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India's Jaitley: I need time to resolve subsidies

After delivering India's budget on Thursday, which fell short on concrete measures to rein in the ballooning subsidy bill, Finance Minister Arun Jaitley said he needs more time to develop a plan to overhaul the system.

"For 66, 67 years, India has not been able to find an answer to subsidies, [and] they expected me to find it in 45 days," Jaitley said in an interview with CNBC-TV 18.

"We've just taken over so the [credit] rating agencies should also appreciate that these are areas in which we will require some more time to move," he said.

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In his budget speech, Jaitley said the government will set up an Expenditure Management Commission to overlook the subsidy program. He also said there are plans to make food and petroleum subsidies "better targeted". However, he did not provide details on how that would be achieved or the savings it would bring.

Subsidy expenditures have strained government finances in the recent years, particularly given sluggish economic growth. The economy expanded 4.7 percent in the fiscal year that ended March 31, the second straight year of sub-5 percent growth.

Spending on food, fuel and fertilizer subsidies has increased significantly over the past decade, rising to 16 percent of India's total budget in the year ended March 2014, up from 9 percent in 2004.

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When asked what he thought an ideal spending cap would be for subsidies, Jaitley said he did not want to tie himself to a figure.

Hindustan Times | Getty Images

"Don't forget there are two aspects of subsidies - there is a very large section of India which still depends on these subsidies. All subsidies are not undeserving," he said.

"India still has 30 percent of its people below the poverty line, and trickle down alone won't pull them out," he added.

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The government fell short in other areas in the budget including a concrete timeline for introducing the goods and service tax and revising the land acquisition law, which is seen an obstruction to the country's infrastructure and industrial development.

Sharing his thoughts on the overall budget, Jaitley said "I had to lay down an initial road map which is directional. Now other steps will follow in that direction."

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