The finance minister has given a clear signal that the focus is on where most of India lives — small towns and villages. And to fuel growth, he is going to spend more than Rs 10,00,000 crore in the forthcoming year, which includes a 37 per cent jump or an additional $65 billion. Most of this is going to go into the government's flagship schemes such as the National Rural Employment Guarantee Scheme and Bharat Nirman which, in effect, puts more money in the hands of rural Indian consumers.

It will be naive for India Inc not to take the hint and move forward. By increasing government outlay by such large amounts, the finance minister is creating new markets. It is for us now to get out of our comfort zones and start catering to places where the majority of Indians live. Rather than limiting ourselves to big metros, we have to look at new ways in which we can evolve new distribution strategies, offer value-added products and drive consumption in rural India. Domestic demand and consumption has been the key driver for economic growth in India. Till now, most of the domestic consumption demand was based out of big cities with the top eight cities accounting for almost 40 per cent of the total demand. Household savings in India are among the highest in the world and statistics suggest that the poor are forced to save a much higher share of their income, than the rich.

With this budget, and its huge spending on rural India, the finance minister has set for himself ambitious targets of halving poverty by 2014, adding 12 million jobs each year and bringing 50 per cent women under self-help groups. If this holds true and if 70 per cent of India which resides in small towns and villages have more money in their pockets and spend more on consuming value-added products, this has the potential to bring about a paradigm shift in the Indian economy. So, whether it is on televisions, toothpaste or cars, increased consumption in rural India will create new jobs required for providing these value-added products and services.

After many years, if not decades, the philosophy for driving growth is bottom-up, rather than depending on the ‘trickle-down effect.’ We are focusing on moving with the majority, rather than focusing on the affluent minority. Thus, this budget is a clear shift in terms of its ambitious vision for driving economic growth.

However, what it lacks to an extent is innovative thinking and a clear plan for ensuring that the ambitious spending plan of the government delivers growth. It does not take into account behavioral economics on how rural spending by the government can be productively used by rural consumers to enhance their quality of life.