This Union Budget came against the backdrop of a raft of reforms, economic slowdown and fiscal stress.

While the budget proposals will incrementally contribute to economic expansion, with its de facto elements of stimulus, the pace of growth will largely be due to factors outside the budget.

Growth has already bottomed out, so the key drivers in fiscal 2019 will be: 1) improved ability to benefit from strong global growth as domestic headwinds from demonetisation and implementation of the Goods and Services Tax fade, 2) enhanced ability of banks to lend following recapitalisation, and 3) normal monsoons.

To be sure, there was limited headroom for a big spending push due to fiscal constraints.

The government has for the second consecutive year already breached its fiscal deficit to gross domestic product (GDP) target of 3%. As opposed to a budgeted 3.2%, fiscal deficit in fiscal 2018 stood at 3.5% of GDP and is budgeted at 3.3% in fiscal 2019. But the more worrisome part is that the breach in fiscal deficit is despite a cut in capital expenditure (capex); that means, had the government stuck to its targeted capital expenditure for fiscal 2018, fiscal deficit would have been still higher.

Moreover, it is the productive spending in the economy that has seen a compromise, making way for revenue spending. The fiscal deficit target for fiscal 2019 overtly relies on a large indirect tax collection target. In sum, the government’s fiscal consolidation path has got stretched by three years. As opposed to achieving a 3% fiscal deficit in fiscal 2018, the government now hopes to achieve the same in fiscal 2021.