NEW DELHI: Prime Minister Narendra Modi said on Friday he was committed to meeting this year's budget deficit target, welcoming a cut in interest rates by the Reserve Bank of India on the back of falling inflation.
In a speech, Modi said his government would cut wasteful spending, streamline the payment of welfare benefits and raise investment in roads and railways to boost economic growth in Asia's third-largest economy.
Modi's comments signalled his assent to RBI Governor Raghuram Rajan's call for "sustained high quality fiscal consolidation" as a condition for further monetary easing after a surprise quarter-point cut on Thursday.
"We are committed to achieving the fiscal deficit target announced in the budget," Modi told an Economic Times event. "We have worked systematically in this direction."
The government is struggling to contain the deficit at 4.1 percent of gross domestic product in the year to March 31. It is still looking to raise funds through asset sales and has taken advantage of weak oil prices to hike fuel levies.
The 64-year-old prime minister said it would be difficult to revive economic growth but promised to deliver a combination of big-bang and incremental reforms. "The objective must be to improve the welfare of the people," Modi told business leaders.
These included reforms to the power sector to ensure round-the-clock supply, and following up on a shakeup of the coal sector that would open up mining and marketing to private-sector and foreign players.
Addressing the same event, Finance Minister Arun Jaitley said earlier that the RBI's quarter-point cut in its main policy rate, to 7.75 percent, marked an important turning point for the economy.
"Hopefully, it will add to growth, add to investment," said Jaitley, who has called repeatedly for lower interest rates.
He said the government was keeping its options open on pushing its reform agenda through parliament and did not rule out calling a joint session of both houses to enact key legislation.
Modi has resorted to issuing a string of temporary executive orders to keep his reform drive on track because he does not command a majority in the Rajya Sabha.
To permanently enact these orders he could call a joint session in which his nationalist Bharatiya Janata Party and its allies would command an overall majority.
Jaitley said he doubted that the political opposition could be persuaded to back the government's reforms but said it faced defeat at the polls if it failed to do so. Delhi holds its state election on Feb. 7.