India's cautious budget has pluses, but falls short on bank reform

INDIA'S federal budget for 2017/18 - which was presented on Wednesday - was much anticipated, coming as it did, soon after the demonetisation programme launched by Prime Minister Narendra Modi last November.

That programme had caused widespread pain across large sections of Indian society, but it had also accelerated India's shift to a "less-cash" economy. Observers were curious to know what follow-up actions the budget would take to cushion some of the pain and consolidate the gains from demonetisation. As well, this budget was expected to provide some clues to the Modi government's policy priorities for the remaining two years of its term.

In the event, Finance Minister Arun Jaitley delivered a conservative budget, with tight controls on expenditure, which is set to grow at only 6.6 per cent, even though revenues are projected to increase by almost twice that rate. This will help to keep the projected budget deficit at a prudent 3.2 per cent of gross domestic product (GDP) and the current account deficit at 0.3 per cent of GDP - both of which would bolster India's case for a credit rating upgrade.