India needs extra 200 billion rupees for food subsidies

NEW DELHI (Reuters) - India needs a 200 billion rupee top-up for its proposed food security bill, aimed at ensuring subsidised grain for the poor, Food Minister K.V. Thomas said on Thursday, even as the government is seeking deep spending cuts.

The bill will be introduced in the budget session of parliament which begins on February 21. The food subsidy bill for the current fiscal year was one trillion rupees, Thomas told reporters.

A massive increase in spending on food subsidies will make it tougher for Finance Minister P. Chidambaram to trim a swollen fiscal deficit that has put the country in danger of losing its investment-grade credit rating.

India's fiscal deficit is expected to reach 5.3 percent of gross domestic product by the end of March.

With very little resources at its disposal to cut the fiscal deficit - among the widest in major emerging economies - the government is resorting to deep spending cuts, which are further clouding near-term growth prospects.

(Reporting by Mayank Bhardwaj; Writing by Malini Menon; Editing by Nick Macfie)