Fiscal deficit, the gap between government expenditure and revenue, could be contained at budgeted levels with better manoeuvrability on the expenditure front along with the focus on disinvestment, Citigroup said in a research note.
"While slow growth in tax revenues does make the fiscal deficit target challenging this year, we believe that better manoeuvrability on the expenditure front coupled with the government's focus on disinvestments and non-tax revenues (higher dividend pay-outs) could allow government to contain fiscal deficit at budgeted 4.1 per cent levels," it said.
According to official figures, fiscal deficit touched 74.9 per cent of the Budget Estimates for 2014-15 to cross Rs 3.97 lakh crore at the end of August.
At the end of August in 2013-14 fiscal, the deficit was 74.6 per cent of the Budget Estimates (BE).
"While weak tax revenue growth is a concern, lower crude prices and their impact on the subsidy bill may enable the government meet its budgeted fiscal target of Rs 5.31 lakh crore or 4.1 per cent of GDP," the report said.
The report noted that over the medium term, sustained fiscal reforms with respect to fuel subsidy, GST, expenditure commission review would be key to achieve meaningful fiscal consolidation.
"Fiscal consolidation would not only support sovereign ratings but could also help contain inflationary pressures," the report said.
For entire 2014-15, fiscal deficit for the whole fiscal has been pegged at Rs 5.31 lakh crore or 4.1 per cent of GDP.
The government had put in place a fiscal consolidation roadmap as per which the fiscal deficit has to be brought down to 3 per cent of the GDP by 2016-17.