The Union Budget would be presented on Monday the 28th of February and though it is a non-event there is always that hope that something would spur the markets this year.

Things have gone wrong this year for the ruling UPA and the number of scams that they are fighting ranging from 2G to Adarsh to the Commonwealth Games, they seem to be simply unending. Our honourable PM nobody doubts upon but is being blamed for turning a blind eye to the happenings and is being held responsible for not putting his foot down. We lost the Winter Session of Parliament to the JPC on 2G not being constituted but fortunately that has been formed at the beginning of the Budget Session. What is in store for the citizen is a million dollar question on everyone’s mind.

The image of the UPA government has been tarnished without doubt and the rising inflation in particular has broken the back of the common citizen. Vegetables, milk and cereals are simply unaffordable and all that we hear is that in a few months time things will improve. It is most unfortunate that besides assurances nothing seems to be happening. Elections to the Tamilnadu and West Bengal assemblies are due shortly and they are critical to the present government for different reasons. In Tamilnadu the present ruling party is the DMK Congress combine who are fighting the 2G scam with the former telecom minister Mr A. Raja of the DMK in jail currently. In West Bengal a key ally of the Congress the Trinamool Congress and the current Railway Minister Mamta Banerjee expects to win and become the new Chief Minister. The Railway Budget announced on Friday gave an indication of the same being the Bengal budget with all eyes on the forthcoming election.

The budget would be for the “AAM AADMI” and would focus on reassuring him that the government has him in mind. With this being the key we should expect small sops for the common man to dominate the budget. Some bullet points are enumerated below.

• The tax free limit for salaried class is likely to be raised.
• The standard deduction in the lower slabs could also be raised so that the total tax incidence gets reduced.
•  A reduction in duties and taxes on crude oil and petroleum products is expected so that the precarious condition of oil marketing companies improves without having to raise diesel prices any further.
• An increase in excise duties and service tax rates are expected with probably new services attracting service tax being added. 
• Extension and increased allocation to programs like NREGA and Bharat Nirman so that the common man gets assured employment.
• Withdrawal of sops granted in 2009 after global economic meld down.

These would be measures to by and large benefit the “AAM AADMI” and would cause revenue loss to the exchequer. The fiscal deficit is a cause of concern and apparently the fine balancing between the common man and ensuring that the growth does not falter at the cost of inflation and fiscal expenditure needs to be finely balanced. Crude oil is literally on fire and is a big cause of worry.

The infrastructure bonds have been a good success in 2010-11 and there were quite a few players who launched such schemes during the year. Even currently we have PFC, IDFC, L&T Infra having such schemes open while IIFCL issue would be closing next week. These bonds had a tax break on an investment of upto Rs 20,000 being invested in such designated schemes.

I believe that the FM has looked at this avenue of raising money for the rapid infrastructure growth, investment and expenditure that is required in the 12th Five year plan and is likely to raise this limit to Rs 1 lakh if not Rs 50,000. This would help the government to garner funds to the designated institutions who could in turn lend to the public and private companies involved in infrastructure. If something like this happens it would provide a fillip even to the stock markets which are in a fairly depressed state of affair currently.

The Honourable Supreme Court of India has been very critical of the Government inaction in tackling the issue of unaccounted money or black money of Indians lying abroad in tax havens. The current global scenario where we are seeing uprisings in many African and Middle East countries may force the government to announce some sort of Amnesty scheme which could make an attempt to bring back this money into the mainstream of Indian economy. An announcement of this sort which implies that the money declared would be put into a designated account would come with a lock in for a certain period of time of anything between 5 to seven years and the interest notionally earned would be treated as tax payment would help reviving the sagging market to a great extent.

The black money is of no use to the Government and lying in Swiss accounts it neither earns interest nor is put to productive use. In this case it could be used to generate employment and provide the required capital for Infrastructure. I believe that the reason why such a scheme is likely that the safe havens are becoming unsafe and the holders of the money overseas are getting worried that it is better to bring the money to India rather than lose it completely.

I believe these two measures have the capacity and capability of turning the capital markets and providing an upward impetus to the markets.