Govt may cut FY14 plan expenditure to rein in 4.8% growth

Sources claim the finance ministry is likely to cut FY14 plan expenditure as it tries to meet its fiscal deficit target of 4.8 percent.

CNBC-TV18's Aakansha Sethi reports the government has given away a large chunk of what was budgeted for this year in the last quarter of the last fiscal. Hence, the balance is only Rs 10,000 crore and given the rupee depreciation and a possible diesel price hike, the government will overshoot the subsidies by about Rs 40,000 crore.

Also read: Petrol price hiked by Rs 2.35 per litre, diesel by 50 paise

Apart from fuel subsidies, tax collections were estimated with the gross domestic product (GDP) growth of about 6 percent. Since that is going to be lower, sources in the finance ministry say that meeting the tax collection targets will be a challenge.

Additionally, the disinvestment was budgeted at Rs 40,000 crore but given the market volatility, that maybe difficult to get.
The government cut its plan expenditure last year too, but there was a lot of slack in the system. As there is not much slack in the system, any cuts in plan expenditure will impact growth.