India will struggle to meet its already swollen deficit target this year after a dismal response to this week's auction of mobile phone licences and a battle to sell stakes in state companies, finance ministry officials privately concede.
Global rating agencies have threatened to downgrade India's sovereign credit rating to junk if it fails to put its fiscal house in order.
Analysts said while the disappointing auction would likely not be a deciding factor, it underscored the challenges facing the government in trying to slash the deficit.
Finance minister P Chidambaram said he was still confident of meeting the 5.3% target, although his officials expressed scepticism, saying the poor auction result may have pushed the government's already tough deficit target even further out of reach.
"The task has become more difficult. Some out-of-the-box measures are needed to save the situation," a senior finance ministry official with direct knowledge of the matter told Reuters.
Other finance ministry officials interviewed by Reuters this week gave similar assessments.
The officials declined to be identified as they are not authorised to speak to the media.Seven private economists polled by Reuters said they now expected the fiscal deficit for the year to end-March 2013 to grow to 5.5-6% of GDP. "Slippage is now inevitable. How much slippage happens depends on whether they can actually cut down on any spending area," said Sonal Verma, an economist at Nomura.
The government still has some options to get it closer to its fiscal goal.
It could sell its stakes in private firms such as Axis Bank, infrastructure company Larsen and Toubro and hotel and tobacco conglomerate ITC.
It can also ask for special dividends from cash-rich, state-run companies.