As far as the common man is concerned, the most important issue is inflation. It is hovering around 8 per cent. The budget must signal the government's intention to contain inflation.

As far the economy is concerned, the real problem is investment. There is simply no flow of foreign investment into the country today. The government must design a package that will make India a favoured destination once again.

Worse, the sentiments of domestic investors are also extremely low. Step up public investment and stimulate private investment. If money is a problem, put whatever money you have into quick-yielding public investments like the Accelerated Irrigation Benefit Programme, Accelerated Power Development Programme, water harvesting, ground water development programmes.

There is tremendous scope for expenditure reduction. Implement the Expenditure Reforms Commission's (ERC) recommendations about various ministries and on the food and fertiliser subsidies. On March 31, the government must close down a few departments. Axe jobs that are vacant.

The government must put in place another disinvestment commission and depoliticise disinvestment. Lay down guidelines, work out the powers of the commission, and hand over PSUs for it to disinvest.

Cap expenditure through parliamentary legislation under Article 292. Don't provide for any exceptions, barring a national or financial emergency.

Some subsidies have to be cut. Perhaps there is no scope in the case of food and fuel. But fertiliser and transport subsidies can be cut. The 1997 white paper on subsidies must be updated.

This government has gone back to the old bad habit of simply raising taxes whenever it wants money. Cancel the surcharges on income-tax and roll back the 20 per cent tax on dividend to 10 per cent.

Excise and customs duties are completely distorted with multiple rates and special duties. Rationalise and simplify it and make it tax-payer friendly.

Various tax exemptions can be removed. But tax rates must be lowered and simplified simultaneously. Tax administration is very cluttered with a large number of rules. And because it is heavily discretionary, there is a large degree of corruption. Revamp the whole system and make it taxpayer-friendly.

The basic problem is one of growth. The prime minister is talking of 9 per cent growth. This will require investible funds to the tune of 32-33 per cent of GDP. The rate of domestic savings is 23 per cent. And the entire amount is not transferable. It is simply not possible to bridge the gap from external sources. So the emphasis must be on higher growth in domestic savings. Therefore, the budgetary exercise must be savings-oriented.

Growth also requires massive investment in infrastructure and the social sector. This may increase the fiscal deficit. If we want to have higher growth, perhaps we will have to relax a bit on this front. But there should be a rider that the borrowed money should be used only for developmental purposes and not for consumption.

Also, the government should be very strict about the revenue deficit. It should aim at reducing it to zero within three years. This can be done through both expenditure control and mopping up revenue.

Therefore, the taxation proposals must aim at increasing the tax-GDP ratio from 14 per cent to 18 per cent in the next 3-4 years. There is scope for this through rationalisation, periodical adjustment of customs duty, imposing tariff on items that will be freed of quantitative restrictions. If the government can streamline the tax machinery and expand the tax base, then the quantum of tax realisation can be increased without jacking up the rate.

Expenditure control is very important. There should be some understanding with government employees for a moratorium, maybe a limited one, on increase in perks etc.

There should be a discussion paper on subsidies. First, the quantum of subsidies should be determined and direct subsidies must replace hidden subsidies. Beneficiaries should be targeted and the delivery system should improve.

The government must see how far the recommendations of the Expenditure Reforms Commission (ERC) can be implemented.