India pledges to cut deficit and cap debt

NEW DELHI: Top Indian officials said they will cut the widest budget deficit among the world’s largest emerging markets and curb public debt, as the Asian nation seeks to avert a credit-rating downgrade.

The government is “optimistic” it will rein in the shortfall for the year through March 31 to 5.3% of gross domestic product (GDP) from the previous year’s 5.8%, and has no plan “at the moment” to increase its record borrowing programme, Finance Minister Palaniappan Chidambaram said. The deficit will be cut 0.6% annually for the next five years, Chakravarthy Rangarajan, chief economic adviser to Prime Minister Manmohan Singh, said in Kolkata.

“I would like to, with all the conviction and command, reiterate that the government is fully committed

We have a clear programme of disinvestment and we are confident of meeting our targets. — ARVIND MAYARAM

to contain the fiscal deficit within 5.3%,” Economic Affairs secretary Arvind Mayaram said at a conference in Mumbai.

“We have a clear programme of disinvestment and we are confident of meeting our targets,” he said.

Credit Agricole CIB said last week that financial markets are pricing in an increasing likelihood of a credit rating downgrade to junk status. The threat of losing the nation’s investment-grade sovereign ranking prompted Singh to reduce fuel subsidies in mid-September to tackle thet fiscal gap, and boost investment by allowing foreign investment in retailing and aviation.

Standard & Poor’s and Fitch Ratings lowered India’s sovereign credit outlook this year, citing a widening budget deficit, and a slump in economic growth and investment. Both companies rank India’s debt BBB-, the lowest investment grade.

The US$1.8 trillion economy is likely to expand 5.5% in the three months ended September, Chidambaram said, matching the preceding quarter’s expansion. Economists predict GDP will increase 5.3% from a year earlier, according to the median estimate in a Bloomberg survey before data due Nov 30. – Bloomberg