Union Finance Minister P Chidambaram on Monday announced a plan to halve India's fiscal deficit to 3 per cent through five-year (2012-17) plan; however, he declined to detail any concrete steps to achieve the ambitious target.

Many believe that the announcement is a part of the government's efforts to convince the Reserve Bank of India (RBI) to slash interest rates. The central bank is all set to announce monetary policy review today, Oct. 30.

Last fiscal, the country's fiscal deficit was recoded at 5.9 per cent of gross domestic product (GDP), and it is expected to jump more than 6 per cent by the end of current fiscal.

The union finance ministry is banking on a slew of policy measures like goods & services tax, the direct taxes code, divestments, direct transfer of subsidies via the Aadhar platform to arrest subsidy leakages to achieve the 3 per cent mark.

But, Chidambaram did not detail any plan to reduce subsidies on food, fertilisers and fuel, which account for a considerable portion of the escalating deficit.

Commenting on the topic, an analyst said, "That's because it's too dangerous politically as the country goes into election mode next year."

A majority of economists expect the RBI to announce a cut in cash reserve ratio (CRR). A recent poll found 36 per cent of economists expecting the central bank to slash CRR by 25 basis points, and 29 per cent expecting no change, while 7 per cent expecting a cut of 50 bps.

But as far as key interest rate is concerned, 57 per cent do not expect any big change by the central bank, while 39 per cent see a cut of 25 bps and just 4 per cent expect a cut of 50 bps.