2015-16 Budget to assume growth of 8-plus per cent

India has changed the way it measures economic activity to conform with international standards, resulting in huge upward revisions to growth figures but a small downward adjustment to the size of Asia's third-largest economy.

"In the budget, we would have to set GDP growth of at least 8 percent for next financial year as the manufacturing sector has shown a good performance," said the source, who has direct knowledge of budget planning.

A downward revision in nominal gross domestic product in the current fiscal year to March 31 would, however, require spending cuts of around Rs 91 billion ($1.5 billion) to hit Jaitley's fiscal deficit target of 4.1 per cent of GDP, the source added.

The new GDP series, calculated based on market prices, has confused economists who say it poorly reflects other indicators that suggest India's economy is in a weak recovery - and not the fastest-growing large economy in the world.

Reserve Bank of India Governor Raghuram Rajan has gone on the record to say he does not understand the new numbers.

Finance ministry officials are now rushing to plug the new numbers into the annual spending plan that Jaitley will unveil on February 28, with the economy now expected to grow by 7.4 per cent in the fiscal year that is now coming to a close. The RBI had forecast growth of around 5.5 per cent this year.

"Everyone is happy that India's GDP growth has picked up, but we are worried over slower growth in tax collections," said the source, who requested anonymity as he was not authorised to speak on the record.

With limited scope for boosting tax revenues, Jaitley should step up the pace of sales of state assets and curb spending to hit the government's deficit reduction target in the coming fiscal year.

"We will have to speed up the sale of shares in cash-rich oil companies that could help the government meet the fiscal deficit target of 3.6 per cent (of GDP) in 2015-16," the source said.

Prime Minister Narendra Modi's government has postponed the proposed sales of stakes in oil companies Oil and Natural Gas Corporation Ltd (ONGC) and Indian Oil Corporation Ltd in recent months, as global oil prices have slipped.