India faces a sharp decline in government revenues and economic growth for at least two quarters as the coronavirus hits economic activity and a fall in investor sentiment impacts privatisation plans, government and industry sources said.
Officially, the government is still sticking to the target of achieving 6-6.5% in the next financial year beginning April, while hoping that a fall in crude oil prices could help it garner more revenue and contain a fall in revenue from other sectors.
But economists and bankers are turning increasingly downbeat about India's economic prospects, especially as the government is betting on filling its coffers through ill-timed asset sales.
"We are going to miss the revised revenue targets for the current fiscal year, and will have to lower next year's targets as well," said a senior government official with direct knowledge of budget estimates.
He said receipts from a much-delayed privatisation of India's second-biggest oil refiner, Bharat Petroleum Corp, could be lower by at least $2 billion against initial estimates.
The company's share prices have fallen by over 27% since January while the broader NSE Nifty 50 index has fallen by nearly 20% following a panic in global markets.
On Wednesday, the government suspended almost all visas to the country till April 15 to prevent the spread of coronavirus as cases across the region continue to rise.
Total cases in the country rose to 73 on Thursday, according to the government.
Another senior finance ministry official said some of the proposed share-shale plans in companies like Coal India,, Steel Authority of India Ltd (SAIL), NMDC and IRCON have been deferred.
The government now expects to raise about 500 billion rupees ($6.75 billion) against downwardly revised target of 650 billion rupees for the ongoing financial year ending in March, the official said.
Another senior official in the tax department said receipts have been hit due to fall in consumer demand as reflected in the lower sales of autos, passenger traffic, hotel bookings, and retail sales.
Tour operators estimate January-March quarter earnings could fall by more than 60% from a year ago as hundreds of thousands of tourists cancel travel, hitting hotels, airlines and tax collection for the federal and state governments.
India attracts nearly one million foreign tourists a month, and the travel restrictions could impact for next few months.
"This is the worst year for the tourism sector as bookings have been cancelled for next two-three months," said Pronab Sarkar, national president of the Indian tour operators association.
The situation in India was still far better compared to some other countries hit by global pandemic, Sarkar said.
India annually earns nearly $30 billion from foreign tourist arrivals, and the industry is worried that a global spread of the virus will harm already weakened economic growth.
