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India Must be Ready to ‘Correct’ Budget if Fiscal Goal at Risk

“You must be ready to correct yourself if things go wrong,” Montek Singh Ahluwalia, 66, said in an interview in his office in New Delhi on Saturday.

The goal of reducing the budget deficit to 5.5 per cent of gross domestic product for the financial year starting April 1 “absolutely” must be met and “something will have to be done” if it’s endangered, he said. India must convince investors it is committed to the deficit reduction, in part because the nation needs overseas capital to finance a current-account deficit. That shortfall may reach 2.5 per cent of GDP from 2.2 per cent as domestic demand grows more strongly than exports, according to Ahluwalia.

“We need to remain an investor-friendly environment,” said Ahluwalia, who is the deputy chairman of the Planning Commission, an agency that sets India’s growth and investment targets. He refrained from specifying what new efforts the government should be ready to adopt to maintain its fiscal goal.

Finance Minister on Friday unveiled a budget proposal featuring tax increases and Rs400 billion of state asset sales to help shrink the deficit from a 16-year high of 6.9 per cent of GDP.