Through a campaign that was relentless in its focus, Narendra Modi cut through the complexities of the Indian political milieu, its array of caste and class loyalties, to fashion a spectacular electoral victory in May. In the following two months though, he has shown a curious willingness to play by a book of rules he scorned all through his campaign.

If Modi’s election triumph in May -- and his decimation of the Congress after a decade in office -- heralded a transformative moment in Indian politics, his government’s first budget on July 10 was when reality asserted itself.

Finance Minister Arun Jaitley began the day with a deep bow towards the people for investing the Bharatiya Janata Party (BJP) under Modi’s leadership with a historic mandate for change. He launched then into the longest budget speech in recent times, broken only by a five-minute interval to tend to a back ailment. At the end of it all, P. Chidambaram -- who held the finance portfolio for much of the Congress’s two-terms in office -- remarked in a seeming mood of triumph that Modi’s vow to liberate India from the Congress had floundered at its first encounter with reality: "BJP sought a mandate for Congress Mukt (free) Bharat. My friend, Arun Jaitley, would have realised that it is not possible to have even a Congress Mukt Budget".

Chidambaram seemed especially delighted that Jaitley’s aggregate math closely followed the template he set down in an interim budget just ahead of the general elections. In particular, Jaitley’s calculation of the fiscal deficit -- the one parameter identified as the source of all evil in the neo-liberal economic canon -- turned out to be almost identical to Chidambaram’s. For media commentators and the chambers of commerce, the figure involved -- 4.1 per cent of GDP -- was sufficient indication of serious fiscal intent. A reduction of the fiscal deficit, which is the excess of all expenditure over revenue, is expected to take pressure off the interest rate, promote investment in the private sector and restore the country to the growth trajectory that it slipped off in 2008.

Matters may not quite work out that simply. Much of the reduction in the fiscal deficit is being achieved through cutting government capital expenditure and this has its own costs. For the neo-liberal economist, excessive government spending is a singular iniquity, since it pre-empts resources and crowds out private sector investment. The situation in India is perhaps the opposite: government capital expenditure actually creates conditions that draw in private sector investment.

Things may have been different between 2003 and 2008, in being the only recent interval of years in which the Indian economy has grown despite a contraction of the fiscal deficit. Revenues were buoyant at the time because of unprecedented growth, but as a proportion of the GDP, capital expenditure by the government remained fairly constant.

The moment the downturn began in 2008, the fiscal deficit shot up from 2.5 to 6 per cent of GDP. And the Congress government then felt compelled to keep pumping money into the economy to keep it afloat. By 2012, foreign investors were threatening to pull out in droves, pushing stock markets into the doldrums and potentially driving the Indian rupee over the cliff. The easy option had reached its limit and a harsh fiscal contraction became the inevitable price to be paid.

A fiscal contraction has political hazards, particularly from sections that see their entitlements being taken away. And it was a key part of the Congress’s strategy during its second term to secure its political bases by safeguarding entitlements it had created through a variety of schemes, such as the right to work. It was not a policy course that global finance was particularly enamoured of. Late in August 2013, the Congress-led government pushed through legislation making food security a basic right. The markets went instantly into a swoon and the rupee plunged to a new low. Arun Shourie, the journalist turned BJP ideologue -- whether out of anxiety at the political capital that the Congress could harvest or out of sincere commitment to fiscal prudence -- called for the food security bill to be scrapped.

Though the first of July was the date agreed by all parties, operationalisation of the right to food has been held in abeyance for a three-month period by the Modi government. Meanwhile, it has transferred responsibility for the right to work and other welfare measures to the exclusive jurisdiction of the state governments. This has been done ostensibly to tailor the implementation of these schemes more closely to local requirements and to eliminate wasteful leakages. But in a context when the central government is in headlong flight from its responsibilities, the long term implication could well be a radical abridgment of these entitlements.

For the Indian middle-class that had seen dreams of unending affluence evaporating in the 2008 meltdown, the promises made to the undeserving poor were in some manner a direct contribution to their woes. Layers of wasteful flab had been added during the ten-year long tenure of the Manmohan Singh government which needed to be ruthlessly pared away. Jaitley fed these hopes in an address to a group of accountants just a week before his budget presentation. The country was at a stage where it could ill afford "mindless populism" he said, eliciting from the fickle and temperamental Indian stock markets a sharp upward rally.

And then came the reality check of the budget. Jaitley has projected a fiscal deficit for the year ahead which will not send the markets into an undue flutter. But this has been done at considerable risk to accounting integrity. Tax revenues have been pegged at an unrealistically high level, even for the very optimistic growth rates projected. Dividends from public sector enterprises are forecast to increase dramatically, though part of the payment due has already been appropriated by Chidambaram into last year’s revised estimates. And somewhat contrarily, the proceeds from disinvestment in public sector units have been put at almost thrice the actual achievement of the year gone by.

With all that, Jaitley does not manage to bring the fiscal deficit down any more than the figure that Chidambaram forecast in his interim budget. And to actually get to that figure, he would likely need to squeeze capital expenditure even more. That much prized statistical entity called growth could well be the casualty.

To seek economies in any sphere other than the social sectors would be deeply corrosive of the BJP’s core ideological commitments. Defence spending, which slipped below budget estimates last year on account of lower capital acquisitions, has been restored to a level consistent with the BJP’s earlier record in office. Otherwise, Jaitley has sought to appease his flock through a plethora of schemes, many of them named after ideological mascots of Hindu nationalism, all of them uniformly allocated a symbolic sum of Rs 100 crore (one billion) over the year. There are no fewer than twenty-eight such schemes, many of which could vanish off the books, possibly leaving their names as a symbolic bequest to future governments.

One ideological commitment that Jaitley has put a more substantial sum of money into is the rehabilitation of Kashmiri pandit migrants. At Rs 500 crore (five billion), the allocation works out to an estimated average of Rs 20,000 for each migrant.

At the end of it all, Jaitley may have been relieved to see a moderately buoyant response from the stock markets and a fairly equable mood through the following week. But he could well be gnashing his teeth at the rapid retreat he has had to beat from the extravagant rhetoric of the BJP campaign. The reality he possibly realises is that the Indian economy allows today for cosmetic changes and flourishes in nomenclature. But the room for manoeuvre is limited and the penalty for departing from the rule-book set down by global finance, potentially severe.