Thursday, June 9 2005 16:22 Hrs (IST) - World Time -

New Delhi: Finance Ministry today (Jun 9, 2005) exuded confidence of a high growth prospect and lower fiscal deficit during 2005-06 but indicated that there was no reason to be complacent on the price front.

Finance Ministry is likely to target a higher tax collection and a squeeze in expenditure to cut fiscal deficit, chief economic advisor Ashok Lahiri said referring to Finance Minister P Chidambaram's recent statement on lower deficit and borrowing this year (2005).

Chidambaram had made it clear that Government will cut deficit to less than the 4.1 per cent of 2004-05. He also stated that borrowing will also subsequently be lower than the budgeted Rs 1,00,836 crore both by "design and compulsion".

On the growth prospects, Lahiri said "so far so good." The Government may consider policy changes so as to boost the manufacturing sector in order to sustain 7 per cent growth.

Though Finance Ministry and Reserve Bank Of India (RBI) expect Gross Domestic Product (GDP) to grow by 7 per cent this fiscal compared to 6.9 per cent in 2004-05, the Prime Minister's economic advisory council recently raised doubts over the growth prospects and forecast 6.7 per cent GDP growth due to a lower 7 per cent growth in manufacturing and 2.2 per cent growth in farm output.

The panel had proposed slew of policy interventions to boost manufacturing sector and attain 7.2 per cent growth in the economy. Lahiri declined to comment on what policy intervention Government was considering.

On agriculture growth, he said that there were conflicting reports on monsoon. A normal to excess monsoon is crucial for India's farm sector and the overall GDP growth.

He also indicated that Government and RBI were keeping a close watch on inflation.