I have drawn red lines for Budget: Chidambaram

London: Red lines have been drawn for next month's Union Budget, Finance Minister P Chidambaram has said ruling out abandoning of all subsidises while non-merit ones could be eliminated over a period of time.

"I have drawn the red lines. The red lines are that the fiscal deficit for the current year will be no more than 5.3 per cent (of the GDP) and the fiscal deficit for the next year will be no more than 4.8 per cent.

"That's a red line and I will not breach that red line," he said in an interview to British daily 'Financial Times'.

He said government has taken measures to augment revenues, especially through tightening tax administration. It has promised the people that next year higher growth rate between 6 and 7 per cent will be aimed at.

"So I think all that we have said and all that we have done points to a responsible Budget. The Budget can be nothing except a responsible Budget," he said.

Asked whether the government would be strong enough to cut fuel subsidies, he said he would not make any "declarations from the pulpit".

The government has already corrected diesel prices and allowed oil companies to make small corrections periodically over a period of time.

Maintaining that the government has to still correct about Rs 10 a liter in diesel, the Minister said a beginning has been made this month and the government should be judged by the steps it took.

"And in a country where there are a large number of poor people, the correction can be gradual and in small steps at a time. That's the politically wise course to take," he said.

In reply to a question whether the direction of travel is clear, he said replied, "absolutely".

Asked whether the government would like to abandon fuel subsidies as a long term goal, he said not all subsidies can be abandoned.

Citing the example of kerosene, Chidambaram said if the subsidy on it is corrected completely, it would make the fuel unaffordable to the rural poor and they would demand wood for cooking purpose that could lead to destruction of forest.

"One has to balance these things and take a prudent decision. Some subsidies in India are indeed merit subsidies. What might appear to be non-merit subsidies from the vantage point of London and Frankfurt, some of them are indeed merit subsidies in India.

"So my approach, our approach is merit subsidies - we have to maintain a certain level of merit subsidies but non-merit subsidies we should eliminate over a period of time," he said.