New Delhi: Sounding alarm bells that the Common Minimum Programme (CMP) of the Government is a recipe for higher fiscal deficit, economists have asked Finance Minister P Chidambaram to take stringent measures to cut subsidies and strive to broaden the tax base in the Budget for 2004-05.

Responding to a questionnaire sent by PTI, economists from across the country have demanded removal of tax exemptions and incentives as they distorted the tax structure.

"The budget deficit is likely to widen with the focus on the hike in spending on rural areas and infrastructure in line with the CMP," CRISIL managing director R Ravimohan said.

To check fiscal deficit, ICRA managing director P K Chaudhury said, "there should be efforts to widen the tax base, improve tax administration and reduce non-plan expenditure through reduction in subsidies."

Economist Ram Upendra Das of Delhi-based economic think-tank RIS said Government should create a policy environment to encourage private investment in social sectors on a selective basis.

"Fiscal consolidation requires cutting food, fertiliser and petroleum subsidies. However, the delivery modes of subsidy may be re-oriented so as to make them reach the poor," ICRA said.

While apprehending that subsidies may remain untouched in the Budget, Crisil said, "There is a case for targeting them to improve their effectiveness".

Emphasising on improving tax administration, Mumbai-based economist S Mahender said, "increase in Tax-GDP (Gross Domestic Product) ratio should be the major objective of Budget".