India’s last three budgets, which can be seen as statement of economic policy, have focused on two major principles: to portray India as an attractive destination for capital, and increase in public spending to raise returns and attract private investors. It has become apparent by now that these principles haven’t been successful in achieving government’s growth strategy goals. Jaitley’s earlier budgets have benefitted from low oil prices, and increase in gasoline taxes, but even this strategy is unlikely to help this year. In fact, increase in oil prices pose a risk to the country’s growth trajectory.

-We can see a sliver of election budget here, with elections in five states starting this month 

-Modi will want to focus on redeeming the damage caused by demonetisation, focusing on those affected the most. The focus of this year’s budget will therefore be increasing the spend on poverty alleviation: Allocation for rural sector for Fiscal Year 2018 is Rs 1,87,200 cr, which is a record, and represents an increase of 24%. This will boost consumer spending that has decreased post demonetisation.

*tax rates cut (from 10% to 5%) for people earning less than Rs500,000 

*tax rates cut (2.5% reduction) for companies with turnover of less than Rs500m 

*treating low cost housing as infrastructure, to build 10m houses by 2019 for the homeless 

-Indian Finance Minister Arun Jaitley will likely increase spending and ease back on cutting the deficit when he presents his fourth budget on Wednesday, as he seeks to lift growth hit by the government's drive to clear the economy of “illegal money”. Demonetisation, however, will have a transient effect on economy. 


-Acknowledgment of the failure of current growth strategy is required to avoid future failure.