Defence & welfare spending to be cut

NEW DELHI: Finance Minister P Chidambaram is putting welfare, defence and road projects on the chopping block in a last-ditch 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 rupees in the current financial year, some 8% of budgeted outlay, or roughly 1% of estimated gross domestic product, two senior finmin officials and a senior government adviser told Reuters.

It is the first time the scale of the cuts and details of where the axe will fall have been made public, with officials revealing startling details about delays to arms purchases and belt-tightening for politically sensitive rural welfare schemes in an election year. Chidambaram has staked his reputation on lowering the deficit to 5.3% of GDP to improve the investment climate following ratings agency threats to downgrade to junk India's sovereign debt if action was not taken.

After a series of investor-friendly reforms and small steps to reduce fuel subsidies, he has now turned firepower on big-spending colleagues, some of whom are pushing back, worried cuts will hit voters ahead of a national election due in early 2014. "Every ministry is affected by the budget cuts. We are trying hard to get as much money as possible," said a senior official in the road transport ministry, who declined to be named because of the sensitivity of the issue.