NEW DELHI -- India's plan to roll out economic reforms remains intact, but volatile global crude prices are limiting efforts to deregulate local fuel prices, Finance Minister Pranab Mukherjee said Wednesday.
Monday's federal budget - which projected a record deficit, leaned heavily in favor of spending to spur domestic demand and shied away from large reforms - was poorly received by financial markets.
Investors hoped the newly elected government would use its strong victory in May's election to push through long-stalled reforms to attract foreign investment, while putting a lid on borrowing.
However, Mr. Mukherjee said the budget was not the government's only option for introducing economic reforms.
"The Union Budget is not the only instrument available to the government to outline reform initiatives," Mukherjee told the UTVi television channel in an interview.
He said the government was waiting for global crude oil prices to stabilize before beginning to align local and global fuel prices.
Nymex-traded crude's August contract was at $62.24 a barrel, its lowest level since May 26, after posting the largest quarterly percentage gain in the second quarter since July-September 1990.
Currently, India subsidizes state-run fuel retailers, who must sell their products at a discount to the prevailing global price.
High subsidy payouts in the form of oil bonds and fertilizer bonds blow a hole in government finances, limiting productive spending.
The government has indicated its willingness to resort to market-driven fuel prices and on Thursday hiked retail diesel and gasoline prices in line with a spike in global crude.
While Mr. Mukherjee raised personal income tax exemption limits to keep more money in the hands of consumers, he didn't change corporate tax rates in the budget.
"This was not the time for making major changes in tax structures," Mr. Mukherjee said in the interview.
However, minor adjustments in the tax structure outlined in the budget will have some "accommodative positive impact" on the corporate sector, he added.
Mr. Mukherjee scrapped the Fringe Benefit Tax - a tax levied on some executive perks - but hiked the Minimum Alternate Tax by 5%.
"If you read between the lines, indications are there that there may be some changes in (corporate and personal) tax structures," Mr. Mukherjee said, without elaborating.
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