Finance Minister Jaswant Singh is likely to project a fiscal deficit target of around 5 per cent of the gross domestic product for 2004-05 in his interim Budget.

The revised estimate of the fiscal deficit for the current fiscal is likely to be 15-20 basis points lower than the Budget estimate of 5.6 per cent of GDP.

Finance ministry sources reckon that expenditure during an election year will be high. Total expenditure for the next fiscal is likely to vary between 10 per cent and 12 per cent over the revised estimate for the current fiscal.

2004-05 projections

• Expenditure in 2004-05 to grow 10-12% over this fiscal
• Realistic growth in tax mop-up, 12-15% growth expected
• Buoyant economy to result in higher excise and corporate tax collections
• Fiscal deficit for 2003-04 to be 15-20 basis points lower than the 5.6% of GDP
• Defence spend my be close to Rs 50,000 crore

This year's Budget estimate had projected a 8.6 per cent increase in total expenditure over the previous year's revised estimate.

In the current fiscal, expenditure has been kept in check and the government is likely to post a saving of about Rs 5,000 crore (Rs 50 billion).

Finance ministry officials said the saving would be similar to that made in the last fiscal and in the predictable areas of defence and Plan expenditure and because of the zero offtake from the infrastructure viability gap fund of Rs 2,000 crore (Rs 20 billion).

Last year the government saved over Rs 6,250 crore (Rs 62.5 billion), much of which was due to lower defence spending.

Singh is, however, deriving comfort from the fact that the economy has gathered momentum and a 7.5-8 per cent growth target for 2004-05 is well within reach.

Increased economic activity is likely to translate into higher tax receipts next fiscal. He will be realistic in estimating a 12-15 per cent growth in tax receipts for 2004-05.

In the current fiscal, the shortfall in indirect taxes is likely to be more than made up by direct tax receipts, expected to be Rs 6,000 crore higher than the Budget estimate.

According to the sources, defence spending is likely to be higher in 2004-05 because of the Gorshkov and advanced jet trainer deals signed in the current fiscal.

In fact, the vote-on-account for the first four months of 2004-05 will reveal the swollen defence budget. Defence payments are staggered, so although they may climb next year, a saving is expected in the current fiscal.

While food and oil subsidies will be the pressure points in the next fiscal's expenditure budget, the growth of interest payments will slow. The average cost of the government's market borrowings has come down significantly this year.

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