The national development council headed by Prime Minister Manmohan Singh is slated to meet on June 27-28 to revise the Tenth Plan target and take corrective steps in various sectors including fiscal policy, official sources told PTI.

The NDC is likely to impress on the finance ministry to stick to the fiscal responsibility and budget management targets of wiping out revenue deficit by 2008-09 and bring down fiscal deficit to 3 per cent.

It would also discuss state finances, which could be improved if tax collections are improved and debt burden is reduced, sources said.

To meet the twin objective of adhering to FRBM schedule and improving state finances, the mid-term appraisal of the Tenth Plan has set a target of 22 per cent growth in tax collections annually during 2004-09.

The MTA has suggested setting an ambitious target of increasing the Tax-GDP ratio from 10.6 per cent in 2005-06 to 11.1 per cent in 2006-07 and further up to 12.6 per cent in 2007-08 and finally to 13.7 per cent in 2008-09.

"The central budget will have to walk the tightrope in the coming years," the MTA said, while appreciating finance ministry's efforts to meet the Tenth Plan target in revenue collection through introduction of new taxes and cesses, bringing in more services under tax net and improving compliance.

The NDC may be critical on fiscal deficit calculation taking into account the higher outgo following implementation of 12th finance commission recommendations, absence of divestment proceeds and lower interest receipts from loans given to states.

"The fiscal deficit targets of the FRBM may indeed turn out to be a more binding constraint than the revenue deficit in so far as the size of the Plan is concerned," the MTA said.

Considering this, the NDC may suggest changes in budgetary classification of central assistance to states. At present, the Central support to states are shown in the budget either in the head of 'additional central assistance' or through centrally sponsored schemes.

Since both are in the form of grants, they are treated as revenue expenditure. By changing the classification, the government's revenue deficit would come down substantially.