Spending on a national job guarantee plan that has touched 35 million households in the past year will continue. So will funding for rural infrastructure and a national mission to provide free midday meals to poor schoolchildren, the biggest such effort by any country worldwide. Another 36 million farmers have gained from a US$15 billion (S$22.8 billion) loan waiver announced by the government last year.

'The budget had both eyes firmly on the upcoming election,' said Mr Tushar Poddar, research head at Goldman Sachs in India. 'It suggested that further policy changes needed a fresh mandate.'

National elections are widely tipped to be held after the second half of April. With results probably to be known by mid-May, a new government may not be able to present a full budget before July.

The 'vote on account', as the interim budget is called, was presented by Foreign Minister Pranab Mukherjee, who is standing in for an ailing DrSingh. Both men are former finance ministers. India has not had a regular finance chief since Mr P. Chidambaram was elevated to the Home Ministry in December.

Defence expenditure will rise from 2.1 per cent of gross domestic product (GDP) to 2.4 per cent, an acknowledgement of new security challenges perceived by India in the wake of the November terror attack on Mumbai. Almost half the US$29 billion allotted to defence will go to buying arms.

'A threshold has been crossed,' said Mr Mukherjee, who was defence minister before being moved to external affairs. 'Our security environment has deteriorated considerably.'

Mr Mukherjee made it clear that he was constrained from announcing major tax breaks or other initiatives because those would be the responsibility of the next government, which should take power in May. Besides, he noted, two fiscal economic stimulus packages had been announced in November and December.

Even so, at the very least, industry had expected measures to boost the sagging real estate and automotive sectors.

India's stock markets dipped on news of the budget. The Sensex, the key index, was down almost 330 points, or 3.4 per cent, at the close of trading. Still, economists said the central bank, taking advantage of falling prices, may be readying another rate cut to be announced in the next few weeks.

Read the full story in Tuesday's edition of the Straits Times.