Finance Minister P. Chidambaram in his Budget today deftly walked the political-economic tightrope announcing an increase in spending on agriculture and the social sector — including health and education — and at the same time ensuring that reform, in a growing economy, stays on track.

So without rocking the boat and largely resisting pressures to bring back failed policies, his Budget steers a course towards minimum changes to ensure maximum continuity in investment, export and growth.

The fiscal deficit, which measures the extent to which the government is spending beyond its means, is budgeted to come down from 3.7% of GDP to 3.3%. The primary deficit, a better measure of the government’s deficit as the legacy of previous governments is stripped away, now shows a surplus.

When the FRBM Act was passed in 2004, there was a lot of scepticism on how a populist UPA would achieve these targets. Budget 2007 shows the importance of Parliament tying the hands of the government. This reduction of deficits makes space for the private sector to invest and to generate growth.

Chidambaram’s speech, however, began on an ominous note with a ban on futures trading in wheat and rice, despite evidence that this has little to do with inflation. The Abhijit Sen committee set up to look into this will, hopefully, find a way to strengthen these markets instead of banning them.

On taxes, one element of strategy that has been rightly emphasised has been the lowering of customs duties. The peak rate has been reduced, and the customs rate on many goods has been reduced. This will help curb local inflation, reduce raw material prices in India, and bolster export competitiveness.

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