The fiscal deficit of state and central governments, combined with losses of state-run firms, was about 8 per cent of gross domestic product (GDP) in 1998/99 (April-March). The government aims to rein the central fiscal deficit at 4 per cent of GDP in 1999/2000, down from 4.5 percent the previous year.

Economists doubt its ability to stick to the target because of unanticipated expenditure incurred on account of a 10-week clash earlier this year with armed intruders in the Kargil heights in Kashmir, combined with expenses towards a general election in September and October. The costs of rehabilitating millions of homeless people and re-building infrastructure in the eastern state of Orissa, ravaged by a severe cyclone in late October, is expected to dent fiscal calculations further.