Delhi sees bigger fiscal deficit

New Delhi: Indian authorities will continue to take steps to moderate inflation and cut wasteful expenditure as it expects its fiscal deficit to swell beyond the 2008-09 target, the finance ministry said in a report.

The quarterly review report tabled in parliament also said tax receipts have been buoyant in the April-June period and the outlook was "good" for the remaining part of the fiscal year.

"Due to the perceived slow down in the world economy and its possible impact on India, it is likely that the final figures of fiscal deficit and revenue deficit may exceed the budget estimate," it said.

In February, India set a fiscal deficit target of 2.5 per cent of gross domestic product (GDP) for 2008-09, smaller than 2.8 per cent in the previous year.

Global uncertainty

On Wednesday, the finance minister said the fiscal deficit could be close to 3 per cent of GDP at the end of March 2009.

"Notwithstanding the slowdown in the economy due to global uncertainty and pressure of increase in crude oil prices, the process of fiscal consolidation which is a pre-requisite for sustained growth, continues to be in focus,"the report said.

"Harmonising the need to provide resources for developmental expenditure within the fiscal discipline, government will continue to take necessary measures to moderate inflation, prune unproductive expenditure and closely monitor the FRBM [fiscal deficit] targets," it added.

But higher subsidies on fertiliser and food, a debt relief scheme for poor farmers and other populist schemes have prompted the government to seek parliament's approval to spend an extra Rs1.06 trillion (Dh118 billion) during 2008-09.