The government is likely to come out with a successor to the Fiscal Responsibility and Budget Management Act in the Budget to continue the process of consolidating government finances, which got derailed on account of the global financial crisis.
As the duration of the FRBM Act, enacted in 2003, has come to an end, the government would be required to replace it with another law on fiscal consolidation.
The International Monetary Fund in its report on India said the the successor to the fiscal consolidation legislation should have 'an explicit national medium-term debt target and define a path to achieve it'.
The FRBM Act, which was notified by the earlier United Progressive Alliance government in 2004, aimed at reducing the fiscal deficit to 3 per cent by 2008-09 and the revenue deficit to nil over te five-year period.
Although former Finance Minister P Chidambaram tried to follow the fiscal consolidation path laid out in the FRBM, the developments following the collapse of iconic investment banker Lehman Brothers in mid-September shifted the focus to expanding public expenditure to arrest the impact of the global financial meltdown.
On account of various stimulus packages announced by the government to boost industry, the fiscal deficit during 2008-09 soared to 6.2 per cent of GDP and the revenue deficit for the year was 5 per cent of GDP.
The government has projected a fiscal deficit of 5.5 per cent for the current fiscal, 2009-10, and a revenue deficit of 4 per cent.
These figures do not include the cost of subsidies given by the government in the form of bonds like oil and fertiliser bonds.
However, the IMF has suggested that all subsidy-related expenditure should show in the Budget accounts.
"Bring all subsidy-related expenditures on budget," the multilateral lending agency said in its country report on India.