Delhi disappoints - FT.com Since his appointment as finance minister last summer, Palaniappan Chidambaram has taken bold steps to reverse India's disappointing economic record. In September he passed several "big bang" reforms, including the controversial decisions to open up the aviation and retail sectors to foreign investors. However, Mr Chidambaram's first budget, announced last Thursday, was disappointing. True, the finance minister stuck to his promise to reduce the fiscal deficit. He plans to cut it to 5.2 per cent in 2012-13 and to 4.8 per cent the following year. With an election scheduled for 2014, this was not an easy political decision. However, budget discipline is essential to keep Delhi's high inflation under control. Editorial Yet, these headline budget figures may be just a pious aspiration. Planned revenues, which rely, among other things, on a 10 per cent surcharge on the super-rich and an increase in import duties on luxury goods, appear over-optimistic. Were growth to disappoint as it has done in the recent past, the funding gap would be even larger. The government was right to increase spending on some areas that are vital for economic development, such as health and education. Were the greater than expected increase on capital investment to go ahead, this too would boost growth. India's dismal infrastructure is a prime reason why Delhi fails to attract enough foreign investments. These programmes, however, would have been better funded by cutting other areas of spending. Mr Chidambaram was not brave enough to take the axe to India's large subsidy bill, which covers a wide range of products, including fuel and fertiliser. These are a poor way of alleviating poverty, since they do not discriminate between poor and better-off consumers. The decision not to reform the tax system was another lost opportunity. No steps were taken to move towards the unified goods and services tax which would replace a wide range of indirect taxes. Such a system would lower compliance costs for businesses and increase tax revenue. Nor did the government cancel the retrospective amendment which revived a $2.5bn tax battle with Vodafone. This will send a negative signal to investors. India's success will depend on its ability to pass structural reforms, of which tax is one. This year, Mr Chidambaram should show this budget was only a setback and not a complete halt to his drive to revitalise India's economy.