WSJ: “India’s government has started to tighten its belt as it strives to meet the revised budget deficit target of 5.3% of gross domestic product for the year through March 2013.
It’s not that spending is decreasing: it’s still increasing – only a lot less. So in September, government spending rose by a “paltry” 1.4% from a year earlier, according to a new report by brokerage Nomura. By comparison, in August, spending had increased by a whopping 32% from a year earlier, Nomura economist Sonal Varma told India Real Time.
To look at it another way, public spending rose by 0.47% between August and September compared to a 30.7% increase in the same period last year.
Nomura’s Ms. Varma told India Real Time said that the government has cut spending on sectors such as defense. A recent increase in fuel prices means the government is also saving money on subsidies. In September, the government raised the price of diesel by 14% to about 47 rupees to reduce its expenses on fuel subsidy. The government estimates this will save it around 150 billion rupees in the year ending March 31, 2013.
One of the reasons why public spending has slowed down, says Ms. Verma, is because the government has delayed paying subsidies to oil marketing companies. These are costs that may be partly rolled over to next year.
A senior finance ministry official told India Real Time that the government expects to cut at least 500 billion rupees, or about 4% of the 14.9 trillion rupees that it had planned to spend this year. The official said spending cut will be across the board, but did not want to single out any particular area.
Despite spending cuts, public expenditure remains high, mainly due to subsidies on fuel, food and fertilizers, and on social sector schemes.
To meet its budget deficit target, India needs to slash government expenditure as well as raise funds through stake sales in state-run companies and the sale of radio bandwidth.
These are the governments priorities as laid out by Finance Minister P. Chidambaram last week, when he announced a fiscal roadmap aimed at lowering the budget gap from 5.3% in the year through March 2013 to 3% by 2017.”
via India Is Clamping Down on Spending – India Real Time – WSJ.
CHINDIA ALERT: You'll be living in their world, very soon 