To make this much more easier, right-click on the desktop and choose personalize, now click windows color and choose icon spacing under the drop-down menu
Backup the following registry key before attempting this:
Icon spacing is available in Windows properties or through the registry.
Open regedit and navigate to [HKEY_CURRENT_USER\Control Panel\Desktop\WindowMetrics]
In the right pane there is an entry named IconSpacing. The default is 1125.
To space them further apart, set the value to 925 which will place them closer together and the size will not be as large.
Change the IconVerticalSpacing to 925 as well.