India faces fiscal deficit target miss after extra borrowing

India will borrow an additional 500 billion rupees ($7.79 billion) this fiscal year, a higher-than-expected figure that could lead to it breaching its fiscal deficit target for the first time in four years and hit the bond and equities markets. The announcement by the finance ministry on Wednesday comes weeks after Moody’s Investors Service upgraded India’s sovereign credit rating for the first time in nearly 14 years, in a boost for Prime Minister Narendra Modi’s government. It had vowed to maintain fiscal discipline without compromising growth. But analysts said the additional borrowing was a “negative” that could raise the fiscal deficit to 3.5 percent of gross domestic product, against Finance Minister Arun Jaitley’s stated target of 3.2 percent. India is having to raise the extra funds as the federal government has already spent over $200 billion in eight months to October, about 60 percent of the budgeted spending, while revenue collections were just 48 percent of the target. The government’s tax collection plunged after the launch of the national Goods and Services Tax (GST) in July that complicated tax filings for business and hit the economy. Aditi Nayar, an economist at ICRA, the Indian arm of rating agency Moody’s, said the additional borrowing could lead to “modest fiscal slippage” as the government was likely to miss its revenue receipts target.