Laying to rest the speculation that he would deviate from the fiscal consolidation path to accommodate higher spending in FY2017, Finance Minister Arun Jaitley reaffirmed his commitment to contain the fiscal deficit at 3.9 percent this year and 3.5 percent in FY2017.

The bold statement in the wake of various economists and former bankers asking him to opt for a range and not necessarily stick to a number has been appreciated by analysts and credit rating agencies. 

It has also raised expectations of the country's apex bank following suit and reducing the key policy rate (repo rate) when it meets for the first bi-monthly monetary policy statement for 2016-2017 on Apr. 5, 2016.

The optimism was visible in Indian stock markets gaining more than 3 percent on Tuesday, the best single-day gain in two years. 

The Reserve Bank of India (RBI) had left the repo rate unchanged at 6.75 percent at its Feb. 2 sixth bi-monthly monetary policy meeting.

Reinforces credibility but at a price, says IHS 

"The government's decision to keep the budget deficit target for the FY2016/17 at 3.5% of GDP reinforces the credibility of its medium-term fiscal consolidation goal but comes at a cost of insufficient allocations for the much-needed public sector banks' recapitalisation," IHS Global Insight Senior Economist Hanna Luchnikava said.

Surprised us, says Standard Chartered

"Much to the surprise of the markets, including us, the finance minister announced a tough fiscal deficit target for FY17 (year ending March 2017) of 3.5% of GDP (FY16: 3.9% of GDP). This is in Iine with the original fiscal consolidation plan and comes despite a challenging economic environment. We believe adherence to the original target for FY17 will enhance both policy credibility and macroeconomic stability for India, a big advantage in today's volatile global environment."

Fiscal discipline trumps growth, says DBS Bank

In her post-budget analysis titled "Fiscal discipline trumps growth," Radhika Rao, economist, group research at DBS Bank, said: "The FY16/17 Union Budget saw the government prioritise fiscal discipline and macro-stability over growth (capex spending). In contrast to consensus and DBS expectations for a slower pace of fiscal tightening, the FY16/17 deficit target was maintained at -3.5% of GDP."

Fiscal discipline is the mantra, says Prabhudas Lilladher

"The key highlight of the budget was in maintaining the fiscal deficit at 3.9% of GDP for FY16 and reiterating the target at 3.5% for FY17. The budget has given a target of fiscal prudence rather than growth at any cost," said the Mumbai-based brokerage.

RBI likely to cut rates, says Bank of America-Merrill Lynch 

In its analysis of the budget, BoA-ML said the government's approach was "conservative" and that there is now a case for a rate cut by the RBI, followed by a reduction in deposit and lending rates by Indian banks.

"Given that the government has adopted a conservative fiscal position (fiscal deficit target at 3.5 percent of GDP), our economist reiterates his view that the RBI is likely to cut rates. We also expect banks to cut deposit and lending rates from April by up to 50-75 bps."

Not a big deal, says Axis Securities

According to the research of Indian private sector lender Axis Bank, the finance minister adopted a pragmatic approach in the wake of global headwinds that would have not helped domestic economy, even if the government had gone on a spending spree. 

"Given anaemic conditions and broken balance sheets, higher spend unlikely to have kick-started growth and instead increased vulnerability to global vagaries."