INSUBCONTINENT EXCLUSIVE:
target for the current financial year, despite receiving an additional dividend from the Reserve Bank of India (RBI), five government
officials and advisers said, as tax collections have sunk amid a sharp slowdown.With economic growth falling to a six-year low of 5 per cent
in the April-June quarter, the sources said the government could toward the end of 2019 be forced to raise the fiscal deficit target to 3.5
per cent of GDP from 3.3 per cent, amid pressure for additional stimulus measures.The officials asked not to be identified as they have not
been authorized to discuss the matter with media.A Finance Ministry spokesman did not immediately respond to requests for comment.Tax
collections could fall by as much as Rs 1 lakh crore ($14 billion), or 4 per cent of $344 billion annual target, two of the officials said,
noting that sharp shortfalls are expected both in goods and services tax (GST) and income tax collections."Overshooting the fiscal deficit
target is inevitable this year as the economic slowdown has hit government revenue," a senior adviser said, adding the deficit would rise
unless the government resorts to hefty spending cuts.Separately, a finance ministry official said plans to sell minority stakes in some
state-run entities including electricity producer NTPC, state insurer General Insurance Corp and construction finance company HUDCO could be
deferred, as market sentiment has weakened.Two government advisers said they have also urged the Prime Minister Narendra Modi-led government
to defer the fiscal target to tackle the economic slowdown and outline stimulus steps to help the hard hit sectors such as autos and
textiles.Downward revisionsPrivate economists have revised growth forecasts to as low as 5.8 per cent for 2019/20, one percentage point
lower than the prior year, saying the slowdown could persist for two or three years while much needed cyclical as well as structural reforms
are put in place.The flat manufacturing sector growth of 0.6 per cent during the April-June period, and contraction in the auto sector by
nearly 30 per cent in July, has hit GST and corporate tax collections, while consumer spending cuts amid job losses have dented revenue
collections.So far, the government has resisted pressure to announce a big bang stimulus package while nudging the RBI to cut its benchmark
repo rate, which is already down 110 basis points since February.Another government adviser said despite receiving a bonanza of around $8
billion in extra dividends from the RBI, the fiscal deficit would rise as nominal GDP growth has fallen well below the budgeted estimate for
the fiscal year.Policy advisers fear that the government's recently outlined plan to merge 10 state-run banks into four mega banks this
year, could also prove to be a distraction for bankers, reducing their focus on credit growth, delaying recoveries on bad loans, and in turn
impacting their profits and their dividend payouts to the government.In 2018/19, government revenue receipts fell 11 per cent against the
budgeted target, and the government resorted to spending cuts of Rs 1.46 lakh crore ($20.42 billion), and the deficit rose 3.4 per cent of
GDP against initial target of 3.3 per cent.Get Breaking news, live coverage, and Latest News from India and around the world on
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