India will unveil a credible and feasible fiscal consolidation path for the next five years, Finance Minister P. Chidambaram said on Monday, days after a government panel said the economy was on the edge of a fiscal precipice.
A slowing economy has hurt tax returns while subsidies on fuel, food and fertilizer have further strained government finances and endangered India's investment-grade credit rating.
No one will have confidence in the Indian economy if there is uncertainty about the fiscal stability of the country, Chidambaram told a news conference.
It is our intention to announce a credible and feasible path of fiscal correction beginning this year and ending in the fifth year of the 12th plan, which ends in March 2017.
In recognition of mounting worries over public finances, Chidambaram, after taking over the ministry in August, appointed a committee led by a former official, Vijay Kelkar, to recommend ways of improving government finances.
In its report, the Kelkar panel suggested slashing fuel, food and fertilizer subsidies urgently to curb a deficit it said could hit 6.1 percent of GDP this fiscal year.
Chidambaram did not give details of his plans for fiscal prudence, but said he was waiting for more feedback on the Kelkar report.
To shore up its balance sheet, the government last month raised the price of heavily subsidised diesel and cut supplies of subsidised cooking gas despite strong political opposition, including from within its own coalition.
In March, the government had promised to narrow the fiscal deficit to 5.1 percent of GDP this year from 5.8 percent last year. But analysts doubt New Delhi will come good on that commitment.
The investment rate in the Indian economy is seen picking up in the third quarter of the current fiscal year that ends in March 2013, Finance Minister P. Chidambaram said on Monday.
India's investment rate has fallen to 32 percent from 38 percent in 2007/08. Analysts say investment needs to pick up before the economy returns to the 9 percent growth it was clocking before the 2008 global financial crisis.
Absence of reforms will slow growth: Chidambaram
(PTI) Cautioning that absence of economic reforms will slow