New Delhi: Bold and drastic measures including a cut in corporate tax and peak customs duty to 30 per cent and reduction in small savings rate by 1-1.5 per cent, besides steps to boost investment in infrastructure and rural sectors are likely in the forthcoming Budget.

The fifth Budget to be unveiled by Finance Minister Yashwant Sinha on February 28 is also expected to announce the much-awaited Asset Reconstruction Company for reducing non-performing assets in banks and financial institutions, official sources said.

Hit by economic slowdown, Sinha is left with little choice, but to go in for some innovative measures to pump-prime the economy even at the cost of higher fiscal deficit, as low inflation rate and comfortable FOREX reserves gave enough cushion to take a modest risk, the sources said.

To increase revenue, the sources said, more services are likely to be brought within tax net besides simplifying procedures further for better compliance.

In order to pull the industry out of the slump, the sources said, Finance Minister might accept the demand of industry for slashing corporate tax to 30 per cent from the present 35 per cent.

Government may reduce rates on small savings to move towards softer interest regime for reducing cost of capital.

As part of tax reforms, the sources said tax on perks, exemptions, particularly in excise and customs, and export incentives like Duty Entitlement Passbook schemes, are likely to be rationalised to plug leakage of revenue and misuse.

The thrust would be mainly on increasing direct tax to 10 per cent of Gross Domestic Product (GDP) in coming years from 3.4 per cent in 2000-01.

Sinha has already insisted that the Budget will have measures to spur investment, particularly in infrastructure besides steps to boost agriculture growth to generate much needed rural demand and income.

In the light of the announcement, sources said the Budget may see a jump in gross budgetary support for Plan Expenditure by about Rs 10,000-13,000 crore.

The government may also increase defence allocation by 10 per cent from the present level of Rs 62,000 crore.

On agriculture reforms, Sinha had said that numerous impediments to price flexibility and movement of farm products, would be removed to make the agriculture sector "market-oriented".