NEW DELHI: India on Monday unveiled plans to slash its fiscal
deficit to three per cent of GDP by 2017, as Asia’s third largest
economy tackles faltering growth, but stressed that populist subsidies
would remain.
After years of policy paralysis that eroded investor confidence and
slowed growth to a near three-year low, the government last month
launched a bid to boost the economy with a slew of reforms in retail,
aviation and broadcasting.
“As fiscal consolidation takes place and investors’ confidence
increases, it is expected that the economy will return to the path of
high investment, higher growth, lower inflation,” said Finance Minister
P. Chidambaram.
“We think we have a doable fiscal consolidation plan,” he told a news
conference in New Delhi, hinting at tough cost-cutting measures to
shore up government finances.
Chidambaram said the government is targeting a fiscal deficit of
three per cent of GDP by 2017, down from 5.8 percent of GDP last year.
But he added that the government’s flagship anti-poverty programmes
would remain. Analysts have warned the government must slash large
subsidies to curb its ballooning fiscal deficit.
“The poor must be protected and others must bear their fair share of the burden,” Chidambaram said.
“The burden of fiscal correction must be shared, fairly and equitably by different classes of stakeholders,” he added.
The Indian economy expanded at near double-digit rates between 2005
and 2011, but the International Monetary Fund forecasts just 4.9 per
cent growth for the current fiscal year.
Standard & Poor’s (S&P) warned this month there was “at least
a one-in-three likelihood” of a downgrade of India’s sovereign credit
rating within the next 24 months from investment grade to junk.