New Delhi: Finance Minister Yashwant Sinha on March 1 admitted that he was feeling "guilty" of pegging the fiscal deficit at 5.3 per cent of GDP for next year in the Budget, but said it was sustainable as the balance had been struck between demand and fiscal consolidations to reverse the economic slowdown.

"I personally feel guilty that I could not peg fiscal deficit at a lower level. But an honest attempt has been made to strike a balance between spurring demand and fiscal consolidation," Sinha told FICCI's customary post-budget interactive session with the captains of Indian Industry.

To the demands of the Industry for a five per cent cut in corporate tax, introduction of investment allowance and Minimum Alternate Tax, Sinha said if these measures had been resorted to - the central exchequer would have lost a revenue of Rs 18,000 crore, which would have pushed up the fiscal deficit to an unsustainable level of 7-7.5 per cent of GDP.

"The main challenge in the Budget" Sinha said, "is to strike a balance between fiscal rectitude and slowdown in the economy and that is precisely what I have done."

Sinha said had he given more tax concession to the Industry as demanded by them, the fiscal deficit would have gone up resulting in more borrowing from the market by the government crowding out the private sector investment.

Also, he said this would have put pressure on the interest rate, which is soft now.

He did not agree with the view that five per cent surcharge slapped on personal income tax was too high considering he was trying to mop up only Rs 2,750 crore in the whole budget of over Rs 4,10,000 crore.

Sinha said every year one could not be expected to announce major economic reform measures and this Budget has tried to consolidate the big dose of second generation reforms chalked out in the last budget.

PTI