“India will probably contain the budget deficit at about 5.3 percent of gross domestic product this fiscal year as it tries to slow inflation, and economic growth is set to recover, Finance Ministry advisers said.
“The government is committed to fiscal consolidation,” they said in a report in New Delhi today, predicting GDP will rise as much as 6.7 percent in the year through March 2014. Deficit curbs, along with “demand compression and augmented agricultural production should lead to lower inflation, giving the RBI the requisite flexibility to reduce policy rates,” they said.
Finance Minister Palaniappan Chidambaram, who presents the budget tomorrow, faces the task of narrowing the widest fiscal gap in major emerging nations to avert a credit-rating downgrade. The Reserve Bank of India has signaled government spending has added to inflation risks, limiting the extent of interest-rate cuts as the economy falters….”
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