Elections to curtail expenditure; help fiscal deficit: Montek

The ongoing state elections and the general elections due next summer will curtail the pace of expenditure, which in turn will help contain fiscal deficit, Planning Commission Deputy Chairman Montek Singh Ahluwalia told NDTV on Wednesday.

"The fact that you have got election at four states that will certainly hold down the pace of expenditure during the elections months and also immediately after elections. You have also got general elections coming so I would expect the pace of expenditure during February and March to be lower than it would otherwise be," he said.

Finance Minister P Chidambaram has said fiscal deficit, which is the difference between the government's expenditure and its revenues, will be contained at 4.8 per cent of the GDP or gross domestic product, during the current fiscal.

Despite fiscal deficit nearly touching 85 per cent of its full year target by October, Dr Ahluwalia said, he was hopeful that the government would be able to stick to its target.

"...there is under spending, because a lot of ministries make optimistic assumptions about the pace at which they will roll out a number of schemes, particularly the newer schemes. And what happens is that where money is being saved in some areas decision are taken to allow additional spending in other areas where the schemes are moving rapidly," Dr Ahluwalia said.

During the last fiscal year, India's fiscal deficit was at $ 88 billion or 4.8 per cent of the GDP.

Commenting on the possibility of a sovereign rating downgrade Dr Ahluwalia said, "Ratings agencies are noting the good news, I think no one is thinking of downgrading India."

"I am not a good judge of what ratings agencies think, but my guess is that rating agencies all recognize that economic situation is lot better than six months ago," he said.
In November last year, global rating agency  Standard & Poor's had said it may cut India's sovereign rating to below investment grade should the next government fail to provide a credible plan to reverse the country's low economic growth.

India's economy grew at a decade-low 5 per cent last fiscal.

Alternatively, the credit ratings agency said it may revise India's outlook back to "stable" should a new government have an agenda to restore growth, improve the country's finances, or allow the implementation of an effective monetary policy.

"We will end the year at 5 per cent growth or a little higher. My prediction would be that we will see a turnaround in the current financial year, and next year will be significantly better," Dr Ahluwalia said.

Finance Minister P Chidambaram has also expressed confidence that the economy would expand by 5 per cent during the current fiscal.