The government may relax the fiscal deficit target of 3.1 per cent of the GDP for 2019-20 set by the Fiscal Responsibility & Budget Management Act.

Finance ministry officials said they had been asked to work on several sets of outlay scenarios — under two such cases, fiscal deficit is projected to top the 3.1 per cent target set for 2019-20.

In those two scenarios, officials said, the proposed sops for farms and social sector will result in higher fiscal deficit, which is the gap between the government’s income and expenditure.

Finance minister Arun Jaitley, in a televised address on Thursday, had hinted that deviations from the fiscal deficit targets were possible under “extraordinary circumstances” and added that the farm sector was “facing challenges” because of low price realisations by farmers.

A scheme to give farmers a fixed subsidy per acre, which is under active consideration, could alone cost more than Rs 1 lakh crore.

Similarly, an interest subsidy plan for farm loans announced by the government sometime back is estimated to cost at least an extra Rs 12,000 crore, which will have to be met by the budget, to be presented on February 1, 2019.

Other social welfare schemes and interest subsidy for small businesses could cost an extra Rs 50,000 crore, while bank recapitalisation could take up an additional Rs 50,000 crore.

“Nothing is final. But there are multiple sets of figures and schemes that are being worked on. At the same time, tax and other income realisation measures are being worked upon to see that the long-term fiscal deficit targets are adhered to,” officials said.

“However, a small slippage in the fiscal deficit targets for the next fiscal is understandable in the face of economic headwinds,” they added.

Concern areas

Industrial growth has slowed down to 0.5 per cent in December, while farm sector growth has remained stagnant even at current prices, a sign of depressed rural income.

“The combination of low market prices, high input costs and a lack of credit has intensified rural distress,” said Biswajit Dhar of Jawaharlal Nehru University’s Centre for Economic Studies and Planning.

India’s exports as a percentage of the GDP have been lowest since 2003-04, standing at 10.48 per cent in the April-December period, recording a mere 0.34 per cent growth. Much of the hit has been taken by small businesses, which account for 40 per cent of India’s merchandise exports.