Tackling fiscal mess with 180 IQ

Bankrupting the nation so Kaangress can return to power

India's finance minister is finding it harder and harder to meet the government's budget promises and may sweep as much as $15 billion in subsidy costs into next year's accounts to ensure he hits fiscal targets ahead of national elections, ministry officials say.

By rolling over some costs, Chidambaram can tell voters in the run up to the elections, which must be held by May, that the government met its deficit target. But equally, he will be shackling the next government with costs that could blunt its ability to stimulate an economic recovery.

Meeting the target is important also to stave off the ire of ratings agencies as India's credit status sits just one notch above junk. A loss of its investment grade rating would probably increase the government's borrowing costs.

But Prime Minister Manmohan Singh has shied away from raising fuel prices for fear it could upset voters and cost his Congress party the elections.

A new law to provide cheap grains to millions of people has increased procurement and storage costs, inflating food subsidies by around 10 percent. "The budget will simply collapse, if we continue to provide subsidies on this scale," said a finance ministry official.

Subsidy spending has massively overshot budgeted estimates for the last three fiscal years forcing up the amount of cost that the government rolls over.

Reuters: India eyes $15 billion rollover of subsidy costs into next budget