The finance minister said at the 93rd annual general meeting of the PHD Chambers of Commerce and Industry that the fiscal deficit was likely to overshoot 5.6 per cent. Direct-tax collections are on target but indirect-tax inflows are falling short, he said.

Sinha's reply was in response to Phdcci president OP Vaish's observation that the fiscal position was under pressure with the deficit likely to cross 7 per cent. Vaish also felt that taking into account the states' fiscal deficit, the figure was likely to be 11 per cent.

Sinha said that if he had the margin to take the deficit to 7 per cent he would have no cause for worry and could comfortably ask his colleagues in other ministries to splurge without any worry. State governments and other ministries have been told that no excessallocations can be made over and above the budgeted amounts, he said. Sinha stated that demands for grants have been reined in at Rs 1,300 crore.

Indirect-tax collections are low as excise mopup is much below estimates with the manufacturing sector facing a slowdown, Sinha said. Customs revenues have also been hit on account of low oil prices in the international market, he said. He drew attention to the fact that the fiscal deficit for all of the eighties and early nineties had been in excess of 6 per cent.

Pressure on the fiscal deficit is mounting as savings are flowing into government-guaranteed bonds in greater volume, he said. This problem was not before the government when the capital market was doing well some years ago, Sinha said. The only way in which the capital market can be revived is by wooing small investors back into the market, he said.

The minister urged the industry to come forward and pay what is due to the government. "The centre will not like to increase rates as industry is goingthrough a negative phase," he said. The finance minister said that in the budget for the next fiscal, indirect-tax rates will be further rationalised and simplified. He appealed that while there are some inadequacies in the input-output norms for many sector, industry should not take advantage of this. "Only when industry cooperates can the government help reciprocally," Sinha said.

Speaking about the centre's inability to get any major legislation passed in the current session of parliament, Sinha that it is unfortunate that a small minority has been able to stall the legislative process. He said that while there is a broad consensus on the issue of reform introduced in 1991, there could be differences on certain policy details. "It is unfortunate that the sentinels of the jurassic-park era are unable to reconcile to demands of the modern world," he said.

There is an opinion that the worst is now over, the global growth rate according to the IMF has been pegged at 2.2 per cent, he said. The second halfof the fiscal is likely to be brighter than the first half and 1999 will be better than 1998, Sinha said.