India reached 66 percent of its full-year fiscal deficit target just five months into the financial year, reinforcing worries about its ability to stick to the budgeted target for the year that ends in March.

At the same point last year, the deficit stood at 39.7 percent of the full-year target.

Its current account deficit, meanwhile, widened marginally in the June-quarter from the year earlier. While private receipts remained buoyant, investment income continued to show net outflows, the Reserve Bank of India (RBI) said on Friday.

The government's finances are strained by a high fuel subsidy bill and the expected shortfall in government share sales, targeted at 400 billion rupees ($8.14 billion) this fiscal year. Slowing economic growth and rising interest rates in the face of high inflation also put pressure on New Delhi's finances.

India's fiscal deficit during April to August was 2.74 trillion rupees, government data showed on Friday, against the budgeted target of 4.13 trillion rupees for the current fiscal year.

Net tax receipts were 1.45 trillion rupees and total expenditure was 4.72 trillion rupees.

It will not be a surprise if the fiscal deficit goes up a little bit to 4.8 percent of GDP this year as the actual growth will be much lower than earlier estimates, said N.R. Bhanumurthy, senior economist with National Institute of Public Finance and Policy, a Delhi based policy think tank.

New Delhi spooked investors on Thursday with its plan to borrow an additional 528 billion rupees in the second half of the fiscal year, significantly higher than expectations, to make up for a shortfall in a government scheme for small savers, sending bond yields and swap rates sharply higher.

However, it said the new borrowing figure does not change its deficit target of 4.6 percent of gross domestic product for this fiscal year ending in March 2012.

Many analysts say India is on course to breach its fiscal deficit target, and may be forced to borrow even more. Standard Chartered said it expects India's fiscal deficit to hit 5.4 percent of GDP for this fiscal year.

CURRENT ACCOUNT GAP

The current account deficit is likely to widen in the current financial year that started in April due to higher imports, especially of oil, and dwindling export growth on the back of global weakness, analysts said, putting further downward pressure on the rupee.

The import intensity of Indian manufacturers is very high while on the other hand the export opportunities are getting reduced due to the slowdown in other economies, said Rupa Rege Nitsure, chief economist at Bank of Baroda.

She expects the full-year current account gap to be at least 3 percent of GDP, higher than last year's 2.7 percent.

India's current account deficit widened to $14.1 billion in the June quarter, from $12 billion in the year-ago period, the central bank said on Friday. The deficit stood at a much lower $5.4 billion in the March quarter.

The merchandise trade deficit was $35.4 billion in April-June, against $32.3 billion a year ago.

The RBI said on Friday it was changing the way it reports capital account data, which will now be split into two heads -- a capital account and a financial account.

The capital account deficit stood at $300 million in the June quarter compared with $100 million a year ago and a flat balance in the March quarter, based on the new data.

The financial account surplus was $15.7 billion in the June quarter compared with $13 billion a year earlier and $6.2 billion in the March quarter.

Overall net financial inflows increased to $15.7 billion during the June quarter, mainly on net foreign direct investment inflows, which rose to $7.2 billion during the quarter from $2.9 billion a year earlier.

On Thursday, the rupee was down 10.5 percent from its 2011 peak touched in late July and remains the worst performing currency among major Asian peers. It has so far shed 9 percent of its value against the dollar this year.

India's bonds, currency and inter-bank cash markets were closed on Friday for half-yearly closing of banks' accounts.

Currently, rupee is depreciating because of the external factors, but now the fundamental factors such as a widening current account deficit and India's growing dependence on short-term flows will also push it lower, Nitsure said.