Prime Minister Atal Bihari Vajpayee sat in his corner seat, shoulders slumped, head bowed. Next to him was Home Minister L.K. Advani, his left arm crossed over his body and his right hand cradling his chin. Completing the pitiful picture was Finance Minister Yashwant Sinha, trudging through his 100-minute speech with no witticisms or poetic flourishes.

At the end of the day, the nation was in deep shock. It was as much for the horrific acts of violence in Gujarat as it was for the labours of a clueless government. It is amazing that Sinha has not grasped the fundamental problem that plagues the economy. It is even more amazing that a competent professional like Rakesh Mohan, chief economic advisor and the author of the Economic Survey, could not bring home the conclusions in that report to the finance minister.

Read what the Economic Survey says: "On the demand side, real consumption growth declined from 6.5 per cent in 1999-2000 to 2.9 per cent in 2000-1. In real terms, the growth rate of private consumption reduced from 5.5 per cent in 1999-2000 to 2.2 per cent in 2000-1, that of government consumption expenditure fell from 12 per cent to 6.5 per cent during the same period." The message is blunt and clear. The economy is in a recession caused by low aggregate demand. This is also the explanation for the low inflation and the high real interest rates.

There are three things that a finance minister ought not to do when the economy suffers from poor consumption demand. Firstly, he should not impose new taxes. Sinha has planned to raise Rs 10,500 crore by way of additional tax revenues. Secondly, he should not affect the sentiment of the middle class which is not only hard working like every other class but is the only class with the capacity and the need to save. Sinha has raised prices, imposed a surcharge on income tax and taken away several options for saving. Thirdly, he should not introduce elements of uncertainty. Sinha has reintroduced dividend tax, altered the tax regime for software exports and tinkered with savings through life insurance.

On the other hand, the finance minister has not done the one thing that he ought to have done. And that is to announce a slew of measures to stimulate investment. Read what the Economic Survey has to say: "Sustained high growth will require considerable improvement in investment. Given the country's limited domestic resources, it is essential to enhance the inflow of foreign direct and portfolio investment. Enhancement of domestic investment would depend upon structural reduction in inflationary expectations and real interest rates, reduction in the fiscal deficit and further liberalisation of the domestic debt and capital markets." There is not a word in Sinha's budget on how he expects to attract investments.

The Government seems to have lost sight of the purpose of economic reforms. Since 1991, the objectives of reforms have been to induce more investment, growth, employment and, consequently, reduction of poverty. The Budget for 2002-3, I am afraid, will deter investments, retard growth, depress growth in employment and set back the time-table for reduction of poverty. Sinha believes in the policy of tax and spend. He may deny this vehemently, but how does he explain the additional resource mobilisation of Rs 10,500 crore in a situation of recession? Besides, there is no matching reduction on the expenditure side. Plan expenditure is slated to increase by 14.5 per cent from Rs 99,154 crore (revised estimate) to Rs 1,13,500 crore (budget estimate). Similarly, non-plan expenditure is budgeted to increase by 11.9 per cent from Rs 2,65,282 crore (revised estimate) to Rs 2,96,809 crore (budget estimate). And this rise in expenditure will take place when the nominal GDP is expected to grow by only 10.65 per cent.

The Government's four-year track record is dismal. The GDP growth rate has shown a secular decline-6.5, 6.1, 4.0 and an estimated 5.4 per cent in 2001-2. On the other hand, the fiscal deficit has recorded a disconcerting rise-5.1, 5.4, 5.5 and an estimated 5.7 per cent in 2001-2. The so-called Hindu rate of growth is no longer 3.5 per cent; it is now about 5 per cent. So, even if a government sleeps on the job, the economy will grow by about 5 per cent, thanks to the services sector. If the Government is alert and efficient, the economy will grow at 6 per cent, and only if the Government enthuses all sectors and is focused on implementation will the economy grow at 7 per cent and more.

In 2001-2, Sinha made big promises, earned lavish praise and delivered almost nothing. For 2002-3, by making no promises, he and his Government have saved themselves from accountability if they deliver nothing once again. Nihilism is also a philosophy, and that is what marks the budget for 2002-3.

(The author is a former Indian finance minister. These are his personal views)