8 reforms to make or break Budget FY16

Finance Minister Arun Jaitley will present his first full-year budget on February 28, 2015. The 2015/16 budget is billed as a 'make-or-break' event for PM Narendra Modi's eight-month-old government.

For now, investors are giving him the benefit of the doubt, lifting the BSE Sensex by more than 5 per cent in the current year to date.

Here are eight reforms investors and economists expect from the Budget.

FISCAL CONSOLIDATION

Jaitley is expected to stick to the fiscal consolidation path with the deficit target for 2015/16 and 2016/17 at 3.6 per cent and 3.0 per cent of GDP, respectively.

SUBSIDY REFORMS

Investors hope the Budget will follow up the recent scrapping of price caps on diesel with similar reforms for other subsidised fuels.

FM is also expected to initiate steps to trim spending on food and fertiliser subsidies.

HIGHER CAPITAL SPENDING

Investors are looking out for shifts from current to capital expenditure.

Jaitley is expected to create fiscal space to spend as much as $50 billion in the year to March 2016 on new roads, rail lines, ports and irrigation facilities.

MANUFACTURING BOOST

The upcoming Budget is expected to give a big push to Modi's 'Make in India' campaign, with tax breaks and other incentives for several sectors.

GOODS AND SERVICES TAX

Jaitley has promised to implement a nationwide Goods and Services Tax (GST) from April 1, 2016. However, its passage depends on whether he can honour his promise to compensate states for potential revenue losses.

The Budget is expected to detail the promised compensation package.

GENERAL ANTI-AVOIDANCE RULES (GAAR)

Investors are seeking a new timeline for the implementation of General Anti-Avoidance Rules (GAAR), aimed at companies and investors routing money through tax havens such as Mauritius.

The rules were scheduled to come into effect from April 1, 2014, but have been deferred to 2016 to prevent any investor backlash.

BANKING REFORMS

FM is expected to offer a roadmap to improve the health of ailing public sector banks, which have been hobbled by bad loans and corporate governance issues.

At a one-of-a-kind huddle with the government last month, PSBs had suggested setting up a holding company to manage them and suggested reducing state ownership to below 51 per cent.

WELFARE REFORMS

The Budget is expected to streamline flagship welfare schemes like the National Rural Employment Guarantee Act (NREGA).

The scheme provides jobs for 50 million households, but it is also a heavy burden on taxpayers and riddled with corruption.