Reserve Bank of India seen cutting rates next week, first time in 9 months
India's fiscal deficit touched 4.13 trillion rupees ($77 billion) in April-November, or 80.4 percent of the budgeted target for the full fiscal year through March.
The government expects a budget deficit in the current fiscal year of 5.3 percent of GDP.
Economists had pencilled in a deficit of at least 6 percent of GDP, although they have narrowed that to 5.5 percent or 5.6 percent of GDP following the various government measures in recent months.
The country's current account deficit hit a record high of 5.4 percent of GDP in July- September, although Chidambaram said the country can finance the shortfall without cutting into national reserves.
Subbarao, a hawkish outlier in 2012 when many central banks were cutting rates and putting in place other stimulus measures, was due to meet with Chidambaram for a customary pre-policy discussion on Thursday.
In October, the RBI gave uncharacteristically specific guidance, saying there was a "reasonable likelihood" of policy easing in the January-March quarter. It reiterated the same point in December.
"The earlier guidance given by the RBI and the recent steps taken by the government has led to the expectation of a 25 bps rate cut," said Saugata Bhattacharya, an economist with Axis Bank in Mumbai.
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