Extra spending won't widen deficit: FM

India's plan to spend an additional Rs 11,444.76 crore on fuel and fertiliser subsidies won't widen the budget deficit for this financial year, Union Finance Minister P Chidambaram has said.

"I am confident when I rise to present the Budget on February 28, I will be able to say we have met the fiscal and revenue deficit targets," Chidambaram told lawmakers in New Delhi today.

The Lok Sabha today approved the finance ministry's extra expenditure plan. The ministry on December 8 sought Parliament approval to spend the amount in the year ending March 31.

The government will use Rs 10,378.64 crore of its savings to meet part of the gross extra spending of Rs 21,823 crore, the finance ministry earlier said. The net extra spending will be Rs 11,444.76 crore.

Chidambaram expects the deficit this financial year to narrow to 3.8 per cent of gross domestic product from 4.1 per cent. India's financial year starts on April 1.

India will give bonds worth Rs 5,000 crore to Indian Oil Corporation, the nation's biggest refiner, and its state-run rivals for selling fuel below cost and will spend Rs 3,700 crore on fertiliser subsidies, the statement said.

"The only thing that is worrying me is inflation," Chidambaram said. "It's largely a monetary phenomenon. We will take more fiscal steps" to contain inflation, he said.

On the increase in cash-reserve ratio, he said the move would reduce liquidity in the banking system.

Replying to a question in the Upper House, the FM stated that no money had accrued to the ambitious National Investment Fund (NIF) because of the government decision to put the disinvestment process on hold. He added that "at this moment" he did not expect any money to flow into the NIF until consultations (with the Left parties) were over.

The FM said that some months ago, the PM had put disinvestment on hold pending more consultations. Seventy-five per cent of the annual income from the corpus (from NIF) would be used to finance social sector schemes, while the remaining 25 per cent would be invested in loss-making PSUs to revive them.