Less than a month before India's budget, risks are growing that Prime Minister Narendra Modi's government will miss fiscal targets for a second year in a row as it gives into populist pressures before a high-stakes election.
Speculation is mounting of possible cash handouts to farmers and tax exemptions to shore up voter support ahead of polls due by May. Modi's Bharatiya Janata Party lost control of key states in provincial elections last month.
Economists at Nirmal Bang Equities Pvt. and Kotak Securities Ltd. predict a fiscal gap of 3.5 percent of gross domestic product in the year through March, compared with a targeted 3.3 percent. Finance Minister Arun Jaitley is scheduled to give a budget speech on Feb. 1.