The Union Budget for 2015/16 is expected to focus on reviving investments, particularly in the infrastructure sector, with emphasis on areas that can create a larger multiplier effect on growth as well as projects with a relatively short gestation period.
Accordingly, we expect roads, railways, housing and urban development to receive substantial budgetary funding.
Given the limited fiscal space, we expect public expenditure on big-ticket and longer gestation projects such as ports, high-speed railway, smart cities etc., to be financed through innovative financial means, such as sovereign-supported bonds and other non-budgetary channels.
To enhance the fiscal space, the Budget is likely to focus on paring of leakages and better targeting of subsidies, particularly through widening direct transfer of benefits to the intended beneficiaries.
Changes in taxation rates are expected to be limited, given the goal of maintaining a relatively stable policy regime, the lack of fiscal space to cut rates to stimulate growth and the anticipated shift to the GST.
However, it is likely that the Budget will attempt to rectify inverted duty structures for certain imported items and reduce minimum alternate tax to spur domestic manufacturing.
(Naresh Takkar is the managing director & Group CEO of Icra)