India weighs spending curbs to safeguard fiscal deficit target

India is considering cuts across several areas of government spending as rising subsidy costs linked to fuel and fertiliser imports strain public finances.

The proposed reductions are expected to exclude capital expenditure and defence allocations, which are set to be preserved, Caliber.Az reports, citing foreign media.

However, officials have indicated that further adjustments may be required if global oil prices remain elevated, adding pressure to the fiscal position.

The strain on the budget has been exacerbated by higher crude import costs following renewed instability in the Middle East, alongside a weakening rupee and rising inflation. Price growth is now projected to exceed the Reserve Bank of India’s 4% target, complicating efforts to stabilise public finances.

These developments threaten the government’s fiscal consolidation plan, which aims to reduce the budget deficit to 4.3% of GDP in the 2026–27 financial year, which began in April.

Official figures show the deficit nearly doubled in April compared with a year earlier, reaching $37.8 billion. The widening gap is expected to force the government to increase borrowing, adding further pressure to already elevated debt levels.

In response, authorities have introduced measures aimed at supporting the rupee and limiting capital outflows, while the central bank seeks to strengthen foreign exchange reserves amid heightened market volatility.

By Aghakazim Guliyev