Here is a paradox worth paying attention to. Finance minister P. Chidambaram was able to keep the fiscal deficit for 2012-13 within the target he had set himself because total spending by the government was around 60,000 crore less than budgeted.

One would have expected him to build on this austerity, even though it was led by curbs on capital spending rather than subsidy cuts. However, in the budget he presented on Thursday, the finance minister has indicated he will increase public spending faster than the underlying economy is expected to grow in nominal terms.

There are no prizes for guessing why we have seen a strategic switch from austerity to profligacy: there is a national election due in 2014.

The good news is that Chidambaram has promised a sharp increase in development spending while bringing down the subsidy bill as a percentage of the gross national product, by around 0.6 percentage points. The budgeted increase in the food subsidy bill is also modest given the fact that the United Progressive Alliance (UPA) is banking on the proposed food security Act as a vote catcher. The committee of fiscal consolidation headed by Vijay Kelkar had quite correctly pointed out in its report that subsidies pose the greatest risk to fiscal fitness.

The big question that hangs over the latest Chidambaram budget is how the surge in spending will be financed in an economy that has lost momentum, especially if the promise of a further reduction in the fiscal deficit is indeed to be met. The budget is on wobbly ground here. The assumption that tax revenues will be up by a fifth is a brave one, but even more questionable is the fact that the finance minister has budgeted for a massive 32.79% increase in non-tax revenue, including a very ambitious 55,814 crore disinvestment programme.

It seems that the arithmetic depends on two factors: the ability of the government to control subsidies and the success of the proposed disinvestments. Together, these are worth 1.1% of gross domestic product (GDP). I also think the 28.39% increase in Plan expenditure will act as a sort of buffer for Chidambaram in case his revenue assumptions go awry. Plan expenditure can easily be sacrificed at the altar of fiscal prudence, a tactic that most finance ministers have used in the past two decades.

Besides the coming general election, Budget 2013 was also framed for an economy trapped in a host of structural problems that were analysed with welcome candour in the Economic Survey released on Wednesday. Growth is down to its lowest level in a decade, inflation is still too high, the record current account deficit exposes the Indian economy to global shocks, private sector investment has collapsed, the national savings rate is dropping and households are putting their money in gold rather than the financial system.

To be sure, these problems have deep roots and one budget is not going to solve them. What is required is a reforms push that UPA has not shown any interest in since 2004. To his credit, Chidambaram has done a bit here and there to address some of these structural problems: incentives that could encourage companies to invest in new production capacity, attempts to wean Indians away from gold and some moves to make financial savings more attractive. Many of these moves are sensible. Then there was the sort of tinkering at the margins that seems suited more to the style of Pranab Mukherjee than Chidambaram.

But the budget lacks an overall grand strategy that will give the private sector a clear sense that it is time to start investing again.

Niranjan Rajadhyaksha is executive editor, Mint.