India: Estimated Fiscal Deficit to Reach 7.5 Percent of GDP in Current Fiscal

New Delhi: The country’s fiscal deficit is estimated to reach 7.5 percent of gross domestic product (GDP) in the current financial year 2020-21. Experts have expressed this opinion and say that the fiscal deficit will be much higher than anticipated due to declining revenue collection due to the Kovid-19 epidemic. The budget estimate of the fiscal deficit has been kept at 3.5 percent in the current fiscal year. In this context, the fiscal deficit is likely to be 100 percent more than the budget estimate. Finance Minister Nirmala Sitharaman had estimated the fiscal deficit to be Rs 7.96 lakh crore or 3.5 percent of GDP in the 2020-21 general budget. Similarly, the Finance Minister had estimated the gross market debt to be Rs 7.80 lakh crore in the budget.

The government, which was facing shortage of funds in the midst of the Kovid-19 crisis, increased its market lending program by more than 50 per cent to Rs 12 lakh crore for the current financial year in May. ICRA chief economist Aditi Nair said that the fiscal deficit is expected to reach 7.5 percent in the financial year ending in March. “We estimate the fiscal deficit to be Rs 14.5 lakh crore or 7.5 per cent of GDP,” he said, adding that the gross domestic product at current prices is estimated to be Rs 194.82 lakh crore in 2020-21. At the same time, the initial estimate of GDP for the financial year 2019-20 released on May 31, 2020 is Rs 203.40 lakh crore.

DK Srivastava, Chief Policy Advisor, EY India, said that the central government may face a fiscal deficit of more than Rs 12 lakh crore declared earlier this year. The fiscal deficit of the Center has reached Rs 10.7 lakh crore during the first eight months of the current financial year, April-November, which is 135 percent of the full year’s budget estimate. The fiscal deficit crossed the budget target in July due to the lockdown imposed to curb the Kovid-19 epidemic.

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