Austerity in India: Defence and welfare spending to be slashed
NEW DELHI (REUTERS) - India's finance minister is putting welfare, defence and road projects on the chopping block in a last-ditch attempt to hit a tough fiscal deficit target by March, risking short-term economic growth and angering cabinet colleagues.
The cuts will reduce spending by about 1.1 trillion Indian rupees (S$25.4 billion) in the current financial year, some 8 per cent of budgeted outlay, or roughly 1 per cent of estimated gross domestic product, two senior finance ministry officials and a senior government adviser told Reuters.
It is the first time the scale of the cuts and details of where the axe will fall have been made public, with officials revealing startling details about delays to arms purchases and belt-tightening for politically sensitive rural welfare schemes in an election year.
Finance Minister P. Chidambaram has staked his reputation on lowering the deficit to 5.3 per cent of GDP to improve the investment climate following ratings agency threats to downgrade to junk India's sovereign debt if action was not taken.