The Prime Minister's Economic Advisory Council warned of serious fiscal risks from growing off-Budget liabilities, which are estimated at 5 per cent of gross domestic product in 2008-09. This would be much more the budgeted central government deficit of 2.5 per cent of GDP for the year.

In addition, the fiscal deficit of the states is expected to be 3 per cent, higher than the earlier estimate of 2.1 per cent, the council said.

In effect, the combined gross fiscal deficit of the Centre and the states would be 10.5 per cent, EAC member M Govinda Rao said on the sidelines of the release of the council's economic outlook for 2008-09.

The off-Budget liabilities on account of fertiliser and food are estimated at over 2 per cent of GDP.

Another one per cent is expected due to unbudgeted liabilities on account of the farm loan waiver, the employment guarantee scheme and the pay commission award.