Finance Minister Jaswant Singh will have two choices when he stands up to present his Budget for 2004-05.

The first, a tempting and easy one to implement, will be to offer varied sops to the vote bank and climb the popularity chart. A pre-election Budget, so to say.

The second option, a tough one, will be to push through the much-needed second generation reforms aimed at sustaining the 7 per cent-plus growth rate the economy is expected to post during the current fiscal.

If the results of the state elections in Delhi and Madhya Pradesh are any indicator, the minister will be better off placing his bet on the latter option.

Delhi Chief Minister Sheila Dikshit bagged a second five-year term on the development plank and Madhya Pradesh CM Digvijay Singh licked the dust because his government barely came close to people's aspirations from him.

Unlike Yashwant Sinha who preceded him, Singh has been very lucky. In fact, he has just pursued Sinha's proposals since he assumed charge in July 2002.

The restructuring of the Unit Trust of India, the Fiscal Responsibility and Budget Management legislation and the debt swap plan for states were three important moves initiated by Sinha.

The better-than-average monsoons this year after the worst ever drought in 2002-03 did the magic for Singh. Industrial activity picked up and the corporate sector posted healthy profits in the first two quarters of the current financial year.

The feel-good factor immediately translated into a bull run in the stock markets. From a level of about 3,000, the Bombay Stock Exchange Sensitive Index (Sensex) has risen over 70 per cent to touch 5,200 levels.

But Singh cannot be lucky forever. If he does not aggressively push through reforms in vital areas like the financial sector, agriculture, taxation and foreign investment, the 7 per cent growth expected this year may just taper off.

India will miss the bus again and it will be proved that Indian growth rates are cyclical and not sustainable.

After delaying top-level appointments for well over three months, Singh finally decided to appoint Finance Secretary D C Gupta as the economic affairs secretary.

He also appointed D Swarup, an able hand, as secretary, expenditure, despite Swarup being an officer from the Indian Audit and Accounts Service and not from the Indian Administrative Service.

The other key members in his Budget team include Chief Economic Advisor Ashok Lahiri and Revenue Secretary Vineeta Rai.

The uncertainty over the likely time of general elections has also been cleared with the prime minister ruling out early polls in February.

Singh himself said last week that he will present a full Budget for the next fiscal and not a vote on account. So far so good.

A recap of Singh's 2003-04 Budget announcements, however, does not project him as an aggressive reformer. His incentives were targeted towards specific sectors, including infrastructure, textiles and tourism.

Benefits on standard deduction for salaried employees, abolition of surcharge on individuals with an annual income of less than Rs 8.5 lakh, and keeping the sops for housing sector intact were aimed at the electorate.

His Budget, however, left a lot to be desired on the reforms front.

Public sector banks need to be unshackled from government control. The bill that will allow banks to reduce the government stake to 33 per cent is still pending before the standing committee on finance.

Red tape and restrictive norms continue to deprive India of higher foreign direct investment.

Mindless tax exemptions need to be done away with and an equitable tax regime as recommended by the Vijay Kelkar task force reports needs to be ushered in.

Singh's first few pre-budget interviews indicate a renewed thrust to agriculture, which he calls the second Green Revolution.

Knowing Singh, he might also continue with his efforts to put more money in the house-wives' purse and ensure adequate food for the poor.

He has, surprisingly, also told a private channel that the Budget for the next fiscal would not be populist.

His strong point is his political clout and the ability to carry the Opposition along in getting his proposals cleared in the Cabinet and Parliament, respectively.

Singh can use his prowess to catapult India permanently in the next orbit of growth.