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Fiscal deficit biggest challenge for economy

The government warned on Tuesday that mounting fiscal deficit posed the biggest challenge to the economy, which was facing the prospects of weakening growth momentum and pressures on revenue and expenditure.

"Fiscal deficit will be the biggest challenge for the economy in the coming months. Not only the fiscal deficit of the Centre, we have to devise ways for tackling the problem of deficits in states," finance secretary S Narayan told reporters while briefing on the mid-year economic review tabled in Parliament earlier in the day.

Apart from fiscal deficit, all other economic fundamentals were very good compared to last several years and "we need to capitalise on these to convert opportunities into investment."

He, however, did not venture a guess on the level of slippage from the budgetary target of fiscal deficit at 5.3 per cent or shortfall in revenue collection saying it was a bit too early to predict. "Till we have revenue collection figures upto December, we will not be in any position to guess," he added.

The review, forecasting an economic growth of 5-5.5 per cent for the current fiscal, however, states that fiscal deficit during the first half of the year was just marginally higher than the corresponding period of previous year.

"This is in accordance with the projections in the budget but the mounting deficit was still a major concern," he said.

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Mid-term Economic Review 2002
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