New Delhi, Feb. 2 -- An angry middle class, a slowing economy and an election setback finally led to an income tax bazooka from Finance Minister Nirmala Sitharaman, a move economists and policymakers strongly argued was the need of the hour. But beyond the headline-grabbing income tax cuts, the government delivered a smaller budget, barely increasing allocations for several key ministries.

This has kept the government from veering off its fiscal consolidation path.

The Centre cut its fiscal deficit aim to 4.4% of GDP for 2025-26 from 4.8% expected in the current financial year, keeping its 2021-22 promise of bringing it down to below 4.5%. But this feat has been achieved by shrinking the budget year after year. Since 2021-22, the Centre...