Sinha says "harsh" fiscal steps needed

"At present 45 per cent of our revenue is going towards meeting interest obligations and if we do not check this, our entire revenue will go for interest payment. That is the danger written large on the wall," Sinha said.

Ahead of the speech, a business leader asked Sinha if the government proposed to impose a tax to meet additional expenditure linked to India’s campaign to defend Kashmir’s Kargil area, where India wound down a two-month-long offensive against guerrilla infiltrators this month.

"As far as the burden of the Kargil conflict on our budget, I will not be able to give any figure at the moment. Right now we are discussing it with the Defence Ministry," Sinha said.

"The month of October will be the right time to assess the burden (of the Kargil conflict) and decide on the additional tax because by that time, we will know our revenue collections for the second quarter (ending September)," Sinha said.

India is expected to have a new government in place by the end of October after mid-term elections spread over September and October. Sinha said excise revenues had grown by 29.5 per cent in the first quarter and customs collections by 12 per cent. The income tax net had also widened with the number of assesses going up, he said.

If revenue collections continued to be buoyant, there will not be a need for an additional tax, Sinha said. India aims to rein in fiscal deficit at 4 per cent of gross domestic product (GDP) in 1999/2000 (April-March) from 4.5 per cent in the previous year.