Focus to shift to expectations from Budget

With the 3rd quarter earnings season almost over, the focus will shift to expectations from Union Budget 2012/13. On the macro front, the government unveils monthly inflation data for January 2012 on Tuesday, 14 February 2012.

Aditya Birla Nuvo and Oil India unveil Q3 results on Saturday, 11 February 2012. State Bank of India, Cipla, Reliance Power, Indian Oil Corporation, Coal India, Sun Pharmaceuticals Industries and Steel Authority of India (Sail) unveil Q3 results on Monday, 13 February 2012. Tata Motors, Reliance Infrastructure, Jaiprakash Associates, Videocon Industries, Essar Oil and Shipping Corporation of India unveil Q3 results on Tuesday, 14 February 2012.



Headline inflation is seen falling further in January 2012. Inflation based on the wholesale price index is seen rising 6.7% in January 2012, as per the median estimate of a poll of economists carried out by Capital Market. Inflation based on the wholesale price index cooled off to two-year low of 7.47% in December 2011, from to 9.11% in November 2011. The Reserve Bank of India's mid-quarter review of Monetary Policy 2011-12 is scheduled on 15 March 2012.

At its Third Quarter Review of Monetary Policy 2011-12 in late January 2012, the RBI reiterated its earlier guidance that its future rate actions will be towards lowering interest rates. However, the timing and magnitude of future rate actions is contingent on a number of factors, RBI said. In the absence of credible fiscal consolidation, the RBI will be constrained from lowering the policy rate in response to decelerating private consumption and investment spending, it said. The forthcoming Union Budget must exploit the opportunity to begin this process in a credible and sustainable way, the RBI said.

Finance Minister Pranab Mukherjee will present the annual budget for 2012/13 on 16 March 2012, while the railways budget will be presented on 14 March 2012. The budget session of parliament will start on 12 March 2012, Pawan Kumar Bansal, minister of parliament affairs, said recently. The government will present on March 15 the Economic Survey for 2011/12, a document on the state of economy prepared by the economic division in the ministry of finance. The annual budget is usually presented on the last working day of February. However, the budget has been delayed this time due to the ongoing assembly polls. Polling for assembly elections in five states concludes in early March 2012.

Investors will look for a possible road-map for implementation of the Good and Services tax (GST) in Union Budget 2012/13. GST is a major indirect tax reform. GST will subsume various levies like excise, service tax and states tax like value added tax (VAT), entry tax and purchase tax.

Another pending tax reform is the Direct Tax Code (DTC). The DTC, which seeks to modernise the direct taxation system, will replace the Income Tax Act, 1961. Finance Minister Pranab Mukherjee had tabled the DTC Bill in Lok Sabha in August 2011, which was referred to the Standing Committee for scrutiny. Although the government is unlikely to introduce the DTC from 1 April 2012, as planned earlier, it may incorporate some of the provisions of the proposed law in Union Budget 2012/13.