Painful steps needed to contain fiscal deficit: FM

Imperative to contain fiscal deficit by augmenting resources, controlling expenditure

Finance Minister P Chidambaram today indicated some difficult decisions would be taken by the government to contain expenditure and improve its fiscal situation.

Speaking at the National Development Council meeting, he said it was imperative to contain the fiscal deficit by augmenting resources and controlling expenditure. He said some measures might cause immediate pain but this was necessary to ensure fiscal deficit came down to 3% in the next three years. Fiscal deficit is project at 5.3% of the GDP in 2012-13.

Earlier in the day, Prime Minister Manmohan Singh hinted at tough decisions like hike in fuel prices and power tariffs and reduction of subsidies to achieve the growth target of 8% in the 12th Five Year Plan.

Chidambaram lauded the states for containing the fiscal deficit to 2.1% of the GDP and also for generating revenue surplus of 0.75%, said a statement released by the finance ministry.  

The finance minister expressed optimism that the Indian economy would continue to grow at a healthy rate even as the global economies face recession as the country has strong fundamentals and factors such as high savings rate, growing services sector, a large middle class continue to create demand, and technical and qualified manpower.

Chidambaram said steps were also being taken to contain the Current Account Deficit (CAD).  He said there was a need to control gold imports which contributed $64 billion to the CAD. 

Urging all states to adopt the direct cash transfer scheme, he said in the initial phase subsidies relating to petroleum, food and fertilizer would not be distributed through this scheme, but it will be a game changer and transform the way in which subsidies are managed.