tax code for Indian Union has been a dream pending for long. GST might seem to create an extra taxation layer to start with, but gradually with relaxation of state level tax layers, it would benefit the consumer in long run. Of course, at state level, opposition to specific tax laws and bylaws would be another battle to fight and win. This would benefit all business players especially Logistics players, distribution companies and consumer goods.
7. Doomed Sectors :
However year’s budget is set to be a duly political piece, with one eye on next year’s election and several state elections scheduled this year itself. Let’s have a look at what are the key expectations from the budget and how common man, his wallet and his stock investments may get affected.
1. Commoner’s Craze for Gold:
Indian investors’ fondness for Gold is not willing to relent, however huge imports of Gold adds onto our Current Account Deficit (CAD) and hurts overall economy. Budget is expected to boost some form of alternate investment channels to divert India’s attention to Gold. With Indian Gold imports soaring each year, which strongly signals commoner’s loss of faith in our national currency (INR), other investment instruments such as stocks, Insurance and Mutual funds should receive some boost in Budget to arrest this craze. Gold Schemes and Bank’s Gold deposits would see introduction of new processes for their Gold stock utilization lying idle.
2. Housing
With an eye towards elections, FM would be forced to declare goodies in the affordable real estate space. Budget may bring additional tax deductions and relaxations for Home Loan customers, increase the income tax deduction limits for home loans, and bring in policy benefits for real estate players in low income housing as well. Long pending announcements on realty bills like Land Acquisition Bills can hope to benefit players in this space.
3. Income Tax Slab
Income Tax slabs have the trend to relax with each year’s budget. However, this year, with the fiscal deficit and widening gaps, do not expect any significant relaxation for the working class population. The much debated Rich-Tax would definitely appear which would start a long trend of taxing India’s riches differently and with great prejudice. This is a trend which would last for long time and may get worse with each populist coalition government. Just to take an example, in some socialist European countries, rich citizens at taxed at enormous slabs ending at 70% or so.
4. Farming and Agriculture
With about 50% of Indian population being in rural India or Bharat, as it is fondly called, expect blockbuster announcements to benefit farmer and agriculture community in this budget. Loan write-offs, Warehousing loans, SME loans and interest free schemes would definitely find their place in this year’s budget on the eve of General election. Agro processing firms might find themselves in the right place at the right time with some of these schemes. Farmer and rural community would definitely benefit from this year’s budget.
5. Infrastructure:
With new Infrastructure projects and policy announcements beings in limbo for most of 2011 and 2012, this year’s populist budget could focus on reviving some of these schemes to attract investment and provide relief to India’s overloaded metros and Tier-I cities. Infra Companies could see some form of Taxation relief and most of the firms struggling with slowdown in government spending and policy indecision for past 2 years would benefit from pickup in decision making for this financial year.
6. Goods and Services Tax (GST):
GST has been forever coming for Indian consumer and business community. With each state running its own fiefdom in taxation space, common consolidated tax code for Indian Union has been a dream pending for long. GST might seem to create an extra taxation layer to start with, but gradually with relaxation of state level tax layers, it would benefit the consumer in long run. Of course, at state level, opposition to specific tax laws and bylaws would be another battle to fight and win. This would benefit all business players especially Logistics players, distribution companies and consumer goods.
7. Doomed Sectors :
Long doomed sectors like Sugar, Textiles, Wind Power and Capital Goods might see some relief with our expert Finance Minister at the helm. These sectors which are in cyclical downtrend from past many years might see new schemes and policy announcements, regulatory decontrol, tax relief, better depreciation norms and increase in import duties for them to come out of their death spiral.
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