Defence, welfare & road spending to be slashed
Policymakers say getting India's finances in order will give private players room to borrow and the confidence to invest.
“With fiscal discipline, what will happen is that there will be larger money with the private sector, which can be used for the growth,” said BK Chaturvedi, who as Planning Commission member advises the government on infrastructure spending.
Chidambaram will officially report the revised spending figures for 2012-13 when he presents next year's Budget on February 28.
“It is I who have done the math, the deficit will remain below 5.3% this year, next year it will be below 4.8%. I 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