What to expect in Union Budget 2010-11

Following important decisions may be taken in the Union Budget to be presented next Friday. 

Foreign investment reforms

Greater foreign investment in the financial services industry like  insurance and Mutual Funds is expected from this budget. Foreign investments may be allowed in print media, education sectors. Stocks that may be impacted by this development include ICICI, HDFC, Aditya Birla Nuvo, Educomp, Reliance Capital, HT Media, Deccan Chronicle etc.

Implementation of GST

The major benefit of GST (Goods and Services Tax) implementation is that there will be potential reduction in prices of products. The reason being the tax burden in the form of multiples levels of taxes on products and services will come down. The government will also benefit because more companies and services can be brought under the tax net. So the government will get lesser tax from more number of people leading to higher income and greater compliance. It is hoped that this budget will give a clear date for the implementation of GST.

Government divestment plans

The government's holding in several PSUs is planned to be brought down. The cash is required for the government to reduce its budget deficit and also to continue funding social causes. It is hoped that this budget will set in motion a clear road map of future divestments. PSU Stocks may hog the limelight on this announcement.

There are also important industry specific concessions and roll backs expected as mentioned below.

Food processing industry

High excise duty levied on food processing industry makes the product expensive. Due to this many users are not able to afford these products. To encourage agricultural development and prevent wastage of food products we may expect some reduction in these excise duties as well. Keep an eye on Nestle, Brittania, HUL, ITC which will benefit from such a move.

Tax exemption U/S 80C

It is expected that the tax exemption limit U/S 80C may increase to Rs. 250000 as compared to currently existing Rs. 100000

Stimulus for the economy

It is expected that the stimulus packages that were released during the global economic down trend for the economy may roll back. Negative for industrial and automotive stocks though most of  it would have been factored in.

Infrastructure Development

Increased emphasis on Infrastructure development have been seen during the previous few budgets, we expect that infrastructure programmes related to roads, health etc may also remain in focus of union budget 2010 - 11. However, it is unlikely to ease monetary policy to better infrastructure. Interest rate cannot be reduced as well.

Textile support

Textiles industry is expected to get favourable support in the budget. This is likely to be true for both the natural textiles and also the man-made fibers industry. Positive for stocks like Vardhman Textiles, Alok Industries, Welspun India etc.