The Modi government will announce the interim budget tomorrow (February 1, 2019) and expectations are high from it. However, the interim budget is the last budget announced by the outgoing government and is presented for the last few months before the new government takes charge. Despite being an election year, the Finance Minister will present an interim budget on February 1. Mayuresh Joshi, Fund Manager, Angel Broking told Zee Business Online," Considering that it will be an interim budget till the full budget is presented post the elections, not too much is expected in terms of fresh reform initiatives. The first expectation is that the budget could give a big thrust to the agriculture and rural sector.''

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Finance Minister, Arun Jaitley had said earlier that the budget will ease on the burden on Indian farmers and agriculture is the topmost priority as of now. The ongoing situation of mounting loans on farmers and drowning financial condition of Indian agriculture sector is likely to meet up this budget. 

''The second expectation is that the budget could possibly a big booster for the MSME sector, considering their employment potential. This could come in the form of direct tax exemptions as well as a more friendly GST regime. The government is unlikely to make any major changes to the direct tax code considering that there will be a full budget coming up,'' explained Joshi. 

The analysts are expecting the government to declare a deficit target between 3.2 percent to 3.5 percent of GDP for the fiscal year 2019.

''Capital markets will be hoping for a reversal of the capital gains tax on equities that was introduced in the previous budget. For more granular expectations we may have to wait for the full budget after the new government is in place,'' mentioned Joshi. 

The government last year, introduced a 10% tax on long-term capital gains (LTCG) gains above Rs 1 lakh per financial year on the sale of equity shares and units of equity mutual funds. However, earlier such gains were fully exempt from any tax. The government is expected to increase the LTCG exemption limit. As it could help to persuade potential retail investors to pour more investments in the Indian capital market.