India's fiscal deficit for the financial year to end-March will be below its budget target due to expected robust tax receipts, Finance Minister Palaniappan Chidambaram said on Tuesday.

Data released on Monday, showed a sharp rise in the fiscal deficit to 732.01 billion rupees ($17 billion), or 54.9 percent of the annual target, two months into the 2008/09 fiscal year.

But Chidambaram said an improvement would come later. The government allocates the bulk of its expenditure early in each financial year, but tax payments tend to pick up later on.

"At the end of the year, we will do better than the budget estimate," Chidambaram told reporters, when asked to comment on the deficit figure, for which he set an annual target of 1.33 trillion rupees in February's budget.

India aims to cut the fiscal deficit to 2.5 percent of gross domestic product (GDP) in the current fiscal year, from 2.8 percent in the previous year.

The ruling Congress party-led coalition, which subsidises food for the poor and fuel sales for all, faces a soaring bill due to the unrelenting rise in the price of crude oil and higher prices of other commodities.

It has also written off the debts of 40 million farmers, with an eye on general elections less than a year away, and faces a sharp increase in pay for government workers.

The government has trimmed duties on imported fuel, edible oils and other food items to help tame inflation, now at a 13-year high of nearly 11.5 percent, denying the finance minister much-needed revenue.

Chidambaram said he was confident robust economic growth would raise tax payments further.

"India has recorded splendid growth in the last few years. Our tax to GDP ratio has gone up from 9.2 percent in 2003/04 to 12.8 percent in 2007/08, and it is expected to be more than 13 percent this fiscal," he said.