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Economy

India's generous giveaways threaten fiscal health before election

Government unlikely to meet deficit target of 3.3% as revenues slide

Indian Finance Minister Arun Jaitley. Analysts fear reduced GST rates will weigh on revenue, making it difficult for the government to meet its deficit target.   © Reuters

NEW DELHI -- With nationwide polls just months away, Prime Minister Narendra Modi's government is expected to dole out more goodies to woo voters away from an increasingly attractive opposition. But the plan could backfire if it widens the budget deficit, which the government wants to cap at 3.3% of gross domestic product.

In late December, New Dehli announced it would slash the sales tax on nearly two dozen goods and services, including movie tickets, televisions and air travel for religious pilgrimages, a move seen by analysts as appeasing voters, but one that is expected to lead to an annual revenue loss of 55 billion rupees ($785 million).

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