Jaitley, who will present his first full-year budget on February 28 for the 2015/16 financial year, said the current level of deficit was unacceptable.
"We have a roadmap to bring it (fiscal deficit) down a little below 3 percent over the next couple of years and then we intend to maintain it," Jaitley said at an event in Davos.
The government is scrambling to contain the fiscal deficit at 4.1 percent of GDP in the fiscal year ending March, after a sharp shortfall in revenue that forced it to rein in spending.
India's fiscal deficit touched 5.25 trillion rupees ($85.09 billion), or 99 percent of the full year's deficit target, in November.
In his budget, Jaitley is expected to announce subsidy cuts while allocating more for infrastructure, reflecting a rightward shift in thinking since Prime Minister Narendra Modi was elected in May.
Falling oil prices have reduced the fuel subsidy bill and the government has roughly halved expenditure growth this fiscal year.
The government's top two economic advisers, Arvind Panagariya and Arvind Subramanian, have both advocated loosening deficit targets to allow public spending on infrastructure to jumpstart economic growth.
India's economy is recovering from its longest slowdown since the 1980s, but demand and investment remain weak.

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