Buoyant tax revenues have not entirely borne the desired results. The revenue deficit target under the Fiscal Responsibility and Budget Management Act (FRBMA) target has been postponed by a year to 2009-10, thanks to increased spendings on key social sectors like health, education and welfare.

In addition, the implementation of the Sixth Pay Commission in March 2008 and the Rs 60,000 crore debt relief package are set to put pressure on the fisc.

Speculations are also rife on whether non-Plan expenditure would surge with the implementation of the Pay Commission. In case the percentage increase of non-Plan expenditure is significantly more than Plan expenditure, it could even have an impact on the capital expenditure.

Higher salaries and benefits for government workers in the next financial year, apart from subsidies on fuel, fertilisers and food to curb prices may also push up state expenditure.

Presenting his last full Budget before the general elections, finance minister P Chidambaram said fiscal deficit would go down to 3.1% in 2007-08 as against the targeted 3.3%, while revenue deficit is at 1.4% as against the targeted 1.5%. He pointed out that revenue deficit in 2008-09 will be reduced by 0.5% to 1% though the target was to totally eliminate it.

?Because of the conscious shift in expenditure in favor of health, education and the social sector, we may need one more year to eliminate the revenue deficit,? he said.

However, experts feel revenue deficit could be higher than what has been projected due to the big ticket programmes. This may even have an impact on the savings pattern.

Chidambaram pointed out that fiscal deficit in 2008-09 is estimated to be 2.1%. Revenue deficit is estimated at Rs 55,184 crore, amounting to 1% of the GDP while fiscal deficit is estimated at Rs 1,33,287 crore or 2.5% of the GDP. The government aims to issue bonds to raise Rs 1,45,000 crore to meet the Budget deficit. This is 7% less than the total issuance of bonds in the current fiscal.

Chidambaram has also increased the limit for the market stabilisation scheme to Rs 2,48,000 crore, implying additional issues of Rs 63,000 crore. According to an Axis Bank analysis, this means net fresh issues of government securities of about Rs 2,00,000 crore and Rs 1,35,000 crore without the MSS, which is contingent on capital flows.

Importantly, for the first time, it has been acknowledged that significant liabilities of the government on account of oil, food and fertilizer bonds are currently below the line and there is need to bring these liabilities into the fiscal accounting. Borrowings and other liabilities have shown a steady decline in the last three years. For 2008-09, a budget estimate of Rs 133287 crore has been provided, down from Rs 143653, a decline of 7.21%.

Total expenditure for 2007-08 is estimated at Rs 7,09,373 crore while it is likely to be Rs 7,50,883 crore for 2008-09, an increase of 5.8%. Revenue expenditure in 2008-09 is set to be Rs 6,58,119 crore, as against an estimated Rs 5,88,586 crore in 2007-08, an increase of 11.8%.

Total revenue receipts is set to increase 14.82% in 2008-09. Revenue receipts for the next fiscal is estimated at Rs 6,02,935 crore, as against the revised estimates of Rs 5,25,098 crore for the current fiscal, of which Rs 4,31,773 crore is on account of tax revenue.

The government has set an interest receipt target of Rs 11,712.86 crore for 2008-09 while it is estimated at Rs 11,113.46 crore for the current fiscal. Receipts on account of dividends from public sector undertakings is set to increase to Rs 24,758 crore in 2008-09 as against an estimate of Rs 22,379 crore in 2007-08. Similarly, revenue generation from dividend or surplus of reserves from Reserve Bank of India, nationalised banks and financial institutions is expected to touch Rs 18,445 crore in 2008-09 as against Rs 13,728 crore estimated in 2007-08, an increase of 34.3%. This means that the total revenue generated from dividends and profits will be 19.6% higher in the next financial year at Rs 43,203 crore.

Analysts say there has been some continuation of reforms with the rationalisation of tax rates, which should have been done earlier. However, the result of this measure will be marred by the announcements of mega expenditure programmes.