Populist subsidies have more beneficiaries and therefore more friends, but the argument against them is similar: they weaken the state and largely bypass the needy.Re-engineering the state would reduce deficits, spur enterprise and allow resources to move from wasteful activities to productive ones.
An examination of the fine print of the budget documents indicates that Mr Jaitley intends raising substantial revenues through sales of shares in government-owned enterprises to bridge the deficit and fund populist welfare programmes, including a multi-billion dollar rural jobs scheme.
Successive years of fiscal deficits, public enterprise borrowing and off-balance sheet spending, have also contributed to the onerous debt overhang in many of these countries.
And continued budget deficits harm private enterprise by soaking up savings, pushing up interest rates and "crowding out" private investment.But when skittish banks and investors are turning away from funding private spending, there is a strong case for a more active fiscal policy to prop up demand.
For example, high wages in heavily unionized public sector enterprises directly affect the budget deficit and at the same time drive up cost of intermediate products to the private sector and put upward pressure on private sector wages, as well.
During the recent election campaign, the victorious SNS party promised comprehensive economic reform during the first half of 2014 to address issues with the fiscal deficit, state-owned enterprises, the labor market, construction permits, bankruptcy and privatization, and other areas.
The money will be distributed in installments over 10 months, but only if Pakistan meets certain stringent conditions like increasing tax collections, reducing its budget deficit and privatizing public enterprises.
The state had to finance the deficits run by public-sector enterprises, subsidize the substitution of capital-intensive imports and promote non-traditional exports.
With little regard for economic rationality, the government took an active role in developing these activities through public enterprises that became a chronic source of deficits.
As part of a three-year economic overhaul program started last January, the government promised to curb inflation, cut its budget deficit and sell many state-owned enterprises to private investors.
