Officials concede new deficit target doubt

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 percent 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.

FISCAL CREDIBILITY AT STAKE

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.

Besides selling still-unsold telecom spectrum - another auction is possible before March - it could even consider liquidating its land holdings, finance ministry officials said.

But the officials said it was unclear just how much revenue that would generate and whether it would be enough to meet the 5.3 percent fiscal target.

Last year, the fiscal deficit overshot the target of 4.6 percent by 1.2 percentage points. Another big slippage this year could further erode the nation's fiscal credibility.

It is not business as usual. Everybody is under pressure to meet the (deficit) target, said a finance ministry official. Time is running out.

The government's battle to mend its finances not only undermines the campaign against persistenly high inflation, but  also lowers growth prospects as funding the deficit from domestic savings crowds out private investment.

The government is on track to borrow 5.7

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