Govt unveils austerity measures to meet deficit target

NEW DELHI Tue Jul 12, 2011 1:31am IST

Prime Minister Manmohan Singh gestures during the national communal harmony awards ceremony in New Delhi August 12, 2009.REUTERS/B Mathur/Files

Prime Minister Manmohan Singh gestures during the national communal harmony awards ceremony in New Delhi August 12, 2009.

Credit: Reuters/B Mathur/Files

Related Topics

NEW DELHI (Reuters) - The government on Monday announced austerity measures, including a ban on meetings in five-star hotels and restrictions on foreign travel, as it tries to meet a fiscal deficit target.

India, under threat from a slowing economy and a rising subsidy bill, aims to narrow its fiscal deficit to 4.6 percent of GDP in the current fiscal year from 4.7 percent a year ago.

The government has been banking on strong economic growth to help meet its deficit target. But a spike in global oil prices and worries over a slowdown in Asia's third-largest economy could upset the fiscal calculations.

"In view of the commitment of the government to carry on the process of fiscal consolidation vigorously and to meet the fiscal and revenue deficit targets announced in the budget 2011-12, there is a need for economy and rationalisation of expenditure," the finance ministry said in a memorandum.

New Delhi has budgeted spending 1.34 trillion rupees ($30.1 billion) on major subsidies, including fuel and fertilizer in the current fiscal year to end-March 2012. With oil prices showing little sign of moderation, the total spending is expected to be much higher than budgeted levels.

India's decision to raise fuel prices last month is expected to trim revenue losses for state-run oil companies by just 50 billion rupees, to about 1.2 trillion rupees.

Analysts say higher revenue loss for oil companies could widen the government's fiscal deficit to over 5 percent and force it to resort to higher market borrowings.

Finance ministry officials, however, have been downplaying such concerns, saying the government would devise ways to control expenditure and meet its fiscal gap target.

The memorandum instructed government departments to adhere to expenditure ceilings, refrain from buying new vehicles, and asked top bureaucrats to ensure compliance.

"Rush of expenditure towards the end of the financial year continues to be an area of concern," it said. "Not more than one-third of the budget estimates may be spent in the last quarter of the financial year."

For memorandum, click: here emre ExpMan_EcoMeasure11072011.pdf

(Reporting by Rajesh Kumar Singh; Editing by Dan Grebler)

FILED UNDER:
  • Most Popular
  • Most Shared

DEFENCE

REUTERS SHOWCASE

Stake Sale Strike

Stake Sale Strike

Coal India trade unions call off strike in victory for Modi.  Full Article 

Markets Weekahead

Markets Weekahead

Ride the bull with a finger on the ejector button.  Full Article 

Indian Captain

Indian Captain

Team mates will determine success of my captaincy - Kohli.  Full Article 

Interview with Bulgari CEO

Interview: Bulgari CEO

Bulgari CEO: we shouldn’t have left India so we’re back  Full Article 

U.S. Forces in Afghanistan

Obama widens post-2014 combat role for U.S. forces in Afghanistan.  Full Article 

Economic Reforms

Economic Reforms

Long "to do" list for Modi as clock ticks on reform.  Full Article 

Available For Remake

Available For Remake

Bollywood finally wants to pay the price for remakes  Full Article 

Messi Magic

Messi Magic

Messi sets La Liga record of 253 goals.  Full Article 

Movie Review

Movie Review

"Happy Ending" is old wine in an older bottle  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage