Many, including this newspaper, expected an election manifesto out of the budget speech. A statement of intent. Promises for the future. Grandiose schemes to energise the electorate. Mr Singh could easily have walked down that path. It would have been a popular path, without necessarily being populist. Yet, he shied away from that bravado. Rather, he opted to claim credit for what has been done. The few promises made, for islands in the sea and the desert along the border, are developmental in nature. The points of order raised by the opposition political parties may have been valid in theory, but were wasted in effect because Mr Singh’s measured approach pricked their balloon of protest. If he had done constitutionally unacceptable things, they would have been justified in their anger and apprehension. Former Prime Minister Chandra Shekhar even went to the extent of dubbing the interim budget a lie and an affront to the Constitution. In the event, Mr Singh made a molehill out of the Opposition’s mountain of protest by staying the constitutional course and not doing anything excessively out of the way. He could have avoided the temptation of merging DA with basic pay for government employees, but which political party has shown that kind of courage in recent years?

Mr Singh drew attention to the travails through which the economy has travelled. The global economic slowdown, the aftermath of economic sanctions and the Asian economic crisis, the tension with Pakistan and the scourge of terrorism, the natural disasters that visited many regions. These were not problems of our own making. But there were some that Mr Singh did not refer to, like the communal conflagration in Gujarat and travel advisories issued against India. An initial lack of attention to development priorities and diversion of attention to less relevant social and cultural agenda of the ruling party. But India sailed through it all and now stands on a new threshold of growth. Having said this, Mr Singh could have claimed that the year will end with 8 per cent growth. He shied away and said growth could be between 7.5 and 8 per cent. The sobriety of a “cautious sahukar”. Mr Singh’s speech was just as it should have been.

Election manifestoes, however, must go beyond budget speeches. So, when the ruling alliance gets down into the electoral battlefield, it must say more than what Mr Singh has chosen to say in his speech. It must let us know how it plans to sustain this growth momentum. The 8 per cent rate recorded this year cannot be sustained unless there is a higher degree of capital formation. Pressuring banks to lend below PLR and revitalising IDBI are limited supply-side initiatives. Offering fiscal concessions is also a supply-side sop. The fact is that structural reforms are needed to encourage more private investment and to make public investment productive. The fact also is that the social base of demand has to widen and a more broad-based growth of demand is needed. Where will this come from? Mr Singh’s budget speech throws little light on such questions, but the NDA’s election manifesto will have to.

The headline news has been the fiscal deficit number. However, this is partly the product of reduced interest rates that have reduced the food credit burden, and partly the product of stalled defence spending. This has also been enabled by old-style disinvestment. Fiscal conservatives will not take too seriously the reduced fiscal deficit made possible by disinvestment proceeds. The real effort has to be through fiscal empowerment via revenue mobilisation and expenditure reduction. While Mr Singh has positive things to say on both counts, he has some way to go before he can win the confidence of fiscal purists in his management of the fisc. Mr Singh downplays the inflationary pressures developing in the economy. He can ignore these at his own peril and certainly that of the people. Sustaining higher growth without spurring higher inflation remains the key challenge to macroeconomic management today. With the external sector doing well and with improvement in fiscal indicators, the only real macroeconomic challenge is to augment higher capital formation and generate greater employment and demand in a non-inflationary way. How the government intends to do this has not been shared by Mr Singh in his interim budget speech. But sooner rather than later, he and the government will have to address this question.