India's widening fiscal deficit, flat factory output may pave way for rate cut

Source: Xinhua| 2019-08-01 10:10:33|Editor: Li Xia
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MUMBAI, Aug. 1 (Xinhua) -- India's fiscal deficit widened to 62.8 billion U.S. dollars in the April-June quarter of the current financial year of 2019-20, constituting 61.4 percent of the annual target of 102.2 billion U.S. dollars, as per the data released by the Controller General of Accounts (CGA), late Wednesday.

The data coincided with more bad news from Asia's third largest economy with its infrastructure output on eight sectors growing by a meager 0.2 percent, according to the data released separately.

The two figures could pave way for another policy rate cut when the country's Central Bank meeting on Aug. 7, which has so far cut rates by 75 basis points in 2019.

A Bank of America Merrill Lynch report released on Monday said, "We continue to expect the RBI MPC (Reserve Bank of India Monetary Policy Committee) to cut 25 bp (basis point) on Aug. 7."

The widening fiscal deficit - gap between expenditure and revenue that signifies the economy's financial health - is indicating at a fiscal slippage following fiscal deficit target set at 3.3 percent for the year 2019-20.

"At present, we can't rule out that expenditure cuts may be required to prevent a fiscal slippage, if the revenue targets are missed," said Aditi Nayar, Vice President and Principal Economist at the ICRA - a credit rating agency.