Defence, welfare & road spending to be slashed
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 have.
Jairam Ramesh, rural development minister and a close confidant of Congress vice-president Rahul Gandhi, wrote to Chidambaram asking for a review of the cuts to rural welfare.
“Both Prime Minister and you have spoken about the need for fiscal consolidation, but not at the cost of our social priorities,” a government