Mr. Sivasubramanian KN

What is your expectation from the upcoming Union Budget?

The upcoming Union Budget has given rise to lot of speculation and expectations from policy makers (due to the recent spate of reforms). Like in the past, we don't expect too many policy measures to be announced in Union Budget, but the insight into government borrowings and spending plans will be important for investors. It is likely to be an interesting balancing act for the government, ahead of the national elections in 2014, between populist measures and the need to control deficit. Key areas to watch will be efforts to contain the twin deficits and plans for boosting investment activity. The roadmap to fiscal consolidation laid down last year requires the fiscal deficit to be reduced to 4.8% of GDP - the target is tougher to achieve in a slow growth environment. In addition to the recent announcements (direct cash transfers and diesel price de-regulation), changes to taxation and higher disinvestment (through new instruments) may be considered to boost revenues, along with further belt tightening on expenditure. The arithmetic may become complicated due to the focus on the Food Security Bill.

The Budget may see some tax benefits as part of efforts to boost financial savings and investments, along tax measures to boost revenues. The push on enhancing infrastructure is likely to continue - the Twelfth Plan envisages $1 trillion spending during 2012-17. The relative importance of the Union Budget has declined over the last decade or so with regular policy changes being announced outside this event - however, the upcoming event will be keenly watched primarily because of the current economic environment and the limitations to push through major policy changes post this session.

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