High fiscal deficit deterring investment: PM

New Delhi - Prime Minister Manmohan Singh Thursday called for more discipline in government spending, saying India's fiscal deficit is “too high” and it is acting as a deterrent to domestic and foreign investments.

At his first meeting with the 77-member council of ministers at his official residence here after the cabinet reshuffle Oct 28, the prime minister gave a macro-economic picture of the world that is affecting India's economy and shared a few thoughts on the agenda of the government.

"We are now also experiencing the fallout of difficult economic conditions worldwide. As a result, our growth has decelerated, our exports have fallen and our fiscal deficits are expanding.

"Of particular concern is the fiscal deficit, which is too high and acts as a deterrent for domestic and foreign investment. These issues have a rippling effect across the economy and on the work of many departments that are represented here," said Singh.

The prime minister's remarks came just two days after Finance Minister P. Chidambaram announced a five-year road map for fiscal consolidation, setting a target of cutting the fiscal deficit to 3 percent by 2016-17 from 5.8 percent recorded in 2011-12.

Although the government in the budget had proposed to bring down fiscal deficit in 2012-13 to 5.1 per cent from 5.8 per cent in the previous financial year, it is expected to shoot up on account of various global and domestic factors.

The finance minister has said the government will try to maximise revenue collection and contain expenditure to restrict fiscal deficit to 5.3 per cent of the gross domestic product for the current financial year.

As per the five-year fiscal consolidation plan, the government targets to bring down the fiscal deficit to 4.8 percent in 2013-14, 4.2 percent in 2014-15, 3.6 percent in 2015-16 and three percent in 2016-17.

The prime minister also drew attention to the growing gap between demand and supply of energy has emerged as a major constraint on the country's development.

"It is a major factor in widening the deficit on current account of our balance of payments as well as the fiscal deficit," he said, adding that a common understanding on these issues and remedial measures are needed to tackle these on a priority basis.

At the same time, the prime minister told his colleagues that there is no need to be gloomy about the country's fiscal situation.

"We can achieve the targets we have set for ourselves, provided we approach the task with courage and with conviction," he said, reminding them that they are "working against the political calendar", meaning general elections are due in 18 months.