Coming within three months of the Central government’s purge of high-value currency notes that has dampened economic activity, particularly in the informal sector, it was imperative that Union Finance Minister Arun Jaitley soothed frayed nerves with Budget 2017-18. It was equally critical that he provided a glimpse of a larger plan to prevent regeneration of black money, the original intent behind the demonetisation of ₹500 and ₹1,000 notes. He has managed to do both to a fair degree, without resorting to the easy options of blatant populism or spending his way out of trouble in a slowing economy. Apart from funding the sops announced a month ago by Prime Minister Narendra Modi for vulnerable sections of society, the Finance Minister has done his best to further ease the pain of people most impacted by the adverse effects of demonetisation. The tax rate for small and medium enterprises with an annual turnover of up to ₹50 crore, which are the bulwark of job-creation but end up paying higher taxes than large companies, has been slashed to 25%. For corporates, though, there is no road map on lower tax rates. In addition, halving the personal income tax rate from 10% to 5% for those in the lowest tax slab of ₹2.5 lakh to ₹5 lakh not only puts more money in the hands of this segment, but is also an effective nudge to bring more people into the formal tax net. All other taxpayers have been given a benefit of ₹12,500 each.

There is a redistributive element to such sops, with part of the revenue loss from these income tax giveaways being funded by a 10% surcharge on the income tax of those in the ₹50 lakh to ₹1 crore bracket. Mr. Jaitley hinted as much, saying the demonetisation has helped transfer resources from tax-evaders to the government. He disclosed that there has been a remarkable 34% rise in advance personal income tax collections in the first three quarters of 2016-17, after recording single-digit growth in the previous two years. Perhaps the note ban has put the fear of the law into many tax- dodgers. Some logical next steps have been taken, including a bar on cash transactions of more than ₹3 lakh, a nudge to businesses to make all payments over ₹10,000 digitally, and rationalising the costs of non-cash payments. Granting infrastructure status to affordable housing, together with a few changes in the tax treatment to incentivise builders, and the interest subventions already announced for low-ticket home loans, could spur construction activity, and thus job-creation. There is higher allocation for MGNREGA, irrigation and infrastructure projects.

With the Goods and Services Tax on the horizon, Mr. Jaitley has refrained from tinkering too much with indirect taxes. Although a high-level panel that reviewed the Fiscal Responsibility and Budget Management Act has recommended deviations from fiscal deficit targets after far-reaching structural reforms such as the demonetisation, he has done well to refuse to deviate from the fiscal consolidation road map and alter India’s strong macroeconomic fundamentals. There may be no big new schemes or dramatic reforms; the big bang in this Budget is the shift from unfettered populism. On the flip side, the promise to confiscate assets of defaulters such as Vijay Mallya who flee the country and, separately, clean up electoral funding — the most potent root of corruption — appear to be red herrings at best. Provisions already exist to attach assets of defaulters to recover dues. And reducing the cash donation limit from any one source to political parties from ₹20,000 to ₹2,000 is meaningless as long as there is no cap on the number of such people who can make donations anonymously. More clarity is also needed on the electoral bonds proposed to be issued to protect donors from any adverse effects of baring their political leanings.

With the railway budget subsumed by the overall exercise for the first time, and against the backdrop of a series of train accidents, there was expectation that a strong programme on rail safety would be outlined. The ₹1 lakh crore to be devoted over five years for a safety fund, the Rashtriya Rail Sanraksha Kosh, will have to address the many imperatives identified by expert panels such as the Kakodkar Committee. The Railways have a long list of tasks, starting with acquisition of advanced signalling for train control and, as the Budget notes, elimination of level crossings for smooth operations. Replacement of carriages of old design with the better-engineered Linke-Hofmann Busch coaches would cost at least ₹10,000 crore. On the commercial side, passenger tariffs are to be calculated taking into account costs, social obligations and competition from other modes of transport. The objective of the country’s biggest organisation, however, should be to use the higher capacities on identified travel corridors to provide safe, comfortable and affordable travel for all. This can be done relying on a rise in revenues from integrated freight solutions that the Budget has spoken of. Apart from the dovetailing of the railway budget, the abolition of the distinction between Plan and Non-Plan expenditure and its early presentation, Union Budget 2017-18 marks another break from tradition. It is the first time Mr. Jaitley extensively turned to poetry as he began his deftly crafted, workmanlike Budget by referring to a season of optimism. With just one more full-year Budget likely before the 2019 Lok Sabha elections, the Modi government must now put all its energy behind implementing the legislative and administrative reforms it has promised, to translate that optimism into visible change on the ground.