What if a country could allocate resources as if it were a 21st century startup? You know-with no legacy. What would the Union Budget be like? Quite unrecognisable, many economists would contend, especially those who see freedom-yearning reformers at India's top.

The giveaway adjective there is 'freedom-yearning'. The legacy of old economic thinking is not going away anytime soon. Legacy-free budgeting is thus good only as a 'what if', an intellectual exercise. Yet, nobody is yawning at the prospect of P. Chidambaram presenting his second Budget as Finance Minister (FM) of the United Progressive Alliance (UPA) government. The man, to be sure, has shown reformist spunk before. He retains that gleam in his eyes. And he has had the time to think his strategy through. Most critically, if there's ever a time to get cracking, it is now. Besides, legacy-free budgeting is not necessarily an idle 'what if'. It could work as a way to put things in relief-as a challenge poser, even an idea generator.

Some first-principles thinking has already made its way to the public domain in the form of the Kelkar report on tax reforms, and this has already prepared people for a radical re-draft of the taxation system. The basic idea here is simplicity, and this means ripping apart the maze of rebates and anomalies that confuses people and distorts pursuits (and worse, often looks arbitrary and creates mistrust).

Done well, that could deliver dramatic results. Taxation, as Chidambaram believes, is part of the big picture of governance, of which justice is one aspect. Getting incentives to work is another, and this is at the core of the economic challenge.

Specific Budget proposals are nigh impossible to predict. The tax holiday for software exports might be done away with on the justification that a carrot has turned into a handout. The service tax net could be widened on a similar principle. Meanwhile, import tariffs could be reduced from a peak rate of 20 to 15 per cent (or lower), as part of the broad effort to let international prices set India's competitive dynamics.

Turning Indian business globally competitive is also why the country must warm up to global competition. Some sectors have already learnt how to compete with the world's best, and now with India's financial systems shaping up as well, there's little reason why other sectors should continue to be isolated from the rest of the world's market forces. It's not just telecom, aviation and insurance that need prodding to get to world levels of efficiency, but also others. The vast retail sector, for example.

So, will the Budget for 2005-06 open up more business sectors to foreign investment?

That, sadly, remains doubtful so long as the Left plays the obstructionist. The hope is that the UPA will stay true to its middle name and still pull it off... somehow. The fear is that a failure to do so will result in the FM getting so uptight about fiscal management that even good ideas on big-buck expenditure suffer neglect. A big infrastructure boost is the biggest kick-start the UPA can give to the prospect of sustainable 8-per cent plus GDP growth: the surest way known yet to end poverty.

And what about disinvestment, that other political minefield?

It could get going again. In a big way too. But the priority order is likely to be a lot less explosive in terms of implications. By the sound of ministerial rumbles, the government is in no mood to turn India's domestic oil sector, for example, over to private control. Witness ONGC's bid for Russian oil assets; it is anything but just another corporate move. The marvel of a globalising economy, however, is that private players could also take their hunt for oil assets overseas. Operational freedom is the key to be thankful for.

The FM's job, on the other hand, is to hasten India's economic emergence overall. Thankfully, there are many ways to do that too.