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:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Scotland Referendum

Scotland Referendum

Scots vote in record numbers, await independence verdict.  Full Article 

India-US Diplomacy

India-US Diplomacy

Obama to nominate Indian-American Richard Verma as India ambassador - congressional source.  Full Article 

GMR in Nepal

GMR in Nepal

Nepal clears India’s GMR plan for $1.4 bln hydroelectric plant.  Full Article 

LIC on Markets

LIC on Markets

LIC chairman bullish on Indian markets  Full Article 

India Rains

India Rains

Monsoon rains weaken as late retreat looms.  Full Article 

Ellison Quits

Ellison Quits

Oracle's Ellison steps aside, co-CEOs Catz and Hurd take over.  Full Article 

Infosys-Huawei

Infosys-Huawei

Infosys partners with China's Huawei for cloud-based services  Full Article 

Gold Outlook

Gold Outlook

Gold imports seen up, premiums likely to double on festive buying  Full Article 

Trade Dispute

Trade Dispute

U.S. to press India on trade row during Modi's Washington visit  Full Article 

Reuters India Mobile

Reuters India Mobile

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