New Delhi: India is likely to miss its fiscal deficit target for the current fiscal, despite receiving additional dividend from the RBI, five government officials said, as tax collections have sunk amid sharp slowdown.
With economic growth falling to a six-year low of 5% in April-June quarter, the government may be forced to raise fiscal deficit target to 3.5% of GDP from 3.3% towards 2019-end, amid pressure for additional stimulus measures.
The officials who did not want to be named said tax collections may dwindle by 1 trillion rupees ($14 billion), or 4% of $344 billion annual target. Two officials indicated that sharp shortfalls are expected 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 may rise further unless the government resorts to hefty spending cuts.
Another finance ministry official said plans to sell minority stakes in some state-run entities like NTPC, General Insurance Corp and HUDCO could be deferred, as market sentiment has weakened.
Two government advisers said they have urged Modi-led 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 5.8% for 2019/20, one per cent lower than the previous year, saying the slowdown could persist for two or three years.