By Sanjeev Srivastava BBC India correspondent

Jaswant Singh: Weighing war fears

A boost to the economic reforms process is also expected in the budgetary proposal which he will present in the national parliament on Friday.

But the threat of war in the Gulf may force the Mr Singh to take a more conservative approach.

This is unfortunate as, judging by the state of the economy, the timing could not have been better for a dramatic shift of gear in the introduction of second generation economic reforms.

Reforming taxation

Foreign exchange reserves total a record $75bn, the highest in India's history, and enough to pay for 15 months of import requirements.

On the political front too, the governing coalition in Delhi has seldom looked more stable in the past few years.

The stage was thus set for a fresh round of reforms, but the continuing uncertainty over Iraq is now likely to act as a dampener.

According to analysts, the Indian finance minister is likely to be more cautious in the present circumstances as a conflict in the Gulf could send the price of oil soaring and quite radically affect the country's import bill.

So dramatic measures such as allowing full convertibility of the Indian rupee might not happen in Friday's budget, but some rationalisation of India's many-layered tax structure is likely.