Public-private-partnership (PPP) could play a crucial role in infrastructure sector by merging the private sector's skills in project execution with the public sector`s emphasis on public interest, finance minister P Chidambaram said in New Delhi today, on the sidelines of a CII workshop.

He said wasteful expenditure must be cut to promote investment in infrastructure sector.

"If we are able to compress fiscal deficit, we will create space for investment in infrastructure sector," he told reporters on the sidelines of a CII workshop.

This space, he emphasised, has been encroached by inefficient, outdated, "rent-seeking and wasteful programmes" financed through fiscal deficit. "We must resist temptation to follow the route of fiscal deficit for funding projects," he said.

There was no room for wasteful and high-sounding programmes through public funding, he stated and emphasised that the fiscal deficit targets would be met.

He, however, ruled out zero per cent fiscal deficit, saying that the government would allow a fiscal deficit of up to three per cent of GDP to meet investment targets.