There is a possibility of a cut in expenditure to contain fiscal deficit, chief economic advisor Raghuram Rajan said on Wednesday.
"What I am saying is there is a possibility (of expenditure cut)," he said.
When asked whether the expenditure cut will be harsh, Rajan said: "No expenditure cut takes place painlessly."
He was addressing a press conference after presentation of the pre-Budget Economic Survey 2012-13.
Finance minister P Chidambaram had indicated that he would restrict fiscal deficit for the current year at 5.3% and bring it down to 4.8% in 2013-14.
Rajan said the finance ministry will look at curtailing allocation for ministries, which could not fully utilise the earmarked funds.
"In some situations because of the rapid increase in expenditure or at least the budgeted expenditure of the past years, we have not been able to spend that much or spent as carefully as we might have wanted. So, there is a possibility of shrinking allocation in those areas," he said.
The government is scrutinising the efficacy of every expenditure with a view to streamline public finances, Rajan said, adding that there was a need to move away from distortionary spending.
"As far as fiscal consolidation goes, we have to look at every expenditure that the government is undertaking and see whether you need expenditure of that size and can you do with less. Every expenditure has to be examined very carefully to see if we need it," he said.
The finance ministry had earlier asked all departments to cut down on wasteful expenditure like holding seminars at five-star hotels.
It announced a 10% cut in non-plan expenditure in the current fiscal as part of austerity measures aimed at containing the rising fiscal deficit.
The directive from the expenditure department to all ministries and departments also imposed curbs on foreign travel.
It had also directed the size of delegations and the duration of visits be kept to "absolute minimum".