The international scenario, especially in South East Asian countries, is recovering, and OECD economies are showing growth. At home, the investment climate is still favourable and inflation is well under control.

The government has seized this opportunity and has not hesitated in announcing second generation reforms. But not everything is rosy. The finance minister has had to take some tough steps to bring in some amount of discipline on the fiscal front so as to curb the burgeoning fiscal deficit.

If implemented in the right spirit, this would bring in the required revenues and help check unproductive expenditure.

Looking at the harsh measures introduced in this budget, it looks like the government means business and that hard options will have to be lived with.

The government has hiked the prices of urea, kerosene and LPG which are a major chunk of the subsidy burden and sugar has been removed from PDS for higher income groups.

Better late than never -- that is the feeling in the corridors of political power in New Delhi today. Realisation seems to have dawned that unless a beginning is made to rein in the ever increasing subsidy burden, the so-called second phase of economic reforms will not take off. It was in 1991 that fiscal consolidation had emerged as the mantra for all further budgetary exercise, but the government seems to have failed miserably at the task. The result was a decline in social and infrastructure needs.

The whole debate heated up when in May 1997 the then finance minister P Chidambaram presented a White Paper on subsidies which estimated that explicit and implicit subsidies of central and state governments totalled a staggering Rs 1,37,338 crore in 1994-95 or around 14.4 per cent of GDP.The crux was to prove that 75 per cent of the subsidies were targeted at undeserving cases.

It is a known fact the so called pro-poor schemes do not target the needy. Despite this revelation the subsidies on food and fertilisers have been allowed to grow. The main aim of the exercise was to divert subsidy into those sectors where it was required most and it served some useful economic purpose.

It is a well-known fact that implicit and explicit subsidies today are open-ended and that there is no ceiling on the expenditure that can be incurred.

What is required today is a serious debate on pruning the subsidy burden which is resulting in fiscal disorders -- an expensive exercise.

Serious thought should be given to tackling the implicit subsidies which are at least five to six times the open subsidies mentioned in the budget papers.

These arise from considerable underpricing of power, water and other utilities and services provided by the states.

Farmers are provided electricity at very highly subsidised rates which eats into the state revenues. And as the macro power development programme has failed miserably, this is causing an even more serious problem. The state governments will have to co-operate in right earnest if implicit subsidies have to be brought down.