Officials concede new deficit target doubt

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.

Just last month, subdued tax revenue and higher spending on subsidies forced the government to revise its fiscal deficit target to 5.3 percent of gross domestic product (GDP) for the current financial year from a previous target of 5.1 percent.

In setting the new target, the government was banking heavily on generating billions of dollars from the auction of second-generation (2G) mobile phone licences. But the auction this week yielded just under 25 percent of the targeted 400 billion rupees ($7.3 billion), catching officials off-guard.

Finance Minister P. Chidambaram said on Friday he was still confident of meeting the 5.3 percent 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

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