'Further liberalisation for FII investment seems likely'

Suhas Naik

We could see some tax sops for new investments, as one of the biggest drags on GDP growth has been the slowdown in the industry. The services sector could be targeted for higher tax mop up as the contribution of the services sector to GDP is continuously increasing.

Increased allocation to the farm sector and initiation of farm sector reforms is something to look forward for. With 10 year Government Bond yields at 7.2 per cent and inflation running below 2 per cent, the government has enough room to cut the small savings rate by at least 100 basis points. We believe that a flexible rate regime can also be put in place benchmarked against the bank rate.

A further liberalisation of norms for DFI/FII investment also seems likely. A further extension of the tax exemption on income from mutual funds seems likely. Also, tax concessions for housing should be increased further. Though tax concessions could be announced for infrastructure, the implementation is more crucial. The problem with infrastructure is that the policies are unclear and the implementation is invariably delayed. On the whole, we hope this turns out to be a growth-oriented budget.

Suhas Naik is Fund Manager- Equity, IL&FS Mutual Fund.

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