Finance Minister Pranab Mukherjee declared on Tuesday that the government was close to victory on two fronts: inflation and fiscal deficit.
Aided by buoyant tax revenues, healthy disinvestment receipts and telecom spectrum revenues, the government is confident. The key question mark is on interest rates, which could well cool. if the outlook stays.
"I hope that annualised inflation would be around 6 per cent," Mukherjee told the annual economic editors conference.
He added that better revenues on key fronts will "help us meet our fiscal targets for the current year."
The government has targeted a fiscal deficit — a measure representing the extent to which it borrows to fund its expenses — of 5.5 per cent in 2010-11 and 4.8 per cent next year.
"Total revenue receipt has increased by 85 per cent as compared to last year, mainly on account of the bonanza from telecom spectrum auctions and robust growth in excise and customs duty receipts," he said.
He also stuck to the 8.5 per cent GDP growth projection for 2010-11 and said a 9 per cent expansion appeared achievable.
Inflation remains a cause for concern as policymakers grapple for options to cool prices without hurting growth.
"On the whole, notwithstanding continued concerns on inflation, the macroeconomic environment, both domestic and on the external front, is far more comforting at present than last year," he said.
He ruled out any plan to impose restrictions on foreign capital inflows. Foreign institutional investors (FIIs) have pumped in nearly $25 billion so far this year. "At this time I am not thinking of putting any cap on the FIIs because I know that if I have $45-50 billion inflow from FIIs, it will be insurance towards my current account deficit," Mukherjee said.
The record surge in capital inflows has strengthened the rupee, which has hurt export competitiveness.
"We have faced similar situations in the past and have overcome it without taking recourse to some of the more stringent policy measures," he said.
The RBI, he said, was keeping a close watch on rupee's movement.