Come February and the focus of attention turns to the forthcoming Union Budget. Budget 2002 is yet another challenging task awaiting the Indian finance minister given that the Indian economy is confronting problems unique to this year. Growing tensions along the Line of Control raising concerns of war with Pakistan, attacks on the symbol of Indian democracy, weak economy, sharp decline in GDP growth, poor state of capital markets are all poised to challenge the abilities of the finance minister in performing a delicate balancing act.

Year 2001 was a `Black Year' in the history of US, and the contagion effect quickly spread its tentacles all over the world. India was no exception. The real victim of the global slowdown was the IT sector. Standing at this critical juncture, the finance minister is jittery in allocating further funds to meet the rising defense expenses at the cost of other priority sectors. In case he chooses to favor national security, the budget is definitely going to be a tough one. However, experts opine that even if there is no threat of a full-fledged war against Pakistan, a proxy war will definitely continue. In that case, attending to crucial macroeconomic variables to boost the economy, may become all the more difficult.

Nevertheless, the agenda for the finance minister has hardly changedcontaining the burgeoning fiscal deficit, accelerating the disinvestment process, restoring investor confidence in capital markets, reducing infrastructural bottlenecks and creating an environment conducive to FDI. In order to implement the second phase of economic reforms, the finance minister has to attend to this agenda and go ahead with the proposed tax reforms. How the budget addresses these aspects of economic reforms at this crucial juncture is going to shape up the forthcoming budget.

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