New Delhi: India’s budget deficit may widen further than official estimates as the government spends more to limit the impact of a drought affecting almost half the country, Morgan Stanley said.
The budget shortfall may increase by as much as 0.3 percentage point from the government’s forecast in the year to March, said Chetan Ahya, an economist at Morgan Stanley in Singapore. Finance minister Pranab Mukherjee had said in his 6 July budget speech that a deficit of 6.8% of the gross domestic product was expected, the highest in 16 years.
The weakest monsoon in at least seven years has caused drought in 278 of 626 districts, damaging sugar cane, rice and oilseeds crops. That may put pressure on the budget as shortages force the government to spend more on imports and subsidize food items to meet domestic demand and curb food-price inflation.