A Complacent Budget

V M Dandekar Though the general direction of the New Economic Policy appears to be right, two critical parameters of the economic situation, namely, the fiscal deficit and the balance of payments deficit, have remained as serious as they were two years ago. The finance minister is aware that fiscal imbalances are still large and that the economy is still vulnerable to external shocks and that, therefore, there is no room for complacency. Nevertheless, by exuding so much quiet confidence, he is creating a general mood of complacency Reduced customs and excise duties have added to this mood, creating expectations that next year not only will these indirect taxes be further reduced, but also direct taxes will be reduced. This may be politically wise in the short run, but may prove disastrous in the long run, not much longer than the end of the century.