Paras Adenwala, head-equities, Birla Mutual Fund, feels that the elections to be held in various Indian states this year and the general elections scheduled for 2004 might override the need for growth stimulus, when Finance Minister Jaswant Singh unveils the Union Budget 2003-04 on Friday.

Adenwala expects the following to be pronouncements to be made by the finance minister:

• Removal of surcharge on corporate and personal tax. The minimum taxable limit may be  enhanced from its current level. However, there could be some more steps to widen the tax-payer's base.
• Reduction in peak customs duty.
• Some proposals to promote infrastructure development and encourage research and development.
• Introduction of VAT in states.
• No major change in indirect taxes. Tobacco industry however could be used as milch cow.
• Some proposals like removal of dividend tax to prop up the capital markets.

The market is expecting removal of dividend tax and tax on long-term capital gains. It is also expecting a cut in corporate and personal taxes.

Adenwala does not expect any significant amount of rationalisation in indirect taxes.

If the dividend tax and tax on capital gains are removed, the mutual fund industry would certainly expect the sentiment to gain further strength, he says.

He says that the Budget might not be a reformist one, as suggested by the Economic Survey 2002-03, in an election year.

Hence, if the finance minister can do a balancing act between populism and reforms, it would go well with both the masses and the classes, he says.

On the whole Adenwala does not expect any major surprises from the Budget.