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New India pledge to tackle budget deficit

New Delhi, February 18, 2014

India's finance minister yesterday boasted he had slashed the fiscal deficit lower than his target, while unveiling a pre-election budget that political opponents and analysts said contained unrealistic calculations.

Amid uproar in parliament as legislators shouted him down, Finance Minister P Chidambaram also announced tax breaks for struggling manufacturers and more money for defence.

He said he would contain the deficit for the current fiscal year (April-March) at 4.6 per cent of gross domestic product (GDP), below his target of 4.8 per cent. "I can confidently assert that the economy is more stable today than what it was two years ago," Chidambaram said, while warning that action was needed to revive manufacturing.

Yesterday's budget was an interim exercise ahead of the election due by May which the government looks sets to lose. MPs will be asked to approve only the period until the new administration takes charge.

The Bharatiya Janata Party, which polls say is best placed to lead a new coalition government after the election, criticized Chidambaram for cutting spending on public investment while increasing outlay on subsidies and pushing 350 billion rupees ($5.64 billion) of oil subsidy spending onto the next administration.

"This move is a mere statistical illusion to keep the fiscal deficit look optically correct while its inflationary impact on the economy remains real," said senior party leader Arun Jaitley.

Party president Rajnath Singh warned that cuts of some 798 billion rupees to public investment spending announced for the current fiscal would hurt the economy.

Chidambaram also unveiled lower factory duties for passenger vehicles, washing machines, TVs and mobile phones in a bid to breathe life into spending and the manufacturing sector. Chidambaram predicted the current account deficit would be contained at $45 billion at the end of March, around half the level at the start of the fiscal year, thanks largely to tight restrictions on gold imports and a recovery in exports.

Revised major subsidies for 2013/14 will be 2.56 trillion rupees, Chidambaram said. For the coming year, he estimated total spending of 17.63 trillion rupees, up 10.9 per cent against revised expenditure for the current year.

The Finance Minister said India's economy would recover to at least 5.2 per cent growth in the second of 2013/14 from 4.6 per cent in the first half.-Reuters




Tags: India | Budget Deficit |

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