am not going to cross these red lines,” Chidambaram said in an interview on London on Tuesday.
His attention has turned to spending because revenue has dropped. The economy is on track to grow about 5.6% 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% in the current financial year, but loosened the target in October. It was 5.8% in 2011-12.
The impact of measures to cut bloated subsidies will mostly not be felt this fiscal year.
“We are estimating a budget cut of Rs 1.1 lakh crore 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 US by at least few months.
“The 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 scheme, a senior official in the ministry said.
Top officials at the finance, transport, rural development ministries and the Planning Commission said ministries were likely to get 20-30% 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.
Chidambaram's cuts mainly affect capital investment and he has avoided attacking government wage bills and subsidy spending or non-Plan expenditure.
Even so, powerful ministers have protested about the impact lower spending will