In simple English, lower oil prices, lower interest rates, lower inflation and a normal monsoon will lead to higher growth. If only things were as simple as that. A lot of other data highlighted in the Economic Survey shows that all is not well with the Indian economy and a growth of greater than 8% will be very difficult to achieve.
Handing over a greater amount of central taxes to states makes immense sense. Nevertheless, it makes things difficult for the central government. With the centre having to share more taxes with states, it leaves it with a lesser amount of money.
The Reserve Bank will cut the repo rate only when the government manages to allay its fears and present the path for a sustained and a high quality fiscal consolidation. And that is why Rajan will be watching Jaitley's budget very closely.
Jaitley should ensure that the numbers that he projects need to be credible. That should be the basic goal of the budget. As long as Jaitley sticks to it, everything else can fall into place, during the course of the next financial year.