A higher outlay on capital expenditure and healthcare schemes, aimed at boosting India’s further inclusion in the global supply chain is likely. Steps could be announced to reduce tax litigation and boost compliance by greater oversight of transactions, suggests ETMarkets poll of a dozen brokerages.
“We look forward to hearing on whether the attainment of tax neutral GST rate would imply tax rate hikes and its implications for various sectors. Besides, there is a possibility of excise duty reduction on petroleum products. The market is also looking for support measures for sectors such as housing, autos, and auto ancillaries, PLI-related measures in multiple sectors,” said Dhananjay Sinha MD & Chief – Strategist at JM Financial Institutional Securities.
Sinha said one may hear about the broader strategy of fiscal management as he believes that the economic recovery after the Covid shock is still fragile and will require continued fiscal support.
For the working class, Vinit Bolinjkar, Head of Research at Ventura Securities is expecting a work from home (WFH) allowance and revision in the standard deduction.
“It is recommended that an additional deduction of ‘work from home’ allowance of Rs 50,000 be given to employees who are working from home. Also, an increase in the standard deduction limit under Section 16 of the Income Tax Act from Rs 50,000 to Rs 1 lakh is likely,” he noted.
Bolinjkar felt that tax benefits on housing loans both for interest payment and principal repayment could be increased by Rs 50,000 each from the current limit of Rs 2 lakh and Rs 1.5 lakh, respectively.
For the MSME sector, Bolinjkar expects further financial support from the government and reforms surrounding import substitutes to promote self-reliance and domestic manufacturing. Including green energy as part of the policies formulated for MSMEs will also help create a sustainable economy and decrease domestic reliance on energy imports, he added.
Gaurav Garg, Head of Research at CapitalVia Global Research expects the PPF limit to be increased under 80C from Rs 1.5 lakh, given it was untouched in the last Budget.
“I am expecting some relaxations in taxes to boost the real estate sector and waivers or reductions in GST on raw materials as this sector has witnessed sharp bounceback in the last few quarters. Lastly, I expect the education and healthcare sector to get extra allocation amid the third wave of Covid-19,” Garg said.
Sitharaman will table her fourth Budget on February 1.
Among other key expectations is a higher outlay on capital expenditure. A sum of Rs 5.54 lakh was committed in the last Budget, an increase of 26 per cent over 4.39 lakh crore of FY21.
Pankaj Pandey, Head – Research at ICICIdirect expects this to increase by another 25 per cent to reach Rs 7 lakh crore for FY23. This, along with other financial funding options could increase the government’s financing capability substantially to support NIP, he said.
“The government has already launched the National Infrastructure Pipeline (NIP), envisaging the completion of 7,300 projects valued at Rs 111 lakh crore between 2020-25 period. This would require an annual spend of over Rs 20 lakh crore every year for these projects which is equivalent to the total annual receipts of the government. Hence, how the government mobilises additional funding, for ex-channelising investments from PSU units, increasing funding muscle power of DFI and NaBFID, foreign investment participation and proceeds from National monetization pipeline etc. needs to be seen in this budget,” Pandey said.
In FY22, till November, the state of government finance vis-a-vis the budgeted amounts remain much better than those in the comparable periods during FY10-FY21.
Revenue including tax collections (particularly customs and direct taxes) is far ahead compared with previous years, while expenditure is behind leading to a fiscal deficit much lower compared to the budgeted number.
“This is likely to allow the government to simultaneously initiate measures to boost growth while starting the process of fiscal consolidation,” said Sujan Hajra, Chief Economist and Executive Director at Anand Rathi Shares & Stock Brokers.
Aditya Sood, Fund Manager at InCred PMS said the glide path of India’s inclusion in the global bond indices remains crucial from a long-term capital availability standpoint.
“The bond investors would focus on the clarity on taxation and ability to access the market through an international central depository,” Sood said.
Since India is attracting a large number of multinational companies in setting up factories for mobile phones, manufacturing EV battery cells and semiconductors, Sood expects the Budget to announce steps to reduce tax litigation and boost compliance by greater oversight of transactions.
Measures for making India globally competitive are also likely, said Pandey of ICICIdirect.
“This will provide a level playing field for labour intensive sectors and also promote exports of value added products. For example, forming a new set of policies for SEZs, creation of four Coastal Economic Zones (CEZs) etc,” he said.
Vinod Nair, Head of Research at Geojit Financial Services sees focus on the public and private healthcare sector. He also expects focus on underprivileged, rural, and agricultural sections, especially impacted by the pandemic due to fall in income.
Hajra of Anand Rathi Shares & Stock Brokers said weaker rural demand and unsatisfactory performance of agricultural income needs addressal. “This is especially so because the three repealed farm laws were seen as the core agenda for agricultural reform. With those laws now gone, there has to be a new approach to boost agriculture/rural demand,” he said.
From the market’s perspective, Deepak Jasani, Head of Retail Research, HDFC Securities expects the FM to stick to the path of fiscal consolidation. The market would look at monetisation of public assets and divestment of stakes in PSUs and calibrated spending on social welfare and health on the one hand, and capex (including Infra and Railways) on the other.
Ajit Mishra, VP- Research at Religare Broking said the Budget may see limited but strong actionable announcements like measures related to further boosting the real estate and housing sector, measures to boost consumers’ income as well as consumption and plans on disinvestment and asset monetisation.
Amar Ambani, Head – Institutional Equities at YES Securities sees growing share of government capex in terms of GDP, glide path for lower fiscal deficit given the traction in tax revenues, possible tweak to 80 C investment limits given the need to encourage level of savings when compared with the rise in Nominal GDP value.