(Bloomberg) -- India’s economy will likely slow for a second straight year due to tightening financial conditions and supply chains disruptions from a prolonged war in Europe, according to officials familiar with the matter.

Gross domestic product is expected to grow 6.5% in the fiscal year starting April, compared with the 7% expansion estimated for the current year, the officials said, asking not to be identified before a formal announcement. That reading is higher than the International Monetary Fund’s projection for 6.1% growth — which will still make it the quickest pace among major economies.

Sticky global inflation could keep rates higher for longer, hurting growth including in emerging markets like India. That, however, wouldn’t come in the way of the government’s goal to rein in the budget deficit at 6.4% of GDP this year, the people said.

A finance ministry spokesman didn’t immediately respond to a phone call and text message seeking comment.

Finance Minister Nirmala Sitharaman is due to present the economy’s annual report card in parliament Tuesday. Her ministry’s assessment of the state of the economy is a precursor to the annual budget, which will be Prime Minister Narendra Modi government’s final full-year spending plan before a 2024 national vote.

The government is widely expected to deliver a growth-oriented budget, while resisting the temptation to turn populist. Economists surveyed by Bloomberg see her relying on asset sales and cutting subsidies to maintain infrastructure expenditure and contain the fiscal deficit.

The government is seen borrowing a record 15.8 trillion rupees ($194 billion) next year to partly meet its spending requirements. Shorter-dated Indian bonds selloff Monday on worries that the government may raise its current fiscal year’s borrowings from 14.2 trillion rupees due to an anticipated shortfall in small savings collection, according to traders. 

Buoyant tax revenues and sustained growth will provide space for policy stimulus during uncertain times and undue alarm is unwarranted, the officials said. 

Rupee may remain under pressure from further rate hikes by the Federal Reserve, but slowing global growth may push down commodity prices and improve India’s current account balance, they added.

--With assistance from Siddhartha Singh.

©2023 Bloomberg L.P.