Much good cholesterol in Budget 2013: Andy Mukherjee

The slide in Indian equities on Feb. 28 was a kneejerk reaction to, among other things, a 16.5 percent projected increase in the government's total annual spending. That's faster than the growth in nominal GDP, which is projected to rise by 13.5 percent.

But the details do not paint a picture of fiscal recklessness. Like cholesterol, government spending comes in both good and bad varieties. The increase announced by Finance Minister Palaniappan Chidambaram is largely because of a 37 percent jump in public investments. This is the good cholesterol that the rapidly slowing Indian economy needs to avoid a seizure. Growth slumped to an abysmal 4.5 percent pace in the final three months of 2012, the slowest in 15 quarters.

Investors should focus instead on the government's consumption spending - the bad cholesterol. This expenditure, which creates inflationary pressures, is forecast to expand by about 11 percent, both a little slower than in the current financial year and less than the projected expansion in nominal GDP in the fiscal year that will start April 1.

With general elections due in 2014, it was unrealistic to expect the government to hit the brakes any harder on subsidies and other non-investment expenditure. But investors should give Chidambaram credit for not borrowing more to consume. The part of the government consumption that is not matched by revenue is expected to decline by 23 percent.

Meanwhile, the boost to government investments is a welcome

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