Optimistic of 7-7.5 per cent economic growth in 2005-06, Finance Minister P Chidambaram on Wednesday said the government will not hesitate to take fiscal measures to check inflation while keeping deficit on a leash.
"The Reserve Bank of India has projected 7-7.5 per cent growth for the current year. We agree with the assessment and are optimistic of improving our growth performance over that of the previous year (6.9 per cent)," Chidambaram told the annual Economic Editors' Conference in New Delhi.
Giving credit to RBI for the prudent monetary management to keep inflation below 5 per cent despite the surge in global crude oil prices, he said: "The government will not hesitate to take any fiscal measures."
Regarding government finances, Chidambaram said fiscal indicators show states have reduced deficits substantially and decided to carry forward fiscal reforms for halving revenue deficit to 0.7 per cent of GDP in 2005-06 and cut fiscal deficit to 3.1 per cent.
On tax reforms, he asked non-VAT states to 'come on board' and switch over to Value-added Tax regime by January 2006 so that government could start consultations with states for next major reform measure of moving over to a nationwide Goods and Services Tax that will require amendment to Constitution as well.
However, he admitted that Centre's fiscal consolidation process was slower and it would be 'tough' to cut the fiscal deficit below 4.3 per cent and revenue deficit beyond 2.7 per cent in 2005-06 because of high outgo to states and social projects.