Union Budget: Desperate on deficit, govt to set to slash defence and welfare spending

Jan 31 2013, 19:53 IST
Comments 0
Chidambaram is putting big money guzzlers on chopping block to hit a tough deficit target. (AP) Chidambaram is putting big money guzzlers on chopping block to hit a tough deficit target. (AP)
SummaryChidambaram is putting big money guzzlers on chopping block to hit a tough deficit target.

figures for 2012/13 when he presents next year's budget to parliament on Feb. 28.

"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," Chidambaram told Reuters in an interview on Tuesday.

His attention has turned to spending because revenue has dropped. The economy is on track to grow about 5.6 percent this year, the lowest rate for a decade, and the government is struggling to raise $10 billion in hoped-for windfall cash from partial privatisations and mobile spectrum sales.

The government had originally targeted a fiscal deficit of 5.1 percent in the current financial year, but loosened the target in October. It was 5.8 percent in 2011/12.


The impact of measures to cut bloated subsidies will mostly not be felt this fiscal year, which runs to the end of March.

"We are estimating a budget cut of 1.1 trillion rupees ($20.6 billion) as an outer limit. However, the final picture will be clear by March 15 when we have a clear idea about tax collections and the fuel subsidy bill," said a senior finance ministry official, who declined to be named.

A senior official at the defence ministry -- the world's biggest arms importer in recent years -- said a $1.9 billion cut there could delay efforts to buy howitzer guns and Javelin anti-tank missiles from the United States by at least few months.

"The Indian army would be hit hard due to budget cuts," said the official, noting that a defence deal worth more $12 billion for procuring 126 jet fighters from France's Rafale was already delayed by at least three months.

Up to $4 billion will be lost at the rural development ministry, which has the largest budget after defence, hitting spending on roads, housing, and the government's flagship rural job-guarantee programme, a senior official in the ministry said.

Top officials at the finance, transport, rural development ministries and a government body on spending said ministries were likely to get 20-30 percent less funds for assets and projects such as roads, power, rural housing, jobs and shipping.


Critics warn that at a time of low growth, lower spending risks deepening the slowdown without helping the deficit-to-GDP ratio, a problem familiar to the austerity-racked economies of Europe.

Chidambaram's cuts mainly affect capital investment and he has avoided attacking government wage bills

Single Page Format
Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...