Finance Minister P Chidambaram speaking during a news conference in New Delhi on March 20, 2013.
India's embattled government said on Wednesday that it would stick to the "path of fiscal prudence" in the run-up to next year's elections, dismissing market worries of a slew of deficit-busting handouts to sway voters.
The assurance by Finance Minister P. Chidambaram was his first response to a string of defeats for ruling Congress party's in recent state elections, including a rout in the capital New Delhi.
His statements came a day after global ratings agency Fitch voiced concern that the government's unpopularity could pressure it "to limit expenditure cut-backs" and allow the deficit to rise.
But Chidambaram told an economics forum in Delhi "there will be no compromise on the decision to walk on the path of fiscal prudence".
The government will "contain the fiscal deficit step-by-step, year-by-year, until we reach the goal of three per cent of gross domestic product in 2016-17," he said.
The government has set a fiscal deficit target of 4.8 per cent of GDP for the current financial year, the same level as last year, which Chidambaram called a "red line".
In good news for the government, the trade gap narrowed again in November, easing pressure on the current account deficit - the widest trade measure embracing goods, services and investment income - that had been called unsustainable.
Merchandise exports rose by 5.9 per cent year-on-year in November to $24.6 billion, official figures Wednesday showed.
Imports tumbled by 16.4 per cent year-on-year to $33.8 billion, their lowest level in four years.
Gold and silver imports slid a massive 80.49 per cent to $1.05 billion in November from a year earlier, hit by government measures to reduce imports of precious metals.
Earlier this month, figures showed India's current account had narrowed to its lowest level since 2010, falling to $5.2 billion in the three months to September.
Meanwhile, Parliamentary Affairs minister Kamal Nath told reporters the general elections will be held "as scheduled" in May.
Left-leaning Congress is seen struggling to win a third term amid sharply slowing growth and a string of corruption scandals.
The main opposition Hindu nationalist Bharatiya Janata Party (BJP) is expected to fare well but may not win enough seats for an outright majority.
Some analysts say the elections could result in an unstable outcome with smaller regional parties with diverse goals, seizing the upper hand.