India plans $4 billion in extra spending

The Indian government plans to spend an additional $4 billion to boost the nation's slowing economy, the Prime Minister's Office said Sunday.

The government also announced targeted measures to help exporters, small businesses and textile manufacturers, a plan to expand mortgage lending and a cut in a valued-added tax.

It also said a state-run financing firm will be allowed to issue $2 billion worth of tax-free bonds to finance infrastructure projects.

"The government is keeping a close watch on the evolving economic situation and will not hesitate to take any additional steps that may be needed to counter recessionary trends and maintain the pace of economic activity," the Prime Minister's Office said in a statement.

Growth skidded to 7.6 percent last quarter - off from 9.3 percent in the third quarter of 2007_ and exports shrank in October for the first time in seven years.

India's ballooning fiscal deficit means it can do far less than a country like China - which last month announced a $586 billion stimulus package - to spend its way out of an economic slump.

Citibank said in a report Thursday that it expects India's deficit in this fiscal year will swell from 6 percent to 8.6 percent of its gross domestic product - far higher than the government's target.