THE ENSUING UNION BUDGET 2010: WHAT IS IN STORE ?

ON 26TH FEBRUARY, 2010, THE FINANCE MIINISTER IS EXPECTED TO PRESENT THE UNION BUDGET FOR THE YEAR 2010-11. This is a crucial year not only because from the next year Direct Tax Code is going to be introduced but present high inflation is creating havoc in food front and fiscal deficit has increased disproportionately. At the same time economic growth rate has gone up more than expected yet development for below poverty level people has stagnated. Under the above climate it would be very difficult to manage a balanced budget. The finance minister shall have to do a tight rope walking for he would surely like to stress on growth yet would like to bring down the excess liquidity in the economy. To bring down the inflation he would have to increase the revenue receipt yet to curb fiscal deficit he has to control unproductive expenses. During this time expenses on infrastructure and social project shall have to be maintained in high volume. Following are some of the possibilities:-

• Lowering of taxes
• Enhancement of gratuity limit
• Central stimulous may be partially withdrawn
• Lowering of corporate tax
• Disinvestment will be major thrust to reduce fiscal deficit
• Capital gains tax would remain untouched
• Re-structuring of tax slabs
• Self assessment slab may be revised
• Reform in agriculture sector
• Focus on education and skill development

PRE- BUDGET MARKET MOVEMENT:

At present market is trading at 16 thousand to 17 thousand range. The valuation seems to be overstretched. If we look at the Asian peers the India market looks overvalued. The run up in the market due to excitement and liquidity has brought the market into overvalued territory. Too much of euphoria and expectation has been build in the price. We are expecting too much from the government. Government has their limitation. So when there will be any short fall in the fulfilment of the expectation market will move into downward spiral.