Finance minister Arun Jaitley on Friday said the fiscal deficit target of 4.1% of GDP for the current fiscal is a "daunting" task and announced the subsidy bill will be reduced progressively.
"As far as the fiscal deficit is concerned, I have already said that it is a daunting challenge.
"I have accepted the figures and I moved on the presumption that the figures given in the Vote-on-Account of the Interim Budget by my predecessor (P Chidambaram) are correct. Therefore, I have maintained those figures in the larger interest of the economy," he said in Lok Sabha.
He was replying to supplementary questions.
Jaitley, who presented his first Budget on July 10, said the government is going to endeavour for more economic activity, better growth and, therefore, higher tax buoyancy.
"That seems to be the strategy at the moment," he said.
Referring to subsidies, Jaitley said keeping in view the importance of "keeping fiscal deficits" under control, the government proposes to bring down major subsidies from 2.2% of GDP in 2013-14 to 2.03% of GDP in the current financial year.
"With active policy measures/reforms of the government to contain fiscal deficit and the quantum of subsidy bill, it is expected that the subsidy will progressively reduce," he said, adding it is proposed to keep the subsidy level at 1.7% and 1.6% of the GDP in 2015-16 and 2016-17.
Jaitley said the government would rationalise subsidies so that the "targeted subsidies reach those who deserve those subsidies the most".
For that purpose, he said the government intends, in the next few days, to constitute an Expenditure Management Commission and management of the subsidy bill of the government will be one of the major tasks of that Commission.
It is expected to give its report by year end.
To a supplementary on providing subsidies or free power supply to farmers, he said a government can spend within its means. If it borrows to spend, the next generation will have to repay the debts. Debts, he said, means more taxes.