Finance Minister Arun Jaitley will present the most challenging budget of his tenure on Wednesday, as he seeks to appease voters still hurting from the radical monetary shock therapy that his government has administered.
The budget 2017 comes less than three months after Prime Minister Narendra Modi’s bold and risky gamble to outlaw high-value old currency bills, which has slammed the brakes on Asia’s third-largest economy and hit the poor particularly hard.
According to one survey, a third of people say their incomes have fallen, with nearly a tenth saying they are much worse off.
Judging how quickly the economy will recover is a tough call, making Jaitley’s revenue projections a shot in the dark.
A delay in the launch of a new national sales tax has added to the uncertainty. The Goods and Services tax (GST) is expected to improve tax compliance and check evasion, but the union and state governments have yet to work out its details.
Officials say his fourth budget will likely offer modest tax concessions and ramp up spending to ease the pain caused by Modi’s decision in November to scrap 86 percent of the currency in circulation in a bid to purge the cash-reliant economy of illicit “black money” and expose untaxed wealth.
Paying for those giveaways may require Jaitley to slow the pace of fiscal tightening, officials told Reuters.
As well as buoying consumer spending, which contributes nearly 60 percent to gross domestic product, sops to voters could also shore up the fortunes of Modi’s nationalist party in five regional elections for which voting begins on Saturday.
The electoral outcome, particularly in the battleground state of Uttar Pradesh that is home to one in every six Indians, is being viewed by analysts as a mid-term “referendum” on Modi.