High fiscal deficit number for the year 2012-13 cannot be compared with that of 1990s as fiscal fundamentals now are much stronger. Budget is also increasingly getting skewed towards soft sectors like education and health and other rights based entitlements that can provide long term growth dividend. However, if funds allocated for these programmes are not effectively utilized it can create long term fiscal problems.The Budget 2012-13 has been presented in an uncertain global economic environment and declining Indian economic growth.Multiple challenges that had to be factored in while formulating the budget proposals were global economic uncertainty, eroding investors confidence in India and economic growth and above all the issue of access of government provided services to the poor and deserving particularly the subsidies. The budget seems to have followed fiscal expansion both on the direct tax side and on plan expenditure. The direct tax proposal, as estimated, would result in a revenue loss of more than ` 4000 crore. But in case of indirect taxes, particularly in case of excise duty and service tax there has been a general increase in the rate. Also, a welcome move is the introduction of negative list for service taxation which was recommended way back in 2004 by the Committee on Service Taxation.