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Combined FY21 fiscal deficit of Centre, states may reach 14%: Rangarajan

The combined fiscal deficit of states and centre during the current year may go up to 14 per cent against the mandated level of six per cent, former Reserve Bank Governor C Rangarajan said

Fiscal Deficit | c rangarajan | RBI

Press Trust of India  |  Hyderabad 

c rangarajan, RBI, Reserve bank of India, Reserve Bank governor Urjit Patel, urjit patel,  public sector banks, PSBs, Saumitra Chaudhuri, planning commission,PNB scam, Nirav Modi,  Finance Minister Arun Jaitley, Aru Jaitley, Letters of Undertaking ,
C Rangarajan, former RBI governor

The combined of states and the centre during the current year may go up to 14 per cent against the mandated level of six per cent, former Reserve Bank Governor said on Thursday.

Speaking at a programme organised by the ICFAI Business School here, the former Chairman of the Economic Advisory Council to the Prime Minister said banks should neither be timid nor adventurous while lending as the loans of today should not become NPAs of tomorrow.

"So therefore we are essentially talking about 13.8 per cent or 14 per cent of the GDP (gross domestic product) as the overall of the states and the Centre. It is obvious this is twice the mandated level. The mandated level for both the Centre and state is 6 per cent of the GDP.

It is twice or even more than twice of the estimated figure," he said.

According to him, the may further go if the government decides to go in for additional borrowings to meet GST compensation part.

Rangarajan said RBI's monetary policy is "consistent" under the present circumstances and as a result banks have adequate liquidity for more lending.

He opined that governments need to spend more when the economy is in slump and it is essential to spend on healthcare, relief and rehabilitation and on stimulus to spur the economy.

"There are three types of expenditure required. One- expenditure on healthcare second is the expenditure on relief and rehabilitation. Third is expenditure on stimulus. And it appears that the government both at the Centre and states are somewhat slow in increasing expenditures," he said.

He said the economic growth of the country and othernations has come to a grinding halt due to lockdown to contain the spread of coronavirus.

However, he said capital flows into India was encouraging during the last three months.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Thu, October 08 2020. 14:14 IST