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Factbox: Weapons, nuclear power, roads and welfare: India's budget cuts

Source : REUTERS
Last Updated: Fri, Feb 01, 2013 07:56 hrs
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Finance Minister P. Chidambaram is putting welfare, defence, atomic energy and road projects under the knife in a final 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 in the current financial year, some 8 percent of budgeted outlay, or roughly 1 percent of estimated gross domestic product, two senior finance ministry officials and a senior government adviser told Reuters. Here are some of the details of the cuts so far and where the axe is falling:

The defence ministry -- the world's biggest arms importer in recent years -- faces a cut of $1.9 billion for weapons purchases, which a senior official said could delay deals to buy howitzer guns and Javelin anti-tank missiles from the United States by at least few months.

The rural development ministry, which runs a flagship rural employment scheme that is seen as a major vote winner, could have up to $4 billion slashed from its budget, a senior official at the ministry said.

Government data for the April-November period, for which spending numbers are available, show a fall in disbursements to ministries -- and purse strings are tightening further in the traditionally high-spending last quarter of the fiscal year. A senior finance ministry official said ministries will not get more than a third of their allocated funds in the quarter to March.

The atomic energy department was allocated only 13 billion rupees by November-end, out of 56 billion rupees approved in the budget for the whole year, a finance ministry official said.

Just 35.7 billion rupees were released to the ministry of communications and information technology in the same period out of 86 billion rupees budgeted for the whole year, the official said.

Overall in the April-November period, spending on more than 100 capital investment programmes stood at 2.43 trillion rupees, 47 percent of the target of 5.21 trillion rupees for the whole fiscal year, compared with 50 percent a year earlier.

The roads ministry has so far awarded contracts for just 1,000 km (620 miles) of roads against a target of 9,000 km this fiscal year, partly due to budget constraints and the deteriorating economy, an official at the ministry said. The ministry has been told to look for funds from the National Highway Authority, partly funded by market borrowing.

One reason the cuts are needed is a rising subsidy bill. The finance ministry expects the burden for providing cheaper fuel to jump by nearly 500 billion Indian rupees this year, above earlier estimates of 430 billion rupees.

Another factor is low revenue collection - in the first eight months, collections were 47.6 percent of the annual target compared with 49.7 percent during the same period a year earlier, at a time Chidambaram is trying to substantially lower the deficit from last year's 5.8 percent of GDP.


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