A little more than a year ago, Prime Minister Narendra Modi stood in front of thousands at a campaign rally in Delhi urging them to vote for him because of his "naseeb", his luck.

Admitting that the huge drop in oil prices had been a boon for India, Modi asked the crowd why they should even consider voting for anyone else if his luck had been so good for them: “Do you want a lucky person as PM or someone who is less lucky? If Modi’s naseeb proves beneficial to the people of India then can there be anything better than that?”

Modi's political luck ran out soon after, with his Bharatiya Janata Party being routed in the Delhi elections later that month, followed by another defeat in Bihar. That oil price naseeb hasn't exactly extended to all external factors: Modi's prime ministership may have coincided with a remarkable drop in oil prices, but his first two years at the helm have also both been drought years just when the rest of the globe is also struggling to grow.

As Finance Minister Arun Jaitley prepares to deliver his third budget speech on Monday, there appears to be more acknowledgment that the country desperately need some of that good luck to ensure the Indian economy lives up to its high-growth potential over the coming year.

Not so sweet spot
In his first Economic Survey last year – an annual report card on the economy that is tabled right before the Budget – Chief Economic Advisor Arvind Subramaniam sounded positively buoyant, projecting India as a country uniquely poised to take off.

"India has reached a sweet spot – rare in the history of nations – in which it could finally be launched on a double-digit medium-term growth trajectory."

— Economic Survey 2014-15

The past year has been more than sobering for Subramaniam.

He has seen the country lower its Gross Domestic Product growth rate for 2015-'16 from a projected 8.1%-8.5% range in the survey, to 7.6% as per the most recent estimate, with other analysts suggesting even lower figures.

Meanwhile, the Goods and Services Tax legislation remains stuck because of political gridlock, exports have stayed weak, manufacturing numbers have been all over the map, disinvestment targets turned out to be grossly overestimated, corporate balance sheets still seem stressed and two successive droughts have taken rural economies to the brink.

Unusually volatile world

Not everything has gone badly. Inflation, which remained stubbornly high through much of the United Progressive Alliance years, has been tamed and the current account deficit looks comfortable.

Yet this is hardly the sweet spot that Subramaniam spoke of a year ago. Indeed, in this year's economic survey, the renowned economist has shunned talk of double-digit growth and instead preferred to focus on the factors holding the Indian economy back. The survey mentions an "unusually volatile external environment", with risks of weaker global activity and even extreme events.

"Fortifying the Indian economy against possible spillovers is consequently one obvious necessity," the survey says. "Another necessity is a recalibration of expectations. If the world economy lurches into crisis or slides into further weakness, India’s growth will be seriously affected."

Subramaniam adds a graph to explain why India needs to be worried about the global economy, which demonstrates how closely the growth patterns match each other.

Biggest challenge

Which brings us to 2016-'17 and Arun Jaitley's third budget.

The finance minister faces his greatest challenge yet, because of the fiscal challenge he set himself. A year ago, Jaitley said he was giving the government until 2018 to lower the fiscal deficit – the shortfall between what the state spends and what it earns – to 3% of GDP. The target had originally been 2017, but Jaitley said the additional year was important so that the government could stimulate growth.

Quality of spending has improved over the last year, according to Subramaniam's survey (more spending on investment, and towards social sectors). But this has not been enough to jump-start the economy and suddenly Jaitley's hands have been tightened even further, because of the 7th Pay Commission recommendations, which will mean a massive increase in the government's salary bill.

Advance apology

Although there was some talk of deviating from the fiscal consolidation path, reports have suggested Jaitley will not fall prey to this temptation. This means that the government, now finally waking up to the rural crisis ahead of elections in Uttar Pradesh next year, will have less fiscal space to spend its way out of the problem.

This is why much of the chief economic advisor's second survey focuses on what is happening beyond India. If oil prices stay low, if the monsoon recovers after two droughts, if global demand improves and if there are no sudden shocks, India can expect a positive year.

"Assessments of India’s performance over the coming year will therefore need to be conditional. This is not an advance apology for likely future performance but the sobering reality of India becoming “so entwined” with the world." 

— Economic Survey, 2015-'16.

Subramaniam maintains that India is a "refuge of stability and an outpost of opportunity" in a global economy full of turbulence. But from double-digit growth and a "rare moment in the history of nations", India has now recalibrated to being an economy with the potential to grow at between 8%-10%.

Oozing potential

The survey doesn't expect next year to be that good, prudently offering a GDP growth estimate range of between 7% and 7.75%, but it insists that the country could still make its way up the ladder.

"It is incontrovertible that India is still oozing potential," the survey says. And to get there, he charts out three requirements: improving efficiency by making it easier for companies to shut down, investing more in health and education and a focus on improving agricultural productivity.

Jaitley's third budget will certainly promise to do all three of those things. Whether his government can actually make good on those promises is another matter. But even if the government manages to accomplish much of what is laid out in Jaitley's budget speech, Subramaniam has made it clear that next year's growth figures will be as dependent on Modi's naseeb ensuring the external environment doesn't get worse.

"In sum," the survey insists, "for now but not indefinitely, the sweet spot for India is still beckoningly there."