New Delhi: India is likely to miss its fiscal deficit target for the current financial year, despite receiving an additional dividend from the central bank, five government officials and advisers said, as tax collections have sunk amid a sharp slowdown.
With economic growth falling to a six-year low of 5 per cent in the April-June quarter, the sources said the government could toward the end of 2019 be forced to raise the fiscal deficit target to 3.5 per cent of GDP from 3.3 per cent, amid pressure for additional stimulus measures.
The officials asked not to be identified. A Finance Ministry spokesman did not immediately respond to requests for comment.
Tax collections could fall by as much as Rs 1 lakh crore, or 4 per cent of $344 billion annual target, two of the officials said, noting that sharp shortfalls are expected both in goods and services tax (GST) and income tax collections.
“Overshooting the fiscal deficit target is inevitable this year as the economic slowdown has hit government revenue,” a senior adviser said, adding the deficit would rise unless the government resorts to hefty spending cuts.
Separately, a Finance Ministry official said plans to sell minority stakes in some state-run entities, including NTPC, GIC and Hudco could be deferred, as the market sentiment has weakened.
Two government advisers said they have also urged the government to defer the fiscal target to tackle the economic slowdown and outline stimulus steps to help the hard hit sectors such as autos and textiles.
Private economists have revised growth forecasts to as low as 5.8 per cent for 2019-20, one percentage point lower than the prior year, saying the slowdown could persist for two-three years while much-needed cyclical as well as structural reforms are put in place.
Another government adviser said despite receiving a bonanza of around $8 billion in extra dividends from the central bank, the fiscal deficit would rise as nominal GDP growth has fallen well below the budget estimate. — Reuters...