The government, which targeted cutting its fiscal deficit to 2.5 per cent of the country's gross domestic product (GDP) could end up with a deficit of over 5 per cent in the year ending March 2009, chief economic adviser at the finance ministry, Arvind Virmani, said today.
 
The fiscal deficit for the current fiscal year will jump to at least 5 per cent of GDP following the economy stimulus package announced to spur demand in a rapidly slowing economy, which, he said amounts to ''2 per cent of the fiscal deficit expansion.''

The union budget aimed at cutting the fiscal deficit to 2.5 per cent of GDP in the year ending March 2009, as against 3 per cent targeted under the Fiscal Responsibility and Budget Management Act.

The government's borrowing programme has already touched 87.8 per cent of the annual target and the recently approved additional expenditure of Rs42,480 crore, including the Rs20,000 crore fiscal stimulus package would take the fiscal deficit beyond four per cent.

Added to this, the government has also reduced the excise duty by 4 per cent across all products.

The government has already sought additional funds of Rs1,47,000 crore in its first and second batch of supplementary demands for grants. This would raise public spending to Rs9,00,000 crore from Rs7,50,000 crore envisaged in the budget, he said.

Virmani said inflation is fully under control and is expected to come down to 5 per cent levels by the end of the current fiscal.