The Prime Minister cannot be faulted, because he had already warned of 'tough decisions' for one or two years, but faced with a massive fare hike of 14.5 per cent, the fuel surcharge included, the protestors uncomfortably remind him of his 'achcha din' promise under his new NDA Government.

In the run-up to the budget, the Finance Minister is encountering other risks of oil prices driving up in the wake of Sunni extremists over-running parts of northern Iraq and capturing strategic assets including a refinery. With a besieged Shia-dominant Government in Baghdad, the future of oil-rich Iraq is at stake. International oil prices had already risen to 115 dollars a barrel in the wake of the militant inroads.

Iraq, a principal supplier for India's oil needs, is also among countries in West Asia where a large numbers of Indians earn their livelihood. The marauding forces in the North had taken some 40 Indians hostage and presents a challenge abroad for the new Government. It has not only to secure the safety and return of these Indians but also step up its own efforts for return of peace and stability in the volatile region.

Oil prices to consumers will further go up when the Government is already seized of reducing fuel subsidies, essential for fiscal consolidation and a pre-requisite for attracting domestic private and foreign investments for growth and for retaining India’s credit-worthiness. On the one hand, high food prices have to be tackled by curbing the role of intermediaries and on the other fuel subsidies have to be cut down to restore fiscal discipline.

Volatile oil prices coupled with a poor monsoon, as judged so far, could well worsen the inflationary situation. It might even derail ongoing efforts to repair finances and to kick-start an economy languishing at below 5 per cent growth. The rupee has already come under renewed pressure to rise above Rs. 60 to the dollar.

We have the statement of the Finance Secretary Mr Arvind Mayaram at a G-20 Deputies Meeting that the Finance Minister would present a 'growth-oriented' budget which would 'deepen the reform process to put the economy on a high growth path'. Certainly, the Iraq developments would have some bearing on fiscal management amid inflationary pressures from both oil prices and a negative monsoon outlook.

Other budget expectations are a deferment by one more year to March 2017 the provision made in IT Act on avoidance of tax applicable to foreign companies, with some retrospective exemption. This is designed to improve business sentiment. Manufacturing should also be getting some boost with job creation in view for key industries including automobiles and infrastructure-related goods and services.

But what the broader investor community would look for is the extent of fiscal pruning along with reduction of subsidies, taming of inflation and a reform thrust needed for strong investment-led growth revival.

Next on the BJP agenda is to do away with the Planning Commission as it has evolved over the years. Government's deliberations and preoccupations of recent weeks have been more on removing as many vestiges of UPA Government's policy-making bodies as possible but unavoidably re-enacting some of the UPA measures which were frowned upon earlier.

The pre-budget revision of rail fares and freight is one such major step, which also surprised the RSS camp, even if economic merit in restructuring railway tariffs is recognised. The mismanagement of railway finances has been a long-standing problem. Populism had played havoc in keeping fare frozen for years by the regional allies of both UPA and NDA earlier, fostering their own sectional interests.

It was only after TMC withdrew from UPA that the former Prime Minister Dr Manmohan Singh could begin to undo the damage in the Railway Ministry. Proposals to revise fares and freight made for the 2014-15 budget by a Congress Minister had been withheld pending the outcome of the elections. BJP in opposition having played its frustrating role to perfection, its articulate Finance Minister Mr Arun Jaitley justified it saying otherwise railways would be left bleeding.

Moderate increases at intervals would have gone down relatively smoothly and also helped, to gradually reduce the current levels of cross-subsidisation. With this 14.5 per cent effective rise in fares and freight, the Railways would raise some Rs. 7,000 crores, but it would not make a major dent in the shortfalls for development funding.

An indication of the order of magnitude of additional resources needed for the modernisation of Railways is expected to be given in the final Railway Budget for 2014-15 by the new Minister Mr Sadanand Gowda in the July budget session. Railways have to provide or borrow substantial resources for the dedicated freight corridors and for introduction of faster trains and safety requirements.

The Finance Minister in his budget may give us some idea of how far Government is able to deal with food inflation and also sort out issues relating to project clearances and financing of infrastructure. In an investment-starved economy, the market regulator's moves are also timely to help activate the primary market by setting a 25 per cent of public share-holding in state-owned undertakings within three years. This should also facilitate Government’s disinvestment plans. The redefined limits of FDI and portfolio investments, it is assumed, would also bring in larger capital inflows.

While fiscal deficit will be the major concern, India's external position has turned relatively comfortable, with the sharp reduction in current account deficit to 1.7 per cent of GDP in fiscal 2014 as against 4.7 per cent in 2012-13. With a substantial accretion to foreign exchange reserves, notably from NRI deposits, in recent months, the cushion of reserves stood at 313 billion dollars by June 15.

The people who voted to put Mr Modi and his BJP in power would essentially look for relief from inflation and job opportunities. But May data was disconcerting with WPI rising to 6.1 per cent and CPI food inflation at 9.56 per cent. Another other area of public discomfort is the power shortages and cuts in several states, more acutely in the South. Power Minister Mr Piyush Goyal has announced some measures for coal linkages for plants in operation. (IPA Service)