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% 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% of GDP from 3.3%, amid pressure for additional stimulus measures.
The officials asked not to be identified as they have not been authorized to discuss the matter with media.
A Finance Ministry spokesman did not immediately respond to requests for comment.
Tax collections could fall by as much as 1 trillion rupees ($14 billion), or 4% 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 electricity producer NTPC, state insurer General Insurance Corp and construction finance company HUDCO could be deferred, as market sentiment has weakened.
Two government advisers said they have also urged the Prime Minister Narendra 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.