New Delhi, Dec. 27: Finance minister P. Chidambaram today hinted that the government might have to take tough decisions to contain expenditure and improve the fiscal situation.
At the meeting of the National Development Council, he said it was necessary to contain the fiscal deficit by augmenting resources and controlling expenditure.
He said some measures "might cause immediate pain" but it was necessary to bring down the fiscal deficit to 3 per cent in the next three years.
The fiscal deficit is projected at 5.3 per cent of GDP (gross domestic product) in 2012-13.
The government has struggled to contain the fiscal deficit, which has swelled because of oil subsidies and sluggish tax revenues, prompting global rating agencies to warn of a credit downgrade.
It recently hiked diesel prices by over Rs 5 per litre and capped the number of subsidised LPG cylinders to six per family in a year to reduce the subsidy burden.
"Steps were also being taken to contain the current account deficit (CAD)," said the minister.
The current account deficit, or the difference between imports and exports, now stands at 4.2 per cent of GDP, which the government wants to pare to 4 per cent.
A higher trade deficit contributes to the falling value of the rupee against the dollar.
Chidambaram also underlined the need to control gold import, which has added $64 billion to the widening trade account deficit.
Chidambaram lauded the states for containing the fiscal deficit to 2.1 per cent of GDP and for generating a revenue surplus of 0.75 per cent, said a statement released by the finance ministry.
The finance minister also expressed optimism that the economy would continue to grow at a healthy rate despite the global economic troubles.