Fiscal deficit in India in the first three quarters inched closer to the budgeted target for the whole year, suggesting P. Chidambaram, Finance Minister of Asia's third-largest economy, faces a challenge to meet the target.
The government is facing a shortfall in tax collections and revenue receipts from the sale of government shares in state-run companies as economic growth slows to less than 5 percent this fiscal year, from near double digits before the 2008 global crisis.
However, the subsidy bill - mainly for selling oil, fertiliser and food at cheaper rates - is likely to touch near 3 trillion rupees ($48 billion), against a budgeted target of 2.21 trillion rupees.
The fiscal deficit reached 5.16 trillion Indian rupees ($82 billion) during April-December, or 95.2 percent of the full-year target, compared with 78.8 percent a year earlier, government data showed on Friday.
Net tax receipts were at 5.18 trillion rupees in the first nine months of the current fiscal year to March 2014, while total expenditure was 11.64 trillion rupees.
Factory gate duties were down 6.9 percent at 1.02 trillion rupees during April-December from the year-earlier period, while customs tax receipts rose 4.3 percent to 1.24 trillion rupees - much lower than the 13.6 percent annual growth target.
Analysts and the central bank remain concerned about widening oil subsidies as the government has only partially increased diesel and cooking gas prices.
"(The government) needs to strive for a deft balance between fiscal consolidation and economic growth by focusing on quality of government spending," the Reserve Bank of India said in its quarterly report earlier this week.
Finance Minister P. Chidambaram, who has committed not to cross the deficit target, finds it hard to either raise diesel and cooking fuel prices or cut the fertiliser subsidy, as the government faces a national election by May.
"The budget deficit had almost hit its full-year target by November and is unlikely to hold below the government's target shortfall of 4.8 percent of GDP," Moody's Analytics said in a research note last week.
Officials say India's deficit would be met by cutting funds for ministries like rural, urban development, defence and education as India