India Considers Allowing Fiscal Deficit to Exceed 4.8% of GDP

India Prepares for Wider Budget Deficit Amid Iran War Uncertainty

India is bracing itself for a budget deficit that is expected to exceed initial projections, according to a report published by Bloomberg News on Friday. The country's government finances are under pressure due to the ongoing war in Iran, which has led to higher fuel subsidy costs.

The war in Iran has disrupted global energy supplies, prompting India to increase petrol and diesel prices by around 8%. The government has also cut subsidies on cooking gas cylinders for households. As the world's third-largest oil importer and consumer, India is heavily reliant on oil imports, with approximately 90% of its oil shipments coming from abroad.

The government's decision to widen the budget deficit by up to 50 basis points to 4.8% of GDP is a significant departure from the initial target of 4.3% for the current fiscal year, which began on April 1. The increased deficit is largely due to the higher crude prices and supply disruptions caused by the closure of the Strait of Hormuz.