"“The shortfall in GST revenue is likely to result in a modest fiscal slippage, to 3.5% of GDP as against the target of 3.3%. The strong growth in direct taxes will act as a buffer and the government could also push for extra non-tax revenue through special dividends from PSUs or the RBI (Reserve Bank of India),” says Niranjan Rajadhyaksha, research director and senior fellow at IDFC Institute.
Some other economists and equity strategists are also working with a fiscal slippage number of 20 basis points, though there seems to be a difference of opinion on how exactly slippage will be contained at 3.5%. “With GST revenues remaining well short of budgeted targets, it is becoming increasingly challenging to stick to the fiscal deficit target without expenditure reductions. We maintain our FY2019 gross fiscal deficit estimate at 3.5% of GDP, including expenditure cuts; possibly in Q4 of FY19,” analysts at Kotak Institutional Equities said earlier this month.
Rajadhyaksha, however, says that “expecting expenditure cuts in an election year is unrealistic”."