This morning's editorial provided a useful set of criteria by which to evaluate the budget - fiscal discipline, growth sustainability, inclusiveness, anticipation of risks and threats and, finally, political impact.

First, from the fiscal perspective, the budget clearly took full advantage of the unanticipated revenue buoyancy to rein in the fiscal and revenue deficits while being quite expansive on expenditure and also reducing the basic rate of excise duty.

Although the elimination of the revenue deficit clearly poses challenges, the recent trend towards fiscal consolidation has not been compromised on. However, the changes in indirect tax rates could have been placed more explicitly in the context of the stated intent to move towards the Goods and Services Tax by 2010, a reference to which was made long after the indirect tax announcements.

We should perhaps infer from these announcements that the basic rate of the GST will be 14 per cent, which implies that the service tax rate will also converge to that number over the next couple of years. Also, a number of deviations from the basic rate were also announced, when the need of the hour was streamlining and harmonization of rates.

From the growth perspective, the reduced excise tax rates will provide a stimulus to growth by lowering prices and giving the Reserve Bank of India [Get Quote] a little more room to soften its stance on interest rates. This will be reinforced by the expansion of the rural safety net in the form of the National Rural Employment Guarantee Scheme throughout the country.

Having a large number of people with some minimum assured spending power will stimulate consumption of low-price goods, adding to the growth momentum. On the other hand, infrastructure, a serious impediment to growth sustainability, has received some attention in the form of more resources to virtually all sectors, but whether this is enough to accelerate the closure of the yawning gap between demand and supply is an open question.

The inclusiveness agenda has been advanced in a number of ways. Significant increases in expenditure commitments through the government's flagship schemes in the education and health sectors represent the first level of this agenda.

Below this, there are a large number of schemes which have received budgetary support, which offers the prospect of some of them succeeding.

Of course, the whole set of programmes has to be viewed through the lens of delivery; here, the old skepticism returns, but in this respect, this Budget is no different from its predecessors. The strong emphasis on expanding the capacity of the higher education system is a "better late than never" acknowledgement of the demographic and socio-economic dynamics of the country.

The Budget has attempted to address some key looming threats by allowing for a 0.5 per cent of GDP cushion in the fiscal deficit, which will at least partly accommodate the impact of the Sixth Pay Commission recommendations. The move towards transparency on several off-budget liabilities - oil bonds, fertilizer bonds and market stabilization bonds - is welcome and allows observers to make an accurate assessment of the overall fiscal situation.

On the political dimension, there are sources of both comfort and discomfort. In the former category, the raising of the exemption limit for personal income tax, while going against the grain of tax base expansion, really imposes only short term costs, while pleasing a large number of people who are nudging up against the old limit. At the rate at which incomes are growing, they will enter the taxpayer class within a couple of years, comfortably after the elections.

What causes significant discomfort is the loan waiver granted to farmers. This waiver was against the recommendations of an expert committee, which examined the issue. Even though the government may reimburse banks for the losses, as media reports are suggesting, the adverse long-term consequences of waivers and amnesties are well-known. The banking system is just coming through a rather grueling process of compliance with more stringent risk management norms and this measure clearly represents a setback.

There could surely have been less potentially destructive ways to address the issue - re-scheduling and building up viable insurance mechanisms being at the core. The emphasis on higher education will also appeal to the growing middle class, whose younger generation finds it increasingly difficult to get into established public institutions. More IITs and the like are most welcome, provided that they are set up in a hurry. One might recall Mr. Jaswant Singh's promise in his last (albeit interim) budget to set up six All India Institutes of Medical Sciences.

Overall, though, the Finance Minister made very good use of the economic environment and the resources available to address the needs of a large number of constituencies - rural, agricultural, the incumbent and aspiring middle class and, very importantly, his political colleagues and allies. And, it really didn't do any harm (apart from the increase in the short term capital gains tax rate, but who's complaining). Economics and politics are in reasonable balance.