New Delhi: Taking note of S&P's negative rating outlook on India, the government on Tuesday said it is taking a number of measures to improve the health of the economy.
"Government has taken note of S&P's report released on April 25, 2012. In this regard, the government is taking a number of measures with a view to reducing the current account deficit, improving growth prospects of the economy, and reducing the fiscal deficit," Minister of State for Finance Namo Narain Meena said in a written reply to the Rajya Sabha.
The measures, he said, included steps to restrict the expenditure of central subsidies to under 2 percent of GDP in 2012-13 and to further bring it down to 1.75 percent of GDP in the next three years.
"In addition, the government has made a determined attempt to come back to the path of fiscal consolidation by reducing the budgeted fiscal deficit to 5.1 percent of GDP in BE 2012-13 from 5.9 percent of GDP in RE 2011-12," Meena said.
Last month, global credit rating agency Standard and Poor's had lowered India's rating outlook to negative and had warned of a downgrade in two years if there was no improvement in the fiscal situation and if the political climate continues to worsen.
S&P had revised the outlook on the long-term ratings of India from stable (BBB+) to (BBB-) negative.
Replying to another query in the upper house, Meena said current account deficit has increased to 4 percent of GDP in 2011-12 (up to December 2011) compared to 3.3 percent during the same period of 2010-11 due to widening of trade deficit on account of higher imports of POL and gold and silver.
"To lower the impact of gold imports on CAD under balance of payment (BoP), Government in the Union Budget 2012-13 has proposed to increase basic custom duty on standard gold bars; gold coins of purity exceeding 99.5 percent and platinum from 2 percent to 4 percent and on non-standard gold from 5 percent to 10 percent," he said.
He added that the main reasons for rupee depreciation are the supply-demand imbalance in the domestic foreign exchange market, mainly due to widening of CAD, slowdown in FII inflows, and heightened risk aversion due to the euro area sovereign debt crisis.
First Published: Tuesday, May 15, 2012, 18:48