Finance minister Pranab Mukherjee began presenting his annual budget on Monday, saying the impression of policy drift in the scandal-tainted United Progressive Alliance government was misplaced and that food inflation was still a major concern.

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"This year brought us... many challenges as we moved ahead with steady steps on the chosen path of fiscal consolidation and high economic growth," Mukherjee told Parliament in what is widely expected to be a populist budget as Prime Minister Manmohan Singh confronts high prices and corruption scandals as well as elections in five states.

Analysts say it is unlikely that the government will unveil any politically sensitive reforms in the budget for the fiscal year starting in April.

The government is expected to count on a robust economy to expand revenue in the absence of big one-time gains that it enjoyed in the current year from the sale of 3G telecom licences.

It is also expected to withdraw more of the stimulus that had helped India to weather the global economic downturn in 2008-09.

Asia's third largest economy is on track to grow at 8.6% in the current fiscal year that ends in March. A new government survey has forecast economic growth of about 9% for the next fiscal year.

India's economy grew a slower-than-expected 8.2% in the October to December quarter from a year earlier, government data on Monday showed. The median forecast in a Reuters poll was an annual rise of 8.6%.

Reform measures, such as liberalising foreign investment in multi-brand retail and setting out a definitive roadmap for a nationwide goods and services tax, may need to wait for a more receptive political climate.

Mukherjee is expected to give priority to expanding investment in the farm sector, where inefficiency has helped to drive food inflation into double digits for much of the past year, fuelling broader inflation that stands above 8% despite seven interest rate increases since March last year.

Moves to bolster the development of India's infrastructure are also expected. Inadequate power, roads and other infrastructure act as bottlenecks to growth and push up costs.

On Friday, a government survey forecast a fiscal deficit for the current fiscal year of 4.8% of the gross domestic product, far better than the 5.5% target, thanks to $23 billion in telecom licence revenue and a surge in growth that boosted tax receipts and enabled higher-than-budgeted spending.

The survey forecast a fiscal deficit of 4.8% for the next fiscal year as well.

Some economists, however, say the figure is optimistic given the absence of one-time gains from the telecom licence sales and the prospect that India's subsidy burden could swell if oil prices stay above $100 per barrel and New Delhi continues to subsidise diesel and cooking fuels.

Some economists also expect a slowdown in growth in the new year, which would make the deficit target harder to reach.

New Delhi is likely to announce plans to borrow about Rs4.5 trillion ($99.3 billion) from the bond market in the new fiscal year, roughly in line with the current year's borrowing, a Reuters poll found.

India is in a bind over inflation, which has prompted street protests and drawn criticism from the opposition. Food and fuel subsidies are popular with voters and help to offset inflation but add to India's fiscal burden.

Deutsche Bank forecast that subsidies in the current fiscal year would reach 2.5% of the GDP, above New Delhi's target of 1.8%. The bank expects the subsidy burden in the next fiscal year ending in March 2012 to rise to 3% of the GDP.