Amid rising concerns over the widening fiscal deficit of the country, Finance Minister P Chidambaram said that India will have to rein in spending and cut subsidies to meet its fiscal deficit target at 4.8 percent of GDP in the current financial year. Highlighting more measures in the next few weeks and months to cut subsidies by the government and by the central bank (RBI), Finance Minister said that country's slowdown would impact companies’ revenues, therefore the government can reduce spending soon by some large government departments to contain fiscal deficit despite looming national election.
Chidambaram, who is trying to boost investors’ confidence by reducing a wide fiscal deficit, said that the government should tackle higher fuel and food subsidies sooner rather than later. India imports nearly 80 per cent of its oil needs and a sharp depreciation in domestic currency has made government fuel subsidies more costly. At present, oil subsidy is estimated at over Rs 90,000 crore for the current fiscal year, which is around 40 percent more than budgeted.
Recently, in order to cut government spending in non-critical areas, the government has announced a slew of austerity measures including banning government departments for holding meetings in 5-star hotels among others. Meanwhile, in the previous fiscal, the government was able to contain the fiscal deficit at 4.9 percent of GDP in FY13, against the budgeted target of 5.1 percent of GDP.
