If one were to take in all this from a distance, one thing is clear: the finance minister did not lack for ideas when drawing up his budget. However, when one moves in closer, not everything looks hunky-dory. Take the macro numbers, for a start. In his bid to avoid budget-induced deflationary moves, Sinha has kept the fiscal deficit fairly high at 5.6 per cent of GDP-nearly Rs 91,000 crore. And this is an underestimate given the fact that another 0.3 per cent would have been added if the retirement age of government servants had not been hiked to 60 this year. At 5.9 per cent, the fiscal deficit has barely moved from the 6.1 per cent indicated in his interim budget in March. Given the fact that Sinha has promised to give more, if needed, for defence andother worthwhile causes during the year, fiscal 1998-99 could well end up with the same deficit as last year. Some of this can be justified by the need to avoid sending recessionary signals in a bleak industrial scenario; but the downside is that inflationary expectations will resurface.

The other pointers to a resurgence of inflation this year are the steep hikes announced in gross customs and excise revenues -- more than Rs 9,000 crore of it -- through the levy of an eight per cent customs duty that would be non-modvatable, selective increases in import duties on items like steel, and other excise-related manoeuvres. Taken together with the depreciation of the rupee in recent weeks, it is now more than likely that the economy will see cost-push inflation. Before the year is out, inflation could be in double digits. Thankfully, the monsoons this year are forecast to be normal, but even so the government may be courting public wrath over prices for chasing the chimera of growth.

On the plus side, what isgood about the budget is the bold thinking on disinvestment, delicensing, public sector reform, and the opening up of insurance. Of these, clearly the most important announcement is the one regarding the government's decision to privatise non-strategic public sector units, bringing down the government's equity to as low as 26 per cent. In the case of Indian Airlines, the government has announced specifically that it will reduce its holdings to 49 per cent over three years. This is revolutionary, considering the fact that no previous government has gathered enough courage to say it will privatise public sector units. If this plan is not stymied by the unions, India would have moved a significant step towards getting the government out of business -- freeing resources for investment in the social sectors. Equally important is the decision of the government to offer extremely generous retrenchment packages for public sector workers in sick units. On the face of it, the handshakes planned appear overly generous(45 days' wages for each completed year of service, etc), but given the logjam in closing down unviable PSUs, this is warranted. Once again, if this works, India's public sector will be totally transformed over the next five years. There will be one small strategic sector in which the government will run the show as before; but there will be a more dynamic privatised sector that will be freed from the dead hand of bureaucratic meddling. The decaying parts of the public sector will be closed and sold off. Once again, the big question is whether the unions will allow this to happen. The government already has the Left worked up over the nuclear blasts; now workers will be incited to resist the government's efforts to make public sector workers see reason.

In the financial sector, Sinha's initiatives make lots of sense. On the one hand, he appears to have accepted some of the critical recommendations of the Narasimham Committee to improve banks' capital adequacy, reduce non-performing assets and generally toneup banks financial strength by transferring NPAs to asset reconstruction companies. Banks are to be asked to raise their capital adequacy ratios to nine per cent over the next two years, and further to 10 per cent in an unspecified timeframe. The Narasimham committee had also suggested merging banks to create adequately capitalised entities to take on the global competition: Sinha did not pronounce on this, but presumably the increase in capital adequacy ratio will itself force weak banks to seek mergers with stronger ones as a means to survival. On insurance, the announced measures do not amount to big news, because the initial liberalisation only talks about letting the domestic private sector in; given the sheer lack of expertise among private players, it is worth asking whether foreign companies should not have been allowed in with minority stakes at least? The business of opening up insurance has floundered in the past due to pressure from the unions and the Left; Chidambaram failed to open up healthinsurance after promising to do so; it remains to be seen whether the BJP government can deliver on its promises in this regard. For the capital markets, perhaps the biggest disappointment is the absence of any provision for share buybacks -- something over which punters have been speculating for the past several weeks. This perhaps explains why the Sensex shed 152 points in the post-budget session. Another reason why the markets gave Sinha the thumbs down is the relative lack of specific incentives for them; barring a tax incentive for primary issues and the disinvestment plan, there is almost nothing of direct interest for marketmen. However, it is more than likely that the markets will rebound once they read the fineprint on the duty changes -- which should benefit quite a few Indian industries, apart from the tax sops given to infrastructure. If one were to take an overall view of Budget 1998-99, Sinha would probably get a B plus report card. An `A' for coming up with good ideas and pushing forwardreforms; a `B' for efforts to push up growth; and a `C' for risking inflation by doing practically nothing about the fiscal deficit and raising import duties excessively. Sinha has probably tried to appease his Swadeshi supporters by giving domestic industry more than needed import protection; but given the post-Pokharan despondency on the industrial and GDP growth front, perhaps he chose the lesser of two evils: inflation with growth instead of fiscal rectitude and slower growth.