The interim budget announced on February 16th by the finance minister the Pranab Mukherjee projected the fiscal deficit for the ongoing fiscal to be 6% of the GDP against the earlier set target of 2.5% of the GDP.

Fiscal deficit is a situation when the government expenditure exceeds its revenues.

The fiscal deficit is expected to rise because the government spending would rise in the coming times in order to support the economy from overcoming the recession. The government said that the public expenditure would increase to Rs 9.53 trillion in the next fiscal. However no tax cut policy is adopted by the government as yet. The government expects the fiscal deficit to be around 5.5% of the GDP by March 2010.

The rising fiscal deficit is a reason of concern says some of the industry experts. However Mr Mukherjee said that increased spending to revive the economy is more important now than worrying about the deficit.

A Mumbai based economist at Goldman Sachs Group Inc., Tushar Poddar said, "A rise in the budget deficit, given the significant negative shock faced by the economy, is warranted. In the medium-term plan the deficit must be brought down when more normal conditions prevail."

The interim budget did not satisfy the Indian industry. Senior Vice-President at Kim Eng Securities, Jigar Shah said, "It did not contain policy response despite the challenging economic situation."

A chief economist of Bank of Baroda in Mumbai, Rupa Rege Nitsure, said that it was "political budget" which did "not give much confidence on how it will help revive growth"

Recently the government had announced two fiscal stimulus packages in order to boost the economy. Finance Minister said, "Expenditure may have to be increased substantially if we are to give the economy the stimulus it needs to cope with the global recession."

"There may be a need to consider additional fiscal measures when the budget is presented by the new government," he added.