The FM reaffirmed the GDP growth rate at over 7.5 per cent. CMIE and NCAER are even predicting a number in excess of 8 per cent but Jaswant Singh has been careful, especially after the downward revision of last year’s number. More importantly, he gave the pleasant news that the fiscal deficit for 2003-04 is down to 4.8 per cent — much lower than the budgetary estimate of 5.6 per cent. This means that government has been able to reduce its deficit by about Rs 20,000 crore. Of this Rs 10,000 crore is due to reduction in revenue expenditure and another Rs 10,000 crore on capital account. Significantly, the FM has also said that he expects the fiscal deficit to come down even further to 4.4 per cent in 2004-05.

The government has been betting on an aggressive strategy of cutting taxes and using this as a lever to stimulate growth — the argument being the cut in tax rate actually leads to more production and more taxes. This strategy has paid off handsomely and is likely to continue if the NDA government comes to power after the election. The lower fiscal deficit is likely to keep interest rates soft in the economy, spurring growth, reducing the ‘crowding out’ effect and revitalising markets.

The fisc has been the bugbear of economists and rating agencies. While being very appreciative of the foreign exchange position, they have been very critical of the deficits and their effect on inflation, investments and interest rates. This should silence critics for a while. The rural sector has been receiving special attention in the last two years and this interim budget has taken this forward. The Antyodhaya scheme is being extended to another 50 lakh families below the poverty line. The self-help groups programme has also been successful and is being given a push.

Bank interest rates on farm loan are to be cut significantly. It is ironic that where every one swears by the farmer, you can get a loan to buy a Mercedes for 7 per cent without any collateral but the farmer has to pay 14 per cent and also mortgage his land. The system of taking large collateral from farmers is to be dispensed with. These are certain demands the new agriculture minister Mr Rajnath Singh has been making and his colleague has found merit in them.

Our cities are turning into urban jungles and water is one of the biggest problems. Massive investment has been announced for augmenting water supply projects in six major metropolitan areas. The idea of global convention centres is being given a better shape with the six centres being named. Interestingly, Jaipur and Goa join the ranks of the big ones due to their tourist potential.

Some direct tax initiatives are good news for industry and investors. The long term capital gains tax exemption was to expire by 31st March 2004. Under this section, the finance minister had exempted from long term gains tax, listed securities purchased upto 31st March. This sunset clause did not make sense. The FM, by extending it for three more years, has given great news to retail investors. I still do not understand why a clause that was meant for promoting long term investments had a one year validity in the first place.

Tax incentives for investment in power projects also had a sunset clause and the incentive has been extended to 2012. A major fillip for the shipping industry is the announcement that the industry will now pay income tax based on tonnage, as is prevalent in other countries. This should put Indian shipping on the global map. I see a great spurt in shipping stocks on the bourses.

One number which gave me great satisfaction was the amount expected to be realised from sale of government equity in public sector companies. Mr Shourie has been fighting a relentless battle against all sorts of bottlenecks. Now the interim budget states that not only is the ambitious figure of Rs 13,200 crore set for 2003-04 going to be achieved, but we are going to overshoot it by a good Rs 1,300 crore. This is the first time in many years that this figure has been surpassed. One hopes that when a new government is formed, Mr Shourie will continue with the unfinished agenda.

The interim budget, though limited in scope, will keep the feel-good factor going and sustain economic recovery. There are disbelievers who are questioning the numbers on the deficit. Given the momentum that has been generated, one can expect the coming year to be good. Over and again, experience has shown that when you keep the confidence level in the economy up and growth well-oiled, that eventually gets reflected in higher taxes and lower deficits. One would, however, have to wait for the new government to expect big reforms which will propel India towards economic superpower status. And the issues involved would then be much bigger.

With this the stage is set for the coming elections. Mr Jaswant Singh can end his period with the satisfaction that like Harold Macmillan, the British PM of the ’60s, he can go to the people and say “Gentlemen, you never had it so good. Isn’t it reason enough to bring me back?”

The author is a Delhi-based investment banker and Convenor of the BJP Central Economic Cell. The views expressed herein are personal. He can be contacted at pnvijay@vsnl.com