India plans to cut its budget deficit this fiscal year to 6.3% of GDP, or half a percentage point lower than originally targeted, as revenues improve, according to those familiar with the matter.
The target reset is backed by expectations of robust tax collections in the coming months and the achievement of the asset sales target, said those who asked not to be named as the estimates are discussed internally. The government will maintain its spending targets with a focus on capital spending, they said.
The median of a Bloomberg survey of economists predicts an annual deficit of 6.7%, with estimates ranging between -6.1% and -10.8%.
A Treasury Department spokesman was not immediately available for comment.
Indirect tax revenues, particularly collections from a statewide consumption tax, have exceeded a minimum monthly target of rupees 1 trillion ($ 13.5 billion) in recent months, preventing the government from borrowing more. This signals that the recovery is picking up speed in the economy, where restrictions put in place to contain the second wave of the pandemic have been almost completely lifted.
The economy is expected to grow 10% in the year through March, said people, who tend to be more optimistic about the scenario. The Reserve Bank of India and the International Monetary Fund expect an expansion of 9.5% over the reporting period.
Plans to sell assets, including an initial sale of stake in insurance giant Life Insurance Corp. from India by March are in progress, people said.
The government, which is meeting its goal of raising rupees 1.75 trillion this year from sales of state assets, is key to narrowing the budget gap. It has missed its budget deficit targets for the past four years, with the deficit hitting a record 9.3% of GDP in March 2021.
The budget deficit could potentially be in the 7.2% to 7.5% range as the revenue assumptions according to Care Ratings Ltd. are difficult to achieve. “We still have six months to put the divestment story right. Is that going to happen, is that a big question? “The rating company said in a statement on Tuesday.
This story was posted from a news agency feed with no changes to the text. Only the heading was changed.
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