Acknowledging the fact that its debt was threatening the economic growth, India's Government plans to rein in its fiscal deficit by increasing taxes on consumer goods and slowing the growth of spending.

The Finance Minister, Pranab Mukherjee, said the budget deficit would cut to 5.5% of gross domestic product in the fiscal year. He also promised that India would reduce its more than 80% of G. D. P.'s debt.

Although India is not facing fiscal problems, but its debt has driven up inflation and interest rates.

India's benchmark Nifty 50 stock index was up more than 2% after Mr. Mukherjee spoke about the deficit in his annual budget speech in New Delhi.

"It's a sensible budget which addresses some of the anxieties that were bothering the market", said Abheek Barua, Chief Economist at HDFC Bank.

Mr. Mukherjee proposed increasing taxes on fuel by 1 rupee per liter, or about 7.5 U. S. cents per gallon. Import duties on crude oil, petroleum and diesel would be increased between 5-10%. An excise tax on a range of goods would increase to 10%, from 8%, and big cars would be taxed at 22%, up from 20%.

Liberalizing retail trade in food was one of the objectives in his budget speech in parliament, along with a four-pronged strategy, which he outlined.