India To Cut Own Budget Aggressively To Avoid Credit Downgrade

India’s finance minister may have to slice at least 200 billion rupees ($3.2 billion) from government spending to prevent a budget blow-out, which could threaten to send the country’s credit rating into “junk” status, two ministry officials said.

P. Chidambaram will make a final decision on whether to go ahead with the cuts at the end of October, when he gets an update on revenue collections, the officials, who have direct knowledge of the process, said.

If he goes ahead with cuts, the minister would likely focus on areas of discretionary spending but keep programmes, such as food subsidies, in place as state and national elections near, these officials said.

Chidambaram, who last year oversaw cuts worth over 1 trillion rupees, is aiming to prevent the budget for the fiscal year to March 2014 from stretching beyond a deficit target of 4.8 percent of GDP.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza