According to monthly economic report released by the finance ministry, out of Rs 1,58,995 crore (Rs 1589.95 billion) estimated interest payments for 2007-08, the government has already paid 56.6 per cent in the first seven months.

The government had paid Rs 74,150 crore (Rs 741.50 billion) on account of interest a year ago.

It has permitted the Reserve Bank to raise up to Rs 2,50,000 crore (Rs 2500 billion) during the current fiscal under market stabilisation scheme (MSS) to suck out excess liquidity from the economy.

However, due to rise in interest rates, government has been forced to pay higher interest on borrowings. The yield on 10-year bonds has gone up to 8 per cent.

Analysts said rise in interest payments and spurt in subsidy bill could have a bearing on fiscal deficit, which is projected to come down to 3.3 per cent of GDP this fiscal.

During April-October, the subsidy bill has gone up by as much as Rs 8,122 crore (Rs 81.22 billion) and stood at Rs 42,491 crore (Rs 424.91 billion) on October 30 as against Rs 34,369 crore (Rs 343.69 billion) a year ago.

Apart from that, oil bonds amounting to Rs 29,000 crore (Rs 290 billion) are being released to oil marketing public sector companies for selling subsidised fuel during the fiscal. However, its impact would not be shown in the budget.

The pension bill for the first seven months has also gone up by 12.3 per cent and stood at Rs 12,605 crore (Rs 126.05 billion) on October 30, a statement said.

Finance Minister P Chidambaram had earmarked in the last budget Rs 50,987 crore (Rs 509.87 billion) for subsidies in 2007-08. However, he has maintained that despite an increase in expenditure on social welfare projects, government would be able to meet the fiscal deficit target.

The fiscal deficit stood at Rs 82,256 crore (Rs 822.56 billion) on October 30 this year, declining by 5.6 per cent from a year ago, the statement said. The government has projected to contain fiscal deficit at Rs 1,50,948 crore (Rs 1509.48 billion) in 2007-08.