India’s government may curb spending growth in the budget tomorrow to pare the widest fiscal deficit in major emerging nations, seeking to boost the central bank’s scope to reduce interest rates as the economy falters.
Finance Minister Palaniappan Chidambaram will keep deficit goals set in October of 4.8 percent of gross domestic product for the year through March 2014 and 5.3 percent in 2012-2013, Goldman Sachs Group Inc. and Credit Suisse Group AG said.
The government has stepped up efforts to avert a credit- rating downgrade and damp inflation of almost 7 percent under policy changes since September. To avoid political repercussions from restrained expenditure, Chidambaram could allocate initial funds for a plan to give poor people cheap food, according to State Bank of India, the nation’s largest lender by assets.
Benchmark 10-year bond yields have slid 23 basis points in 2013 to 7.82 percent as Chidambaram strives to preserve India’s investment-grade rating. The rupee has strengthened 1.7 percent versus the dollar in the period to 54.095, paring its loss in the past 12 months to 9 percent. The BSE India Sensitive Index (SENSEX) of stocks has slipped 2.1 percent this year.