Indian budget seeks 7-yr low deficit amid sops for votes

NEW DELHI, Feb 17 (Agencies): India's embattled government said Monday it had lifted tens of millions of people out of poverty as it announced an interim budget ahead of elections that it is widely tipped to lose.

Finance Minister P. Chidambaram trumpeted the Congress-led government's achievements during its decade in office, as he presented the budget to cover spending until the general elections due by May.

The government pledged to reduce the fiscal gap to the lowest in seven years in the interim budget while boosting defense spending and cutting taxes on cars, mobile phones and television sets.

The budget deficit will narrow to 4.1 per cent of gross domestic product by March 31, 2015 from an estimated 4.6 per cent in the current fiscal year, which is lower than an earlier target of 4.8 per cent, Finance Minister Palaniappan Chidambaram told lawmakers today in New Delhi. The budget would provide funds for several months until a new parliament is elected.

"I can confidently assert that the economy is more stable today than what it was two years ago," Chidambaram said, pointing to lower deficits, moderating inflation, higher growth and a stable exchange rate. "Analysts and rating agencies had acknowledged our efforts some months ago and no longer speak about a downgrade."

Prime Minister Manmohan Singh faces a slumping economy that's hurting tax revenues as rupee weakness raises the cost of oil imports and fuel subsidies. Standard & Poor's warned in November that it may strip India of an investment-grade rating awarded in 2007 unless the election leads to a government capable of reviving growth.

"There is some degree of populism in this budget, but this is the best he could've done given that it's an interim budget," said Gaurav Kapur, a senior economist at Royal Bank of Scotland Group Plc in Mumbai. "I see the budget estimates as somewhat aggressive, and we'll have to wait and see what the new government comes out with."

The yield on the government bond due November 2023 rose to 8.85 percent from 8.81 percent on Feb. 14 as Chidambaram announced gross borrowing of 5.97 trillion rupees ($96 billion) in the fiscal year starting April 1 from a revised 5.64 trillion rupees for the current year.