hitting spending on roads, housing, and the government's flagship rural job-guarantee programme, a senior official in the ministry said.
Top officials at the finance, transport, rural development ministries and a government body on spending said ministries were likely to get 20-30 percent less funds for assets and projects such as roads, power, rural housing, jobs and shipping.
RISK OF DEEPENING SLOWDOWN
Critics warn that at a time of low growth, lower spending risks deepening the slowdown without helping the deficit-to-GDP ratio, a problem familiar to the austerity-racked economies of Europe.
Chidambaram's cuts mainly affect capital investment and he has avoided attacking government wage bills and subsidy spending known in India as "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 Rahul Gandhi, the ruling Congress party's likely candidate for prime minister in next year's vote, 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 source said, reading from the letter to the finance ministry.
Congress draws support from India's rural majority and a second-term victory in 2009 was partly due to a scheme guaranteeing work to the country's poor, along with a $13 billion farm debt waiver introduced by Chidambaram.
Abheek Barua, chief economist at HDFC Bank, India's second largest private lender, recognised the need to lower the deficit but said the cuts would hit the investment cycle and short-term demand and damage a drive to improve creaking infrastructure.
"Ideally the government should have cut non-planned expenditure such as subsidies," he said. "It also fails to address the supply bottlenecks leading to inflationary pressures."
The finance minister was backed by Prime Minister Manmohan Singh and influential adviser Montek Singh Ahluwalia in a series of meetings with government officials, two officials privy to the agenda of the meetings said. Congress party leaders have publicly given backing to fiscal consolidation in recent days.
Harvard-educated Chidambaram has promised to provide enough funds for the government's flagship programmes -- food security, rural