India is likely to miss its fiscal deficit target of 3.3 per cent of gross domestic product for the current financial year by 30-50 basis points, two sources said, due to the sharp slowdown in the economy that has severely crimped tax collection goals.
The government is now trying to cap the fiscal deficit for 2019/20 at 3.8 per cent of GDP from the target set during the budget presented in July, the two officials told Reuters.
The government is also likely to defer lowering the fiscal deficit to 3 per cent of GDP by a year to 2021/22, the same two officials said.
The officials did not want to be named as the details and the proposals have not been made public.
In trying to revive economic growth from its 5 per cent level in the April-June quarter, the government cut corporate tax that was expected to result in revenue loss of Rs 1.5 lakh crore ($21 billion).
India's economy grew at its weakest pace since 2013 between April and June as consumer demand and government spending slowed amid global trade frictions.
Finance Minister Nirmala Sitharaman has said she will relook the fiscal calculations before the next budget in February before announcing the fiscal deficit target for the year.
A spokesman for the finance ministry did not immediately respond to requests for comment.
The government has yet to decide if it wants to announce more fiscal measures to boost growth or leave them to be unveiled at next year's budget in February, the first official said.
"Whether we announce more measures or not, we are trying to cap the fiscal deficit slippage at 3.8 per cent for the year," the official said.
Direct tax collections growth from April through to October 15 was around 3.5 per cent, way below the over 17 per cent tax target growth the government had budgeted for the year, a third official said.
Meanwhile, the nationwide goods and services tax collection in September fell to a 19-month low.
"We expect the government to miss the tax revenue target by Rs 2 lakh crore in the current year," the second official said.
The official said the government could borrow more than Rs 1 lakh crore from the term deposits it had accumulated from its schemes for small savers to fund some expenditure targets for 2019-20, but despite that it would have a wider deficit.
The government's revenue collection problems have not been solved even after the Reserve Bank of India pitched in a record dividend of Rs 1.48 lakh crore for the current year.