However, ICICI Securities does not expect the deficit in the current fiscal to significantly exceed Rs 100,000 crore, having analysed the broad fiscal sensitivities.

The central government has budgeted fiscal deficit to be Rs. 79,955 crore in 1999-2000.

Significant reduction in revenue expenditure may not be possible in the near-term, ICICI Securities said in its discussion paper analysing India's fiscal arithmetic.

It said corporate tax collections have been resilient over the past two years, despite the slowdown in the pace of economic growth. Partly, it can be attributed to increase in the effective tax rate for corporates, while select sectors like pharmaceuticals and fmcg have performed well during this period.

During the first half of 1999-2000 corporate tax collections have declined three per cent to Rs 9,506.36 crore from previous levels.

Income tax base has increased over the past two years. Measures adopted in this context are also expected to yield positive results in the years to come, icici securities said.

Interest payments form the single largest chunk of non-plan revenue expenditure.

Internal debt has been budgeted at Rs 709,302 crore for 1999-2000, against Rs 458,842 crore revised estimates for 1998-99.

Internal debt has grown at an annual average of 15 to 16 per cent over the past few years. External debt has not growth in any significant manner.

The effective interest rate has persisted close to 9 per cent, ICICI Securities pointed out.

The two areas which have the potential to make a significant difference to India's fiscal arithmetic are the disinvestment process and foreign investments, particularly direct, it said.

Though the absolute amounts available from disinvestment are not expected to exceed Rs 15,000 crore annually over the next two years, the upside from foreign inflows can be substantial.