Bookmakers love to bet that the Narendra Modi government's final budget would be a populist one now that there is an increasing sense of resignation to a stalemate in the match with only the stoppage time play left.

The 2019 general election is only months away and the government is already in defensive formation as many promises made ahead of the 2014 election remain unmet.

The government is finding itself in slippery terrain when even a victory in the important state of Uttar Pradesh already looking difficult as Mayawati's Bahujan Samaj Party and Akhilesh Yadav's Samajwadi Party having hammered out a coalition.

The nation's unemployment scene is not the ideal one for a government seeking re-election and the opposition is out to exploit the gap between Modi's promises and performance.

The government is aware of the challenges and is likely to keep the reform urge in check while trying to appease the rural voter as much as possible.


Allies like the Shiv Sena are continuing to nettle the Modi-Amit Shah combine. Even worse are the pinpricks that Nitin Gadkari, the surface transport minister, has been administering on the government by calling attention to the promises.

The economy, which is the Modi government's trump card, has been holding, assisted by favourable oil and dollar. The country is cruising as the fastest growing major economy ahead of China which has slowed from the effects of a trade war with the US. But the government has not been able to effectively counter the charge that the nation's economic growth suffered through demonetization and the goods and services tax (GST).

Many commentators read into last month's state election results general voter disenchantment towards the central government's performance, especially in the rural sector. Villagers overwhelmingly depend on agriculture for survival and their wrath over the general stagnation in the farm sector seems to have poured out in the form of an electoral revolt.

Entering the home straight, therefore, the government is aware of the challenges and is likely to keep the reform urge in check while trying to appease the rural voter as much as possible. One of the trumps that the government has up the sleeve must have been the universal basic income proposal until Congress president Rahul Gandhi made the abrupt announcement the other day promising it if voted to power. Only time will tell if the Gandhi has upended the Bharatiya Janata Party with the announcement.

Government to miss the fiscal deficit target

The budget being the last one by the Narendra Modi government before the general election, its focus could be on rural or farm sector, according to the Economic Times.

The newspaper spoke to several brokerages who expect the government to miss the fiscal deficit target for the current financial year. The brokerages expect a slip of 20 basis points to 3.5 percent from the targeted 3.3 percent.

The market is bracing for a slew of populist announcements and could remain choppy for the week.

Many foreign brokers told the media that a direct farmer support scheme is likely in the budget or earlier. CLSA said a scheme modeled after the state of Telangana could cost Rs 1.2 lakh crore. CLSA believes that the current off-balance sheet funding of government spending necessitated by the GST-led tax revenue shortfall of 75-80 bps of GDP is not sustainable. Observers expect a 0.5 per ent of GDP shortfall in FY19 led by large slippage on GST collection.