The Budget is once again round the corner. While the last one in February 2009 was silent on most of the ‘expected expectations’, which was in continuation of the tradition usually followed by governments that present an Interim Budget, however, this time around, the expectations of corporates as well as investors are visibly high from the event.

The three most important factors that are supporting this are: 1) A convincing UPA victory with a Congress majority leading to the formation of a highly stable government at the Centre for the next 5-years; 2) The absence of the Left parties in the current coalition equation, thus providing the UPA with the necessary space to carry out the necessary and intended reforms; 3) The huge scope for reforms that are possible in India, which had been put on the back-burner because of the vehement opposition from the Left.

The Budget wish-list is understandably lengthy this time around for the aforementioned reasons. Apart from the reforms that may come up for consideration in the areas of insurance, pension funds, debt markets and banking, FDI in sectors like retail and airlines is also something to watch out for. It is expected that the government will also keep its commitment of implementing central Goods & Services Tax (GST) from April 2010. Implementation of the GST is expected to benefit the Indian economy by about Rs75,000 crore or over 1.2 per cent of India's GDP. PSU disinvestment, which was not on the government’s agenda for the last five years, may also be talked about as a means to improve the fiscal health. Apart from this, in the backdrop of the weak global trade markets, some sops for exporters cannot be ruled out.

Let us consider a few of the sectors’ expectations from Budget FY2009-10 this time around.

Banking

We expect the Budget to prominently feature key financial sector reforms. Top on the agenda of the government could be reforms such as increase in the FDI limit on capital-hungry private Life Insurance companies from 26 per cent to 49 per cent and removal of the voting cap on Bank shares. However, we do not believe that a decision regarding reducing the government’s holding in PSU Banks below 51 per cent will be taken in this Budget. Secondly, financing of the fiscal deficit also has important implications for Banks through its direct impact on government bond yields and consequent treasury gains or losses. In this context, if the government indicates a significant quantum of funds to be raised through disinvestments, that would be a positive for bond markets and consequently banks.

Infrastructure

Among the many changes required for the sector, we expect drastic announcements pertaining to the Road segment, as this segment has come to a virtual standstill. Further, considering that there is still some hesitancy among bankers for PPP based projects, this can be tackled if part government guarantee is provided for major projects. We also expect some clearances/changes in laws relating to land acquisition process being announced as it has been one of the major impediments for implementation of many vital infrastructure projects.

IT

In the backdrop of the current global economic slowdown, the key issues to be addressed in the Union Budget assume even greater importance for the long-term growth of the Indian IT Sector. Thus, an extension of the industry-friendly STPI scheme for at least a further 5 years is the biggest wish-list of the industry. Other issues that require addressing include speedy enactment of the recent clarification pertaining to the SEZ scheme, service tax, FBT abolition and transfer pricing norms. Apart from these issues, the treatment of duties on software - both packaged and customised - is another area to be tackled.

Telecom

The Indian Telecom Sector is the fastest-growing in the world. With a view to encourage the growth of the sector, the total levies on the sector need to be reduced. The sector is amongst the most heavily taxed in the world, and estimates suggest that as much as 30 per cent of a consumer’s bill goes towards taxes and levies in the form of service tax, license fees, spectrum charges, etc. Thus, this is an issue that would need addressing with a view to driving the next phase of growth into rural India and making telecom services more affordable. Further clarity about the possible timeline of the 3G auction should also be looked at.