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Subsidy cuts in budget may disappoint investors

The government may slash its food and fuel subsidy bill by about half a trillion rupees in next week's budget, two sources said, but despite the impressive headline, the cut is not as radical as free market champions had hoped for in Prime Minister Narendra Modi's first full budget.

business Updated: Feb 20, 2015 18:21 IST

The government may slash its food and fuel subsidy bill by about half a trillion rupees in next week's budget, two sources said, but despite the impressive headline, the cut is not as radical as free market champions had hoped for in Prime Minister Narendra Modi's first full budget.

Most of the 20% cut in the budget for subsidies results from lower global oil prices rather than structural changes, with the government's appetite for reform tempered by a heavy local election defeat in New Delhi this month.

"The total subsidy bill could come down to around 2 trillion rupees ($32 billion)," a senior government official, who has direct knowledge of the matter, told Reuters. That calculation was echoed by another source privy to budget discussions.