Budget 2012: Calibrated excise duty hike, investment incentives on cards

Sources say that the Finance Minister is likely to move on excise duties in order to tackle the fiscal deficit pressures, especially considering the fiscal deficit for FY12 might go up by almost 1 percentage point, that is to around 5.6% or so. Also remember that the pressures will be even higher next year with growth at 7.6%.

Another point is that disinvestment revenues could moderate if the market, like this year, does not support the disinvestment agenda. Of course, high subsidies going forward next year will as well have an impact.

Sources from the Finance Ministry told CNBc-TV18 that some action on the excise front is expected. But we will have to wait and see tomorrow to find out if it’s an across-the-board excise hike to 12% or a hike on selective items like diesel cars.

On the brighter side, sources say the Budget is likely to be positive for investors, especially for new investors. The government will probably introduce the Rajiv Gandhi Equity Scheme which will give incentives for new investors.

There also could be an increase in the limit for tax free infra bonds from Rs 30,000 last year to Rs 50,000. These are issued by NHAI, Indian Railway Finance Corporation etc.

Also on Viability Gap Funding (VGF) you will see 10 new items being added.

The big idea for the Budget is the introduction of a negative list for service tax. Of course for the final contours we will have to wait for tomorrow and listen to the FM speech.

Watch the accompanying video for more details..