Fiscal situation may worsen due to rising inflation, decline in economic growth and global slowdown, industry body Assocham said today.
"With little room available for taking counter-cyclical fiscal measures, India's faltering growth coupled with unresponsive inflation can push the country's economy to a precarious situation which could be closer to the one prevailing at the time of 1991 economic crisis," it said.
It also said that continued turbulence in the global economic conditions and widening infrastructure deficiencies are the major challenges for India's growth story.
"If appropriate action is not taken in time, we are likely to be in situation worse than the one in 1991 for several reasons," the Assocham study said.
It added that with public finances remaining in great stress, fiscal deficit may even touch 6.1 per cent of GDP in the current financial year.
The Current Account Deficit needs to be financed through external capital inflows, it said, adding that the Government's funding of the deficit through domestic sources tends to cause inflation.
"Deviation from the Fiscal Responsibility and Budget Management Act (FRBM) Act by the Government has resulted in deteriorated fiscal health of the public finances," it added.
The prevailing industry and business conditions suggests that there would be a likely shortfall in gross tax revenues by around Rs 60,000 crore in the current fiscal, it said.
"The slower pace of GDP growth has affected the manufacturing and trade sectors thereby resulting in lower than estimated excise duty collections. Higher policy rates of RBI, in an effort to contain inflation, has led to an investment downturn," it said.
According to Controller General of Accounts data, the fiscal deficit (gap between expenditure and revenue collection) was Rs 4.13 lakh crore during the first eight months of the current fiscal.