Managing expenditure is an 'unfinished task' for the government in its efforts to rein in fiscal and revenue deficits, the Economic Survey said on Tuesday.

Within overall expenditure, subsidies are yet to be better targeted and expected to increase by Rs 5,200 crore (Rs 52 billion) this fiscal without factoring in bonds issued to oil marketing companies and Food Corporation of India, the Survey tabled in Parliament said.

It is mainly enhanced revenues that led to improvement in fiscal consolidation at both the Centre and state levels with the latter performing better in recent years, the Survey said.

"The sustained improvement in the fiscal position of the Centre and the states in the post-FRBM era has been attained mostly through enhanced revenues. Success in containing or managing expenditure has been limited," the Survey said.

Expenditure management, particularly careful monitoring of outcomes of outlays and targeting of subsidies remains an unfinished task, the Survey said adding considerable downward risks remain from potential pressures on the expenditure front.

On expenditure front at the Centre's level, the ruling UPA's National Common Minimum Programme has pledged to raise the level of public spending in education to at least six per cent of GDP, and on health to at least 2-3 per cent of GDP in a phased manner among other outlays.

With about 86 per cent of the revenue receipts in 2005-06 appropriated by committed expenditure like interest payments, subsidies, pay, pensions and defence, expenditure re-prioritisation needs to be calibrated through higher allocation of incremental revenue towards NCMP objectives, the survey said.

Major subsidies are given by the Centre on food, fertiliser and petroleum. These grew from Rs 40,716 crore (Rs 407.16 billion) in 2002-03 to Rs 44,220 crore (Rs 442.2 billion) in 2005-06 and were budgeted at Rs 44,792 crore (Rs 447.92 billion) in 2006-07.

Overall, progress in fiscal consolidation has been satisfactory after an act on the road-map of cutting fiscal and revenue deficits, called FRBM Act, was passed by Parliament in 2003, the Survey said.

The fiscal deficit of the Centre as a proportion of GDP has come down from 6.2 per cent in 2001-02 to 3.8 per cent this fiscal as per budget estimates.

The fiscal situation of the states also showed considerable improvement, which in fact was even better relative to the performance of the Centre. As proportion of GDP, the fiscal deficit of the states declined by 1.9 percentage point post-FRBM Act from 4.5 per cent in 2003-04 to 2.6 per cent in 2006-07.

Also, revenue deficit on an aggregate basis is budgeted to get eliminated in 2006-07, two years ahead of the target.

The Survey attributed states' performance on fiscal consolidation front to a strong incentive-based restructuring scheme of fiscal transfers, as proposed by the Twelfth Financial Commission.

Economic Survey 2006-07: Complete Coverage