With the Indian economy rebounding strongly, there is no doubt whatsoever that this provides a favourable conjuncture to tackle its fiscal challenges decisively. GDP growth of 8.1 per cent last fiscal and a 7 percent plus trajectory in prospect in 2006-07 and beyond does provide a context for lowering the government’s fiscal and revenue deficits and reducing public debt levels relative to output. For such reasons, the recent Union budget for 2006-07 was expected to make a strong statement regarding the United Progressive Alliance (UPA) government’s intentions to address these fiscal challenges. The big question naturally is whether the Union Finance Minister P. Chidambaram’s budget  does reflect such intentions? On the face of it, he has certainly managed to step up allocations for flagship National Common Minimum Programme (NCMP) schemes like the National Rural Employment Guarantee Scheme in 200 districts and Bharat Nirman to build national highways, rural roads, houses for the poor etc.

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