When it comes to the economy, every action could have a worse opposite reaction.

"It's 690 seats this year; another 964 seats are up for grabs next year, with the general election to follow in 2019," writes Rajrishi Singhal, trying to explain the apparently ruthless actions of Prime Minister, Narendra Modi. He has taken all the Congress schemes, such as Aadhar, MGNREGA, Ghar nu Ghar, and forced them on the nation with scant regard for what damage he may be causing. Elections to assemblies of UP, Punjab, Goa, Uttarakhand and Manipur are to take place in the next 2 months, of which UP is the prize that he craves. Since elections are fought with cash, demonetization was planned to wrong-foot political opponents and the budget was brought forward by one month so as to be able to announce goodies for the poor, and maybe some cosmetic tax cuts for the middle class. "The World Bank's World Development Report 2015 -- titled "Mind, Society and Behavior" -- states clearly that penalties or incentives have failed to improve tax compliance across the world," writes Singhal. Human beings do not like being forced. As an admirer of China, Modi believes in a strong government and his slogan of "minimum government, maximum governance" was a red herring, believes Manas Chakravarty. Modi announced more sops in his New Year speech. Unfortunately, the Finance Minister will find it tough to give away too many goodies in the budget. According to the Central Statistics Office, growth in the first half of the financial year, up to the end of October, has been mainly due to government consumption. Demonetization started on 9 November so that has not been factored in. Government consumption was just 3.1% last year but will be 33.3% this year, private consumption will be 51.2%. Growth in all sectors are down, except in public administration, defence and other services, which are up. The Reserve Bank predicts that Gross Non Performing Assets, as bad loans are called, will rise from 9.1% in September 2016 to 9.8% in March 2017 to 12.9% in March 2018. Which means that public sector banks, which are owned by the government will need vast amounts of funds to comply with Basel III norms by 2020. Banks have lost money by not charging for ATM and debit card transactions till 31 December and are still not being allowed to charge for card purchase of petrol. Modi wants to bring the informal sector, which survives on cash, into the formal economy. The Goods and Services Tax would have done it anyway but Modi wants to make sure by taking away cash altogether. The problem could be that the informal economy thrives because it is cheap and because it serves the millions of poor who live on the margins. Since handouts are not going to make them middle class overnight the loss of jobs could be a hammer blow to the poor. Demonetization is going to cost in excess of Rs 1 trillion so that will have to be paid for in the budget. If Jaitley was an economist he would cry.