Indian foreign minister says cutting deficit 'imperative'
Posted: 10 November 2009 1742 hrs

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NEW DELHI: India's Finance Minister Pranab Mukherjee promised on Tuesday that the government would reduce the fiscal deficit as it seeks to put the nation's financial house in order.

"Fiscal consolidation is absolutely imperative," Mukherjee said in a speech to a World Economic Forum meeting in New Delhi.

He said the government would cut the deficit to 4 per cent of gross domestic product by 2012, down from an expected 6.8 per cent in the current financial year.

"This kind of (financial) tight-rope walking cannot be done for a long time," Mukherjee told more than 600 investors, fund managers and other delegates from around the world.

India's deficit, which stood at 6.2 per cent in 2008, has been swollen by stimulus measures taken by the government to shield the economy from the impact of the global economic slump.

Prime Minister Manmohan Singh told the forum at the weekend that the government would take "appropriate action next year" to roll back the stimulus.

Mukherjee echoed the pledge.

The government is targeting growth of 6.5 per cent this fiscal year and over 7 per cent in 2010. In the medium-term, it hopes for growth of 9 per cent.

But the high deficit and resurgent inflation is seen by economists as threatening the outlook for India's economic performance.

- AFP/sc