The Government of India is scheduled to present the Union Budget for FY2013 on March 16, which is crucial for the economy and markets.

It is also being watched closely as it is the last chance for the government for a course correction towards growth oriented reforms, and prudent expenditure, two years being essential for tangible change before General Elections in 2014.

The Finance Minister's priority in 2012-13 budget will be controlling fiscal deficit as the macro economy is facing a major headwind in the form of very high and unsustainable fiscal deficit.

For F2012, the government budget announcement for projected fiscal deficit was 4.6 percent of GDP – but the actual trend for April-December indicates that the deficit will likely be at 6-6.2 percent of GDP. Including off-budget subsidies, the deficit will be 6.9-7.1 percent of GDP, according to a research note from Morgan Stanley.

Meanwhile, history does not favor the markets in the following weeks as it showed that in two out of three years, markets fall in the month following the budget.

"In the past 15 years, the market has been positive in the following years: 1997, 1999, 2004, 2006, 2009, 2010 and 2011 – there does not seem to be a great correlation between market performance and a market-friendly budget," Morgan Stanley's India Strategist Ridham Desai said in the note.

Analysts at the Deutsche Bank expect the nominal GDP growth of 14 to14.5 percent is likely to be used for the budget arithmetic. The budget will likely layout a roadmap on subsidy rationalization through raising of diesel, LPG and kerosene prices.

Some sectorwise expectations from the Deutsche Bank

Automotive: Excise duty rate on most automobiles (except large passenger vehicles & UVs) could be raised by 200bps to 12 percent, while duty on large cars could be raised by 200bps to 24 percent.

Oil & Gas: expect status quo to be maintained on customs and excise duties in the oil & gas sector in the light of the sustained high losses on sales of subsidized petroleum products at current retail selling price.

Infrastructure: The Finance minister is expected to allow banks to raise tax free paper for funding infra projects similar to those given to NBFC infra companies such as L&T and IDFC.

In consumer staples, specific excise duty on cigarettes is expected to rise by 10 percent. However, Gaurav Bhatia at the Deutsche Bank believes that ITC is best placed to absorb the hike in excise duties as it has a demonstrated track record of passing on excise duty hikes to the end consumer.

In fertilizers, per unit subsidy is expected to be cut under the Nutrient Based Subsidy (NBS) system for non-urea fertilizers.