It has leveraged this uplift in its resources to the hilt by making some heavy allocation to segments of the population that it has identified as the neediest, instead of minor tinkering and half-measures which have the default mode in the past.
Its better fiscal position has allowed it to not only make these significant allocations to developmental and social agenda where the economic pay-offs will be marginal and will take a long time coming, but which have urgent social and human imperatives, and yet provide enough growth stimuli for continued economic development.
This is a powerful acknowledgement that the country needs massive funds for its human, social and development needs, which can only come from a robust economic growth, and hence, the need to finely balance allocations to these two genre of expenditure. If carried forward, this new paradigm augurs well for the country.
This budget has also been refreshingly unabashed about serving the government's political agenda, largely because these are based on just causes.
The nub, of course, is how will these noble intentions be executed so that the intended benefits reach identified targets. Of course, old habits die hard, and the budget continues to rely on some of its blunt instrumentalities such as the massive farm loan waiver provision, which have problematic side-effects. Future budgets needs to take the new found sophistication in this budget to come up with more effective mechanisms for delivering the developmental and social schemes.
The very impressive fiscal correction aided mainly by buoyant tax revenues and supporting streamlining of tax regime and administration has brought down the fiscal deficit to manageable levels and within the range set for itself.
Though the expenditure structure has not been corrected and, therefore, presents a threat of a reversal of this gain in the face of an economic slowdown, the prospects for the near-term precipitation of that threat appear low, given the structural reasons for the economic growth.
The budget makes this assumption very centrally in boldly increasing allocations to both its social/developmental programmes as well to its economic agenda.
By doing this, the government is sending a clear signal that it will live with a certain level of deficit that it considers reasonable rather than play safe and achieve budget surpluses for the sake of stronger governmental finances.
This indicates that the fiscal and debt positions will be maintained within a narrow range, with outlays increasing or shrinking in direct proportion to revenue buoyancy with a lag.
It is a stance with considerable merit as there are many serious issues of basic needs for large segments of our country that need to be provided for, and hence, making these allocations is both a legitimate use of the resources and, of course, now more affordable.
There, of course, needs to be the constant vigil that the developmental agenda should not tip the balance and take away the stimulus that has already been unleashed by the progressive reforms to make the economy and business more productive and competitive, as this is the key driver that is financing the larger allocations to developmental and social causes.
It is also fair to say that as a country, we will be range-bound in our fiscal position for a few decades more till sufficient progress is made to reduce the income gaps and we reach healthier levels of social indicators.
The government seems to be acutely aware of this fine balance and has, therefore, constructed this budget to feed the stimuli powering economic growth.
It has cut taxes and put money in the hands of people, increasing the rural employment guarantee scheme, thereby facilitating higher spending and it is continuing its agenda for promoting investments both with its own capital outlay but also accommodating private investments.
With nearly 450 million children below the age of 16, India is looking at getting each year, on an average, 15 million entrants to the job market, over the next 30 years.
This is an unprecedented challenge that no other country has ever faced. If most them get employed, we will convert this demographic phenomenon to a great advantage which will by itself sustain our economic growth.
If however, there is a significant shortfall in employment opportunities, then the country could descend into very real and terrible social difficulties. One of the risks to achieving this rate of employment is getting this vast number educated and qualified to be employed.
Recognising the serious shortfall that exists in both the quality and quantity of our education system, the budget has taken a number of good initiatives to bolster this area.
Having got the funding, the government must now go hammer-and-tongs at setting the system right, including by partnering smartly with the private sector.
Similarly, the scheme to link up all universities with broadband, the tiger preservation scheme and such other progressive schemes intermingled with the traditional developmental and social plans reflect the growing modernisation of policymaking in tune with the increasing aspirations of the people of the country, in addition to catering to the more traditional goals.
Given that we are growing from a low tax base, tax compliance is increasing, and per capita income levels are improving, the virtuous cycle of higher government revenues as a result of higher economic growth - which, in turn, could be used to promote higher investment and consumption - appears sustainable for a reasonable good period of time. Projecting this trend, the size of budgetary allocations will also keep rising sizably in the future years.
Markets and businesses need to recognise that this changed paradigm casts an obligation on them to be proactively involved in shaping the policies that determine these impressive allocation in future budgets and ensuring their business interests are aligned to these budget imperatives not only to support the ideas for which such large allocations are made, but also to derive legitimate business gains.
For instance, in this budget the big increases in allocation to rural India and to education efforts are abounding in business opportunities. If the businesses take the lead in securing those interests, then the government's goal of improving the quality of life in rural India and in improving the efficacy of the educational system in the country would also be effectively served.
The author is the managing director & Regional Head of Standard & Poor's, South Asia. The views expressed in this article are personal.
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