Budget 2008-09: What to expect

Budget will focus on growth and curbing inflation.~ Positive for Infrastructure (Construction, Power, Railways, Capital goods) since demand has grown faster thansupply. Government says it needs US$500bn for infrastructure development.~ Positive for Telecom since government wants to improve rural connectivity.~ Education may get a boost as economic survey states that thrust is required on creating skilled human resource tomaintain growth.~ Agriculture related sectors will continue to benefit.~ Rationalization of excise and customs duty of essential commodities would take place since inflation control istop priority of the government.~ Not much likely to be done for textiles, handicrafts and leather. It will not affect market sentiment a greatdeal though, as these sectors are not index heavy weights.~ Corporate tax rates not likely to be changed. Surcharge may be lowered or slab for IT exemption may be raised.Two main concernsOne is the ‘devil in the detail’ which has followed Mr. Chidambaram’s earlier budget speeches.Second, any direct or indirect capital controls may add to the near term equity market pain. This, the finance ministerthinks, is necessary to make monetary management easier in the long term.Barring these two concerns, the budget is likely to be a populist one. Huge positions have not been built ahead of the budget, so the flow of good news will result in buying.