Budget: Credit Suisse sees FM boosting capex, raising I-T slab

Swiss brokerage firm Credit Suisse is expecting a growth-boosting budget on Saturday with increase in public spending and in the personal Income Tax exemption limits.

"Given the fiscal room to spend, in addition to capex, tax exemption limit for individuals could be raised.

“At the same time, as part of streamlining the Goods and Services Tax base, the service tax net could be broadened further by removing some services from exempt/abatement list," it said in a note on Thursday.

It also pointed out that as many as 61 per cent of the services GDP is outside the tax net.

Budget 2015: Complete Coverage

Overall, the brokerage said that it expects a growth-boosting stimulus which includes a rise in non-defence capex like roads, railways, and rural and urban housing, and sees a higher fiscal deficit ‘by giving a push-out to the Fiscal Responsibility and Budget Management Act, which if done for the right reasons, will not hurt yields much."

However, it said the government should keep its revenue growth assumptions credible, and expressed hope that the minister may announce some innovative ways of funding infra projects.

"Given the difficulty of spending to boost growth, it may also tweak taxes to support consumption," the report said.

However, the brokerage warned that given the limitations to public spending on infra, it would be interesting to see what the government proposes to attract investment and how it revives the investment cycle.

Budget 2015: Complete Coverage