GDP growth stood at 8.2% and 7.1% in first and second quarters of 2018-19 respectivelyFinance Minister Arun Jaitley will present Budget in Parliament on February 1, 2019.
This will be an Interim Budget, last before general election due by May, so it is final chance to sway public perception.
From a widened fiscal deficit to shrinking Goods and Services Tax (GST) collections, and slowing growth, economists say government faces a number of challenges as it plans income and expenses for coming months.GDP growthThe economy has logged growth rates of 8.2 per cent and 7.1 per cent in first and second quarters of fiscal year 2018-19 respectively.
The government estimates GDP growth at 7.2 per cent in financial year 2018-19, lower than central bank's estimate of 7.4 per cent, and a growth rate of 6.7 per cent recorded in previous year.
Most private economists have lowered country's growth forecast to around 7 per cent for 2018-19 fiscal year citing weakening consumption and slowdown in credit offtake.( IMF sees India's GDP growth at 7.5% in 2019-20)Fiscal consolidationFiscal deficit - amount of money by which a government's expenses in a year exceed its revenue - has already crossed full-year estimate by more than 15 per cent in first nine months of 2018-19.
This means government, which aimed at containing deficit at 3.3 per cent of gross domestic product (GDP) or Rs 6.24 lakh crore ($88.45 billion) for financial year, is likely to miss its deficit target.
Economists say pressure on government finances is mainly arising from revenue side, particularly indirect taxes.GST collectionsThe government aims to achieve GST collections worth Rs 12.9 lakh crore in 2018-19.
In first three quarters of 2018-19, GST collections stood at Rs 8,71,043 crore, official data shows.
That means government requires GST collections of about Rs 4.2 lakh crore (around one third of full-year goal) in final three months of current financial year in order to meet annual target.Bad loansNon-performing assets or bad loans remain an issue in country's banking sector.
Twenty one state-run banks in country - holding two-thirds of assets in sector - account for bulk of record $150-billion (around Rs 11 lakh crore) of soured loans.
The government expects recovery of bad loans worth Rs 70,000 crore by March-end, having recovered Rs 80,000 crore so far through resolution of 66 cases by National Company Law Tribunal (NCLT).TradeTrade deficit - which occurs when imports exceed exports - widened to $129.9071 billion in first eight months of financial year 2018-19 (April-November), from $106.3734 billion in corresponding period a year ago, latest RBI data shows.
India meets more than 80 per cent of its petroleum requirements through imports.
Fluctuations in crude oil prices and currency markets amid jitters from US-China trade war have led to inflation of country's import bill.