India's central bank chief said New Delhi will have a hard time hitting its fiscal deficit target this year unless it makes adjustments to account for the rise in fuel and fertiliser prices, sparking market concern the government will need to step up borrowing in order to fund the gap.
In its budget for the fiscal year that began April 1, India announced a fiscal deficit target of 4.6 percent of GDP, which was widely considered to be ambitious after its 5.1 percent deficit for last year was flattered by high one-time revenues. "Given that crude prices and fertiliser prices have gone up since budget time, unless some adjustment is made either on expenditure side or tax side it is difficult to deliver on a 4.6 percent target," Devour Subbarao said on Thursday after the central bank's board meeting in the eastern city of Agartala.
"It is difficult to say if the government can deliver on a 4.6 percent target. It depends on what decision they take and a number of issues, most importantly on the adjustment of fuel prices," he told reporters, adding that fighting inflation remains the central bank's priority.