Tax receipts have been much lower than targetted, a fallout of lower than expected economic growth and decline in high tariff imports. The Kar Vivadh Samadhan Scheme has also collected around Rs 2000 crore, significantly lower than the VDIS collection of Rs 10,000 crore, ICICI Securities said in its weekly report.

On the other hand, India's external debt is projected to touch $ 98.4 billion (around Rs 4,17,708 crore) by March 1999, an increase of $ 4 billion from the level reported in March 1998. The white paper on external debt by the Finance Ministry says the rise in the external debt is due to higher debt-creating inflows like the $ 4.2 billion Resurgent India Bonds and $ 500-700 millioninflows through foreign currency non-resident deposits.

The only way to exit the trap was to have a sustained period of primary surplus (higher non-debt receipts over non-debt expenditure), I-Sec said estimating that the primary deficit this year would cross Rs 32,000 crore against a target of Rs 16,025 crore.

According to I-Sec, the economy was expected to continue on a slow note over the slack season and growth in tax receipts would remain low. Given the inflexible nature of the expenditure side of the budget, the only option for the government seemed to be higher disinvestment receipts, I-Sec added.

A large portion of the expenditure side of the budget is inflexible, given that of the total expenditure of Rs 268,000 crore in fiscal 1998-99, Rs 75,000 crore was spent on interest payments, over Rs 41,000 crore on defence, Rs 50,000 crore on salaries and over Rs 22,000 crore on subsidies, I-Sec stated.

I-Sec felt that while the first item was an obligation that could not be reduced, the reduction insalary expenses or defence would be politically a difficult act. Of the remaining Rs 80,000 crore (after interest, defence, salaries and subsidies) Rs 58,000 crore was spent on capital expenditure and the remaining on revenue expenditure. ``Conventional wisdom dictates a fiscal expansion to spur economic growth. However, this appears an impossible task,'' I-Sec added in its report.