Ahead of the Budget, the Expenditure Management Commission, headed by Bimal Jalan, has recommended to the government that it cut fiscal deficit to 3.6% of the GDP during 2015-16.
"The (interim) report has been submitted on January 17. We have made recommendation on fiscal deficit as per the FRBM Act. So for the next fiscal we have recommended fiscal deficit target of 3.6%," former RBI Governor Jalan told PTI.
"So that target is as per the terms of reference...We have recommended rationalisation of government welfare schemes," he said.
It is also to recommend ways to achieve a reduction in financial costs through better cash management, greater use of information technology and improved financial reporting systems.
As per the terms of reference that have been announced, the Commission reviewed the major areas of central government expenditure and suggested ways to create fiscal space required to meet developmental expenditure needs.
It was also entrusted with designing a framework to improve operational efficiency of expenditures through focus on utilisation, targets and outcomes.
Earlier this week, Finance Minister Arun Jaitley had said there was a need to rationalise all subsidies and ensure stability in policies to attract investment and drive growth.
The government is expected to incorporate the suggestions of the Expenditure Finance Commission in the Budget, 2015-16.
The government's subsidy bill towards oil, fertilisers runs into lakhs of crores of rupees.
The subsidy bill on food, petroleum and fertilisers is estimated at Rs 2,51,397.25 crore for 2014-15, up 2.47% over the previous fiscal. It was Rs 2,45,451.50 crore in the revised estimates for 2013-14.
The higher subsidy bill in 2014-15 is on account of increased allocation for fertiliser sector. The government has pegged total fertiliser subsidy higher at Rs 72,970.30 crore for full fiscal than Rs 67,970 crore proposed in the interim budget.
Subsidy for imported urea is pegged at Rs 12,300 crore, domestic urea is Rs 36,000 crore and sale of de-controlled fertilisers (like phosphatic & potassic fertilisers) is Rs 24,670.30 crore.
For food subsidy, the government has allocated Rs 1,15,000 crore, which include a provision of Rs 88,500 crore for implementation of National Food Security Act.
The minister also underlined the need for stability in tax and other policies to make India an attractive place for investment.