India's finance minister is putting welfare, defence and road projects on the chopping block in a last-ditch attempt to hit a tough fiscal deficit target by March.
India cuts welfare, defence and road projects in budget overhaul
NEW DELHI // India's finance minister is putting welfare, defence and road projects on the chopping block in a last-ditch attempt to hit a tough fiscal deficit target by March, risking short-term economic growth and angering cabinet colleagues.
The cuts will reduce spending by about 1.1 trillion Indian rupees (Dh75.6 billion) in the current financial year, about 8 per cent of budgeted outlay, or roughly 1 percent of estimated gross domestic product, two senior finance ministry officials and a senior government adviser said.
It is the first time the scale of the cuts and details of where the axe will fall have been made public, with officials revealing startling details about delays to arms purchases and belt-tightening for politically sensitive rural welfare schemes in an election year.
Finance Minister P Chidambaram has staked his reputation on lowering the deficit to 5.3 per cent of GDP to improve the investment climate following ratings agency threats to downgrade to junk India's sovereign debt if action was not taken.
"It is I who have done the math, the deficit will remain below 5.3 percent this year, next year it will be below 4.8 percent. I am not going to cross these red lines," Mr Chidambaram said this week.
His attention has turned to spending because revenue has dropped.
After a series of investor-friendly reforms and small steps to reduce fuel subsidies, he has now turned firepower on big-spending colleagues, some of whom are pushing back, worried cuts will hit voters ahead of a national election due in early 2014.
"Every ministry is affected by the budget cuts. We are trying hard to get as much money as possible," said a senior official in the road transport ministry, who declined to be named.