As countdown to the budget begins, Abheek Barua Chief Economist at HDFC Bank in an interview with CNBC-TV18 talks about his expectations.

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When asked if the government should cut personal income tax or or use that money to increase spend in the rural economy, he said, the latter would perhaps be most desirable because we need quick effects on the ground. "Typically, if you have some mode of cash transfer, either through higher direct benefit transfer (DBT) or rural projects, that tends to get in the hands of people a little more quickly and these are the segments that have a higher propensity to consume."

"Moreover, at this stage given the fact that our tax base is relatively small, they are at a higher income level associated again with a lower consumption propensity, I would put my money on rural income transfer or a rural project which puts money very quickly in the hands of people," he added.

According to him, there is a no need to bring in new schemes to increase rural spending because already have two fairly powerful programs on the ground. One, is Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and a lot can be done with that going forward, and two, we have the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), which is a cash transfer scheme twice a year and although there were teething troubles with it, those can be fixed. 'So, I do not think bringing in a new scheme is desirable at this stage. We just need to flog our existing machines on the ground a little more and perhaps allocate more to the existing schemes than come up with a new one.”

On the fiscal deficit, Barua said, “My belief is that unless we want to stay stuck in this low growth, low revenue, and a bad fiscal situation kind of trap, we need to take a calculated risk. We need to spend more, perhaps about half a percentage point of gross domestic product (GDP) and get growth moving primarily through consumption expenditure and reap the benefits of that rather than be fiscally conservative and remain stuck in what I would consider a fairly low level equilibrium.”

He further added that we have arrived at a situation where fiscal and monetary policy need to work together and in the same direction. "We have been caught in this paradigm and justifiably so because of high inflation. Whenever, fiscal policy tended to create more demand on the ground, monetary policy tended to tap it down. However, in a situation where you have a combined and coordinated fiscal and monetary policy effort to boost growth, interest rates might rise a little, but it will not lead to a situation where it rises to an extent where it nullifies the first round impact of spending.”