There are no plans to review the fiscal deficit target or reduce spending now: Sitharaman
NEW DELHI: India will not review its fiscal deficit target immediately and is not planning any spending cuts at this stage, Minister of Finance Nirmala Sitharaman He said Sunday, after cutting corporate tax rates to boost the economy.
India cut corporate tax rates on Friday in a surprising move designed to attract manufacturers, revive private investment and raise the growth of a minimum of six years that has led to large job losses and generated discontent in the field.
Although equity markets welcomed the measure, bond yields increased to a maximum of almost three months due to speculation that the government might have to borrow more to meet its spending needs.
The measures will reduce revenue by Rs 1.45 trillion ($ 20.4 billion) in the current fiscal year, according to government estimates.
But Sitharaman said the government will only review the fiscal deficit target closer to the 2020/21 budget.
We are not currently reviewing any objectives. The decision will be made later, he told reporters at his residence in New Delhi on Sunday, adding that there was no plan to cut expenses currently.
Sitharaman also said the government would decide on additional market loans for the second half of 2019/20 later.
The Su0026P Global rating firm said on Friday that India's measure to reduce corporate tax rates was a negative credit development despite potentially boosting the economy, as it will expand its fiscal deficit.
Government sources told Reuters this month that India is likely to lose its fiscal deficit target for the current fiscal year and, by the end of 2019, is forced to raise it to 3.5% of GDP from 3.3% after economic growth it will fall to a minimum level of six years of 5% in the April-June quarter.