Recovering rupee gives P Chidambaram relief ahead of Budget

Dec 06 2013, 13:57 IST
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P Chidambaram wants to put the house in order before the 2014 election campaign kicks off and US Fed begins cutting its monetary stimulus, says a FinMin official. P Chidambaram wants to put the house in order before the 2014 election campaign kicks off and US Fed begins cutting its monetary stimulus, says a FinMin official.
SummaryBut PC will have to find about $8 bn in savings from budgeted spending plans to meet deficit target.

budget target of 19 percent. This could create a budget hole of some $2.4 billion, said the second official.

"We will need savings of up to 50,000 crore ($8.1 billion) if the shortfall in tax receipts is between 10-15,000 crore ($2.4 billion)," this official said.

Expected income of $8.8 billion from the sale of government stakes in state-run companies looks increasingly out of reach.

The government could announce later on Friday the results of a sale of a 4 percent stake in power transmission company Power Grid.

Based on the sales price and oversubscription, the sale will raise around $270 million, which would take the total amount raised so far from state asset sales this fiscal year to about $500 million.

The government still hopes to bring in nearly $3.5 billion more by selling its remaining stake in Hindustan Zinc Ltd and Bharat Aluminium Co (BALCO) before the end of the fiscal year.

"The disinvestment numbers are there in the budget. But it appears that we are going to miss them by a wide margin, like every year," said the second senior official.

ANY MEANS NEEDED

In the absence of the share sales, Chidambaram told his cabinet colleagues on Tuesday that money would have to be raised by pressing state firms to buy back government shares or to issue a special dividend, said the first senior official citing a description of the meeting by Chidambaram.

Prime Minister Manmohan Singh had called the meeting to discuss the sale of the government's share in state-run coal producer Coal India and power equipment manufacturer BHEL.

Chidambaram also hopes to make savings by strictly implementing rules on allocating funds to other ministries, which will slow down how quickly they receive the money, the first official said.

"We are expecting savings of about 40-50,000 crore ($6.5 billion to $8.1 billion), though the numbers still have to be finalised," this official said.

Non-spending of allocated funds could help in achieving the budget deficit target, the finance ministry's spokesman said.

The revenue position will be clearer by the end of December, by which time Indian companies will have deposited their advance tax payments for the third quarter.

The government expects major savings from ministries like drinking water and sanitation, rural development, defence, trade, communications, power and planning.

In April to October, the deficit reached about 84 percent of the full-year target.

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