Finance Minister Jaswant Singh’s maiden budget is oriented towards growth. It portrays a vision of India as a will do, can do country, a society ready to assume its historic role in the world economy. Juxtaposed between the fast growing developing country authoritarian model of China, and developed countries feeling the heat from competition down South, there are few counter-weights to the emerging China dominance. Thanks to our misguidedly misguided policies towards labor, small scale industries, food security and other paraphernalia of the left-parivar economics, China has become the leading producer of all the manufacturing goods (besides whiskey) that our erstwhile “in the name of the poor” glitterati consumes. There is little left for other developing countries except to move rapidly up the value chain – that is what Korea is desperately trying to do, and what Jaswant Singh is trying to deliver.

The retention of no tax subsidies for information technology, and extension of some of these privileges to the pharmaceutical and bio-technology sector, has to be seen in this global light. While a "strict" economist should object to such inequities, they nevertheless do make sense, given the pressures of globalization. The Graduate buzzword is no longer "chemicals"; it is Compete, with a capital C. Hence, the continued emphasis on infrastructure to help facilitate growth.

The big picture the budget is portraying is that of growth, and one is hard-pressed to either fight with this objective, or to believe that it will not be achieved. The pluses towards this goal is the reduction in costs across the board; costs related to capital (administered interest rates have been cut by a full percentage point), costs related to infrastructure (lowered costs of transportation via improved infrastructure and literally a reduction in the cost of tires!), costs related to imported inputs (reduction in custom duties), taxation costs (both for salaried employees who will be taxed about 5 percent less and corporates with a similar percentage reduction). Indians do not face a relative disadvantage anymore with foreigners regarding fuel costs - such prices are (almost) out of the clutches of the mandarins. The removal of chemicals and leather from the purview of the reactionary small scale industries act, as well as reforms in textiles, should mean greater growth, and employment.

So what gives? Clearly, the numero uno objective of several fiscally Taliban economists has been relegated to the back burner - the fiscal deficit is not a buzzword in the Finance Minister's vocabulary. I also believe that deficits are bad, but for a somewhat different reason - it is that deficits help finance unproductive government employment, whether in the running of an oil company, or for wages for school teachers who have a left-mandated incentive never to show up for work. Neither the Talibans nor the FM have an answer to these deficit related problems. But the FM has an edge in that he has realized that high budget deficits can be caused, and perpetuated, by distortionary managed interest rate policies. By reducing scam (small) savings deposit rates by one percentage point, and continuing the Yashwant Sinha initiated policy of moving towards market determined interest rates, Mr. Singh has stuck a forceful blow for reduction of future deficits. Also, an important future deficit reducing policy is that of moving with full speed towards initiation of another Mr. Sinha initiative - the debt swap for past state deficits.

While we may fret about the present fiscal deficit, in the neighborhood of 10 percent of GDP (consolidated center plus states) let us have a moment of silence to observe that such high deficits (wasteful government expenditure) have prevailed for the last twenty years (yes count them). Let us also note that such deficits have been financed via financial repression i.e. paying citizens with high interest rates in order to "force" them to finance wasteful, and wasted, state and central "in the name of the poor" expenditures. By reducing this hidden subsidy, and moving towards transparent market borrowings, the FM is ensuring that we are moving towards a 6 + growth rate next year, and who knows, with further Kelkar tax reforms, towards 8 percent growth in the near future.