India's forthcoming budget to be most austere in recent history
economic growth prospects as borrowing costs for private investors will fall, helping lift capital investment growth from a five-year low. He told party colleagues at Thursday's briefing that he was confident of taking growth back to 6-7 percent in 2013/14.
New Delhi missed its 2011/12 fiscal deficit target of 4.6 percent of gross domestic product by 1.2 percentage points, prompting threats of a downgrade from ratings agencies Fitch and Standard & Poor's.
India has a BBB minus rating with a negative outlook from both S&P and Fitch, the lowest investment grade among the BRIC group of large emerging economies. A cut would take the country's credit rating to junk status.
In a measure of what Chidambaram is aiming to achieve by placing a lid on expenditure, spending for the 2012/13 budget was increased by 13 percent compared with actual spending in 2011/12.
"Our first and foremost priority is to avoid a ratings downgrade," said one of Chidambaram's lieutenants, adding that a downgrade would further dent corporate investment and hopes for an economic recovery.
The sources declined to be identified because the budget planning has not been been made pubic.
As Chidambaram prepares to tighten the purse strings, some government departments and ministries are bracing for funding cuts of up to 20-24 percent from their original 2012/13 targets, which could crimp plans for expansion of the defence forces, rail lines, highways and even development spending on tribal minorities.
"We are literally begging for funds," complained a senior official at the Tribal Affairs Ministry.
RAIL, DEFENCE CUTS
The proposed cuts
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