UPA, whatever its own dismal performance, continues to attribute the current woes to global factors though India has remained an outlier in the severity of inflation and in fiscal and external imbalances among BRICS and other emerging economies. So, in countering the effects of global slowdown, it becomes the duty of people to follow the path that the Finance Minister would chalk out, as the Prime Minister would like, apparently without grumbling about sharing the pain.

The Union Budget for 2013-14 to be presented on February 28, will reflect an air of optimism that the worst is nearly over and that the economy could now, through gradually, begin to move toward its pre-destined growth of 8 to 9 per cent over the medium term. But that would not alter the ground realities - supply side shortages, persisting regulatory and other hurdles for projects to take off and key infrastructure (power) bottlenecks- which would constrain speedy recovery of growth momentum. The movement in these areas is still at snail’s pace.

Investors at home and abroad would be looking for signals of action plans to speed up project clearances and remove other constraints as much as what the Budget has to offer on the fiscal side and growth incentives to trigger the flow of capital and industrial resurgence. Mr Chidambaram will certainly deliver on committed fiscal deficit targets of 5.3 per cent of GDP in the year ending March 2013 and target 4.8 per cent for fiscal 14. This should hopefully for him dispel fears of any credit downgrade by global rating agencies concerned over yawning fiscal and current deficits.

The second premise of the Budget, restoring growth momentum and putting India back on a high growth trajectory, would turn out to be far more challenging for Mr Chidambaram who expects India would be able to achieve an 8 per cent growth, if not in 2013-14, in the year thereafter. Reality has caught up with him so that, after disputing the 5 per cent growth postulated by CSO for the current year, he may well be aiming at a modest 6 per cent in 2013-14.

In the market economy which UPA has been assiduously promoting, the focus is essentially on private investment and the budget has necessarily to be business-friendly. But there may be no great expectations on the part of foreign investors, who keep track of political turmoils and scams here and the uncertainty about the outcome of 2014 elections. Mr Chidambaram himself had hinted at the possibility of setback for the reform process should there be a change of government in 2014.

But above anything, the Finance Minister is yet to establish clarity on tax structure for foreign investors in the light of notices served by the Income Tax Department on several foreign companies, apart from the Vodafone issue. This is contrary to the impression he had given earlier that the GARR issues have been settled.

In the run-up to the Budget, Mr Chidambaram has been aggressively pruning down expenditure across-the-board and must have juggled with figures to make his fiscal deficit targets look credible. Keeping down the gross budgetary support for the plan in 2013-14 from what the Planning Commission had sought, the Finance Minister would not have spared the incremental allocations even in major areas of social expenditure in the coming year.

It is rather odd that when there is need for greater public investment especially in infrastructure and on other social overheads, which would help to push growth, the Finance Minister seems to have over-riding concern with implementing the fiscal consolidation road map he has chalked out. And policy negligence and governance deficit of recent years had taken such a heavy toll on economy that for retrieval, India now desperately looks for foreign direct investments.

After a crash programme of diesel price increases and FDI liberalisations to improve market sentiment, the Budget is now keenly awaited for what it unfolds by way of further reforms and incentives that would end the pause in domestic investment and equally ignite direct investments from abroad. But the average citizen in the country would be looking in vain for any relief from the oppressive price surges which have depressed savings and consumption and caused irreversible damage to the economy.

Finance Minister had no doubt promised a “responsible” budget, and this could mean that he would avoid extreme courses in the field of taxation to raise the requisite additional resources which the currently under-performing economy cannot yield or in making the expenditure reductions with due regard for quality. He has talked of preserving stability of the tax structure he has himself shaped over the years. Marginal adjustments, however, come handy always.

Mr Chidambaram can still bring some innovative ideas to pool resources and also announce incentives for corporates to make capital expenditures. Looked at in this perspective, he might bow to pressures from the corporates not to come up with any super-tax for the rich. Also, balancing exercises on tax structure - some reliefs and some tightening - would be so designed to keep the middle class on the right side.

The road-map for introduction of GST will be unveiled in the Budget. On indirect taxes, the possibility of some changes in the tariff mechanism and additions in service tax cannot be ruled out. Selective rise in import duty along with some cuts could be so designed as to keep down imports on the one hand for balance of payments purposes and help maintain price level of some essential products on the other. Thus, he may resist the temptation to raise substantial revenue from excise duty changes – a hardy annual.

Otherwise, the only claim for government would be its strict fiscal discipline should help in not aggravating pressures on prices. It takes the view that inflation is already on decline, ignoring that food prices have risen at 11 to12 per cent, especially cereals including rice and wheat, pulses, edible oils etc.

Finance Minister’s confidence about adhering to fiscal deficit targets arises from the price revisions in the fuel sector - with petrol and diesel prices virtually left to be adjusted by oil marketing companies, according to market signals, with only a passive look by Petroleum Ministry. The oil subsidy could in all probability stand significantly reduced in BE for 2013/14. Also, the disinvestment target in the current year is close to target while Government would be confidently increasing the target to Rs. 40,000-50,000 crores for fiscal 2014.

Secondly, UPA’s much-touted Direct Benefits Transfer (DBT) system, duly highlighted in President Mukherjee’s address to Parliament, is certainly a “game-changer” for Mr. Chidambaram in budget-balancing. None at the top, however, takes note of spreading unrest as in Andhra Pradesh over the linkage of LPG supply to Aadhaar numbers. Lakhs of poor have waited for months to get these numbers and would pay the full cost of a cylinder and then wait to get the due subsidy from the Government.

Such blind application of technology in rural areas could, far from being a vote-catcher, turn out to be UPA’s Achilles heel in 2014 Lok Sabha elections. Ultimately, what matters for the people is not the niceties of budget-making on which Mr Chidambaram excels and complimented by sectoral interests but what growth has to deliver in terms of stable prices, job creation, skills training for lakhs of youth entering the labour force, quality education and health care services. (IPA Service)