The Centre, he said, has done somewhat of a rescue act for the funds strapped state governments. Nine of them mostly in the North-East and North-West part of the country, were given the benefit when the Centre advanced the date of devolution of states' share in revenues to April this year when usually it is done only in June every year.

This has been basically done to help the state governments meet fifth pay commission obligations. Sinha said that MoU has been signed with nine state governments in this regard. He, however, did not elaborate on the quantum of increase and its likely impact on the fiscal deficit.

Sounding an upbeat note on the economy, both at the press conference and earlier at the meeting convened by the Madras Chamber of Commerce and Industry(MCCI), Sinha said that the feel good factor has returned to the economy and it is showing robust signs of revival.

The industrial production has improved from 3.5 per cent to seven per cent in May 1999 while revenue collections have shown a significant improvement with indirect tax mobilisation growing by 20.94 per cent in the first quarter of the current fiscal. Inflation rate which was 2.03 per cent for the week ended June 26 has declined further to touch 1.83 per cent for the week ended July 3, 1999, an all time low.

He also said that food grain production has been a record 203 million tonnes and the forex reserves were over $ 33 billion. Exports have also picked up and has registered a growth of 12 per cent for the month of May. Considering all these factors, Sinha said that he was expecting the economy to grow at seven per cent this year.

He once again emphasised that the government has no plans for a Kargil cess at the moment. ``We have decided to keep a close watch on the economy. We will applystrictest discipline so that expenditure is kept within budgeted amount. Depending on the buoyancy in revenue collection we will have to decide whether there is any need for fiscal measures,'' Sinha said. He also added ``it is not our intention to stop the economic revival at its tracks by imposing a cess.''

He said that a major challenge facing the government was curbing fiscal deficit which has reached unsustainable levels on account of government living beyond its means. This, he said, has resulted in an high level of internal debt, forty per cent of which is used for paying interest.