Analysts at the broking house, HSBC Batlivala & Karani, for example, expect a hike of anywhere between five and 10 per cent in both excise as well as customs duties. With the major impact on petroleum products, steel and tobacco, they expect a revenue mop up of around Rs 3,000 crore (after deducting the states' share) from this measure. Given the 80 per cent drop expected in SAIL's profits this year, an increase in import duties on steel would go down well with the local industry. Analysts at ICICI-Securities (I-Sec) add that while the exemption limit for payment of income tax is likely to be increased from the present level of Rs 40,000, the highest rate of taxation is likely to go up by 5 per cent, to 35 per cent. And while I-Sec believes that corporate taxes won't be raisedsince this would affect the corporate turnaround, it points out that a 5 per cent hike in this would add Rs 3,400 crore to the exchequer.

With prices of petroleum products falling globally over the past several months, analysts feel the brunt of revenue raising efforts will be concentrated in this area. While it is certain that the recommendations of the Nirmal Singh Committee to reduce tariffs are not going to be implemented, I-Sec analysts feel a 3-5 per cent increase in product duties are on the cards. Nor is the impact on prices likely to be very large, given the fact that the slack in the economy has meant that inflation levels continue to be low. A one rupee tax on prices of diesel, according to HSBC, would give additional revenues of Rs 4,400 crore, while the same for petrol will yield Rs 750 crore. The budget is certain to also try to increase the scope of service taxes, but given the fiasco as far as, say, the tax on transporters, it is unlikely that much can be got from this measure.

HSBCanalysts also point out that the government's room for manoeuvre as far as expenditure cuts is extremely limited. Interest payments account for 48 per cent of revenue, defence for 26 per cent, and salaries and subsidies account for 15 per cent and 13 per cent respectively. More important, with the government constrained by various pulls and pressures, it doesn't seem as if any dramatic cuts will be made in subsidies -- with defence expenditures likely to rise after the Pokharan tests -- HSBC puts the hike at Rs 3,000 crore few expect the fiscal situation to improve soon. I-Sec's forecasts put the expected deficit between 5.7 and 6 per cent of GDP.

HSBC expects GDP growth to remain poor, at around 4.5 per cent. With the fiscal deficit continuing to be high, the government will continue to crowd-out private investments. The export outlook looks equally bleak, though less so with the rupee depreciating. In the event, the main stimulus to growth will come, primarily, from higher consumption expenditure.