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According to a knowledgeable official, India is preparing to accept a budget deficit this year that exceeds expectations. Due to the Iran war pushing up the cost of energy subsidies and putting pressure on government finances, India will for the first time since the pandemic be unable to achieve its fiscal deficit target. The Indian authorities are willing to expand the deficit from the previously set target of 4.3% in February to 4.8% of GDP. The official added that the Ministry of Finance has assured rating agencies that any potential deterioration in public finances is due to the uncertain global environment rather than a shift in fiscal discipline. The last time the Indian government failed to meet budget targets was during the pandemic. In the fiscal year ending in March 2021, the deficit more than doubled from the target of 3.5% to 9.2% of GDP. The Modi government has since then maintained a fairly conservative fiscal path to steadily reduce the deficit. The official also stated that the current government is open to reassessing the financial outlook later this year, when non-tax revenues and subsidy needs will be clearer. At the same time, the government is evaluating potential expenditure reduction plans for ministries to control the deficit. This will largely depend on fertilizer prices. The continued decline in global fertilizer prices will help control subsidy spending and reduce the need for overall expenditure constraints.