Despite a rise in non-oil imports, Customs revenue growth continues to flag. The explanation that because of low oil import prices, Customs collections have not bounced does not wash: the budget surely took into account the low oil prices. Latest data also show that excise revenues are lagging behind target. Industrial revival remains uncertain as of now. True, a turnaround could be round the corner.The khariff bumper should result in a demand stimulus. Furthermore, the projected increase in plan outlay, to the extent it is backed by additional budgetary support, could provide an impetus to industries like cement and steel. However, public sector investment growth through internal and extra-budgetary resources (mainly borrowings) remains chancy. Thus, even if industrial growth picks up from last year's 6.5 per cent, it is unlikely to cross 8 per cent. Such improvement may not exactly rain revenues on the government. There is thus no alternative to cutting revenue expenditure. Besides, a key assumption of the budget is mega receipts from disinvestment of PSUs. Apart from dithering on the modalities of disinvestment, the government has to reckon with a lack of buying enthusiasm for PSU equity.

Cutting revenue expenditure, however, raises the question of priorities: which expenditures should be cut and which protected. In the past, capital expenditure came under a squeeze. Now, reversing this may impingeon social sector spending. This must be avoided, and indeed social sector spending must be made effective. The government must announce how it proposes to bring about economies in revenue expenditure. Since there are no soft options, it will perhaps have to reconcile itself to overshooting the fiscal deficit. However, this, in turn, is likely to boost inflation. In the first half of this fiscal, prices rose primarily because of a shortage of agricultural products. But an enlarged fiscal deficit could give a monetary impetus to a price spiral in the coming months.