This is why Modi concentrated on rural areas in Budget 2017

This year budget was aimed at rural areas and it is being said that this was a move by Prime Minister Narendra Modi to give his party an edge in state polls due to begin Feb. 4 and laying the groundwork for his re-election in 2019.

Modi, recently, promised increased infrastructure spending and jobs training and slashed taxes for companies with a turnover of less than 500 million rupees ($7.4 million), in a bid to boost growth for those hurt by his demonetisation drive. 96 % of all registered companies, these firms employ 40 % of Indian workers and vast numbers are based in Uttar Pradesh which goes to the polls this month.

"This is a smart move to get rural votes. It's tried to soothe the effects of demonetization," Raghbendra Jha, an economics professor at Australian National University, told Bloomberg.

According to Anil Bhardwaj, secretary general at the Federation of Indian Micro and Small & Medium Enterprises, the tax cuts will encourage small firms to scale up and hire more people, especially if demand improves.

"How it behaves towards imports of textiles and leather for instance will impact our informal sector, which is very labor intensive. The government of course cannot predict that. But the next best thing is to revive domestic demand and I think this budget addresses that," Bhardwaj said.

Also, Uttar Pradesh is home to the highest share of rural dwellers -- some 155 million people -- and almost half of these are directly employed in agriculture. Elections will also be held in four other states, including Punjab, where the polls open on Feb. 4. All results will be announced on March 11.

"I'd be very surprised if these measures weren't repeated ad infinitum in the prime minister's rallies in months to come. The government's done a great job of laying down a great political foundation from which it can make electoral plays. By 2018 and 2019, a lot of these effects will come into play -- setting the stage for a BJP groundswell," Saksham Khosla, research analyst at the Carnegie Endowment for International Peace India, told Bloomberg.