Eight years later, Mr Chidambaram will certainly be pleased as punch to present his budget against the background of the economy growing by 8.2 per cent last fiscal. But that is where the commonalities end. The big difference in the growth story is that the 7.3 per cent GDP growth then was not dependent on an agricultural rebound. But last year’s performance was as it reflected a recovery from the worst drought in recent memory.

Sustaining the growth momentum indeed is the biggest challenge of Mr Chidambaram’s budget today and the latest Economic Survey for 2003-04 outlines a roadmap to attain a 7-8 per cent growth path. There may be not too much of a problem on the growth front this fiscal as the budget is being presented amidst indications of a normal monsoon. This is good news for higher agricultural incomes and demand for industrial goods.

The Survey does, in fact, provide pointers that the budgetary assumptions in 2004-05 include real GDP growth of 7 per cent with inflation of 5 to 5.5 per cent. So, if the latest CSO’s estimates of GDP at market prices is Rs 27,72,194 crore in 2003-04, then the likely nominal growth of 12.5 per cent will take it to Rs 31,18,718 crore this fiscal. This is the denominator to track the improvement in magnitudes like fiscal and revenue deficits.

Sustaining growth of 7-8 per cent beyond 2004-05 calls for a step up in investments. For all the talk of an investment revival, official sources don’t put out any hard numbers on this. The latest Survey only alludes to a softening regime in interest rates, higher offtake in non-food credit, improvement in stock valuation and a flurry of activity in primary markets — all of which “reinforce the optimism about the investment outlook”.

An important reason why investment is not taking off is that risk-averse households still prefer to invest their savings in physical rather than financial assets. The proportion of household savings in financial assets has stubbornly remained stable at 10-11 per cent of GDP at market prices since 1996-97. In contrast, the household savings in physical assets has doubled to 12.3 per cent of GDP over this period.

Unless this state of affairs changes, there is simply no prospect for savings to flow into investments. The small investor must develop an appetite for equity which, in turn, cannot happen unless there is confidence that the stock markets in the country are well-regulated. All eyes will, therefore, be on Mr Chidambaram today as he seeks to boost confidence in the nervous bourses regarding the reform agenda of the UPA government.

Back to 1996-97, the “significant areas of weakness” listed by Mr Chidambaram included the fiscal deficit, sluggish agricultural growth, inadequate infrastructure, high interest rates and the trade deficit. In 2004-05, the finance minister should hardly be amused that most of these problems remain as daunting as ever barring interest rates and the trade deficit which is neutralised by the surplus on invisibles.

Year after year, various Surveys, including the latest one, hold forth about the challenge of fiscal consolidation and how it is crowding out resources that the State may have otherwise used for infrastructural investments. The latest Survey, in fact, draws attention to the combined deficit of the Centre and states being 10.1 per cent of GDP which is higher than the pre-reform level of 9.4 per cent of GDP.

Unless the fiscal situation is reined in, there is no way that the UPA government can internally fund capital expenditures to underpin the 7-8 per cent growth objective over the next five years. For all the imperatives of the Fiscal Responsibility and Budget Management Act, Mr Chidambaram is already facing lots of pressure from coalition allies like the Left to step up expenditure at a time when the tax-GDP ratio is deteriorating.

Sustaining the growth momentum is all the more imperative as the employment situation in the country has become much worse than eight years ago. Around 41 million job seekers have registered with the 945-odd employment exchanges in the country as on December 31, 2003. Unless there is growth of 7-8 per cent, how can the millions of job seekers from the countryside be absorbed in gainful work in the towns and cities?

There is no doubt that the dismal employment situation is a major factor of change from 1996-97. If one adds in the full-blown agrarian crisis in certain parts of the country — reflected in the rising incidence of farmer suicides and endemic malnourishment in rural India — the objective conditions definitely are less favourable for Mr Chidambaram today than eight years ago. The terrain definitely is bumpier and rougher than before.

Eight years ago, he was more optimistic that the services sector will provide an answer to employment generation — in the form of opportunities in retail trade, tourism and a wide range of maintenance services. The latest Survey, however, glumly notes that “while growth in tourism and tourism-related services, such as hotels, holds a large potential for employment generation, the service sector alone is unlikely to provide a solution to the unemployment problem.”

Absorbing the job seekers is daunting when government employment at both the central and state-levels is restricted and the Indian economy has already become a modern services-driven economy. If the skill requirements of this sector is out of line with those on the employment exchanges, the ranks of the reserve army of unemployed will fuel tremendous tensions in the country. The challenge on the human dimensions thus makes the finance minister’s job much tougher now. Who knows, with better luck, Mr Chidambaram may well convert a nightmare into a real dream budget.