Business groups have urged the government to consider cutting the corporate tax rate and introducing incentives to boost new investments.
Budget
2019 : The government is likely to overshoot the budget
deficit target previously set for the current fiscal year, three
officials have warned, as a slowing economy creates a big shortfall
in tax collections and prompts new stimulus plans.
New
Finance Minister Nirmala
Sitharaman presents her first budget on July 5, for the fiscal
year ending March 2020. It is also the first budget of Prime Minister
Narendra Modi's second term after his government was returned in a
landslide election win last month.
Since
becoming prime minister in 2014, Modi succeeded in improving public
finances, trimming the fiscal deficit to 3.4% of gross domestic
product (GDP) from 4.5% in 2013/14, mostly through subsidies cuts and
fuel taxes.
He
is now, however, under pressure to loosen the purse strings to follow
through on election promises such as increased spending on roads and
housing and tax cuts for companies and individuals.
"There
is no other option but to defer the fiscal consolidation target as
boosting economic growth and reviving private investment is our top
priority," a senior finance ministry official involved in the
budget discussions, told Reuters.
Such
a decision would ultimately be made by the prime minister's office
after consultation with advisers, he said.
That
may well mean raising the fiscal deficit target to as much as 3.6% of
GDP from an already upwardly revised target of 3.4%, set in
February's interim budget, he said. The original goal, set in
February 2018, had been 3.3%.
India's
benchmark 10-year bond yield pushed up by another 3 basis points to
6.87% following the Reuters story, traders said.
Yields
had closed at 6.79% on Thursday and had been up due to gains in
global crude prices.
Slipping
fiscal discipline would hurt the "credibility" of the
budget and in turn hit investment, the bond market and the rupee,
analysts say.
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