NEW DELHI, FEBRUARY 18: The Confederation of Indian Industry (CII) warned on Friday that the government's finances were in "a very precarious state" and prescribed a 12-point action plan to cut government expenditure.The introduction of zero-based budgeting, which would scrutinise items according to actual needs and not on the basis of the previous year's expenditure, could also help trim expenditure, it added. CII said earmarking taxes for certain schemes and targeting subsidies so they benefit only those who need it most would also help.Direct subsidies on fertiliser, food and sugar are expected to touch Rs 22,400 crore ($5 billion) in 1999/2000, it said.CII advocated aggressive privatisation which it said was vital for reducing the deficit, retiring public debt and funding social sector projects.A freeze on new government jobs, a reduction in government size and privatisation of hospitals and universities were also among the 12 measures CII said were required to cut expenditure. India has targeted a fiscal deficit of four percent of GDP in1999/2000, down from 4.5 percent a year earlier.But analysts say the expense of a 10-week border clash with armed intruders in Kashmir last year, a cyclone in the eastern state of Orissa and increased wage and pension payments to government employees would affect fiscal calculations.Junior Finance Minister V Dhananjaya Kumar said earlier this month that the conflict with Pakistan had increased defence expenditure by Rs 6000-8000 crore ($1.38 billion).He added the federal government would have to shell out Rs 4000-5000 crore to repair damage from the cyclone, and the burden of a food and fertiliser subsidy, expected to reach Rs 24,000 crore in 1999/2000, would only add to the deficit."Deficits in the the 5-5.6 percent range are notsustainable," CII added. "They would increase public debt as well as the monetiseddeficit, raise interest rates, increase future interest outflows, crowd out private investments and create an unsustainable fiscal situation," it said.
