India will defer spending to rein in fiscal deficit

MEXICO CITY Wed Nov 7, 2012 4:05am IST

A worker at a fuel station checks a 500 Indian rupee note after filing a vehicle with fuel in Kolkata February 3, 2011. REUTERS/Rupak De Chowdhuri/Files

A worker at a fuel station checks a 500 Indian rupee note after filing a vehicle with fuel in Kolkata February 3, 2011.

Credit: Reuters/Rupak De Chowdhuri/Files

Related Topics

MEXICO CITY (Reuters) - India is reviewing budgeted expenditure at each ministry and plans to defer some spending to the next financial year beginning in April to keep the fiscal deficit at 5.3 percent of GDP, a top finance ministry official told Reuters on Monday.

India's economic growth is expected to slow to about 5.5 percent this fiscal year, the slowest pace in a decade, while rating agencies S&P and Fitch say higher spending and rising subsidies could push the fiscal deficit to 6 percent of GDP.

"Those expenditure that can be moved to the next year would be moved, instead of being done this year," Arvind Mayaram, economic affairs secretary at the ministry of finance said in an interview.

He said the government was determined to keep the deficit to 5.3 percent of GDP this fiscal year, and would take all necessary steps for this purpose. However, he ruled out drastic, across-the-board spending cuts.

Analysts have expressed doubt about whether the government would be able to keep the deficit even to that level.

"Prospects for a material improvement in the fiscal position in the near term are remote, leaving intact the risk of a sovereign downgrade," Anjalika Bardalai, an analyst with political risk consultants Eurasia Group, said in a recent research note.

In March, the government budgeted 14.9 trillion rupees spending in 2012/13 fiscal year. It estimated revenue of 9.4 trillion rupees and targeted a fiscal deficit of 5.1 percent of GDP.

But delays to planned economic policies and the global slowdown have impacted growth and tax collection, forcing the finance ministry to revise the deficit target upwards and look at ways to save money and increase revenues.

"We are reviewing expenditure at this point of time. By early December we will be able to get a picture of what type of savings we will get from that," Mayaram said.

He said finance ministry expected a moderation in the burden of oil subsidies because of a recent hike in diesel prices and the appreciation of the Indian currency.

"We believe the rupee might strengthen a little further and go down to 52, 52.5, in which case there would be a substantial shaving off of the subsidy bill on that account," Mayaram said.

The rupee was trading at around 54.6 to the U.S. dollar on Tuesday.

The finance ministry official said the government was working on a number of new economic reforms. He mentioned overseas borrowings and the corporate bond market as areas being looked at.

"Please expect announcements every 15 days," he said.

(Reporting by Gabriel Stargardter; Writing by Manoj Kumar; Editing by Frank Jack Daniel & Kim Coghill)

FILED UNDER:

INTERNAL SECURITY

REUTERS SHOWCASE

Setback For Sahara

Setback For Sahara

Supreme Court defers verdict on Sahara plea to raise more debt on hotels  Full Article 

SpiceJet Crisis

SpiceJet Crisis

SpiceJet says fleet grounded on lack of fuel  Full Article 

Drug Patents

Drug Patents

Novartis sues Cipla over respiratory drug Onbrez   Full Article 

Boost for Tata Steel

Boost for Tata Steel

Tata Steel restarts key iron mines amid shortage  Full Article 

Reuters Poll

Reuters Poll

BSE Sensex to hit 32,980 by December 2015  Full Article 

India Outlook

India Outlook

ADB trims growth forecasts for developing Asia, says India to grow 5.5 pct in 2014  Full Article 

Real Estate

Real Estate

HDFC to raise $500 mln real estate private equity fund - sources  Full Article 

Banking Sector

Banking Sector

Japan banks to bulk up India presence on improving ties   Full Article 

U.S. Spending Bill

U.S. Spending Bill

Obama signs bill $1.1 trillion government spending bill  Full Article 

Reuters India Mobile

Reuters India Mobile

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