The passive fiscal consolidation. We do not expect either a broadbased   tax hike or a major across-the-board cut in expenditure in the   FY11 budget.

Yet, we forecast that the FY11 fiscal deficit could   narrow by 1.6 percentage points to 5.9% given strong non-tax   revenue growth, partial rollback of tax rate cuts, the lack of one-off   expenditures as in FY10 and the change in GDP growth mix.

"Tweaking of indirect tax rates. The rollback of excise duty   concessions is likely to be modest and selective, with focus on sectors   that have recorded strong demand growth in FY10 automobiles,   consumer durables and cement.

Customs tariff roll backs, however,   are likely to be more broad-based. The service tax rate is likely to   revert to 12%, while direct tax rates could be broadly unaltered.  

Strong non-tax revenue pipeline. Revenue from 3G spectrum   auction and the likely surge in the RBIs profit could play important   roles in containing the fiscal deficit. The strong fund mobilization   through the small-savings scheme could reduce the governments   reliance on market borrowing to fund the fiscal deficit.  

Likely winners and losers. The focus of the FY11 budget is likely   to be on driving broad-based growth, fostering agro productivity,   infrastructure development and exports.

Sectors that are likely to   benefit include agro products, financials, capital goods, construction,   IT services and utilities. Rising tax rates, however, are likely to be   negative for the automobile and metal sectors.