The 2010/11 budget includes a strong emphasis on fiscal consolidation. It outlines a schedule of progressive deficit reduction, according to which the budget shortfall is targeted to narrow to 5.5% of GDP in 2010/11, 4.8% in 2011/12 and 4.1% of GDP in 2012/13. The improvement in the fiscal position will be partly a function of faster economic growth. The other main factors contributing to the shrinking of the deficit until 2012/13 will be the proceeds from the government's divestment of shares in state-owned firms and auctions of third-generation (3G) telecoms licences, together with reforms to the fuel-subsidy programme. Moreover, for the first time ever the budget includes an explicit target for a reduction in the ratio of public debt to GDP. We forecast that the government will achieve its budget deficit target for 2010/11. The Ministry of Finance has said that the government stands a good chance of beating the target, given the success of the 3G auction and the strength of tax revenue in the first quarter of 2010/11. Although we acknowledge that this is possible, we believe it more likely that the government will use any unexpected fiscal flexibility to fund its myriad welfare schemes. The budget deficit will shrink further in 2011/12, but at 5.1% of GDP it will miss the government's target by a narrow margin. Public expenditure is expected to continue to rise rapidly in the remainder of the forecast period, as the government has announced large increases in spending on health, education and rural infrastructure. However, rapid economic growth will allow the budget deficit to continue to fall steadily as a percentage of GDP during 2011-15.