Slowing economy may force FM to wield Rs 20k-cr Budget knife

Written by Reuters | Updated: Oct 4 2013, 09:51am hrs
The finance minister may have to slice at least R20,000 crore from government spending to prevent a budget blowout, which could threaten to send the countrys credit rating into junk status, two ministry officials said. P Chidambaram will make a final decision on whether to go ahead with the cuts at the end of October, when he gets an update on revenue collections, the officials, who have direct knowledge of the process, said. If he goes ahead with cuts, the minister would likely focus on areas of discretionary spending but keep programmes, such as food subsidies, in place as state and national elections near, these officials said. Chidambaram, who last year oversaw cuts worth over R1 lakh crore, is aiming to prevent the budget for the fiscal year to March 2014 from stretching beyond a deficit target of 4.8% of GDP. A budget blowout would be a concern for credit ratings agencies. India has the lowest investment grade rating and Standard & Poors maintains a negative outlook. A cut to junk status would raise its borrowing costs and could trigger further panic on financial markets.