The Union Budget for 2011 -2012 will be presented on February 28. Given the inflationary environment and spate of scams country is embroiled in, 2011-12 Union Budget provides a perfect opportunity to the government to allay the anxieties of common man.

So what can you expect from this Budget? And what you should not expect?

What will the Budget focus on?

Rise in Tax Exemption Limit

The budget may propose an increase the income tax exemption limit to provide some relief to the taxpayer from inflation. Income tax relief can be provided to lower income brackets. There would be relaxation in individual tax slabs with a likely hike in income tax exemption limit. This will be a natural move to align with provisions of DTC. This could take the form of raising the tax exemption limit from the current Rs 1, 60,000 to a higher income slab Rs. 2, 00, 000. Presently, income up to Rs 1, 60,000 for men and Rs 1, 90,000 and Rs 2, 40,000 for women and senior citizens is exempted from tax. DTC; GST implementation is unlikely before April, 2012.

Metro Network

Fresh Metro rail network for Kochi is likely to be announced in the forthcoming budget. Funds worth Rs 6,000 crore could be allocated for Chennai and Bangalore Metro rail systems. Delhi Metro Phase-III will be launched in the Union Budget and funding is likely to be announced in the General Budget for 2011-12.

Service Tax Ambit

2011-12 Indian budget can see an increase in the service tax to boost the revenues. The service tax net is expected to increase either through the addition of new services or the expansion of the scope of the existing services. New set of services that could be bought under the ambit of services tax are CA audit, corporate finance and accounts services, health and education services, legal services, postal services, gas and water distribution, hospital OPD services, retail services, research and experimental development etc.

There could be a rise in tax exemption limit for investing in infrastructure bonds from the current limit of Rs 20,000 per annum

Sector wise Expectations

Consumer Durables may become Costlier

It is highly speculated that excise duty will be hiked and economic stimulus given earlier may be rolled back in the durable, electronic, FMCG, beverage, and automotive sector. Post budget, consumers may have to shell out more money on electronics, appliances and fast moving goods. A rollback of the duty benefit and increase in excise levy coupled with rising input costs will force companies to pass the excise duty burden on the end consumer, thus leading to higher retail prices for consumers. The upped tags will increase overall expenses of consumer who is already stretched as far his budgets go, given the rise in food inflation. In FMCG and food processing sector there can be increased excise duty on cigars & cigarettes. This will lead to an increase in the price of cigars & cigarettes.

Agriculture

This budget may award positive measures to the Agri Inputs sectors to boost Agriculture growth during the current fiscal. Farmers in drought and flood prone areas may get 2% subsidy on short term farm loans. Union Budget 2011-12 is likely to undertake measures to ease supply side constraints through various reforms.

Increased Investments in technology
Improvement in the Agri logistics & cold storage chains
Reduction in essential commodities hoarding
Investment in R&D
Irrigation and water management
Increased procurement of agri inputs

Automobiles

The last year budget had partially rolled back the stimulus given to the auto firms by increasing the excise duty to 10%. This year, the existing excise duty would remain unchanged on small cars, two-wheelers and commercial vehicles. However, the excise duties on large cars and utility vehicles could be increased to 12%.

Banking

The coming budget session may implement specific measures to overcome the mismatch in credit-deposit growth in the economy. To give boost to higher deposit mobilization, the lock-in period for tax-saver FDs can be reduced to three years from five years. Another laudable feature could be allowance of provisions for NPAs as an expense for calculation of tax liability and not just full write-offs. A proposed increase in FDI in insurance to 49% could also be raised in this budget. One of areas that will attract attention is the high fiscal deficit. Unlike last year, when the government received revenue from 3G and BWA spectrum auctions, there are no such benefits till date. An increase in fiscal deficit can harden interest rates, which will further hit the credit demand/margins of the banks.

Telecom

Telecom is one of the heavily taxed sectors in India with levies such as license fees and spectrum charges. This year budget could announce a uniform tax structure and various indirect incentives by reducing the duty levied on capital/equipment imports, which would reduce operational costs, in turn lowering tariffs, which is necessary spurring the domestic demand.

IT

Union Budget 2011-12 is unlikely to produce positive fireworks for the Indian IT sector as the mid and small-size IT firms vie for the extension of STPI and tax clarifications. STP is of prima facie importance to mid to small-size companies who are already bogged down with wage hikes, steep upswing in tax rates, and moderate growth. Various e-governance initiatives such as RAPDRP, UIDAI and Sarva Shiksha Abhiyan are other areas to watch out. Increased emphasis on PPP in education and ICT implementation in schools would benefit firms such as Educomp Solutions, NIIT and Brainworks who primarily cater to the K-12 segment. A possible extension of STP expiry is highly unlikely, which if implemented could improve bottomlines of mid-size and tier-I IT companies such as Tech Mahindra, KPIT Cummins, Mphasis, TCS, HCL Tech and Wipro.

Cement

The budget may not reduce excise duty on cement.

Real Estate

In the Union Budget, we expect the government to increase the tax limit under Sec 80c from '1lakh to '2-3lakh, which will lend a boost to the housing segment. Currently, only the township projects avail external commercial borrowing (ECB) funds. However, the developers' expect the FDI-compliant projects to be allowed access to the ECB route of funding. Re-introduction of tax holiday for housing projects under Sec 80IB is also on the developers' wish list. Further, the developers having higher exposure to SEZ's expect STPI benefits to end by March 2011. Overall, we do not expect these measures to have a significant near-term impact on our estimates. Hence, we expect the Budget to be Neutral for the Sector.

Inflation High on Agenda

The budget may unveil more measures to combat high inflation which has adversely impacted the common man. Important measures that could be implemented are setting up farmers' mandis, and mobile bazaars, computerization of the Public Distribution System (PDS), and opening of more procurement windows across the country. A review the Agriculture Produce Marketing Committee Act to exempt horticulture products from its purview is also possible in the upcoming budget. This will remove marketing and distribution bottlenecks in the supply of horticultural products.

Highlights of Railway Budget 2011-12

Railway Minister Mamata Banerjee is likely to announce a slew of projects and important initiatives in the Railway Budget 2011-12; many of them may fall in the purview of West Bengal which will hold crucial assembly elections later this year. Banerjee is planning to introduce two more Duranto (non-stop) trains from Howrah to Guwahati and Chennai. Speculation is rife that Railway Budget 2011-12 could launch a multimodal transport system in Hyderabad and Secunderabad. There are also plans to introduce special trains for the youth.

Highlights of Railway Budget 2011-12 - As announced in Parliament on 25th Feb 2011.

No hike in passenger fare and freight rates.
Highest ever Plan outlay of Rs. 57, 630 crore proposed for Railways.
Rs. 9,583 crore provided for new lines.
1300 km new lines, 867 km doubling of lines and 1017 km gauge conversion targeted in 2011-12.
56 new Express Trains, 3 new Shatabdis and 9 Duronto trains to be introduced.
AC Double Decker services on Jaipur-Delhi and Ahmedabad-Mumbai routes.
New Super AC Class to be introduced.
A new portal for e-ticketing to be launched shortly. Booking charges will be cheaper with a charge of only Rs. 10 for AC classes and Rs.5 for others.
Pan-India multi-purpose smart card "Go India" to be introduced.
236 more stations to be upgraded as Adarsh Stations.
47 additional suburban services in Mumbai and 50 new suburban services proposed for Kolkata.
Two new passenger terminals in Kerala and one each in Uttar Pradesh and West Bengal proposed.
Feasibility study to raise speed of passenger trains to 160-200 kmph to be undertaken.
A special package of two new trains and two projects for the States managing trouble free run of trains through out the year.
Anti Collision Devise (ACD) sanctioned to cover 8 zonal railways.
GPS Based 'Fog Safe' Device to be deployed.
All unmanned level crossing upto 3000 to be eliminated.
All India Security Help line on a single number set up.
All state capitals in the North-East except Sikkim to be connected by Rail in next seven years.
A Bridge Factory in J & K and a state-of-art Institute for Tunnel and Bridge Engineering is proposed at Jammu.
A Diesel Locomotive Centre will be set-up in Manipur.
A Centre of Excellence in Software at Darjeeling proposed under the aegis of CRIS.
Rail Industrial Parks at Jellingham and New Bongaigaon proposed.
Additional mechanized laundry units to be set up at Nagpur, Chandhigarh and Bhopal.
700 MW gas-based power plant to be set up at Thakurli in Maharashtra.
18,000 Wagons to be procured during 2011-12.
A scheme for socially desirable projects, 'Pradhan Mantri Rail Vikas Yojana' with Non-lapsable fund proposed.
10,000 shelter units proposed for track side dwellers in Mumbai, Sealdah, Siliguri, Tiruchirapalli on pilot basis.
Concession to physically handicapped persons to be extended on Rajdhani and Shatabdi trains.
Concession of 50% to press correspondents with family increased to twice a year.
Senior Citizens concession to be hiked from 30 % to 40 %.
Medical facilities extended to dependent parents of the Railway employees.
Scholarship for Girl child of Group-D railway employees increased to Rs.1200 per month.
20 additional hostels for children of railway employees to be set up.
Recruitment for 1.75 lakh vacancies of Group 'C' and 'D' including to fill up backlog of SC/ST initiated, 16,000 ex-servicemen to be inducted by March 2011.
A separate sports cadre to be created.
2011-12 declared 'Year of Green Energy' for Railways.
Freight loading of 993 MT and passenger growth of 6.4 % estimated for 2011-12.
Gross Traffic Receipts at Rs.1,06,239 crore, exceeding one lakh crore mark for the first time estimated.
Ordinary Working Expenses assessed at Rs. 73,650 crore.

Last Updated on : 25 February 2011