The government on Wednesday said that it has no option but to eliminate tax incentives and step up action against tax evaders to bridge resource gap and reduce budgetary deficit.

"The share of direct taxes in the overall tax-GDP ratio has to be necessarily increased. The only option left on this front is to eliminate incentives and step up deterrence," Revenue Secretary P V Bhide said while speaking at a Ficci seminar.

The government's fiscal deficit has come under pressure on account of rising food and fertiliser subsidy bill, farm debt waiver scheme and additional outgo towards national employment guarantee programme.

"The need for reducing high fiscal deficit, which initially arose to prevent crowding out investment, has become all the more important to control present inflation, which is not only due to factors within the country but also on account of global environment," Bhide said.

Inflation has soared to a 13-year high of 12.44 per cent despite host of fiscal and monetary steps taken by the Central government and the Reserve Bank of India.

Pointing out that it was difficult to reduce fiscal deficit in the short-run by cutting expenditure, Bhide said,

the only option left with the government is to raise additional resources through direct taxes, as indirect tax like customs are being reduced to check inflation and also honour international commitments.

India's total tax-GDP ratio, which was at 17.5 per cent, needs to be stepped up to mobilise additional resources for reducing fiscal deficit and funding social sector programmes of the government.