New Delhi, Jan 31: Finance Minister Arun Jaitley on Thursday will present the final, and electorally the most crucial Budget under the current tenure of the Narendra Modi-led government. The fiscal policy would present the last opportunity before the incumbent BJP regime to consolidate its voters' base, which seems to have weakened if judged by the results of the recently contested Gujarat assembly elections.

A populist Budget on the cards?

In a year marked by elections -- eight states will go into legislative polls, followed by the battle for Lok Sabha next year -- analysts have set their eyes on possibly the most populist Budget in the past four years.

The rural constituency, particularly the agrarian sector, has much to expect from the Modi government, with dissatisfaction clearly looming over the alleged lack of steps taken over the past four years.

"The past four years have been marked by agrarian suicides, lack of vision and below par MSP (Minimum Support Prices) for farm produce," said Kedar Sirohi who heads the Aam Kisan Union.

Experts believe that Modi government, in a bid to pacify the resenting voices from the rural region, could unveil incentives for the farm sector, particularly on the purchase of seeds, fertilisers and pesticides which could bring down the input costs. The Finance Minister is also expected to increase expenditure towards MNREGA, rural housing, irrigation projects and crop insurance.

Apart from the farmers, the small traders and businessmen have also made their dissent against the Modi government public, especially after the shock implementation of demonetisation and the chaotic roll-out of the Goods & Services Tax. FM Jaitley could be charting out lucrative sops to aggrieve their distress.

One of the steps could be sector-wise subsidy on exports -- a move which the Chief Economic Advisor Arvind Subramanian described as "successful" for the textile sector.

The salaried class, part of the urban electorate, too holds expectations from the Modi government. An increase in tax exemptions via an alteration in the section 80C of the Income Tax Act would have a mass appeal.

Expenditure on infrastructure could also be on the rise, as this marks the final year of the government in Office. The FM may ensure an increased flow of funds to ensure the completion of the ambitious road projects before the nation goes to general polls next year. Expenditure is also needed to be enhanced for the Railways -- whose growth is at a four-year low.

The corporate sector, which prima facie appears to be satisfied with the pro-market stance of the Modi government, has also been patiently waiting for Jaitley to fulfill his promise of "gradually lowering" the corporate tax from 30 per cent to 25 per cent.

Why Jaitley could stick to fiscal prudence

While speaking to Times Now, Prime Minister Modi indicated a non-populist fiscal policy to be enacted in the final year of his current term, saying the country supports constructive development, "rather than sops and freebies".

India's resurrection from the 'fragile five' to a 'bright spot', Modi said, is the result of the hardline reform agenda enacted by his government after coming to power.

The efforts would continue to remain directed towards tightening the fiscal deficit, Modi had said.

In a boost to the government's effort, a spree of reports by global credit rating agencies have lauded the long-term reforms enacted by the incumbent Indian government. The most favoured shot in the arm came in November 2017, when the Moody's gave India a sovereign upgrade in its ranking -- first time since 2004.

Despite the arguments in favour of fiscal prudence, Jaitley faces a dilemma as he presents the final full-year fiscal policy of the government. As hinted by CEA Arvind Subramanian, who presented the Economic Survey earlier in the week, "a pause in the fiscal consolidation plan can’t be ruled out". His opinion was in contradiction to the views of NITI Aayog Vice Chairman Rajeev, who said the government "is likely to stick to the (fiscal deficit) target".

(The above story first appeared on LatestLY on Jan 31, 2018 10:13 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).