Finance Minister Pranab Mukherjee was set to present the union budget to parliament on Friday morning, under pressure to trim the country's fiscal deficit amid cooling economic growth and a crisis of stability for the coalition government.
The government's move on Wednesday to raise railway fares for the first time in eight years sparked an intense backlash from a key coalition ally, further eroding its ability to make politically tough decisions such as raising diesel prices in order to ease its fiscal deficit.
Prime Minister Manmohan Singh's government was already reeling from a dismal showing in recent state elections and more than a year of corruption scandals that have resulted in a policy gridlock.
"I have a feeling they will try and avoid announcing controversial things, but that doesn't mean they are off the table altogether," said Abheek Barua, chief economist at HDFC Bank in New Delhi.